Medicare Advantage – the Private Option

June 29, 2014
Posted by Jay Livingston

Healthcare stubbornly refuses to conform to conventional economic models, particularly the idea that competing private firms are more effective than government.  Medicare Advantage may be the latest example of privatization not working out the way it’s supposed to.

Medicare Advantage is part of George W. Bush’s  Medicare Modernization Act (MMA) of 2003.  Medicare, the original,  is a single-payer system; the government pays doctors. Medicare Advantage is the private option – the government pays money to insurance companies, who in turn sell insurance plans for seniors. 

The theory behind this privatization of Medicare was that it would bring more insurance companies into the market, and the competition among those companies would result in better and cheaper medical coverage.  Opponents of the MMA saw it as yet another instance of the Bush administration giving away money to business. 

Did the Medicare Advantage subsidies bring better results? We don’t have a randomized control study, but a provision of the MMA allows for a sort of natural experiment.  Counties in areas with a population of 250,000 or more got subsidies that were 10.5% greater than counties in areas under 250,000.  Three Wharton professors* compared the outcomes. 

One of the results comes right out of the Econ textbook: where subsidies were higher, more firms followed the money and entered the marketplace. They also enrolled more people.

The first key takeaway is that a firm’s decision to enter a market is highly responsive to how much the government pays. When the government pays more for private health insurance through Medicare, more insurers compete to offer that coverage.

But the important question is whether the money that brought companies into the marketplace went to cheaper and better medical care.  And if not, where did the money go?

Our findings indicate that we see more insurers enter and we see more people enroll, and we see more advertising expenditures. But we actually don’t see much better quality when you pay plans more. The question then naturally rises, “Where does the money seem to go?” And in a final empirical analysis, we try to see how much of it ripples through to profits of health insurers. And we see that a quite significant share of it does. [emphasis added].

This is not really surprising. For-profit firms want to make a profit. In theory (classical economic theory), they should make that profit by providing a better product. Unfortunately, that’s not what happened.

A second takeaway is that, at least given the many quality measures that we can look at, we don’t find a ton of evidence that paying plans substantially more leads to much better quality. . . .  We didn’t see a big improvement in quality. And we’re talking about billions of dollars in additional government spending as a result of this somewhat higher reimbursement in the places with a population of 250,000 or more.

Under Obamacare, reimbursements to Medicare Advantage will shrink. Reimbursments to Medicare Advantage have been 14% higher than those in the traditional Medicare, and Obama care aims to reduce that difference. Obama opponents have run scare ads, and of course the insurance companies have lobbied heavily against the reductions.  But according to the Wharton study, the reductions will have little impact on seniors.

there are a number of changes that will take effect over the next several years as a result of the Affordable Care Act, better known as Obamacare. Chief among them is a reduction in the generosity of reimbursement of Medicare Advantage plans… our evidence suggests that the costs of those reimbursement cuts for consumers might not be so great after all..

---------------------------------

*Mark Duggan, Amanda Starc, and Boris Vabson, NBER paper “Who Benefits when the Government Pays More? Pass-Through in the Medicare Advantage.” The interview with Duggan is here. 

Soccer and Status Politics

June 27, 2014
Posted by Jay Livingston

Ann Coulter nails it in her column on soccer.  Not the part about the rising interest in soccer signalling America’s  moral decay. That’s just her usual attempt to be provocative.  What Coulter gets right is that soccer is part of the cultural divide.  The question she raises is much bigger than whether soccer is an inferior sport to baseball or football. It’s “Whose country is this anyway?”

Though she doesn’t say so explicitly, Coulter frames soccer is a matter of status politics – the struggle for recognition, respect, and prestige among different groups. She sees the soccer demographic as is a coalition of White liberals and immigrants of the past generation or two. The anti-soccer side comprises what Sarah Palin called “the real America” – non-urban, White, Protestant, nativist, Republican.  That’s Coulter’s side, and she’s worried that in the long run, her side will lose.

We’ve seen this match-up before. In the late 19th and early 20th centuries, Prohibition provided a vehicle for “real Americans” to assert the virtue and predominance of their way of life over that of the immigrant, non-Protestant groups. The opposition to Obamacare (and just about any Obama policy) had pretty much the same roster.  (See an earlier post here.) In both cases, these groups felt a threat to their position of privilege.  The anti-Obama crowd is explicit about this sense of loss and threat. America is “our” country, “they” have taken it away, and we are going to take it back.  (See my “Repo Men” post from three years ago.)

Coulter is absolutely open about her nativism and Xenophobia – none of this “America is a nation of immigrants” nonsense. Or as she says, “I promise you: No American whose great-grandfather was born here is watching soccer.”  And one of the bullet points in her argument that soccer is a sign of moral decay is

• It's foreign.

Followed by

• Soccer is like the metric system, which liberals also adore because it's European.

(The metric system is simpler and more logical. But it’s used in all those foreign countries, and it’s used universally in science – two reasons for conservatives like Coulter to give it the red card.)

Maybe liberals do like soccer because it’s European, or more accurately international.  But it’s equally true that conservatives fear things because they are foreign.  They demand that the rest of the world become American.  In 2006, John Tierney, a conservative/libertarian writing for the Times, said (here), “Instead of us copying the rest of the world, the rest of the world could learn from us. Maybe they love soccer because they haven’t been given better alternatives.” *

To see what else the soccer soccer coalition liked, I went to Google correlates and entered “world cup.” Unfortunately, data for the current World Cup are not in, so most of the queries are from 2010.  The map looks like what you would expect – the states where people Googled “World Cup” were the Northeast corridor and California. What’s more puzzling is that many of the highest correlates were for movies – Oscar nominees like “Avatar” and “The Hurt Locker,” but also movies liberals like – “Vicki Cristina Barcelona,” “Inception,” and “Eat, Pray, Love.” All these had correlation coefficients with “World Cup” of 0.87 or higher. Here are the results for “World Cup” and “Oscars 2010.”

