Proof that isn’t

Posted by & filed under CGR Staff, Rochester Business Journal.

Kent GardnerWe are routinely bombarded by claims that have been “proven” with statistics. Today’s column offers tips in judging these claims.

  • Surprising results get headlines. “Did you hear that hurricanes with female names are more deadly? Who knew?!!” An Internet search of this report from last week yields thousands of citations.
  • That’s why autism is on the rise!! It’s the vaccines!” The 1998 study making this claim got a lot more ink than The Lancet’s retraction, after the study’s publisher learned that the results were fraudulent.

Pure fabrication may be rare, but many studies are published with claims that should be served with many grains of salt. The first question to ask: “Is there enough data?” Read more »

A Perspective on the Affordable Care Act: Part 2

Posted by & filed under CGR Staff, Rochester Business Journal.

Kent Gardner

Will more be insured? Will we have the health professionals to meet their needs?

Last month’s column looked at how health insurance eligibility changed under ACA and explored the “coverage gap” in states choosing not to expand Medicaid. This week we’ll explore other implications of this revolutionary change in how health insurance is secured and paid for.

On balance, will the share uninsured go down?

Cutting the ranks of the uninsured is a key objective of ACA. Not all of the 8 million who signed up for new plans were previously uninsured: According to early surveys, two thirds to three quarters of these enrollees were changing plans. No surprise here. ACA offers subsidies that are significant for many, making the Marketplace plans very attractive for those who qualify. Others who didn’t qualify for subsidies still found the Marketplace plans a good deal. Competition spurred by the Marketplace drove down prices for nonemployer plans in some states, including New York.

Yet some will choose to pay the penalty for being uninsured instead of the premiums. Insurers are now required to cover a fixed set of preventative services at no extra cost to the consumer. The law also limits what consumers can be charged for care within a single year. Initially, ACA required that a 2014 policy must cover all costs above $6,350 for singles or $12,700 for families. That’s the “out-of-pocket maximum,” now delayed until 2015. (These deductibles are subsidized for individuals and families below 250% of the poverty line.) This shifts the financial burden of major illness from the insured to the insurer. Both changes make for better insurance—but they cost insurers more and premiums will rise. Read more »

A Perspective on the Affordable Care Act

Posted by & filed under CGR Staff, Rochester Business Journal.

Kent Gardner

Part 1: Health Insurance Coverage for the Poor

The Affordable Care Act’s initial enrollment period is over and Health & Human Services Secretary Kathleen Sibelius has resigned, having earned a jacket full of Purple Hearts from countless Congressional hearings. What have we wrought?

Make no mistake—this will revolutionize health care delivery in the United States. As the Arab Spring suggests, revolutions can be good or bad. Or both, as in this case.

In the first of a two-part column on the Patient Protection and Affordable Care Act (ACA), let’s focus on how coverage for the poor has changed. Read more »

I’m ready for some Global Warming

Posted by & filed under CGR Staff, Rochester Business Journal.

Kent GardnerThe Polar Vortex has me thinking about global warming. No, not the reflexive, “How could the world be warming and still post the coldest temps in recent memory?” I’m on board with the scientific consensus on climate change and I’ve a healthy appreciation for the randomness of complex systems.  Most economist & weather forecaster jokes are interchangeable, after all. Read more »

Collateral Damage Revisited: The Minimum Wage

Posted by & filed under CGR Staff.

Kent GardnerOnce again, the Congressional Budget Office is weighing in on a current policy debate—in a just-released report, they have sided with the consensus view among economists that an increase in the minimum wage will eliminate jobs: “Most [low wage workers] would receive higher pay that would increase their family’s income, and some of those families would see their income rise above the federal poverty threshold. But some jobs for low-wage workers would probably be eliminated, the income of most workers who became jobless would fall substantially, and the share of low-wage workers who were employed would probably fall slightly.” If the minimum wage goes to $9/hour, CBO estimates job loss of about 100,000 in the second half of 2016, relative to what might otherwise have occurred. If the minimum wage rises to $10.10, they estimate the loss at about 500,000 jobs.

Every policy change has good and bad effects. If the goal is to maximize the number of jobs, we should eliminate the minimum wage entirely. But that would open up some workers to a level of exploitation most of us would find unacceptable, so we put up with some degree of job loss in exchange for this protection. And we counter the effects of the minimum wage on labor demand by putting more money into improving the employability of low wage workers, thus boosting the supply of workers who are more productive. Read more »

That’s why we call it “work”

Posted by & filed under CGR Staff, Rochester Business Journal.

