January 23, 2021

Economic Scene: For Obamacare, Some Hurdles Still Ahead

It chose what was a novel solution for the time. It dropped its standard deal — a subsidy that rose in line with the price of the insurance policy — and switched some 10,000 workers on its payroll to a fixed subsidy that encouraged them to shop around for care.

For Harvard’s accountants, the change worked wonders. A study a couple of years later by David M. Cutler, a Harvard economist, and Sarah Reber, a Harvard graduate, concluded that competition among insurers cut the university’s health bill by 5 to 8 percent.

But not everybody was equally pleased. Families of workers who chose the Preferred Provider Organization offered by Blue Cross/Blue Shield — the most comprehensive plan, with lots of doctors and hospitals on its network — faced a $500-a-year jump in their out-of-pocket spending on health care.

Younger and healthier workers canceled their P.P.O. plans, enrolling in cheaper H.M.O. options or dropping Harvard insurance altogether. Left with a sicker patient base, the P.P.O. raised its premiums further, which prompted the next layer of relatively healthy customers to leave.

And so on. In 1997, Blue Cross/Blue Shield withdrew its P.P.O. from the market, making it a victim of what economists call the death spiral of adverse selection.

In a couple of months the nation is set to experience a similar shock on a very large scale: the greatest change in how Americans pay for health care since the advent of Medicare nearly half a century ago.

Come October, millions of uninsured people will be able to choose one of several health plans, offered at four different tiers of service and cost through new health exchanges coming onstream in every state.

Cheap “bronze” plans will shoulder some 60 percent of patients’ medical expenses. Pricey “platinum” plans will cover at least 90 percent. But insurers will not be allowed to exclude people with pre-existing conditions, or charge more for the sick, or put a lifetime cap on medical costs. Their policies will have to cover a minimum standard of medical care. And the government will subsidize those who cannot afford to buy the policies.

President Obama and his advisers hope the overhaul will do two things. The first is to extend coverage to tens of millions of Americans who today lack health insurance. The second is to hold the line on rising health care costs.

“Over time, success will depend on what happens to the cost curve,” Professor Cutler told me. “If we don’t bend the cost curve, everything will fail. The government won’t be able to afford it. Nobody will be able to afford it.”

In theory, the overhaul could meet both goals. Millions of new Americans armed with a subsidy and shopping among plans would bring consumer choice to bear, finally, on the health care industry. Insurers would compete to create policies that offered the most value for money, pressuring hospitals and doctors on behalf of all of us.

Yet despite the care the administration took in establishing incentives and safeguards, even some of Obamacare’s most committed backers are wondering whether the experiment will work as advertised — or, like Harvard’s P.P.O., go off the rails along the way.

Adverse selection is perhaps the direst threat. For Obamacare to work, millions of healthy, young, uninsured Americans must join a health plan to counterbalance the sicker millions who are most likely to buy insurance. Otherwise, health plans on the exchanges will have to raise premiums to shoulder the higher costs.

Selection will also take other forms. Healthier Americans will probably flock to cheaper bronze plans. And insurers will vie to enroll the healthy. In some states, big insurers have chosen not to participate in exchanges to avoid their strictures. On the outside, they could still sell cheap plans to skim off the healthy and avoid a rule that insurers on the exchanges must also offer more generous silver and gold plans.

Adverse selection is not the only risk.

A few studies have found that more competition among health insurers leads to lower hospital fees on average and that premiums rise when insurer competition diminishes. But researchers have also found that top hospitals — which any decent plan must have on its network — increase their fees when more health plans compete for their business.

E-mail: eporter@nytimes.com; Twitter: @portereduardo

Article source: http://www.nytimes.com/2013/08/08/business/economy/for-obamacare-some-hurdles-still-ahead.html?partner=rss&emc=rss

Economix Blog: Podcast: Econometrics, Bailouts, Jobs and Mankiw

The economics profession has been blamed for failing to predict the global financial crisis, much less prepare for it or resolve it.

Thomas J. Sargent and Christopher A. Sims, who are to receive the Nobel prize in economics in Stockholm on Dec. 10, have been thrust into the spotlight at a very awkward time.

In a discussion with David Gillen on the new Weekend Business podcast, I explain how the two men rose to their current eminence and what their contribution to economics has been.

As I write in an article on the cover of Sunday Business, neither economist favors giving simple prescriptive advice about complex problems. But both have influenced the thinking of policy makers in governments and the central banks, and they have helped advance the technical ability of econometricians. They’ve also been embraced by conservatives, although they say they are actually lifelong Democrats.

In a separate conversation, Gretchen Morgenson discusses new information about bank bailouts during the financial crisis, the subject of a report by Bloomberg News, and of her column in Sunday Business.

Catherine Rampell talks about a drop in the unemployment rate in the United States, from 9.0 to 8.6 percent in October. Much of the reduction appears to be a result of people leaving the labor force, although 120,000 new jobs were created during the month.

