45,000 of the 223,000 jobs added in April were in health services, according to today’s Employment Situation Summary from the Bureau of Labor Statistics. This continues the trend seen in March. As shown in Table 1, jobs in ambulatory settings accounted for well over half of health jobs.
(A version of this Health Alert was published by Forbes.)
Governor Charlie Baker of Massachusetts has proposed a tax of $2,000 per worker on businesses which do not offer health coverage to employees who become dependent on Medicaid. This makes him the second Republican governor of Massachusetts to buy into the notion that imposing taxes (or fines or penalties or fees) on individuals and businesses can force them to accept responsibility for government failure at getting health spending under control.
Evidence from Massachusetts and the nation shows the opposite is true. Yesterday, I testified on the effect of Obamacare’s individual mandate before the Oversight Subcommittee of the U.S. House of Representatives’ Ways and Means Committee. (The video is at this link, and my written testimony is at this link.)
I was joined on the panel of witnesses by Dr. John E. McDonough of Harvard University’s T.H. Chan School of Public Health. Professor McDonough was a central figure in Governor Mitt Romney’s 2006 Massachusetts health reform, where the individual mandate was first implemented. Governor Romney tried to label it a “conservative” or “Republican” idea. The spin was that the mandate characterized individual responsibility.
The reality is the mandate merely camouflages significant growth of government spending and control over health insurance. This has been the case in Massachusetts since day one: Spending has grown out of control despite many failed efforts to bend the cost curve.
A new survey by the Physicians Advocacy Institute and Avalere Health, a consulting firm, shows a significant increase in the number of physicians leaving independent practice and joining hospital-based health systems:
Good or bad? Well, color me skeptical. This acquisition spree is driven by new payment models which seek to reward providers for “accountable” care (which I suppose is better than unaccountable care.) So far, the results of payment reform in Medicare have been trivial.
Last week’s employment report showed good growth, and jobs in health care were a big part of it (Table 1). Total nonfarm payroll increased by 257, 000, of which 38,000 (15 percent) were jobs in health care. Job growth in healthcare was 0.26 percent, month on month, versus only 0.17 percent for nonfarm, non-health jobs.
In Ayn Rand’s novel The Fountainhead, Dominque Francon and Ellsworth Toohey are in a high rise apartment, looking out at the evening lights of New York City. Toohey speaks:
Look at it. A sublime achievement, isn’t it? A heroic achievement. Think of the thousands who worked to create it and of the millions who profit by it. And it is said that but for the spirit of a dozen men, here and there down the ages, but for a dozen men — less, perhaps — none of this would have been possible. And that might be true. If so, there are — again — two possible attitudes to take. We can say that these twelve were great benefactors, that we are all fed by the overflow of the magnificent wealth of their spirit, and that we are glad to accept it in gratitude and brotherhood. Or, we can say that by the splendour of their achievement which we can neither equal nor keep, these twelve have shown us what we are, that we do not want the free gifts of their grandeur, that a cave by an oozing swamp and a fire of sticks rubbed together are preferable to skyscrapers and neon lights — if the cave and the sticks are the limit of our own creative capacities. Of the two attitudes, Dominique, which would you call the truly humanitarian one? Because, you see, I’m a humanitarian.
Until recently, I thought that the latter attitude had become completely disreputable. The idea that we should tear down the good just because they are good or the successful just because they are successful is bad economics, bad ethics and an embarrassingly childish form of envy.
But it has recently re-emerged in large part because of Thomas Piketty’s new book, Capital in the Twenty First Century. Piketty argues that we have been experiencing and will continue to experience growing inequality of income and wealth. To prevent this he argues for punitive taxes on high incomes and a worldwide tax on wealth.
Piketty’s book has created near ecstasy on the political left, where it is taken as an unquestioned article of faith that inequality of income and wealth is bad. See gushing praise from Paul Krugman here and gloating over the right’s ineffectual response to the book here. Among other economists, Robert Solo praises the book in The New Republic (“Piketty is Right”), but Greg Mankiw has a more measured response.
What is more interesting than the book itself is that the left now seems free to say things they previously would have been embarrassed to say.
Paul Krugman says that in a weak economy workers have weak bargaining power. In his opinion, that’s bad for workers, but good for their employers. He writes:
Now think about what this means for workers’ bargaining power. When the economy is strong, workers are empowered. They can leave if they’re unhappy with the way they’re being treated and know that they can quickly find a new job if they are let go. When the economy is weak, however, workers have a very weak hand, and employers are in a position to work them harder, pay them less, or both.
