In Washington this time of year, thoughts turn to getting the hell out of Dodge for climates not shaped by former swampland.  The coming weeks will be decisive for the fate of healthcare reform, as members of Congress go home to hear from constituents, interest groups dig in for the coming battle royale, and the press looks for something to cover other than kidnappings and hurricanes.  Healthcare reform is now as close to passing as it has ever been in modern America.  But I'm going out on a limb and predicting it will fall short again.

From the beginning, reformers have been most interested in expanding coverage to the uninsured and only secondarily interested in bending the cost curve.  But adding coverage costs lots of money.  Even absent coverage expansions, as current Office of Management and Budget director Peter Orszag made clear while director of the Congressional Budget Office, healthcare costs threaten to explode the federal budget.  Trying to expand coverage without addressing this explosion—indeed, making it much bigger—was never going to be an option politically.  (You think the Blue Dogs and Senate Finance Committee Republicans are dissatisfied now?)

The problem is that the evidence on how to reduce health spending either doesn't exist or involves policies such as greater cost-sharing that are unattractive to progressives.  Instead, reformers lashed themselves to evidence from Dartmouth researchers that much of what Americans spend on healthcare is wasteful.  From this conclusion, the solution that suggested itself to reformers was that to control costs, the delivery of care should be rationalized in some way that at the very least will require federal incentives.  And here the reformers pinned their hopes to a number of policies that came to be known as "game-changers": health IT and medical records, comparative effectiveness research, and a public plan with strong bargaining power against providers.

But they were unduly hopeful.  CBO crushed their strategy by declaring these first-wave game-changers not very game-changing at all.  This blow led to a scramble to find other game-changers.  Suddenly "IMAC"--an independent commission that would make decisions about Medicare reimbursement--and taxing overly generous health plans became the ideas for savings that would allow healthcare reform to succeed.  But then CBO last week poured cold water on IMAC, saying that it had a high probability of not saving much at all.  (At any rate, it was always unlikely that Congress was going to cede authority over Medicare spending policy.  Plus, all the factors that prevent Congress from cost-cutting in Medicare today would work toward pressuring them to overturn IMAC decisions, making cuts unlikely.  Plus the whole IMAC idea raises the threat among skeptical voters of rationing by a body that is relatively unaccountable to the public.)  

Progressive Democrats balked at taxing workers for generous health plans because many of those workers are union members.  This fall, look for John Kerry's proposal to tax insurance companies when they offer too-generous plans to get a boomlet of discussion—but then look for it to fail for the same reason that taxing workers failed.  The idea that insurers will absorb the cost of the tax rather than pass it on to workers is a fantasy, and unions will see this.

Ultimately, the reformers' game-changer strategy suffered from two additional problems.  First, the inefficiencies in American health care are not the driver of cost increases – they just make levels higher.  If we could somehow root out all inefficiency, that would be a one-time cost savings but would still leave the cost-curve unbent.

Second, insured Americans prefer maximal choice with inefficiency rather than ceding power to the federal government to limit their choices (even if the result is more efficiency).  To be sure, they don't like that anyone limits their choices, whether it's the government, their employer, or their insurance company.  When insurers tried to move toward more managed care in the 1990s, workers rebelled and insurers gave up.  As for employers, they knew better than to push their workers in this direction.  And despite the myth that employers have resorted to more and more cost-shifting to workers, what has actually happened is that employers pay as great a share of their employees' insurance as they did 20 years ago, but at the expense of wages and salaries (see page 8 of the linked chapter).

Reformers appealed to the insecurity of insured Americans that they might lose their coverage.  They also appealed to dissatisfaction with the status quo.  The problem is that anxiety about losing coverage is relatively modest--with not many more people concerned about it than are worried about crime or even dangerous errors while flying (page 20).  And polls show that the majority of the insured is happy with everything about its care except for rising costs.

