The Independent Institute


Medicare Pays for Prevention – For the First Time

17463088_MLThe Centers for Medicare & Medicare Services has announced that Medicare (that is, taxpayers) will pay for lifestyle-intervention program that prevents type 2 diabetes:

In 2011, through funding provided by the Affordable Care Act, CMS awarded the National Council of Young Men’s Christian Associations of the United States of America (Y-USA) more than $11.8 million to enroll eligible Medicare beneficiaries at high risk for diabetes in a program that could decrease their risk for developing serious diabetes-related illnesses. Beneficiaries in the program attended weekly meetings with a lifestyle coach who trained participants in strategies for long-term dietary change, increased physical activity, and behavior changes to control their weight and decrease their risk of type 2 diabetes. After the initial weekly training sessions, participants could attend monthly follow-up meetings to help maintain healthy behaviors. The main goal of the program was to improve participants’ health through improved nutrition and physical activity, targeting at least a five percent weight loss for each individual.

The results of the Diabetes Prevention Program model are striking:

  • Medicare beneficiaries enrolled in the program lost about five percent of their body weight, which is enough to substantially reduce the risk of future diabetes. Average weight loss was 4.73 percent of body weight for participants attending at least four weekly sessions. Participants who attended at least nine weekly sessions lost an average of 5.17 percent of their body weight.
  • Over 80 percent of participants recruited attended at least four weekly sessions.
  • When compared with similar beneficiaries not it the program, Medicare estimated savings of $2,650 for each enrollee in the Diabetes Prevention Program over a 15-month period, more than enough to cover the cost of the program.

Statism—the Broken Window Fallacy Writ Large

broken_window_MLThe success to date of Bernie Sanders’s campaign for the Democratic presidential nomination and the visible support for socialism on display among the U.S. public, especially among young adults, demonstrate once again the enduring vitality of economic nonsense and ideological folly. (Please note, however, that the foregoing statement should in no way be understood as an endorsement of anyone else seeking a major party’s presidential nomination. Every serious contender is a statist of some stripe.)

If sincere (as opposed to purely opportunistic) statism is anything, it is Frederic Bastiat’s broken window fallacy writ large. The visible accomplishments of the state are hailed to the heavens, but the opportunity costs of these accomplishments are ignored or pooh-poohed (e.g., taxes reaped from “the rich” are regarded not as genuine costs but as payback for the exploitation they allegedly used to get their wealth in the first place).

Statists, however, not only avert their eyes from opportunity costs in the form of sacrificed current goods and services. More important, they act as if their glorious state projects have no adverse dynamic consequences, including discouragement and suppression of technological changes, economic innovations, and capital investments that might otherwise have produced more rapid economic growth and a widely shared improvement in the standard of living. For the statist, tunnel vision focused on the state’s current, visible benefits is the only vision that counts. Such an optical deficiency well nigh guarantees that statism will produce destitution and ruin in the long run, as it has everywhere it has been pushed to its feasible limits (e.g., the Soviet Union, Maoist China, North Korea, Cuba and, most recently, Venezuela), regardless of the propaganda and coercion the state employs to obfuscate and deflect blame for what it has done.

Like Lord Keynes, statists do not stop to weigh opportunity costs especially when those costs take the form of sacrificed goods and services in the more remote future, when presumably all the statists will be dead. The trouble is that as one generation of statists dies off, another comes along to take its place. The childish wishful thinking of getting something for nothing seems impossible to discredit successfully among a large segment of the public.

Reconsidering “Must Vote” Arguments

9445484_MLAs Americans move closer to November’s elections, the campaigns are gearing up to tell each of us how important it is to vote. One illustration is a recent Michael Barone article titled “A very few votes can make a big, big difference.”

Barone makes his point by citing several close elections. Most prominent was George W. Bush’s election win due to a 537-vote margin in Florida. He also offered several other examples, focusing on the current primary season, where vote differentials as small as 1,148 made a difference.

Unfortunately, when the closest election cited was decided by more than 500 votes, Barone’s conclusion that “a few votes can make a big difference” does not support the conclusion that your individual choice of whether to vote or who to vote for makes a big difference. In fact, it implies that your vote will make no difference in the outcome. The results will be the same, whether you voted for the winner, a loser, or no one. And that has some important implications.