As a result, he says that workers are burdened by a “fear factor” and goes so far as to label our economy “the fear economy,” implying that the workplace is somewhat akin to a police state.
Now let’s turn to reality. In his book, The Road to Freedom, Arthur Brooks summarizes a number of studies on how people feel about work:
As for “bargaining,” alert readers will recall it is a word that Krugman has used before, with respect to health care. A “single payer” he says would have the bargaining power to push doctors’ fees below their current levels and reduce the price patient must pay. But why is it good for doctors to live in fear, but not ordinary workers? And if the single payer bargaining is good for medicine, why wouldn’t it work just as well for college professors — given that higher education seem to have all the same problems that the health care system has. (Think how much lower Princeton tuition might be if Krugman, Uwe Reinhardt and all their colleagues had their salaries cut in half.)
Moreover, if “bargaining power” is what counts, why not have government bargain for us in every market for every product we buy?
Before I go on, pick up any introductory textbook in economics and see if you can find the word “bargaining” or the word “fear.” I bet you can’t. That’s just by way of warning you that Krugman’s depiction is not the way real economists would describe any of this.
Take this job and shove it.
Back in 1993, the economists Jonathan Gruber and Brigitte C. Madrian highlighted the problem of “job lock”, a consequence of employer-based health benefits. Gruber and Madrian figured if people with a serious health problem left their jobs, they would be subject to medical underwriting and be charged high premiums or perhaps be denied coverage altogether if they entered the individual market. So they stay in their jobs to buy the insurance their employers provide.
In one widely cited paper, Madrian estimated that this drawback reduced the proportion of workers who switched jobs in a year from 16 percent of the workforce to only 12 percent. In another paper, they concluded that coverage is greatly minimized by state laws plus COBRA, a 1986 federal law that allows a former worker to keep her previous employer’s group plan for a period of time, if she pays the premiums herself.
The problem is also reduced by HIPAA, a 1996 federal law which required employers to offer benefits to new employees on the same term as incumbent employees, without medical underwriting, if the new employees had previous long-term coverage without a significant lapse (literally, at least six months coverage without a lapse of more than 63 days).
Years ago Milton Friedman was asked at a conference what he thought about different schools of economics (Chicago school, Austrian school, etc.) Friedman replied, “There are only two kinds of economics: good economics and bad economics.”
I’m reminded of this by Krugman’s Monday column in which he asserts that there is a Republican economic theory of unemployment.
Here’s the world as many Republicans see it: Unemployment insurance, which generally pays eligible workers between 40 and 50 percent of their previous pay, reduces the incentive to search for a new job. As a result, the story goes, workers stay unemployed longer. In particular, it’s claimed that the Emergency Unemployment Compensation program, which lets workers collect benefits beyond the usual limit of 26 weeks, explains why there are four million long-term unemployed workers in America today, up from just one million in 2007.
Then he offers this assessment:
Proponents of this story like to cite academic research — some of it from Democratic-leaning economists — that seemingly confirms the idea that unemployment insurance causes unemployment. They’re not equally fond of pointing out that this research is two or more decades old, has not stood the test of time, and is irrelevant in any case given our current economic situation.
As we have pointed out before, the best work on this subject seems to be that of Casey Mulligan who writes for The New York Times economics blog. (That’s right, the very same newspaper that Krugman writes for!) Mulligan estimates that as much as half of the excess unemployment we are experiencing is the result of overly generous entitlements benefits.
And, no. I don’t know who Mulligan votes for.
There is a tradition that in the planting of New England, the first settlers met with many difficulties and hardships, as is generally the case when a civiliz’d people attempt to establish themselves in a wilderness country. Being so piously dispos’d, they sought relief from heaven by laying their wants and distresses before the Lord in frequent set days of fasting and prayer. Constant meditation and discourse on these subjects kept their minds gloomy and discontented, and like the children of Israel there were many dispos’d to return to the Egypt which persecution had induc’d them to abandon.
Depressing news from Tyler Cowen:
For Americans aged 16 to 24 who aren’t enrolled in school, the employment picture is grim. Only 36 percent are working full time, down 10 percentage points from 2007. Longer term, the overall labor-force participation rate for that age group has dropped 20 percentage points for men and 14 points for women since 1989.
It gets worse:
Falling wages for new entrants to the job market suggest that a sizeable chunk of the American labor force may never achieve middle-class wages in a relatively secure full-time job.
And then there is this:
To focus on policy alone is to miss the gravity of the situation.