Ultimately, progressive healthcare reform offered the insured highly uncertain promises that their costs would go down and that their current coverage would not otherwise be affected.  The latter claim was disingenuous—regulating insurers is sure to shift costs between the healthy and the unhealthy, the young and the old, the rich and the poor.  In New York, younger workers saw huge increases in premiums when community rating was instituted.  And those whose benefits would be taxed would either pay more or lose that coverage for cheaper plans.  Meanwhile, for those uninsured by choice, progressives offered to increase their taxes on April 15 though a fine unless they spent their limited dollars on health insurance.  

Progressives bemoan the fact that the healthcare system today rations by ability to pay, but rationing by willingness to pay is likely to be the only way that we will control health spending.  Federal limits on healthcare choices will never command enough popular support to ensure that 60 Senators enact game-changing reform.  Employers will continue choosing to invisibly make their workers pay for costly coverage by limiting wage growth rather than explicitly make their workers pay for it.  Insurers will never have the bargaining power to bid down reimbursement to providers enough to matter.

If progressives want to get serious about universal coverage, they will need to get serious about cost control.  And that is likely to require that we stop the unequal treatment of health benefits versus wage and salary compensation and unequal treatment of health insurance when provided by employers or unions versus purchased individually or through other means (page 33).  Changing the tax status of employer-provided health insurance should not be a source of revenue for healthcare reform; it should be coupled with offsetting tax cuts.  The federal government can make it easier for individuals to band together in insurance pools and can even sponsor such pools.  It can subsidize the poor and sick.  But then we should let markets work, and individuals will need to choose between more generous coverage and cost-reducing rationing of care.  If we choose more generous coverage, then who cares about bending the cost curve?  But then we will have no one to blame for rising costs.  If we choose less generous coverage, then we will have rationed our own care by choice.

In the end, reformers may get an expansion of Medicaid or SCHIP for their efforts--though probably not unless the feds subsidize states at an enhanced rate, given the governors' opposition to taking on more costs when their budgets are in such a mess.  But I'm betting that come 2010, we will have lost another opportunity to do a lot of good by not facing up to hard political and economic realities.

 
 

Welcome Daily Dish  and Marginal Revolution readers!

For your first blog posts, you want to pick subjects that are snappy, topical, concise.  Something sexy.  That's why I've chosen to write today about....causal inference.  (I'll return to the question I raised at the end of my first post later on.  When I have an actual readership, I'll try to stick to my word better.)

More often than not, this blog will be about fact-checking arguments and reviewing the right way to measure things.  But other posts will assess various claims made in think tank and academic studies about how X affects Y.  How does family structure affect child outcomes? How does ideology affect voting?  How does discrimination affect the wage gap between men and women?  You ought to know up front how much of a grinch I am when it comes to establishing causality, and why.

There are academic treatises on the proper way to infer causal relationships, but I want to lay it out in a way that will be accessible to all y'all, whether you currently own a graphing calculator or not.  So with the left-brained in mind, I'm going to initially frame the discussion using a dramatic depiction of a debate between an influential Harvard statistician named Don Rubin and a dead physicist named Sir Isaac Newton:

(Scene: Rubin and Newton shooting pool.  ZZ Top's "Tush" plays on jukebox.)

Newton: Did you catch the Real Housewives of New Jersey reunion the other night?

Rubin: (looks up, eyeing Newton suspiciously)  Two ball in the side pocket.

Newton: Nice shot.  (profane word muttered under breath)

Rubin: So to pick up where we left off the other day, I still say that we can only talk about cause and effect if things turn out differently than they would have absent the cause.  For instance, saying that my incredible talent in pool is the "effect" of my mother making me watch all those billiards tournaments on ESPN is saying that if she had not made me watch all those tournaments, I would be stinking up the pool hall.  If, however, the counterfactual—what would have happened absent my mother making me watch billiards—would have been that my father would have made me watch the tournaments anyway, then we can't really say that my mother caused me to be the pool player I am today.  Even if she had not made me watch pool, I would still be just as good as I am.  My mother's efforts would have had no "effect" on my pool talent—they would not have "caused" it.

