Professor John H. Cochrane of the University of Chicago had an op-ed in the Wall Street Journal on December 25, in which he gave a brief description of (among other things) a market in which individuals buy our own health insurance – and not from an Obamacare exchange.

According to Professor Cochrane:  “…we should transition to fully individual-based health insurance”. This is the Holy Grail of free-market reformers, and likely unattainable as long as Obamacare’s political opponents are unwilling to take the risk of a reform that can be twisted as “taking away” employer-based benefits. (Although, as I have described in a previous post, the task would not be impossible if free-market reformers improved our communications skills.)

In Professor Cochrane’s approach, each individual would buy health insurance that actually combines two policies. The first would cover the beneficiary for catastrophic illness and accidents this year. The second, called health-status insurance, is insurance against being underwritten again in future years.

Traditional employer-based coverage is re-underwritten every year (sometimes within limits prescribed by state laws). Before Obamacare, individual insurance was never re-underwritten, but that fell apart if the beneficiary switched insurers. Healthy beneficiaries found it easy to switch insurers, but people who became sick were forced to stay with their plans, even if they preferred to switch.

Here is a story about a recent court case in which a federal judge blocked the State of Georgia from charging $5 per month charge to low-income recipients for federally-subsidized cell phone service.  One reason I find this interesting is that as recently as 1999 only 32% of Americans had cell phones, according to this site, and 25 years ago almost nobody had one.

Cell phone service, an almost unobtainable luxury a quarter of a century ago, has now become an entitlement that the poor should not be forced to go without.  Charging poor people even $5 a month for one is, apparently, a large enough burden that the charge was struck down be a federal judge.

The article notes that about 14 million households receive this federal entitlement.  With about 116 million households in the US, that is about 12% of all US households.

What an amazingly wealthy country we are that people would think it is unreasonable to deprive the poor of cell phone service, and even that it should be illegal for them to have to pay $5 a month for it!

Hooray! The Medicare “Doc Fix” Is Fixed Until March 31.

Once again, Congress pretends to have fixed the unfixable: The way Medicare pays doctors. An earlier blog entry describes how Medicare pays physicians by using a method that puts the old Soviet Gosplan to shame.

The simplest description is that a government-authorized committee determines how much time it takes a doctor to do a procedure. For example, a session of psychotherapy for a patient with panic attacks takes 45 minutes. A hysterectomy takes about twice as much time as the session of psychotherapy, plus 3.8 times as much mental effort, and 4.47 times as much technical skill and physical effort, as well as 4.24 times as much risk. Needless to say, negotiation over these estimates consumes a lot of energy in a zero-sum game between specialist medical associations.

The outcome is a “relative value” for every single thing doctors get paid for by Medicare. A highly complex and time consuming procedure earns a high relative value. Each relative value is adjusted for geography (e.g., Manhattan is more expensive than Dallas) and multiplied by a conversion factor to determine how much Medicare will pay a doctor.

Julie Appleby of Kaiser Health News recently reported on a presentation by Paul Mango of McKinsey & Co. to an audience of health-insurance executives. According to Appleby’s report, Mr. Mango’s research found:

• About two-thirds of hospital networks on the exchanges are “narrow” or “ultra-narrow”;
• This was defined by surveying 20 urban areas and identifying the 20 biggest hospitals in each area;
• An insurer with at least 15 hospitals in network have a “broad” network; those with 7 to 14 hospitals have a “narrow” network; and those with 6 or fewer hospitals have an “ultra-narrow” network.

Furthermore, Appleby reported that Mango’s research concluded that the “narrow” and “ultra-narrow” network plans did not always have the lowest premiums. Nevertheless, “broad” network plans have premiums 26 percent higher than the plans with smaller networks, according to Appleby’s report.

The point of this blog entry is to discuss why health insurers have networks at all. However, before we get to that, I would like to emphasize that the previous paragraphs specify “Appleby’s reporting of Mango’s research” and not “Mango’s research” itself.

The winter 2014 issue of The Independent Review is hot off the press! This edition of the Independent Institute’s 160-page scholarly journal includes a stimulating mix of timely topics and enduring themes, including a symposium on Nobel laureate economist James M. Buchanan and classical liberalism. Read it and gain a deeper understanding of the ideas and legacy of a hero of the liberty movement who pioneered the study of government failure, public choice, and constitutional economics. Other subjects in the winter issue include Iceland’s and Ireland’s recent banking crises, healthcare without government intervention, economics lessons from The Treasure of the Sierra Madre, worrisome trends in unemployment, and a tribute to the late Charles K. Rowley.

