Thursday, October 23, 2014

Comparing the administrative costs of Obamacare to single payer

Above: Critics of Obamacare from the right
Below: Critic of Obamacare from the left

Since this is a very long post, I wanted to emphasize at the beginning that we're most interested in two numbers: $5 billion and 27 million. Obamacare is (at least) $5 billion more expensive than single payer. And, Obamacare leaves 27 million people uninsured that would otherwise be covered by single payer. Essentially, our political system chose to pay $5 billion to prevent 27 million people from getting health insurance.
[UPDATE]--The $5 billion number comes from only start-up costs for the Obamacare website and exchanges--so only for the exchanges and only through 2014. Himmelstein and Woolhandler use CMS estimates to calculate the increase in administrative costs caused by Obamacare to the entire health care system (public and private) from 2014 to 2022: over a quarter of a trillion dollars. See full update at the bottom of this page.

This is the third and final post on how the design of social welfare programs affects their administrative cost. The first two posts (part 1, part 2) established the theoretical framework, exploring how various aspects of social policy design, like eligibility, actuarial values, economies of scale, etc, should affect administrative cost and program efficiency. Of course, theory does not always match reality, so a separate series of two posts compared the individual and aggregate costs of the American versus social democratic welfare states using real world data. This demonstrated that the theory behind program design is sound: the theoretical administrative efficiencies of the social democratic model indeed result in enormous cost savings in the real world.

Missing thus far is an example of social policy analysis using the lessons of administrative design on a real world social welfare policy. This post concludes this series on administrative cost by performing such an analysis on Obamacare. We will examine all the areas of administrative cost (and waste) covered in parts 1 and 2: universal eligibility, actuarial values, economies of scale, automatic enrollment, and other, miscellaneous administrative issues. Since we've already established that the social democratic (single payer) system is the most efficient option, we will compare the administrative structure of Obamacare to the single payer model, and how Obamacare's design makes it less efficient than single payer.

Before beginning, it's worth reiterating that Obamacare is basically the law Obama wanted, not something watered down to get conservative votes (see here and here) (and recall that every single Republican in both houses of Congress voted against the bill, minus one abstension).

Obamacare and universal eligibility
Single payer systems derive much of their efficiency from universal eligibility. When everyone is eligible, there is no need to hire legions of bureaucrats to ensure that all applicants meet eligibility requirements, or verify that all current beneficiaries remain eligible. Every step away from universal eligibility means that some system must be created and staffed by bureaucrats to ensure that only eligible applicants are able to participate, and this does not happen for free.

Sunday, October 5, 2014

Links worth reading: Jacobin edition

Jeff Bryant on the (predictably) broken promises of the charter school movement

Glenn Greenwald on the American political class's lurching from supporting dictatorship, then democracy, then back again to dictatorship in Egypt


The next issue of Jacobin is due out very soon. It sure seems longer than 3 months since the last issue of Jacobin was sent out. To hold you over until the next issue, here are some of my favorites from Jacobin so far:

Megan Erickson - The Strike that Didn't Change New York
Llewellyn Hinkes-Jones - Bad Science
Pankaj Mehta - There's a Gene for That
Seth Ackerman & Mike Beggs - Don't Mention the War
Gavin Mueller - The Rise of the Machines
Penny Lewis - The Myth of the Hardhat Hawk

Wednesday, October 1, 2014

U6 Watch: September 2014

Vox has two articles on the labor market worth reading, both highlighting recently released data that confronts the misleading U3 unemployment rate. A drop in the U3 unemployment rate is not an entirely positive development because:
  • Some of the drop in the U3 unemployment rate continues to reflect a drop in the labor force participation rate. This disproportionately affects female workers and is still vastly underestimated by policy makers and commentators.

The development of early maternal health policies in Finland

Note: This post was created to supplement a different post on the Finnish welfare state. For clarity, a long blockquote I wanted to include in that post is instead published here.

The book Birth by Design details several countries' transition to a healthcare system in which childbirth occurs in a hospital, instead of in a family's own home. Lacking hospital infrastructure, impoverished Finland had an additional, intermediary step. Before transitioning to birth in hospitals, the Finnish government expended significant effort to provide professional birth attendant services for in-home births. The the innovative strategies to that ultimately overcame the many difficulties of this process make this decades-long event a classic example of social policy design: