State Licensing Boards, Antitrust, and Innovation

June 7, 2018

Every state has occupational licensing laws or regulations, which require individuals seeking to offer a certain service to the public first to obtain approval from the state. Occupational licensing requirements historically derive from a desire to protect unwitting consumers from bad actors. In recent years, however, the number of licensed professions in the United States has skyrocketed and licensing requirements have become increasingly onerous. When incumbents wield licensing requirements not as a defensive shield to protect consumers but as an offensive sword to exclude new entrants, serious concerns regarding the competitive implications of the licensing schemes arise. Self-interested incumbents have incentives that may differ from consumers, and these self-interested incumbents can—and sometimes do—impose requirements that do not enhance quality, but rather restrict output, increase prices, and hamper innovation. This Paper explores the competitive implications of state occupational licensing regimes. Part I analyzes the historical development and justification for occupational licensing. Part II reviews the empirical evidence regarding the effects of occupational licensing on factors such as quality, price, innovation, and availability. Part III summarizes how antitrust law, and particularly the state action doctrine, treats state board-enacted occupational licensing. Part IV explores the interplay of occupational licensing and antitrust laws in the United States, delving into a particularly striking case at the intersection of occupational licensing and innovation: Teladoc, Inc. v. Texas Medical Board. Part V provides some suggestions for agency engagement in monitoring the effective use of occupational licensing.

via State Licensing Boards, Antitrust, and Innovation by James C. Cooper, Elyse Dorsey, Joshua D. Wright :: SSRN

Medicare Secondary Payer and Settlement Delay

June 7, 2018

The Medicare Secondary Payer Act of 1980 and its subsequent amendments require that insurers and self‐insured companies report settlements, awards, and judgments that involve a Medicare beneficiary to the Centers for Medicare and Medicaid Services. The parties then may be required to compensate CMS for its conditional payments. In a simple settlement model, this makes settlement less likely. Also, the reporting delays and uncertainty regarding the size of these conditional payments are likely to further frustrate the settlement process. We provide results, using data from a large insurer, showing that, on average, implementation of the MSP reporting amendments led to a delay in the resolution of disputes involving auto accidents of about six months.

via Medicare Secondary Payer and Settlement Delay by Eric Helland, Jonathan Klick :: SSRN

Separating the Wheat from the Chaff: A Disaggregate Analysis of the Effects of Public Spending in the US

June 7, 2018

In this paper, we undertake a systematic disaggregate analysis of the effects of government spending on economic activity in the US. The level of disaggregation we consider is the highest available and is unprecedented in the empirical literature. More specifically, public consumption and public investment are decomposed into various subcategories, which are measured at the levels of the federal (defence and non‐defence), and state and local governments. For each subcategory, we estimate a structural vector autoregression that identifies public spending shocks through the conditional heteroskedasticity of the structural disturbances, thus relaxing the identifying restrictions commonly used in the literature. Our analysis reveals significant heterogeneity in the effects of public spending shocks on output both across subcategories and government levels. Shocks to spending on durables and structures are found to have the largest and most persistent effect on aggregate output, with a peak multiplier that exceeds 1. Our results also suggest that there is little association between the size of a given category of public expenditures and the magnitude of its effect on output.

via Separating the Wheat from the Chaff: A Disaggregate Analysis of the Effects of Public Spending in the US by Hafedh Bouakez, Denis Larocque, Michel Normandin :: SSRN

A Quick Take on the 2018 Social Security and Medicare Trustees Reports

June 5, 2018

The Medicare Trustees’ report estimates that the Hospital Insurance (Part A) trust fund will be exhausted in 2026, three years earlier than projected last year. Most of the changes between last year’s report and this year’s come in the short term; still, the projected 75-year shortfall increased from 0.64 percent of payroll last year to 0.82 percent of payroll. The change in the exhaustion date means that lawmakers have less than a decade to deal with Part A’s shortfall. We will have more on the Medicare Trustees’ report in the coming days.

With regards to Medicare on the whole (including Part B and D), the Trustees project total costs will rise from 3.7 percent of GDP in 2017 to 5.9 percent by 2042 and 6.2 percent by the 2092.

via A Quick Take on the 2018 Social Security and Medicare Trustees Reports | Committee for a Responsible Federal Budget

The New Health Care Federalism on the Ground

June 5, 2018

This essay, part of a symposium investigating methods of empirically evaluating health policy, focuses on American health care federalism, the relationship between the federal and state governments in the realm of health care policy and regulation. We describe the results of a five year study of the implementation of the Patient Protection and Affordable Care Act (ACA) from 2012-2017. Our study focused on two key pillars of the ACA, which happen to be its most state-centered — expansion of Medicaid and the implementation of health insurance exchanges — and sheds light on federalism in the modern era of nationally-enacted health laws that preserve key roles for state leadership. The full study is detailed in the Stanford Law Review; here, we offer a more accessible snapshot and highlight a key aspect of the research: interviews of approximately twenty high ranking former state and federal officials at the forefront of ACA implementation.

The interviews corroborate the study data and substantiate our conclusions about the defining characteristics of the ACA’s implementation from a federalism perspective. Specifically, we found that the ACA’s implementation process has been 1) dynamic; 2) pragmatic; 3) negotiated; and 4) and marked by intrastate politics. We observed waves of engagement and estrangement between states and the federal government, and state decisions to participate in the ACA’s programs have not been binary, in/out choices. Vertical and horizontal negotiation and copying have been near constants.