The other highly correlated cluster of terms had a different theme:

• hanukkah 2010 (0.8989)
• passover 2010 (0.8972)
• yom kippur 2010 (0.8950)
• chanukah 2010 (0.8874)

Here are the graphics:

This does not necessarily mean that people who Googled “passover 2010" also Googled “World Cup.” It means only that in states where people Googled “passover 2010" people also Googled “world cup.” In New York and California, for example, it might have been Jews looking for information about Passover and while Hispanics Googled “World Cup.”

Soccer, Jews, and moral decay.  This combination reminded me of something Coulter said in a 2007 interview with Donny Deutsch, who happens to be Jewish (the full transcript is here):

COULTER: Well, OK, take the Republican National Convention. People were happy. They're Christian. They're tolerant. They defend America, they — DEUTSCH: Christian — so we should be Christian? It would be better if we were all Christian? COULTER: Yes. DEUTSCH: We should all be Christian? COULTER: Yes. Would you like to come to church with me, Donny? . . . . . COULTER: No, we think — we just want Jews to be perfected, as they say. DEUTSCH: Wow, you didn't really say that, did you? . . . . . . DEUTSCH: Ann said she wanted to explain her last comment. So I'm going to give her a chance. So you don't think that was offensive? COULTER: No. I'm sorry. It is not intended to be. I don't think you should take it that way, but that is what Christians consider themselves: perfected Jews.

Coulter didn’t mention soccer at the time, but perhaps that is yet another sign of the how Jews are imperfect compared to Christians – they live in places where soccer is popular, places where small-town and suburban WASP conservatives are not so dominant. For Coulter, that’s not just imperfect, that’s moral decay.


----------------------
*In 2012, Marco Rubio, addressing the Republican convention, used nearly identical language – the same know-nothing arrogance – in speaking about Democratic proposals like Obamacare: “These are ideas that threaten to make America more like the rest of the world instead of making the rest of the world more like America.”

We Still Don’t Call It Football, But . . .

June 26, 2014
Posted by Jay Livingston

How American is soccer now as a spectator sport? My totally unscientific indicator is the front page of New York tabloids.  And today, they both had the US-Germany World Cup match.

The inset in the Daily News picture is a letter written by coach Jurgen Klinsmann for workers to give to their employers:  World Cup as excused absence. 

(Someone ought to remind Coach Klinsmann that this is the US, not Europe. Employers here don’t even have to give workers a day off for childbirth.)

Eight years ago, the World Cup was not front page news, perhaps because team USA went 0-2 in the first round. In 2010, soccer made it to the front page of the Post, when the US was knocked out of the tournament by Ghana.

It’s still one of my favorite captions.  But if the US loses today, I doubt that we’ll see this kind of ironic humor.

And Then There Were Two

June 19, 2014
Posted by Jay Livingston

Horace Silver died yesterday. He was 85.

Great musicians have an unmistakable sound. Horace’s chord voicings were distinctive. Even if you hear him comping behind a horn solo, you know it’s Horace.

Horace and his music rarely reached beyond the jazz audience. Some jazzers complained that Steely Dan stole the opening vamp from “Song for My Father” for their “Rikki Don’t Lose That Number.” But as someone else said, you can’t copyright one and five.  Norah Jones, who learned and played jazz as a teenager, used to sing “Peace” in her concerts. “This is a Horace Silver tune,” she says quickly after the first chord on one live recording, and I wonder, how many people in that audience knew who Horace is.  She sings and plays the song beautifully.  Outside of that, I know of no crossovers.

Horace is known less for his piano soloing, though that too is unmistakable, than for the groups he led. So many great players have stints with the Horace Silver quintet early in their careers – Hank Mobley, Joe Henderson, Donald Byrd, Art Farmer, et al.

But he will be most remembered for his writing.  I started thinking of his compositions that I know – know well enough to play and have them be recognizable. It started with “The Preacher,” which I first heard when I was thirteen or so on a four-trombone Kai Winding record. “Opus de Funk,” “Strollin',” “Nica’s Dream,” . . . .  and the hits just kept on coming. My Real Book app has eleven Horace tunes, and that leaves out quite a few.  His best known is probably “Song for My Father.” My own list of favorites includes, for idiosyncratic reasons, lesser known tunes like “Cool Eyes” and “The St. Vitus Dance.”

Dan Okrent tweets that with Horace’s death, of the musicians from the Great Day in Harlem photo, only two remain: Benny Golson and Sonny Rollins. 

(Horace is at the left, Golson at the top of the steps, Sonny Rolllins just to the right behind Marian McPartland and Mary Lou Williams.)

These were the musical heroes of my youth, and it’s strange to see them gradually disappear. Others in the photo are from a slightly earlier era – musicians whose names and sound were familiar, but I had no idea what they looked like.  One night, probably in 1994 when a documentary film had given the Art Kane photo some popularity, I was walking up Amsterdam Ave. and saw the great pianist Tommy Flanagan looking in the window of a neighborhood store. Inside was the photo. I stopped, and we talked briefly. Tommy would point to the faces of those who had already passed on.  “That’s Buck Clayton. There’s Red Allen.”

And now, that’s Horace Silver.