As always, The Independent Review includes insightful book reviews written by leading subject-matter experts. The new issue features reviews of the following books: John P. Tiemstra’s Stories Economists Tell: Studies in Christianity and Economics; Jonathan V. Last’s What to Expect When No One’s Expecting: America’s Coming Demographic Disaster; Samuel Gregg’s 
Becoming Europe: Economic Decline, Culture, and How America Can Avoid a European Future; James T. Bennett’s They Play, You Pay: Why Taxpayers Build Ballparks, Stadiums, and Arenas for Billionaire Owners and Millionaire Players; and Benn Steil’s The Battle of Bretton Woods: John Maynard Keynes, Harry Dexter White, and the Making of a New World Order. Read them all to better understand current trends and historical turning points.

Special Internet Offer: Subscribe to The Independent Review now—and select a free book. It’s never too late for great holiday gifts!

[This post also appears in the 12/24/13 issue of The Lighthouse. To subscribe to this weekly newsletter from the Independent Institute, enter your email address here.]

In two recent posts I discussed out-of-control prices for hospital services, especially emergency-room care. In the first, I argued that sky-high hospital prices are the result of government interference. In the second, I cheered the fact that consumer-driven health plans are inducing hospitals (ever so gradually) to be more upfront with patients (at least, those coming in for scheduled surgeries) about how much they will have to pay out of pocket, and agreeing on payment plans before admission.

Obamacare promises to come to the rescue of uninsured patients who are charged outrageous prices by hospitals. Statutory language purports to limit hospital charges to uninsured patients in the ER to “not more than the lowest amounts charged to individuals who have insurance covering such care.” Hospitals that fail to adhere to this policy risk losing their non-profit status. (The relevant text is on page 739 of the enrolled version of the bill here.)

Hospitals take threats to their non-profit status very seriously. So, since the Affordable Care Act was passed in 2010, you might expect that the overcharging of uninsured patients has long since stopped. You would be wrong. Like everything else in Obamacare, this has malfunctioned.

In Time magazine, Steven Brill reports that hospitals continue to levy exorbitant charges on uninsured patients treated at ERs, and accuses the Obama administration of “bungling the easy stuff.” Well, the “stuff” is never “easy” when the federal government gets involved.

Catching Fire, the second installment in the trilogy of films based on The Hunger Games books by Suzanne Collins, is burning through the box office, raking in revenues of more than $360 million since its November release. This makes the movie the third highest grossing movie of the year. And this bodes well for individualism and liberty.

I’ve written earlier about how The Hunger Games books have a strong liberty theme. Indeed, these books could be considered this generation’s version of George Orwell’s 1984 or even Animal Farm. The story is about young heroine, Katniss Everdeen, fighting the tyranny of an oppressive government (The Capital District) that sends teenagers into a ring to fight to the death. Collins has explicitly drawn on the Greek Myth of the Theseus and the Minotaur, the Roman penchant for gladiatorial games, and reality shows such as Survivor. The individualism is palpable in the books, but the quest for liberty is more muted. Collins is first and foremost focused on exploring how violence (and war) effect children. While she is clearly opposed to tyranny, she’s not stumping for either individualism or liberty and has carefully avoided engaging in public discussions about the political implications of her books.

The first movie was a disappointment if we were looking for a strong liberty theme, defaulting toward action and adventure and away from ideas. (See my discussion at the Beacon here and on youtube here.) At the time, I felt the constraints of film made it difficult to really develop the pro-liberty theme even though it was implicit, although the anti-tyranny theme and plot were strong and compelling. In part, I felt this was a constraint of the way Collins chose to tell her stories, using the setting of the gladiator-type ring and survival game to propel the plot.

Thus, I was pleasantly surprised by Catching Fire, both in terms of the greater emphasis on the importance of liberty as well as the way the medium of film may have contributed to strengthening its message. As the second film in the series, the movie explores more of the individual characters’ personal qualities and their motivations. The storytelling, unlike the first movie (and much of the book), relies more on the actors to propel the emotion of the story. Left in the hands an able actress like Jennifer Lawrence, the injustice of the Capital District’s terrorization of the of the post-apocalyptic nation of Panem and her sympathy for protestors and a budding revolution comes alive in her on-screen emotions and reactions if not her words. Indeed, as she tours the districts of Panem in the wake of her win from the Hunger Games, we almost feel like she is ready to jump in with the protestors. Her emotional reactions to the individualized terror (the execution of protester), her acts of heroism (saving her friend Gale Hawthorne), and her anger at the brutal beating of one of her mentors by the District’s guards are individualized and powerful.

Catching Fire remains remarkably true to the plot of the books, so Everdeen retreats into her surivival mode when the games begin. But this is still progress. The books have an explicit message supporting individual freedom and an implicit message supportive of personal liberty. The movies, I believe, are evolving into stories that are more explicit about personal liberty.

