Not sure if you saw this from Uwe...
-----Original Message-----
From: Uwe E. Reinhardt [mailto:[log in to unmask]]
Sent: 31 December 2009 16:30
To: Oliver,AJ; [log in to unmask]
Subject: RE: Op-Ed Columnist - A Less Than Honest Policy - NYTimes.com
Adam:
I believe only May could run England properly. (a) she loves British
royalty and all that goes with it, (b) she is a total dictator under
whom "democracy" works (as long as I don't vote), but (b) she is
benevolent (or I'd weigh 40 lbs more).
For smokimg, though, you'd have tp go the island of Jersey.
So if you need a leader for your new party, may I suggest her.
Happy New Year!
Uwe
-----Original Message-----
From: [log in to unmask] [mailto:[log in to unmask]]
Sent: Thursday, December 31, 2009 9:52 AM
To: [log in to unmask]
Cc: [log in to unmask]; [log in to unmask];
[log in to unmask]; [log in to unmask]
Subject: RE: Op-Ed Columnist - A Less Than Honest Policy - NYTimes.com
Dear Joe,
Ok, fair enough. Actually, the only thing I'm certain about is that I
don't really know much at all.
The tax-related issues are not really something that UK health
economists have to think about that much - many of them focus upon
QALYs, which, admittedly, has become a dominant school of thought in
that particular discipline, something that I have been moaning about for
years, due to methodological weaknesses. But then, I moan a lot
(incidentally, the Chief Exec of NICE, Andrew Dillon, was knighted today
- he probably deserves it though, if knighthoods mean anything).
I'll copy in some of the US-based health economists you mention, to see
if they can come back on your points. I'm always amazed that the RAND
experiments are still taught at the LSE - they were great work, but seem
to me to be 30 years out of date, and were, as you know, not even
conducted in England.
Incidentally, since we're talking about challenges to dominant views,
David Hockney said the following, reported in the Sunday Times, on the
smoking ban in pubs in England (I agree with him more or less, and I
hate smoking):
"First of all, the smoking ban was never mentioned during the general
election. Second, in Germany they rescinded the ban on smoking in bars
when people complained, because Germany is an adult democracy (Note from
AO: not sure about this!). Not here. We're treated like children. I am
fed up with it. One might go along with the ban in a restaurant, but not
in a pub. I don't know what they think pubs are for. They're making a
very dull and dreary country, and it all came from the Labour party.
Tobacco used to be a huge added tax earner. But they're turning a legal
industry into an illegal one, and everybody will have to pay more taxes.
They just assume everyone wants to be healthier. It's not true (Note
from AO: QALY maximisers, take note). It's absolutely a feature of the
Noughties that we've lost sight of the bigger picture."
The bizarre thing to me is that I'll probably still end up voting for
Gordon Brown in 2010. The Blair/Brown governments have been an almost
total disaster, particularly, I think, under Blair, and particularly
given the economic circumstances and huge parliamentary majorities they
enjoyed up until 2005. But the Conservatives would have made the same
terrible decisions, and more besides. We really need a new political
party, and a new more mature form of parliamentary debate, rather than
heckling each other across a chamber. How about it Joe? I think we allow
our leaders to be foreign born...
Best,
Adam
-----Original Message-----
From: Joe White [mailto:[log in to unmask]]
Sent: 31 December 2009 14:15
To: Oliver,AJ; [log in to unmask]
Subject: RE: Op-Ed Columnist - A Less Than Honest Policy - NYTimes.com
Dear all,
It is surely true that not all economists have a common view. One of
the
nice things about Adam is, he's an uncommon economist! I apologize to
anyone who feels unfairly labeled.
In the case of this particular issue, however, the vast majority of at
least
well-known U.S. economists appear to be on one side. And this is a very
important political fact, which shapes policy-making. It shapes Jon
Gruber's view of himself and the proposal; it shapes the various
editorial
boards' positions, and I suspect it even shapes what younger U.S.
economists
feel they must believe if they are to seek tenure and advancement.
This is something that the occasional political scientists who are
invited
to some gathering full of economists have been remarking on for years.