And Greg Mankiw, the Harvard economist, writes about being a target of an Occupy demonstration. Students walked out of his lecture class, protesting what they considered a conservative bias in his teaching. He explains his thinking about economics and about the protest, and invites those students who are still missing to return.

You can find specific segments of the podcast at these junctures: Catherine Rampell on the jobs report (29:25); news headlines (25:33); Jeff Sommer and David Gillen on the Nobel laureates (22:26); Gretchen Morgenson on bank bailouts (12:27); Greg Mankiw on the Occupy movement (6:44); the week ahead (1:18).

As articles discussed in the podcast are published during the weekend, links will be added to this post.

You can download the program by subscribing from The New York Times’s podcast page or directly from iTunes.

Article source: http://feeds.nytimes.com/click.phdo?i=5c3037985b0e5e3cb65c72e1e3da391c

Economix: Podcast: G.D.P., European Stocks, Bernanke and Bing

If you were hoping for some economic good news to close out July, forget it. Not only did the Commerce Department offer up a gloomy assessment of the second-quarter gross domestic product, it also said the recession of 2007-9 was deeper and the recovery slower than we thought.

As Catherine Rampell reports, the G.D.P. —  that closely watched measurement of economic output —  grew at an annual rate of only 1.3 percent in the second quarter. That’s barely breathing. In fact, the economy over all is smaller now than when the recession began in 2007, she says. 

In the Weekend Business podcast, Ms. Rampell offers up one tiny bright spot: automobile sales were not as bad as expected.

Meanwhile, the Fundamentally columnist for Sunday Business, Paul Lim, urges investors not to run away from stocks in European companies, despite economic uncertainty there. In a podcast interview with Phyllis Korkki, he argues that European companies have fared slightly better over all than their American counterparts.

Steve Lohr talks with the Sunday Business editor, David Gillen, about his article in this week’s section on Microsoft’s high hopes for the search engine Bing — its David to the Goliath Google. And Gregory Mankiw, the Harvard economist, writing in the Economic View column, defends the performance of Ben S. Bernanke, the regularly pummeled chairman of the Federal Reserve.

You can find specific segments of the podcast at these junctures: the G.D.P. report (31:09); news summary (22:52); Microsoft (19:46); Gregory Mankiw (12:45); European stocks (6:24); the week ahead (0:51).

As articles discussed in the podcast are published during the weekend, links will be added to this post.

You can download the program by subscribing from The New York Times’s podcast page or directly from iTunes.

Article source: http://feeds.nytimes.com/click.phdo?i=679b219666eab3eda39ddf01b95bdcce

Economix: Podcast: Taxes, Debt and Regulation

General Electric is the biggest corporation based in the United States, and it had a very successful 2010, with billions of dollars in profits.

But it paid nothing at all in taxes in the United States. As David Kocieniewski writes in The Times, the company actually claimed a tax benefit of $3.2 billion. What is the basis of G.E.’s extraordinarily successful tax strategy — and what are its implications for the fiscal health of the United States? We discuss these issues at length in the latest Weekend Business podcast.

In the Economic View column in Sunday Business, Greg Mankiw, the Harvard economist, adopts the voice of a future president of the United States on a day of avoidable crisis: the day the country’s debt finally comes due. In the podcast, I talk to Professor Mankiw about the current crisis that prompted this dystopian vision, and about his prescriptions for making sure it never happens in the real world.

The Dodd-Frank law emerged in response to the financial crisis of 2007 and 2008. It is hundreds of pages long, but Congress left many of the regulatory details to the Treasury and other government entities to decide. Gretchen Morgenson joins me in a conversation about some major issues that are being resolved behind the scenes.

One is whether foreign-exchange contracts should be exempt from the requirement that financial derivatives be cleared and traded on exchanges or swap facilities. Another involves the classification of mortgages: Which of them should be deemed risky enough to require that some of their credit risk be retained by issuers of asset-backed securities? And a third involves what are known as covered bonds — pools of debt obligations whose assets could be out of the reach of regulators in the event of a bank failure. In her column in Sunday Business, Ms. Morgenson writes about these controversies — and calls for much greater transparency to protect investors.

In another conversation on the podcast, David Gillen and Natasha Singer discuss Estée Lauder, the woman and the global business based on the promise of beauty. Ms. Singer writes in Sunday Business about how the Lauder family — and other top managers at the company — are trying to preserve the legacy of the company’s founders, while also making the business nimble enough to compete in a world where Lady Gaga is a trendsetter.

A discussion of the week’s news also includes the supply-chain disruptions caused by the disasters in Japan, the financial and political problems in Portugal, ATT’s proposed merger with T-Mobile, and the legal decision that sets back Google’s plans for digitizing books.

As articles discussed in the podcast are published, links will be added in this post.

And you can find specific segments at these junctures: General Electric and corporate taxes (36:31); headlines (29:15); Estée Lauder (26:48); financial regulation (17:54); Gregory Mankiw on the federal debt (9:03); the week ahead (2:04).

Article source: http://feeds.nytimes.com/click.phdo?i=50b3b93e17155cdb05a2b6b52134d8a9