Newton: Bullstein!  Look, you just sank the two ball, right?  Your brain sent a signal that led your muscles to apply force to the cue stick, that force was transferred to the ball, and the ball went into the pocket—your actions caused the effect.  If the counterfactual would have been that I would have knocked the ball in myself, that doesn't change the fact that what actually happened was that you caused the two ball to go into the corner pocket!


Rubin: Six ball in the corner pocket. (misses)  OK, let me try from another angle (the argument, not the shot).  Let's think in terms of a pressing social policy question—whether divorce is harmful to children.  I say that it all depends on the counterfactual.  A child experiencing a divorce may end up worse off than where she was before the divorce, but if the counterfactual would have been that her parents would have been miserable, combative, and disruptive then she might not have turned out any better.  In that case, divorce would have had no effect on her.  A policy that had prevented her parents from divorcing would not have helped her!

Newton: That may be, but that doesn't mean the divorce didn't actually cause the child do turn out worse.  It just means that unhappy parents would have caused the child to do worse in the absence of divorce causing it. (scratches, yells unprintable word)

Rubin (sighs in exasperation): OK, let me try one more time with a medical example.  You run a clinical trial.  You give half the participants a little blue pill and everyone else gets a placebo.  The people who get the little blue pill all lose their hair.  We know that the blue pill caused the hair loss because we know that if they had taken the placebo instead, they'd have their hair just like the people who really did take the placebo.  That's the counterfactual.

Newton (cracks pool stick over knee): Dammit Rubin!  Run another trial!  Give half the people the little blue pill and give half of them an otherwise identical red one!  Everyone loses their hair!  Do you then say that the blue pill did not cause hair loss?  Of course not!  Both the red pill and the blue pill cause hair loss!

Rubin: but--

Newton: I am NOT DONE.  Sure, the logic of experiments—getting assigned to a treatment or control group randomly—helps to establish causality, but the causality either operates or it does not—independently of how we identify it.  The girl who is harmed by divorce does not give a flying (censored) that she would have been harmed by fighting parents if the divorce hadn't happened.  (pacing the pool hall now) Counterfactual-shmounterfactual!

(Chorus line enters stage left.  ZZ Top enters stage right.  All sing):  Counterfactual!  Shmounterfactual!  What the girl cares about is the Actual!....

And....scene!

After intermission (which may last a couple of days—again, day job...), I'll come back around to the point.  The gist is that social science has over-corrected in addressing its previous inattention to counterfactual logic (which is crucial for policy questions and powerful in certain applications) and is now uncritically adopting the views I put in Rubin's mouth above (which I'm caricaturing somewhat).  On the other hand, at least Rubin's acolytes are able to convincingly establish causality in a limited number of contexts.  Most of those suspicious of him have no idea where to begin in establishing causality outside those contexts.

And for the record, I am not high on poppers.

 
 

First the right started talking up this post by AEI resident scholar Andrew Biggs showing that consumer spending on veterinary services is rising as fast as health care spending in the U.S. (see Cowen, McArdle, Kling, Mankiw, Manzi).  Then the left responded (see Klein, Yglesias, Drum, and a sympathetic DeLong).  There have been two main criticisms of the chart (reproduced below).  First, there's funny business going on with the scales used (as Matt puts it, "Fun with the Y Axis").  Second, the figures aren't comparable because they should be per capita.  Let's take a look at both of these criticisms.

Picture

First on scaling.  You could write an entire book on how to lie with charts. But this one's fine -- both Y axes start at 0, and both end close to where the series hits its maximum.  It's true the levels of spending are much different, but Biggs's point is about the change, not the levels.  If you eyeball the numbers in the chart and compute % changes over the period, you'll see that they're similar.

Let's do that.  Biggs shows national health expenditures rising from about $800 billion in 1984 to about $2.1 trillion in 2006 -- an increase of about 160 percent.  The increase in veterinary service spending was from about $4.5 billion to about $11.1 billion, or 150 percent.  Given these are rough guesses and that all of these numbers have considerable uncertainty, that's pretty similar.  Point for the conservatives!