There are really two beliefs, and they're linked: the distaste for the
tax
preference, and the belief that the RAND experiment showed that
cost-sharing
is a good idea.
I'm not sure which U.S. economists actually understand that the tax
preference is not so bad. Surely Karen Davis does, because she and her
crew
did a very nice report, this year, explaining that the usual conclusions
about its distributional impact are backward. (Cathy Schoen, Kristof
Stremikis, Sara Collins and Karen Davis. "Progressive or Regressive? A
Second Look at the Tax Exemption for Employer-Sponsored Health Insurance
Premiums." Commonwealth Fund Issue Brief (May 2009).) But, as Shirley
noted in her e-mail, the distaste for the tax preference is extremely
broad.
Given that the main effect of the Senate provision would be to increase
cost-sharing, a logical person would have to like more cost-sharing to
like
the provision. It appears that most American economists are perfectly
happy
with that, based on beliefs about what the RAND experiment showed.
There
are American economists who are not convinced by that argument (Davis
and
Tom Rice leap to mind), and a good review of the evidence is Dahlia K.
Remler and Jessica Greene, "Cost-Sharing: A Blunt Instrument." Annual
Review
of Public Health 2009. 30: 293-311. And, of course, skepticism about
cost-sharing is more common internationally (e.g. Bob Evans).
I think it's fair to say that, outside of the U.S. economics fraternity,
economists may be more likely to see cost-sharing as an empirical
question
that must be answered case by case; and not to start with the
presupposition
that it is a good idea. But, INSIDE the U.S., the default is that
cost-sharing is a good idea, because in general people are over-insured.
I
had a nice talk with one of my Case Western colleagues about this
recently,
and he started from the principle that a lot of health coverage isn't
really
"insurance" anyway, because it involves not-so-rare events (as for
chronic
illness). He's right, compared to normal insurance for, say, auto
accidents. But that doesn't mean
broad-healthcare-something-that-isn't-really-insurance is a bad idea!
If you look at who signed the original "economists' letter" which
explicitly
praised the Senate's "Excise tax on high-cost insurance plans," they
are:
Henry Aaron Kenneth Arrow Alan Auerbach
Katherine Baicker Alan Blinder David
Cutler
Angus Deaton J. Bradford DeLong Peter
Diamond
Victor Fuchs Alan Garber Jonathan
Gruber
Mark McClellan Daniel McFadden David Meltzer
Joseph Newhouse Uwe Reinhardt Robert Reischauer
Alice Rivlin Meredith Rosenthal John
Shoven
Jonathan Skinner Laura D'Andrea Tyson
Conspicuously missing -- I don't know if they were asked or not -- are
Karen
Davis, Tom Rice, and Ken Thorpe, whom I would surely rank as
significant
U.S. health economists (sorry to any whom I'm not mentioning). But that
is
one heck of a list of notables. It's striking that some of them are
really
policy economists who talk about the deficit (e.g. Rivlin and Sawhill),
and
don't actually work on or, to my mind, know anything other than what
Brookings colleagues tell them about health policy. And that speaks to
what
I said in my e-mail -- that the attitude towards the healthcare tax
preference is grounded in a broader distaste for tax preferences in
general.
But the list explains why Jon Gruber feels the excise tax "is almost
universally favored by health policy experts." Shirley may well be
right
that the problem is they haven't thought through the "compromise" of
taxing
only "high cost" plans. But by now, after the various criticisms
especially
by Jon Gabel and a bunch of other experts on insurance, people like
Gruber
should be paying attention to the data, rather than just following their
presuppositions. That's what makes the Gruber article particularly
bothersome.
The right answer, in principle, is obvious -- as Tim and I and others
have
wrote, and Adam also mentions. Define the benefits and make only the
benefits up to that coverage level eligible for the tax break. But any
politically plausible version of that would not raise as much money,
precisely because it would apply to fewer people. Therefore it would do
less to pay for reform. What Adam calls a "more nuanced" approach might
not
work politically because of Senate coalitions. Just guessing, but
Gruber
surely has spent enough time talking with policy-makers to draw the
conclusion that the Senators won't go for any more reasonable way to pay
for
reform. Therefore he is making the case for something that CBO will say
saves money and that Senators from low-cost rural states who don't like
reform all that much anyway will endorse because it will not have much
effect on their states. I see the political logic. But that's why
David
has a point -- if the only way to pass reform is with this horrible
provision, we shouldn't be sure the conference is going to come out
alright.
