How to Fix America’s Health Insurance Crisis: GET SOME

Although this video is somewhat dated (since it makes passing reference to the health care reform proposals of the 2008 presidential candidates), it provocatively illustrates why a nontrivial proportion of the nearly 47 million Americans who lack health insurance may be “voluntarily” uninsured.  Indeed, a recently released study by the Employment Policies Institute puts the number of uninsured Americans ages 18-64 who could likely afford health coverage at roughly 18 million people.  This video provides some anecdotes as to why this occurs.

Assorted Links (8/31/2009)

Here’s a list of articles that I have been reading today (organized by topic):


Professor Mulligan notes, “This article explains how NY schools are required to hire from a pool of senior teachers who must be paid more than entry level teachers. In effect, schools are required to pay more than the market clearing wage. The result: teachers are unemployed and classes go without teachers.”

New York Times: “How a worldwide “social epidemic” of ideas is supporting renewed confidence in the economy.”

Energy Policy

Wall Street Journal: “The Obama administration is using its brass knuckles to support Latin American thugs.”

Foreign Policy

Wall Street Journal: “Demand in the developing world trumps new technology.”

Health Care Reform

Assorted Links (8/29/2009)

Here’s a list of articles that I have been reading today (organized by topic):

Foreign Policy 

Health Care Reform

“Resources are constrained, and so someone has to make the cost-benefit decision, either by creating a rule or making decisions on a case-by-case basis.  Many of those decisions are now made by insurers and employers.  The House and Senate bills would move some of those decisions into the government.  Changing the locus of the decision does not relax the resource constraint.  It just changes who has power and control.”

Knowledge @ Wharton: “Information technology could actually raise costs because of culture clashes, training, the implementation of the systems and the labor required to maintain the new technology.”

Wall Street Journal: “After decades of government-run care, some Indians are finally saying enough.”

Health Economics

Freakonomics: “It’s got the pharmaceutical industry worried enough to fund a major study to identify the factors in rising placebo potency. Drug companies could be victims of their own success in this instance: we’ve become so convinced of the power of modern medicine, it works even when we’re off the pill.”


Freakonomics: “More than 52,000 bicyclists have been killed in bicycle traffic accidents in the U.S. over the 80 years the federal government has been keeping records. When it comes to sharing the road with cars, many people seem to assume that such accidents are usually the cyclist’s fault, a result of reckless or aggressive riding. But an analysis of police reports on 2,752 bike-car accidents in Toronto found that clumsy or inattentive driving by motorists was the cause of 90 percent of these crashes.”

57th Annual Management Conference 2009 on “The Future of Markets” at University of Chicago

I would like to call attention to the 57th Annual Management Conference 2009 on “The Future of Markets”, held at the University of Chicago Booth School of Business, May 29, 2009.  Of particular interest is the 2 hour, 7 minute long keynote panel webcast featuring the following six University of Chicago faculty panelists:

  • Gary Becker, University Professor of Economics and of Sociology and winner of the 1992 Nobel Prize in Economics
  • Kevin Murphy, George J. Stigler Distinguished Service Professor of Economics
  • Raghuram Rajan, Eric J. Gleacher Distinguished Service Professor of Finance
  • Steven Kaplan, Neubauer Family Professor of Entrepreneurship and Finance
  • Marianne Bertrand, Fred G. Steingraber/A. T. Kearney Professor of Economics
  • Anil Kashyap, Edward Eagle Brown Professor of Economics and Finance

Click here for an executive summary of the keynote panel. For some context on the panel members, read the “Conference Pre-Reading“. Also, the discussion (roughly 1 hour long) featuring Ted Snyder and Gene Fama (from the same conference) on the question “Is the stock market an “efficient” market? is also very worthwhile (executive summary here). Ironically, even though the keynote panel and Fama webcasts took place nearly two months prior to the publication of the Economist cover article (dated 7/16/2009) entitled “What went wrong with economics (and how the discipline should change to avoid the mistakes of the past)”, these webcasts address many of the issues that were brought up in the Economist article.