It means that many of the “get out the vote” arguments American hear every four years are invalid.

“If you don’t vote, you don’t have a voice in government”: This claim is falsified by the fact that even casting your vote won’t give you an effective voice in government.

Blue Cross Blue Shield Confirms Obamacare Death Spiral

16494121_MLThe Blue Cross and Blue Shield Association, which represents 36 Blue Cross and Blue Shield plans covering 105 million Americans, has just released a study of its members’ claims data in Obamacare exchanges 2014 and 2015. It confirms that Obamacare exchange enrollees are sicker and more expensive than enrollees in pre-Obamacare individual plans or employer-based plans. Here I quote four of the study’s findings:

  • Members who newly enrolled in BCBS individual health plans in 2014 and 2015 have higher rates of certain diseases such as hypertension, diabetes, depression, coronary artery disease, human immunodeficiency virus (HIV) and Hepatitis C than individuals who had BCBS individual coverage prior to health-care reform.
  • Consumers who newly enrolled in BCBS individual health plans in 2014 and 2015 received significantly more medical care, on average, than those with BCBS individual plans prior to 2014 who maintained BCBS individual health coverage into 2015, as well as those with BCBS employer-based group health insurance.
  • The new enrollees used more medical services across all sites of care—including inpatient admissions, outpatient visits, medical professional services, prescriptions filled and emergency room visits.
  • Medical costs of care for the new individual market members were, on average, 19 percent higher than employer-based group members in 2014 and 22 percent higher in 2015. For example, the average monthly medical spending per member was $559 for individual enrollees versus $457 for group members in 2015.

Beware Survivorship Bias

15187831_MLSuppose you wanted to know how many of the soldiers, sailors, and airmen who served during World War II were killed in that war. So you sent inquiries to a random sample of persons whose names were drawn from a list of all those who served in the military during the war, asking: Were you killed in the war? I presume that all of those who responded to the survey would reply, no. Having conducted your scientific poll, you could then conclude that none of the soldiers who served in the military services during World War II were killed.

The mistake you would have made in this case springs from what is known as survivorship bias. It affects many sorts of studies, including many where the study design is not so obviously stupid as in my foregoing example. Surveys have sought, for example, to determine how an increase in the legal minimum wage affected employers’ total hours of labor services hired. Such a forced wage-rate increase, however, especially if it were a large one, might well cause some marginal firms to go out of business. They would then be unavailable to respond to a poll or to show up in another type of survey to indicate that the increased minimum wage had caused them to reduce their hours of employment to zero, wiping out however many jobs they had previously supported.

Trump’s Health Reform Won’t “Make America Great Again”—or Do Anything

46586331_MLI recently wrote a blog entry on one plank in Donald Trump’s health reform plan: imposing foreign prices on medicines sold in the United States. As Mr. Trump is currently the leading Republican presidential candidate, it behooves us to examine his health plan overall.

Don’t worry: It won’t take long.

Mr. Trump proposes to “allow individuals to fully deduct premiums from their tax returns under the current tax system. Businesses are allowed to take these deductions so why wouldn’t Congress allow individuals the same exemptions?”

This proposal is meaningless. For households, premiums for employer-sponsored health coverage are currently excluded from taxable income. So, unless Mr. Trump is proposing some sort of double dipping, there is no benefit here. Indeed, it might even comprise a tax hike. Excluding employer-based benefits from taxable income also excludes them from Medicare and Social Security payroll taxes. If Mr. Trump wants to add the benefits to taxable income and then allow households to deduct them, they will be subject to payroll taxes.

For individuals who pay their own premiums, this amount is currently deducted as an adjustment to gross income on the first page of Form 1040. That means a person does not even have to itemize deductions on Schedule A to get the tax break.

In other words, Mr. Trump’s proposal to reform the taxation of health benefits is not a reform at all. Effectively, it is the status quo. If Mr. Trump is elected, Americans who want to repeal and replace Obamacare with patient-centered health care will have to wait a long time for the new president to even understand the basics of the current system, much less propose a meaningful reform.