Sigh. Happy New Year!
Joe
-----Original Message-----
From: Anglo-American Health Policy Network [mailto:[log in to unmask]]
On
Behalf Of Adam Oliver
Sent: Thursday, December 31, 2009 8:11 AM
To: [log in to unmask]
Subject: Re: Op-Ed Columnist - A Less Than Honest Policy - NYTimes.com
Dear all,
One of the things that I think ought to be guarded against is the
implication that economists share a 'common view' (on this or on
anything else). I have read as such time and time again throughout my
own career in articles and books by non-economists (and also by some
economists), and I think it is damaging to interdisciplinary
understanding (in fact, it can be pretty infuriating). There are almost
as many views within economics as there are across disciplines, and I
myself am as likely to be in agreement/disagreement with an economist as
I am with a non-economist. Wasn't it Keynes who said that if you put 10
economists in a room, you will end up with 11 different opinions (it was
someone anyway)? What would you think if I said all political scientists
are new institutionalists?
Rant aside, and although I am a novice of US health policy, shouldn't
there be a somewhat more nuanced debate of the Cadillac plans? I suspect
that the target for the Democrats are the plans that offer a wide range
of benefits, some of them perhaps not even directly relevant for health
per se, for wealthy people. And these perhaps do not warrant tax breaks.
And then there are the plans that offer lots of benefits that sick
people, and not necessarily wealthy people, really need, which might
warrant tax breaks. How to separate the two?
Anyway, I wish you all an economically viable New Year.
All best wishes,
Adam
-----Original Message-----
From: Anglo-American Health Policy Network [mailto:[log in to unmask]]
On Behalf Of Shirley Johnson-lans
Sent: 31 December 2009 12:50
To: [log in to unmask]
Subject: Re: Op-Ed Columnist - A Less Than Honest Policy - NYTimes.com
Dear Joe and David,
I agree with both of you. Another unforseen or unintended negative
consequence of taxing the "Cadillac plans" is to provide an incentive
for employers of fairly small groups of employees to try to avoid hiring
or not retain employees who are known to be (or have family members who
are) high risk.
In an attempt at a defense of my colleagues in my discipline, I think
one of the problems that the economics profession is tending to ignore
is that even if one espouses the position that all employment-based
health insurance premiums should be taxable income, this does not have
the same consequences as choosing to tax only more expensive plans,
which was a scheme hatched as a "compromise" between not taxing and
taxing all such benefits.
Happy New Year to All,
Shirley
----- Original Message -----
From: Joe White <[log in to unmask]>
To: [log in to unmask]
Sent: Wed, 30 Dec 2009 16:30:26 -0500 (EST)
Subject: Re: Op-Ed Columnist - A Less Than Honest Policy - NYTimes.com
Dear Colleagues:
The following two links show what Tim Jost and I think of the "cadillac
tax"
as well:
http://healthaffairs.org/blog/2009/12/03/cadillacs-or-ambulances-the-sen
ate-
tax-on-excessive-benefits/
http://www.rollcall.com/news/41838-1.html
Jon Gruber had a piece in the Post endorsing it on the 28th.
http://www.washingtonpost.com/wp-dyn/content/article/2009/12/27/AR200912
2701
714.html
It is quite revealing - he thinks the health policy community
strongly supports it, because the part of the community he recognizes as
legitimate - American economists - strongly supports it. Political
scientists, actual insurance experts, etc. don't count. I drafted the
following - not sure what I'll do with it - that expresses the truly
remarkable aspects of Jon's argument.
The Real Case for the "Cadillac" Tax:
Employers Should Not Sponsor Health Insurance
Joe White
<mailto:[log in to unmask]> [log in to unmask]
December 29, 2009
Jonathan Gruber has done the public a favor in his December 27
Washington
Post article that endorses a special tax on high-cost, "Cadillac" health
plans.