Kent GardnerTwo weeks ago, the Congressional Budget Office stirred up a hornet’s nest with its estimate of the impact of the Affordable Care Act (ACA) on jobs. Here’s the key sentence: “CBO estimates that the ACA will reduce the total number of hours worked, on net, by about 1.5 percent to 2.0 percent during the period from 2017 to 2024, almost entirely because workers will choose to supply less labor—given the new taxes and other incentives they will face and the financial benefits some will receive.” The annual reduction is estimated to be a headline-grabbing 2.5 million jobs.  Download the report here.

Critics of Obamacare greeted the news with barely disguised glee: “The CBO says that Obamacare is a job killer,” they crowed. That’s not what it said: “The estimated reduction stems almost entirely from a net decline in the amount of labor that workers choose to supply, rather than from a net drop in businesses’ demand for labor.” The jobs aren’t eliminated—workers choose not to fill them. Read more »

Don’t underestimate the role culture plays in the economy

Posted by & filed under CGR Staff, Rochester Business Journal.

Kent GardnerFew of us make decisions based on a purely rational assessment of our own self-interest. And thank goodness for that! Life with homo economicus, “economic man,” would be dreary indeed. There is a deep tradition in economics that considers the role that “institutions”—defined here as traditions, cultural mores and social organizations—play in society. A cultural value of honesty, for example, contributes to a more efficient economy. Traditions and cultural norms, even without any claim to morality, also bring societal benefit. Laws and explicit rules cannot create a good society unless they are built upon a strong cultural foundation. I illustrate this below in three spheres: the macroeconomy, government, and the firm. Read more »

Oops about OOPM: You really can’t keep your health plan

Posted by & filed under CGR Staff, Rochester Business Journal.

Kent Gardner

The Tampa Bay Times Politifact has awarded its coveted “lie of the year” rating to President Obama’s oft-repeated “If you like your health plan, you can keep it” promise. Personally, I’m happy to chalk this one up to naiveté and the heat of the political moment(s). In this column we’ll explore why the statement was false—and why so many health insurance policies were cancelled due to the Affordable Care Act (ACA or Obamacare). Read more »

Should we tax medical devices?

Posted by & filed under CGR Staff, Rochester Business Journal.

Kent GardnerLike most aging runners, my wife’s knees aren’t what they used to be. Fortunately, there is a solution to this problem—knee replacement has become nearly routine surgery.  The Agency for Healthcare Research and Quality reports 718,000 hospital stays in 2011 were due to “knee arthroplasty” or total knee replacement. The rate per 10,000 population nearly doubled from 1997. Yes, the aging of the population has something to do with the increase—yet even among 65-84 year olds the rate increased by 59% (http://www.hcup-us.ahrq.gov/reports/statbriefs/sb165.jsp). And yes, the rising rate of obesity explains part, but not all, of the trend.

We needn’t look to sophisticated studies for the reason as joint replacement surgery can significantly improve quality of life. A 2011 “meta analysis” of over 100 studies concluded that nearly 90% of artificial knees were still doing the job 10 years after surgery. As these studies necessarily involved surgeries that took place before 2000, results have almost surely improved. For most patients, an artificial knee (or hip) can be expected to last 15-20 years. Recovery time is getting shorter, too. Many patients are back to driving in a month. If you can’t walk without pain, an implant would seem to be an easy choice.  Provided you can convince your insurer to foot the bill.

Which brings us to the cost of artificial joints. Did you wonder why the medical device industry gets its very own tax under the Affordable Care Act? American health care’s dysfunction has enabled the medical device industry to earn very robust profits, thus making it a target for special treatment. Does this tax make sense? Read more »

The Challenge of Matching Jobs and Job Seekers

Posted by & filed under CGR Staff, Rochester Business Journal.

Kent GardnerThere is nothing more debilitating than unemployment—both for the individual and society. The jobless are deprived of the dignity of work and the community is deprived of the benefit of their labor. We look to workforce development programs and higher education to match jobs and job seekers and, often, to help the unemployed gain the skills that are needed in the workplace.

Recent attention has focused on “middle skills,” those positions requiring some postsecondary technical education and training but not a four year college degree. A recent Harvard Business Review article[*] found that nearly half of new job openings from 2010 through 2020 will be middle-skills positions in fields such as computer technology, nursing, and high-skill manufacturing. Community colleges (such as Monroe Community College) are particularly well suited to addressing the middle skills gap and are exploring how they can best fill that need.

This leads to a reasonably neat policy prescription: If we have willing workers whose skills simply fall short, then the public’s role is to provide a bridge to employment through training. Easy, right? As one of the Rochester area’s most strategic training providers, Monroe Community College is continuously seeking better information on the needs of its market. Read more »