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Health policy wonks and the preservation of human capital - Barokong

Austin Frakt at theNew York Times covered an interestingsurvey of health economists, revealing their interesting support for the status quo  Mike Cannon at CATO hasan interesting tweet storm in reaction, andTyler Cowen at Marginal Revolution also comments.

My diagnosis comes at the end. Those whose human capital is knowledge of the current rules, and whose employment derives from the agencies who run the current system, are unlikely to challenge the status quo.


Imagine if American health policy were established by the consensus of health economists. What would the system look like?
Health economists .. strongly reject repeal [of the ACA], with 89 percent opposing the idea.

Really, is this miserable status quo the best that thousands of professional health economists can dream up?

Various ideas to cut costs in Medicare and Medicaid have been proposed in recent years. Health economists generally oppose those changes.
A related idea for Medicare is to convert it to a voucher-based program. This would establish a set amount the government would pay for your coverage so that you could shop for a health plan. Most health economists (61 percent) also oppose this idea
Commenting Frakt notes,

It may surprise some that economists, who normally prefer market-based approaches to government programs, are so supportive of Medicare’s current structure. “Though they recognize the value of free markets, economists also believe that market failures are harmful,” the poll’s conductors told me. “In some cases, such as health insurance for the elderly, many economists think that society does best when government provides services directly.”

I may be getting jaded, but it seems no longer true that economists normally prefer market-based approaches to government programs. Especially in health. My pretty uniform experience talking to health economists is that even they say "well, the free market might be fine for apples and oranges, but health is too important to be left to the free market."  What follows is often an amazingly patronizing view of the idiocy of the average health consumer, who requires the paternalistic guidance of, well, an army of health policy economists to tell them what to do.

Still, that a large majority of PhD economists prefer the government to run a health insurance and health care system rather than just pay for one,  allowing thereby healthy competition, is still pretty astounding. That judgement seems far beyond the central point of health economics and deep in to public choice. Sadly, public choice is not a standard part of any PhD program, so most economists still rattle off the party line, there is a market failure in here somewhere so the government has to run things to provide the social optimum.

Seventy-seven percent of health economists do not believe work requirements should be part of Medicaid.

This is another interesting judgement, rather outside health economics. I have an acquaintance, single and able, who chooses not to work and to be an artist instead, producing art that few will pay much for. They have medicaid. It's awful. I have others who work pretty much just to have the health insurance. There are the people who spend eight hours a day stuffing our orders into boxes at Amazon, or checking out our groceries at Whole Foods, to get a bit of cash and somewhat better health insurance.  It's a lot less fun than being an unpaid artist. It would be nice if nobody had to do these unpleasant tasks and everyone could be an artist. Can we be such a society? That's an interesting question, at the eternal struggle between incentives and compassion that defines good economics. And a politically charged one. You can tell where the politics of health economists lie.

Still, there are rays of common sense and good economics among the health economists

..only 14 percent of [health economists]favor the current tax treatment of employer-sponsored health insurance. But they’re just about the only group that feels that way.


Health economists overwhelmingly (93 percent of them) say that if employers were to spend less on health insurance, wages and other benefits would increase.

As blog readers know, I'm a fan of guaranteed renewable or health status insurance in place of the ban on rating for pre-existing conditions. How is this faring?

..insurers cannot raise premiums for pre-existing conditions. Health economists appear to agree with this, with 80 percent saying premiums should not be higher for those with “genetic defects” (the poll’s wording)...
But nearly 70 percent of health economists are comfortable charging people more if they engage in unhealthy behaviors that lead to higher health costs. The A.C.A. allows marketplace plans to do just that based on smoking.

Sadly, the survey does not really get to the issue.  Genetic defects are about the hardest part of a health status scheme -- they requires that parent's health status insurance covers their children's genetic defects. Even I would consider government topping up heath status accounts or vouchering guaranteed renewable insurance for genetic defects. I wish we had a clearer question, health status or guaranteed renewability vs. community rating (all pay the same price) plus mandate (you have to buy health insurance, even if wildly overpriced for you.)