The Constitutional Economics of the “Divergent” Films

Divergent-Allegiant-Movie-PosterThe third installment in the Divergent movie franchise, Allegiant, inserted itself into cinematic pop culture with a whimper on its opening weekend, but the movie seems to be completing a unexpectedly weighty arc on the nature of politics. While almost certainly unintentional, the thematic arc is intriguing because it brings to life the warnings proffered by James Madison in what is perhaps the most famous of the Federalist Papers: Federalist No. 10 on factions, and their implications for governance.

The Divergent films bring onto the big screen the dystopian stories penned by Veronica Roth set in post-apocalyptic Chicago. With the rest of the world decimated, or at least presumed inert, the principal protagonists–Beatrice “Tris” Prior and Tobias “Four” Eaton–fight powerful faction leaders determined to control their existence and their highly localized society in Chicago.

In the aftermath of world war, Chicago exists as a seemingly ordered society based on five factions:

  • Abnegation, the “selfless”, run the government presumably in the public interest.
  • Amity, the peaceful, are farmers and producers.
  • Candor represents the honest and judicious faction.
  • Erudite represents the intellectuals, the philosophers.
  • Dauntless, the brave, are the enforcers.

Ideology—a Lens with Blinders

crisis and leviathanEvery ideology has its Great Satan and a supporting cast of demons. These serve as all-purpose targets of blame and of the hatred that animates the ideology’s adherents. Ideology is not simply the distorted belief system of one’s political enemies. In accordance with the “inclusive” conception that I have employed in my writing for more than thirty years, everyone who is not completely apathetic about politics and the state has an ideology. Having one is not necessarily a bad thing—individualist, private-property anarchism, for example, is in my estimation a noble and respectful (of people’s natural rights) set of beliefs and commitments—yet every ideology puts blinders on its adherents, narrowing their vision and keeping certain aspects of social reality out of sight. We would therefore be wise never to forget that we are all the prisoners, as it were, of our overarching belief system about social relations. This remembrance also helps us to humanize ideological opponents whom we might otherwise cast, if only rhetorically, into outer darkness.

(My most detailed and extensive discussion of ideology as an analytical concept in political economy appears in chapter 3 of my book Crisis and Leviathan.)

The Myth of All-Payer Claims Databases

33201864_MLMost observers agree that it is very, very difficult for patients to choose health services wisely based on prices, because prices in U.S. health care are generally not transparent. The primary reason for this problem is that health providers haven’t relied on patients to pay their bills directly in many decades.

Instead, their business models rely on submitting claims to health insurers. Of course, there are convenient clinics and a few doctors and ambulatory clinics which post prices up front. However, the patient who enters the hospital – where most health costs are incurred – enters a maze of opaque and incomprehensible prices.

Some people believe price transparency can be commanded by government: Enter the “all-payer claims database,” which an increasing number of states are embracing. Every payer in the state reports its claims to this government-run database, and the government can then publicly disclose what actual health prices are.

The momentum for all-payer claims databases just hit a road-block at the U.S. Supreme Court, in the case Gobeille v. Liberty Mutual. This concerned a new Vermont law that compels payers to report their claims to the state’s all-payer claims database. The Supreme Court struck down the mandate, based on the doctrine of ERISA pre-emption.

Apple Encryption and the Erosion of Privacy

32667669_MLIn the wake of the terror attack in San Bernardino late last year, the FBI and other government agents set out to uncover as much information about the attackers as possible. After searching the suspects’ home, speaking with the families of the perpetrators, and looking for other clues, authorities had uncovered a great deal of information about the two suspects.

Despite their findings, however, gathering all the desired data proved exceptionally difficult. In February 2016, the FBI announced that it was unable to unlock the iPhone used by one of the shooters. The phone only allowed so many attempts at the passcode before it prevented any additional attempts. The phone’s operating software provided additional security in the form of encryption.

As a result, the FBI requested that Apple Inc. create a “backdoor” to their own operating system, one that would allow the FBI and other law enforcement to undermine the security features of Apple’s system. Apple denied this request, prompting the FBI to seek a court order.

Apple has opposed the FBI’s demands to create the program that would allow law enforcement to access information on their software. The legal battle is ongoing. On February 16, Apple CEO Tim Cook released an online statement to Apple customers, explaining why the company was refusing to comply with the order.

The United States government has demanded that Apple take an unprecedented step which threatens the security of our customers. We oppose this order, which has implications far beyond the legal case at hand. This moment calls for public discussion, and we want our customers and people around the country to understand what is at stake.