All this bodes well for the third movie in the series, Mockingjay. If we continue to see Everdeen’s character evolve in a way consistent with the books, the third movie may well complete her evolution from reactionary individualist to a practical libertarian revolutionary.

Recently I wrote about the latest PISA results for American 15-year-olds in reading, math, and science. (See PISA Results Show We’re No. 1…in Spending, Not Performance.) One commenter stated that she saw “very little control for demographics” with international assessments such as PISA.

In particular, the commenter objected that while other countries may surpass the United States in terms of the quantity of immigrants and still perform better, what matters is the quality of those immigrants in terms of their educational backgrounds. (For countries’ immigration rates, see Figure II.3.6, p. 76. See here for a performance snapshot of participating countries.)

This is a valid point—one that the Organization for Economic Cooperation and Development (OECD), which administers PISA, analyzes in great detail.

The impact of immigration status on PISA student performance varies, depending in part on a country’s immigration policy. Australia, Canada, and New Zealand, for example, have very selective policies that favor better educated and more well-to-do immigrants. The United States has less selective immigration policies that tend to favor keeping families together, meaning we’re more open to poor and less-educated immigrants (See here p. 72, and here p. 11).

Yet it would be wrong to conclude that less educated or disadvantaged immigrants explain the United States’ PISA performance. What follows is a summary of some of the leading findings from the OECD on the effects of students’ immigrant status.

After 12 years of seemingly inexorable blind faith in an ever more powerful and intrusive government, a spate of recent polls finally shows support crumbling for Washington’s hubristic overreach:

The new Gallup poll: “Record High in U.S. Say Big Government Greatest Threat: Now 72% say it is greater threat than big business or big labor”

Harvard University’s Institute of Politics: “Millennials Abandon Obama and Obamacare: A majority of America’s youngest adults would vote to recall the president”

Also from Gallup: “Obama Approval Down Most Among Hispanics in Past Year”

The Daily Beast: “The GOP Couldn’t Kill Obamacare, but Hispanics Could”

Pew: “Liberal support for Obama at all-time low, worse than George W. Bush and conservatives”

Business Insider: “Obama’s Current Approval Rating Is The Ugliest Since Nixon”

And with a federal judge ruling NSA’s spying to be unconstitutional, sense may be coming back in vogue.

Details from the polls also reveal a heartening bipartisan distrust:

• Forty-three percent of respondents approve of Obama, compared with 55% who disapprove.
• Forty-two percent approve of how he’s handling the economy; 55% disapprove.
• Thirty-four percent approve of how congressional Democrats are handling their jobs; 64% disapprove.
• Twenty-four percent approve of how congressional Republicans are doing their jobs; 73% disapprove.
  On the question of who respondents “trust” to do a better job with the nation’s problems, 41% say Obama, and 41% say congressional Republicans.
• Forty-five percent trust congressional Republicans more to handle the economy — 41% say Obama.
• 42% trust Obama more with the implementation of the Affordable Care Act — 37% say congressional Republicans.

You can’t have too much of a good thing—unless you mean freedom and you live in Oakland, apparently.

Oakland Unified School District school board member Jody London says enough’s enough when it comes to parents looking out for their own kids’ education. What does she mean?

Oakland has the highest concentration of charter schools of any city in California, according to the San Francisco Chronicle: “This year, more than a quarter of the city’s 49,000 students are attending one of its nearly 40 alternative public schools, far more per capita than anywhere else in the state.” That means fewer students—and dollars—for Oakland USD.

There oughta be a law. Well, technically in California, there is.

The number of charter schools is capped at 1,650 statewide, but that cap is increased by 100 schools annually. While there’s no limit at the local level, an estimated 50,000 students statewide are on charter school waiting lists.

That suits London just fine because as far as she’s concerned, children are community property, as the Chronicle continues:

With five more charter applications in front of the school board this fall, London said she has had enough. Supporters of charter schools are “looking out for their families, for their kids,” she said. But that support doesn’t necessarily extend to the neighbors’ children, perhaps a child with severe disabilities or one most at risk of failing.” At some point, we have a collective responsibility in this society, in this community to look out for each other,” she added. Last month, she vowed to vote against any new charters.

It’s illegal for school board members to vote down prospective charter schools because they might negatively affect districts’ budgets. But London insists she’s not against charter schools, just “too many” charter schools.

For her, determining how many is too many is a matter of local control. London’s right.

And it doesn’t get more local than parents who have the right and the responsibility to educate their children as and where they think is best. The last thing elected officials should be doing is rationing schooling options—especially ones who’ve claimed collective “responsibility” over other people’s children and failed.