Assorted Links (8/28/2009)

Here’s a list of articles that I have been reading today (organized by topic):


Global Warming

Health Care Reform

  • A Strategy to Save Obamacare, But at What Cost, by Charles Krauthammer
    Washington Post: “Obamacare Version 1.0 is dead. The 1,000-page monstrosity that emerged in various editions from Congress was done in by widespread national revulsion not just at its expense and intrusiveness but also at the mendacity with which it is being sold. You don’t need a PhD to see that the promise to expand coverage and reduce costs is a crude deception, or that cutting $500 billion from Medicare without affecting care is a fiction.”
  • Some Roman Catholic Bishops Assail Health Plan, by David Kirkpatrick
    New York Times: “Despite the church’s push on the issue, some are raising concerns over abortion and alarms about ‘rationing.’”
  • Fixing Health Care Is Good for Business, by Gary Locke
    Wall Street Journal: “How many aspiring entrepreneurs are stuck in dead-end jobs because of health concerns?”President Obama’s Secretary of Commerce asks a very pertinent question here. However, as I have previously noted, the question of whether the health care system should be reformed is not particularly controversial; what is controversial is the manner in which health care reform ought to be structured and implemented.


  • How Facebook Ruins Friendships, by Elizabeth Bernstein
    This essay from today’s Wall Street Journal ought to be required reading for all Facebook users!


  • The Benefits of Religion
    Freakonomics: “A new study by Angus Deaton uses an expansive dataset to analyze the determinants and benefits of religiosity around the world.”

Assorted Links (8/27/2009)

Here’s a list of articles that I have been reading today (organized by topic):

The Economy

Health Care Reform


  • Statistical Slumps, by Ian Ayres
    Professor Ayres provides a very interesting essay about statistics in which he discusses a contraption called the Galton Box (which apparently is also known as the Quincunx) and how this relates to Pascal’s Triangle.  From there, he derives “a statistical standard for determining when an athlete was having a ‘statistically significant slump.’”  Good stuff!


  • Craigslist’s Business Model, by Donald Marron
    Here’s a quote from this essay (taken from Wired magazine’s article which Dr. Marron summarizes): “craigslist is one of the strangest monopolies in history, where customers are locked in by fees set at zero and where the ambiance of neglect is not a way to extract more profit but the expression of a worldview.”


My preferred approach for reforming health insurance…

I don’t think that the question of whether the health care system should be reformed is particularly controversial; what is controversial is the manner in which health care reform ought to be structured and implemented.  I have always thought that the system could be much better designed, and that if you were going to do design such a system from scratch, you definitely would not want to tie the provision of health insurance to employment. This is the problem with “path dependence”; the institutional arrangements depend critically upon the starting point.  I think that it is fairly well known that in the case of the United States, the seminal event in tying the provision of health insurance to employment was the imposition of wage-price controls at the end of World War II.  Also, as Whole Foods CEO John Mackey recently pointed out, health care reform is not just health insurance reform. We also need tort reform so that the corrosive influence of the trial bar on the practice of medicine can be mitigated, and liberalization of health insurance markets so that there is a national (rather than the current “balkanized” state-by-state) market for health insurance.  While the latter reform would require some changes in insurance regulation, I think it would have the salutory effect of introducing much more competition into the health insurance market.

I personally favor a market-oriented reform along the lines described by Mr. Mackey. This would involve the expansion of Health Savings Accounts (HSA’s) coupled with high deductible insurance coverage.  Since we are concerned about controlling costs, it seems obvious that there ought to be more of an emphasis placed upon first party as opposed to third party payment, particularly for low severity, high frequency claims.  By exposing consumers more to the financial consequences of their health care consumption decisions, Health Savings Accounts have the potential to “bend the cost curve” by creating incentives for better decision-making by consumers and greater innovation and competition by health care providers. Efficiently priced excess of loss insurance coverage that is layered on top of the HSA’s protects consumers from catastrophic loss, and also further reinforces incentives for competition and innovation in the financing and provision of health care services.  To Mr. Mackey’s plan, I would also add assigned risk/joint underwriting association (JUA) mechanisms in order to address the problems of the uninsured and pre-existing conditions.  These types of mechanisms are widely and effectively used in property-casualty insurance markets (e.g., auto insurance, workers compensation, etc.) for the purpose of providing coverage to individuals and firms who are otherwise “uninsurable” in the voluntary markets.