The findings also reveal theoretical and empirical challenges for quantitatively evaluating health care federalism. Does it exist? Is it successful? We found the traditional federalism attributes pop up in inconsistent ways under the ACA and emerge from virtually every structural arrangement of the law. We tried, for instance, to measure how “cooperative” the states were, only to find that concept meaningless. Some states attempted implementation but failed; other states rebelled by refusing to run their own programs at all. The federal government stepped in for both. Were such states equally “cooperative” or “autonomous”? The same challenges occurred for all of the classic federalism metrics. For example, we saw local experimentation emerge from every kind of governance structure under the ACA, including nationalist ones.

Our work leads us to a key question: Why choose federalism-oriented health reform models in the first place? In ACA implementation, it sometimes appeared that federalist arrangements did not aim to improve health outcomes but rather reflected “federalism for federalism’s sake”—federalism to advance political or constitutional values, such as reserving power to the states in the interest of sovereignty and balance of power — regardless of the effect on health care coverage, cost, quality, or other measures of health policy success. At other times, it seems federalism was intended as a means to an end — e.g., that state-led health policy is assumed to produce better health outcomes. In the end, we were able to conclude more assuredly that the ACA’s many structural arrangements served state power than that any particular one of those arrangements was more federalist or that any particular one produced better health policy. Clearly, we cannot evaluate federalism — whether it exists, whether it is working, whether it is worth defending — without knowing what it is for in the first place.

via The New Health Care Federalism on the Ground by Abbe R. Gluck, Nicole Huberfeld :: SSRN

Predatory Public Finance and the Evolution of the War on Drugs

June 5, 2018

US drug policy has a long history of providing revenue for federal, state, and local governments. Before the War on Drugs, opium and cocaine were legal and medical professionals who prescribed these substances had to pay extra taxes to do so. This chapter explains how, as the federal government began enforcing outright bans on drugs, law enforcement agencies took advantage of their newly acquired authority to profit. Today, civil asset forfeiture related to drug crimes provides officers with incentives to use and abuse their authority and increase their revenue by making more drug arrests. Key takeaways: (1) Drug policy has a long history of providing law enforcement with increased revenues and authority over time. (2) Law enforcement agencies may be targeting the crimes that present the opportunity to raise revenue for their departments rather than the most serious public safety threats.

via Predatory Public Finance and the Evolution of the War on Drugs by Bruce L. Benson, Brian Meehan :: SSRN

The American Dream and Support for the Social Safety Net: Evidence from Experiment and Survey Data

June 5, 2018

I propose the status quo bias hypothesis, which predicts that housing wealth increases preference for status quo arrangements with respect to Social Security. I contrast the status quo bias hypothesis with the claim that housing wealth reduces support for social insurance, and test the hypothesis in two empirical studies. A survey experiment finds that homeowners informed about high historical home price appreciation (HPA) are about 8 percentage points more likely to prefer existing Social Security arrangements to privatized retirement accounts, compared to those informed about low historical HPA. Observational data from the 2000-2004 ANES panel show that homeowners who experience higher HPA are about 11 percentage points more likely to prefer status quo levels of spending on Social Security than those in the bottom HPA quartile. No significant HPA effects are observed among renters, and for other domains of social insurance among homeowners. The evidence suggests that housing wealth’s conservatizing effect should be interpreted as a status quo preference, rather than opposition to redistributive social policies.

via The American Dream and Support for the Social Safety Net: Evidence from Experiment and Survey Data by Weihuang Wong :: SSRN

Selective Consumption Taxes in Historical Perspective

June 5, 2018

America’s history of selective consumption taxes dates back to the colonial era, when revolutionaries protested against taxes on tea and paper goods. While the Revolution was prompted in part by opposition to selective consumption taxes, this chapter describes how Alexander Hamilton implemented a selective consumption tax on whiskey to cover the American war debt shortly after America won its independence. The whiskey tax had characteristics common to selective consumption taxes we see today.

via Selective Consumption Taxes in Historical Perspective by William F. Shughart :: SSRN

The Politics of Taxes in the Affordable Care Act

June 5, 2018

The Affordable Care Act includes taxes on medical providers and insurance companies — taxes that make healthcare more expensive. As MIT Professor Jonathan Gruber (one of the ACA’s architects) said, the “lack of transparency” of these obscure taxes “is a huge political advantage.” This chapter shows that when the revenue-raising tools for a policy plan are hidden from voters, the project will appear to be a better deal for taxpayers than it actually is. The ACA’s revenues include the individual mandate as well as taxes on healthcare providers and insurance companies rather than taxes applied directly to consumers. While the ACA is a highly visible and controversial piece of legislation, a study of its revenue systems provides broad lessons on tax policy. Politicians who are seeking to appear as if they are providing constituents with large benefits at a reasonable price will attempt to obscure the cost of the programs they implement, reducing transparency in the process.

via The Politics of Taxes in the Affordable Care Act by Randall G. Holcombe :: SSRN

Circumvention Medical Tourism and Cutting Edge Medicine: The Case of Mitochondrial Replacement Therapy

June 2, 2018

“Medical Tourism” is the travel of patients from a home country to a destination country for the primary purpose of receiving health care. “Circumvention Tourism” is a sub-type of such travel where the motivation is circumventing a domestic prohibition on accessing a medical service. This Article, adapted from the George P. Smith Lecture given at the University of Indiana’s school of law, focuses on such circumvention tourism for cutting-edge medicine. I use the recently reported case of travel to Mexico for Mitochondrial Replacement Therapy as a springboard for examining the legal and ethical issues raised by the practice and to discuss restrictive regulation in place in the United States.

via Circumvention Medical Tourism and Cutting Edge Medicine: The Case of Mitochondrial Replacement Therapy (The George P. Smith Lecture) by I. Glenn Cohen :: SSRN