Frakt's bottom line

If health economists were in charge of the health system, not a lot would change, with some notable exceptions. Medicaid would not have work requirements (which would be unpopular among conservatives in some states), and taxes would go up for Medicare and for employer-based health insurance (which would make it unpopular among just about everybody).
Frakt may be jumping to conclusions here. The survey did not ask about taxes, and one might suspect a majority of health economists answering the survey might think it can all be paid for by taxing "the rich" only.


Cannon gets right to the point.

“If health economists were in charge of the health system, not a lot would change,” which tells you just about all you need to know about most health economists in the United States
Health economists seem to have a lot of attachment to the status quo, which is pretty much universally reviled by everyone else. Why?

Cannon's diagnosis

there is a mountainous structural ideological-bias problem in #HealthPolicy.
The health policy professions skew left, because federal and state health policy skew left; thus the set of individuals who select into these professions skews toward those whose ideas concern *how* government should allocate resources/regulate rather than *whether* it should.
Since the majority and the elites within these professions skew left, it is harder both to attract free-market advocates to the professions and for free-market advocates to advance within the professions.
Cannon has a point. Free market analysis has a tough time getting jobs, publishing papers, getting grants, getting tenure. Health policy is a lot like the humanities.

But I see it slightly differently. As economists, let us look first not at ideology, but at interest. Economist capture can be independent of political ideology.

To be a health economist today, you need to learn a lot about the details of the ACA, medicare and medicaid rules, health insurance regulations, and so on. If we throw all this out and start over, as any good free marketer will tell you to do -- and as a good Sanderista, single-payer will also tell you to do -- all that human capital is thrown out. You will be as relevant as the economists who studied how soviet communism worked, in 1991. You will be as relevant as a typewriter repairman when word processors take over.

Health economics is an immense industry now, much of it financed by soft money, either NIH and other government grants or private grants, funneled through an explosion of health policy "centers," not standard tenure track departments. Many health economists depend for their jobs on getting grants from government agencies that promulgate the current system to study the current system and improve it. Or, viewed more cynically, the government agencies that run the current system pay economists to support the current system. Viewed either way, good luck at getting a 3 year grant, with salary support, to study "how a voucher could replace medicare," or "how health-status insurance could obviate the need for the ACA" or "eliminate cross-subsidies with tax-supported charity care, and leave the rest of us to the free market."

The average health economist surveyed -- the average member of the American society of health economists --  is not a professor of economics at Harvard or Stanford. He or she is a grant-supported researcher at a health policy center, or directly employed by a federal government agency. From a quick bit of googling, Stanford has a centerhere, a health research division in the medical school here, a health research and policy department of the medical school here, and health economics researchers at Hoover, business school, law school, SIEPR, and doubtless more.   Frakt lists his first affiliation as  "director of the Partnered Evidence-Based Policy Resource Center at the V.A. Boston Healthcare System." Cannon, a lone free-marketer, is at CATO and knows this world well.

My view is thus less ideological but perhaps more deep-rooted than Cannon's. In support, note that it is a general phenomenon, not unique to health economics.

Why do the majority of bank regulation economists largely support the general structure of the Dodd Frank act, wanting only to fiddle with regulations on the edges, and heaven forbid even thinking about replacing the whole mess with narrow deposits and equity financed banking?

Why do the majority of monetary economists support the institutional structure of the Federal Reserve, mostly supporting the actions of the top ("why does QE work?" Not "does QE work?"), fiddling with interest rate rules, and those who even think about really fundamental changes in structure in the sidelines? (Note there the large fraction of monetary economists employed directly by the Federal Reserve, its member banks, BIS, IMF, ECB, etc.)

There is nothing necessarily pernicious here. Researchers at the Fed can write pretty much anything they like. But the institutional rewards for "policy relevant" research, research that helps those at the top to manage their day to day affairs, are obviously there.

Why do antitrust or securities regulation economists sound pretty much like the health economists here, with only a few outsiders arguing that the efforts are pointless rabbit warrens?

Self-interest, for people to preserve hard-won human capital, and for institutions to support research that keeps them going, is a powerful explanatory force. Even if individuals do not respond to this incentive, and are all pure in their pursuit of ideas, selection is a powerful explanatory force. Economics is a good way to explain economics!

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