He makes clear that he and other health economists simply dislike the
tax
exclusion for employer-sponsored insurance benefits, regardless of the
effects of any policy to alter it. The logical implication of his
argument
is that employers should not sponsor insurance at all.
He begins by saying that reducing a tax expenditure does not constitute
a
tax increase. Now, whenever Congress reduces a tax expenditure, that
raises
tax revenues. That has the economic effect of a tax increase and has
always
counted as a tax increase under budget rules. Although he endorses the
provision because it would raise government revenues, he argues that it
isn't really a tax because it simply changes some peoples' taxes from
being
too low to being the right level. Apparently he has invented a new
budget
accounting category: tax revenue increases that aren't tax increases.
I'd
call it, "tax increases that some economists like, so they think should
be
viewed differently than increases they dislike."
This could be viewed as remarkably self-regarding, except that Gruber
apparently only thinks health economists' opinions should count anyway.
Thus early in his article he describes the excise tax as "almost
universally
recommended by health policy experts." It would be more accurate to say
that the tax is broadly praised by health economists, but experts with
other
backgrounds disagree. For example, many insurance experts, such as
those
quoted by Allen Sloan in his December 18th article in the Post, think
the
economists' enthusiasm ignores evident facts about how the tax would
work.
Gruber bows to this evidence a bit when he admits that, "many claim that
this is a tax not on excessively generous insurance plans but on those
who
happen to have high insurance costs." But he then ignores the evidence
when
he argues that it is unfair for taxpayers to provide twice as large a
tax
benefit to a family whose insurance costs $13,000 than to a family whose
insurance costs $26,000.
This is a remarkable position for a person who has advocated
consistently
that (a) all Americans should have insurance; (b) coverage should be
subsidized according to ability to pay; and (c) coverage should be
sufficient to cover need.
If insurance costs more for one family than for another family with the
same
income, and that is because the first family has greater need, Professor
Gruber is quite willing to say the two families should pay the same
price.
That's called community rating, and he endorses it strongly. If
community
rated insurance has an income-related subsidy, then the net subsidy for
health care costs is much greater for the family with higher costs.
That is
what Gruber has fought for in Massachusetts and in the current health
care
reform effort.
So Professor Gruber strongly endorses a system in which one family with
costs of $26,000 receives a much greater subsidy, in practice, than the
subsidy received by another family, with the same income, but costs of
only
$13,000 - so long as both families get their insurance through the
"exchange." This difference in subsidies is the whole point of reform:
to
make health care affordable regardless of income or illness.
But, as soon as insurance is provided through employers' books, and the
subsidy therefore takes the form of the tax deductibility of premiums --
poof! Suddenly it is unfair. "Taxpayers are literally sending twice as
much money to the second firm," which has the employees with higher
costs,
and Gruber thinks this is such a bad tax policy that changing it
shouldn't
even count as a tax increase!
How can anyone take such an inconsistent position, in policy terms?
There
are three possibilities.
First, Professor Gruber simply has not accepted the mounting evidence
about
why costs of employer-based plans differ, so can rationalize ignoring
it.
Second, he objects to the tax preference so much that he can't see that
it
is just the way insurance is subsidized when it is provided through
employers, rather than through the exchange. More expensive groups of
employees get a bigger subsidy than less expensive groups, just as, in
the
exchanges, more expensive families would get bigger subsidies than less
expensive families.
Third, he appears to believe that workers will just get the money as
wages
anyway. Even if that were true, they would still lose the government
subsidy through the tax code. So workers in a less fortunate group
would be
worse off than workers in healthier groups - which is precisely what
health
care reform should be designed to avoid.
The effect of the "Cadillac tax" will be to punish employers for having
less
healthy workers, or workers for joining companies with less healthy
employees. It only makes sense if your long-range goal is to get
employers
to stop providing insurance - or, to ensure that only employers with
particularly healthy employees provide insurance directly.