However....I tried to find  Biggs's figures on the web but couldn't.  I'm pretty sure they're wrong.  [Update: Biggs emailed me to say that he had adjusted for inflation, which I should have guessed--so his figures are not "wrong". -srw]  The official source of national health expenditure data is the Centers for Medicare and Medicaid Services.  National health expenditures, according to CMS's figures rose from roughly $400 billion in 1984 to $2.1 trillion in 2006 -- an increase of 426 percent -- not 160 percent!  Point for the liberals!

Except...it looks like Biggs's veterinary expenditure figures might be off too.  Consumer Expenditure Survey figures on veterinary services expenditures are not, as far as I can tell, easily gettable.  Instead, I went to the trusty Statistical Abstract, put out annually by the Census Bureau.  And lo and behold, those crazy bastards have data from the American Veterinary Medical Association going back to 1983 on household expenditures on veterinary services for dogs and cats.  When I add up expenditures on both, the increase is from $3.5 billion to $21 billion--an increase of about 500 percent!  Point for the conservatives (if not for Biggs)!

A number of commenters noted that these figures really ought to be per person/animal. Otherwise, it's possible that the increase in the number of pets outpaced the increase in the number of people and that's what's really driving the figures for animals.  From one perspective, if household pets were growing more numerous at a faster rate than their owners were, that would simply reflect that with growing affluence, people are choosing to spend more on the luxury good that is a furry four-legged companion occasionally needing expensive veterinary care, just like they are choosing to spend more on health care.  But if the argument is about inefficiency in care, then per-capita expenditures are probably the most appropriate.

Anyway, when you look at the increase in spending per capita, health care spending per person rises by 350 percent, vet spending per dog rises by 335 percent, and vet spending per cat rises by 340 percent..  So on this one, I think the conservatives have the better argument, despite the flaws in the original evidence.

(Sources: For the vet and pet data, see http://www2.census.gov/prod2/statcomp/documents/1990-03.pdf, Table 400, and http://www.census.gov/compendia/statab/tables/09s1201.xls.  For the health expenditure data, see http://www.cms.hhs.gov/NationalHealthExpendData/downloads/nhe2007.zip, and for the population figures, http://www.census.gov/popest/archives/1990s/popclockest.txt and http://www.census.gov/popest/states/NST-ann-est.html.)
 
 

Happy Fourth of July everyone!  The first time we celebrate the birth of the nation with an African-American president.

I'm excited to report that my new Kindle DX arrived yesterday (early verdict: very cool).  I toyed with the idea of buying, as my first book, Infinite Jest, but I couldn't bring myself to take the plunge and begin my first novel since the mid-1990s.  Instead I bought Grand Expectations, James T. Patterson's history of the U.S. from 1945 to 1974.  Chapter Two is about the state of the labor movement at the beginning of the period.  Lots of interesting stuff, as this was really the peak of the labor movement in the U.S., with a high of 35% of non-agricultural workers in unions in 1945, and one in fourteen workers participating in work stoppages in 1946.

What's interesting to me is that even then, you can see signs that labor's power was tenuous.  Massive strikes had thin support among Americans.  There is a remarkable recounting of Truman's response to a potentially crippling railworker strike in which he marches to Capitol Hill to give an address.  Truman planned to propose legislation that would allow him to draft striking workers into the Armed Forces in the event that a strike would create "emergency" conditions.  With his intentions widely known, Congress gave him a standing ovation upon entering the House.  Before the speech ended, Truman had been handed a note relaying the news that the railworkers' union had backed down.  (Even more remarkably, a draft of a proposed radio address the night before that his aides squashed ended, "Let's put transportation and production back to work, hang a few traitors, and make our country safe for democracy.")

Remember, this was a pro-New Deal president--the populist "Give 'em Hell Harry"--with a Democratic Congress.