As I have already noted, such reforms would also create even more opportunities for innovation in the financing of health care.  For example, University of Chicago Professor John Cochrane has proposed a particularly compelling idea about insurers offering long-term health insurance contracts in which future insurability is guaranteed, regardless of the manner in which one’s morbidity risk changes throughout the term of the insurance contract. This is conceptually similar to so-called level term contracts offered in the term life insurance market already, and it seems like an obvious innovation in a free market.  However, this kind of innovation is not possible as long as we continue to tie the provision of health insurance to employer groups.  Group policies are typically contracted for on a 12 month basis, and level term health insurance contracts are inherently less feasible with groups than for individuals.

Assorted Links (8/26/2009)

Here’s a list of articles that I have been reading (and videos that I have been viewing) today (organized by topic):

Financial Crisis

  • Where Cash for Clunkers Ran Off the Road, by John Quelch
  • I highly recommend viewing Economic Bloggers and the Renewal of Entrepreneurial Capitalism, a video from the Kaufman Foundation.  According to the Kaufman Foundation,

    “The video takes a behind-the-scenes look at economic bloggers offering the experts’ perspectives on the business of blogging, tracing the steps that lead to the economic meltdown, and giving their views on the role innovation and entrepreneurship will play to lift the global economy out of recession…the 20-minute video…highlights some of America’s top economics bloggers, including professional and academic Ph.D. economists and journalists who have built loyal Web audiences by offering in-depth economic analysis and provocative commentary.”

    Here’s the video:

Math and Statistics

Political Economy

Prediction Markets

  • According to The Intrade Gazette (TIG), Obama’s Approval Ratings Slide Further
    TIG: “The fierce debate over health care reform continues to prove a drag on Barack Obama’s job approval ratings…The Intrade market shows a 85.0% chance his approval rating will be above 45.0%, a 55.5% probability it will remain above 50.0% and only 20% that it will be back over 55.0%. This may also indicate a victory on health care will not be forthcoming.”

Assorted Links (8/25/2009)

Here’s a list of articles that I have been reading today (organized by topic):

Energy Economics

  • ‘Peak Oil’ Is a Waste of Energy, by Micheal Lynch
    New York Times: “A careful examination of the facts shows that most arguments about the theory of peak oil are based on anecdotal information, vague references and ignorance of how the oil industry operates.”

Game Theory

Health Care Reform

  • In Defense of the Public Option, by Alex Tabarrok
    Professor Tabarrok argues that “…health insurance reform will increase the market power of insurance firms and drive up prices.  In this scenario, the public option at least has a raison d’etre, although whether it actually fulfills it’s purpose is an open question.”


  • Obama’s Summer of Discontent, by Fouad Ajami
    Professor Ajami’s historical references are quite apropos, and I even learned about an interesting French phrase from reading this article: lèse-majesté. According to Wikipedia, “…lèse-majesté is the crime of violating majesty, an offense against the dignity of a reigning sovereign or against a state.”
  • Saving the Obama Presidency, by William McGurn
    Mr. McGurn draws some interesting (although perhaps somewhat speculative) parallels between August 2009 and August 1994. August 1994 marked a major turning point for the Clinton presidency, in the sense that in the wake of the failure of the so-called “HillaryCare” initiative, President Clinton “freed” himself from his party’s left wing and returned to the centrist themes on which he had originally campaigned. McGurn’s question is whether President Obama will follow President Clinton’s example, thereby “saving” his presidency.