This is a situation where a comparative perspective is relevant. In the
draft, I compare two of Gruber's own views. But lets do this
cross-nationally.
If you have a country with various sickness funds - like Germany - and
some
companies have healthier pools than others, then the sickness funds with
healthier pools have to make transfers to the funds with sicker pools.
The
transfers don't eliminate all differences, but ameliorate them. If you
have
a country with alternative kinds of pools like Japan, so healthier and
wealthier people are in one type of insurance (big companies) and, on
average, less healthy or poorer people in others (the national fund for
workers, or community funds), there are some transfers among funds too,
but
the government also provides differential subsidies to the funds.
In the U.S., we have companies that buy insurance or self-insure. They
and/or their employees (take your pick how you divide it up) basically
spend
their own money but, to encourage the pooling advantages of grouping by
employer, the government subsidizes the insurance somewhat with a tax
break.
Some pools have greater medical expense risks than other pools, so
either
their premiums (if they buy insurance) or their incurred costs (if they
self
insure) are higher. According to the available data, the variations in
costs across employers depend far more on the pools than on the
benefits.
The U.S. does not have the risk-experience transfers that some countries
have. But it DOES have a modest functional equivalent, in that the tax
code
gives a larger subsidy to less healthy (so more expensive) groups, and a
smaller subsidy to more healthy (so less expensive) groups. The tax
subsidy
does not come close to eliminating differences, but ameliorates them.
That's what Gruber is criticizing. The inequities due to unequal risks
are
what the excise tax would purposefully worsen. This is entirely
contrary to
the goals of reform. But American economists don't like the tax subsidy
in
principle, and that is part of a more general distaste among our
economists
for tax preferences of any sort - which are viewed as a "distortion" in
principle. So Gruber's view is deeply entrenched in the theology of
American health economics. Apparently, contrary facts just lead him to
make
bizarre excuses for the policy - to the point of saying a change in tax
law
that increases revenue by taking more from some people isn't a tax
increase!
Cheers,
Joe
From: Anglo-American Health Policy Network [mailto:[log in to unmask]]
On
Behalf Of David Wilsford
Sent: Wednesday, December 30, 2009 1:38 PM
To: [log in to unmask]
Subject: Op-Ed Columnist - A Less Than Honest Policy - NYTimes.com
Dear AAHPN colleagues
Well, now that the Christian Christmas is over, time for Scrooge to
be
back - and in the nick of time to spoil New Years too, if you are
passionately interested in American health care reform efforts.
Much brouhaha accompanied the Senate's passing of Harry Reid's
"ugly"
bill on the Christmas Eve. (The adjective "ugly" comes from all sorts
of
commentators.)
Little noticed - until perhaps this morning - is the middle class
gouge
that is in the making, if the bill passes with the so-called Cadillac
tax on
generous plans. It is little wonder that labor unions are against it.
Why is this important? Rather than for me to summarize it, better
to
read the scathing review of it in this morning's NYT by columnist Bob
Herbert, longtime center-left mainstay of that paper's op-ed page. (See
link below.)
For such a scathing critique to come from him, well, trouble is
clearly
brewing in Oz.
He closes it with this passage:
"The tax on health benefits is being sold to the public dishonestly
as
something that will affect only the rich, and it makes a mockery of
President Obama's repeated pledge that if you like the health coverage
you
have now, you can keep it.
"Those who believe this is a good idea should at least have the
courage
to be straight about it with the American people."
It also catches my attention that more than a few Obama partisans
that
are friends of mine (yep, they hold their noses when associating with
me)
and have administraion posts are near-to-alarm at the electoral results
that
stand to come when a so-called Cadillac tax kicks in. Moreover, more
than
one have pointed out to me, when subsidies to buy insurance end up not
covering the premiums required to abide by the mandate, all hell will be
to
pay by these voters, as well.
The corridors of power in the nether regions of this administration
are
not as jubilant as Harry Reid, the Senate Democratic caucus and the
White
House are.
Yours for a good New Year, in spite of my curmudgeonly views,
David
http://www.nytimes.com/2009/12/29/opinion/29herbert.html?hp
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