Labor basically got nowhere with its legislative agenda during this period--conservative Democrats from the South and West and pro-business Republicans held the balance of power.  Republicans won control of both houses in 1946, and Congress overrode Truman's veto the next year to pass the anti-union Taft-Hartley Act.

Meanwhile, by 1950, labor leaders had basically reached a truce with capital: union members would get cost-of-living adjustments to their pay and increasingly generous benefits, paid for via price increases levied on consumers.  Non-union members were basically S.O.L.

Many progressives seem to believe that the weakness of labor today is mainly a consequence of the Reagan Revolution and soft-spined Clintonites.  But the following chart, based on OECD data, should disabuse them of this fantasy
:

Picture

Note first that in 1960, the U.S. and Canada had less unionization than even the other Anglophonic countries (also true of other western European countries except Italy and France).  Second, note that by the time Reagan took office, unionization in the U.S. had already dropped from 31 percent to 22 percent.  Finally, note that unionization began declining in the other countries between the mid-1970s and the early-1980s.  Unionization has also fallen in most of western Europe, where it peaked in the Netherlands and Norway by the early 1960s, in France and Austria by the late 1960s, in Switzerland by 1976, in Italy in 1976, Portugal in 1977, Germany in 1978, Denmark in 1983, etc.  Finally, note how much the cross-national differences narrowed over time vs. 1975 or 1980.  How did Reagan defeat the unions in those other countries?

So why the decline if not politics?  I'm no expert on this question, but I'll try and speculate a bit in my next post.  Meantime, leave a comment if you want to weigh in (eventually I'll have a comments section publicly displayed, but that's in progress)
.

 
 

Welcome to TESB, my first attempt at blogging since I left The Democratic Strategist in spring of 2007.  If you're thinking, "I needed another blog to add to my online reading like I need a hole in my head," this post is for you.  Because, all respect, you need another blog. (Whether you need another hole in your head depends on the number of nostrils and ear canals you currently have.  And mouths.)

Here's the thing: there are a lot of numbers out there, and not many reliable resources that help people make sense of them.  The blogosphere is dominated by passionate people with strong ideological bents.  Passion is generally a good thing, and you'll see a lot of it here as well.  But it too often gets in the way.  Soft hearts can make heads mushy too.  And the correlation between hard-heartedness and hard-headedness is, shall we say, less than perfect.

As for ideology, well, there's no escaping it is there?  But what one can do is to try as hard as possible to surmount it.  People who pretty much always argue the same, readily identifiable ideological side of any debate in which they participate ought to be viewed suspiciously.  On the other hand, while no one ever filled up a dating card by being "tough to categorize", people who are willing to argue against both sides or for both sides without regard to how either side perceives them at least have the benefit of being more likely to be trusted as a straight shooter.

I'm not going to always live up to the ideal of the "non-partisan gun-slinger"...because I do have some ideological commitments.  Some of them are matters of values that aren't subject to empirical refutation.  I think Americans collectively should do more than we currently do to expand opportunity for those with fewer opportunities.  Some of my ideological commitments—like those of anyone—are just failings, and hopefully, you will help keep me honest.  But if this blog succeeds, it will be because I have fewer ideological commitments—or am better able to surmount them—than the other blogs buried sadly within the recesses of your feed reader.

This is a blog about domestic policy, social and economic trends, and politics.  I have a day job, so I won't be posting as much as other bloggers.  In fact, I'd like you to think of TESB as a self-published ezine that dribbles out over the course of a week, as I will likely carry on about some obsession for days at a time (lucky you!).  For now, if you want to be emailed on a weekly basis with my posts, drop me a line at tesbATscottwinshipDOTcom.  You may also follow me on Twitter (username swinshi).

About me: I'm a newly-minted Ph.D. in social policy, a resident of D.C.'s hipster neighborhood of ten minutes ago (that is, no longer hipster), a native of small-town Maine, and a two-time body-building champion.  One of those descriptors is a lie.