March 7, 2014
Many pundits, politicians and economists claim that wages have fallen behind productivity gains over the last generation. This “decoupling” explains allegedly stagnant (or in some versions of the story, declining) middle-class incomes and is held out as a crisis of the market economy.
This story, though, is built on an illusion. There is no great decoupling of worker pay from productivity. Nor have workers’ incomes stagnated over the past four decades.
The illusion is the result of two mistakes that are routinely made when pay is compared with productivity. First, the value of fringe benefits—such as health insurance and pension contributions—is often excluded from calculations of worker pay. Because fringe benefits today make up a larger share of the typical employee’s pay than they did 40 years ago (about 19% today compared with 10% back then), excluding them fosters the illusion that the workers’ slice of the (bigger) pie is shrinking.
via Donald Boudreaux and Liya Palagashvili: The Myth of the Great Wages ‘Decoupling’ – WSJ.com.
February 19, 2014
The demand for long-term care services will explode as the population ages and more people live longer with chronic conditions. Who will pay for these services and how will they be delivered?
In 2010, 40 million Americans were age 65 or older. By 2050 that number is expected to jump to 88 million. Among these older citizens, only three in 10 will never receive long-term care services. The majority will get such care—though not necessarily in a nursing home or assisted living facility. The current definition of long-term care includes services provided in the home by family members or paid caregivers. Adult day-care is also considered a form of long-term care.
The cost will be huge. In addition to the increase in the number of people over 65, the number of people 85 and older is also predicted to jump dramatically. This is the “frail elderly” group most likely to need long-term care. In 2010 there were 5.5 million of these older people, but by 2050 there will likely be 19 million.
These demographic shifts raise two questions. How will the nation decide to pay for that care? Will it be given in different ways and settings?
via Long-Term Care: What Are the Issues? – Robert Wood Johnson Foundation.
January 30, 2014
The US health care sector is large and growing – health care spending in 2011 amounted to $2.7 trillion and 18% of GDP. Approximately half of health care output is allocated via markets. In this paper, we analyze the industrial organization literature on health care markets focusing on the impact of competition on price, quality and treatment decisions for health care providers and health insurers. We conclude with a discussion of research opportunities for industrial organization economists, including opportunities created by the US Patient Protection and Affordable Care Act.
via The Industrial Organization of Health Care Markets.
March 21, 2013
Although long-term care is a substantial financial risk for retired households, only about 10 percent purchase insurance, with many of the remainder relying on Medicaid. Faced with rising Medicaid expenditures on long-term care, states have attempted to encourage the purchase of private long-term care insurance through partnership programs that exempt purchasers of qualifying policies from the Medicaid asset test. Using numerical optimization techniques, and assuming plausible preference parameters, we show that the programs will only increase insurance coverage among single males by 5 percent and single females by 4 percent. Most of the program benefits will go to those who would have purchased non-partnership long-term care insurance anyway. Thus, the cost of the subsidy will exceed the savings in Medicaid costs.
via Can Long-Term Care Insurance Partnership Programs Increase Coverage and Reduce Medicaid Costs? by Wei Sun, Anthony Webb :: SSRN.
March 21, 2013
Key provisions within healthcare reform will likely further increase the cost of employer‐sponsored insurance. Theory suggests that workers pay for their health insurance through a wage offset. We investigate this issue using data from the Medical Expenditure Panel Survey. GMM estimates aimed at correcting for endogenous worker mobility reveal evidence of a trade‐off for workers who are offered health insurance as the only fringe benefit. On the other hand, employees in establishments with a more comprehensive set of benefits enjoy higher wages relative to employees in establishments that offer no benefits. Health also affects the wage–health insurance trade‐off.
via The Wage–Health Insurance Trade‐Off and Worker Selection: Evidence from the Medical Expenditure Panel Survey 1997 to 2006 by Stéphanie Lluis, Jean Abraham :: SSRN.
March 17, 2013
Five months after the commission filed its final report, Governor Corzine introduced and New Jersey’s State Assembly passed Assembly Bill No. 2609. It limits the maximum allowable price that can be charged to uninsured New Jersey residents with incomes up to 500 percent of the federal poverty level to what Medicare pays plus 15 percent, terms the governor’s office had negotiated with New Jersey’s hospital industry.
via Uwe E. Reinhardt: What Hospitals Charge the Uninsured – NYTimes.com.
March 14, 2013
I develop and structurally estimate a non-stationary overlapping generations equilibrium model of employment and workers’ health insurance and wage compensation, to investigate the determinants of rising inequality in health insurance and wages in the U.S. over the last 30 years. I find that skill-biased technological change and the rising cost of medical care services are the two most important determinants, while the impact of Medicaid eligibility expansion is quantitatively small. I conduct counterfactual policy experiments to analyze key features of the 2010 Patient Protection and Affordable Care Act, including employer mandates and further Medicaid eligibility expansion. I find that (i) an employer mandate reduces both wage and health insurance coverage inequality, but also lowers the employment rate of less educated individuals; and (ii) further Medicaid eligibility expansion increases employment rate of less educated individuals, reduces health insurance coverage disparity, but also causes larger wage inequality.
via The Determinants of Rising Inequality in Health Insurance and Wages: An Equilibrium Model of Workers’ Compensation and Health Care Policies by Rong Hai :: SSRN.
March 12, 2013
The increasing cost of employer contributions for employee health insurance reduces the share of compensation subject to the Social Security payroll tax. Rising insurance contributions can also have a more subtle effect on the Social Security tax base because they influence the distribution of money wages above and below the taxable maximum amount. This article uses the Medical Expenditure Panel Survey to analyze trends in employer health insurance contributions and the distribution of those costs up and down the wage distribution. Our analysis shows that employer health insurance contributions increased faster than overall compensation during 1996–2008, but such contributions grew only slightly faster among workers earning less than the taxable maximum than they did among those earning more. Because employer health insurance contributions represent a much higher percentage of compensation below the taxable maximum, health insurance cost trends exerted a disproportionate downward pressure on money wages below the taxable maximum.
via Effects of Employer-Sponsored Health Insurance Costs on Social Security Taxable Wages by Gary Burtless, Sveta Milusheva :: SSRN.
March 12, 2013
We test for asymmetric information in the UK private health insurance (PHI) market. In contrast to earlier research that considers either a purely private system or one where private insurance is complementary to public insurance, PHI is substitutive of the public system in the UK. Using a theoretical model of competition among insurers incorporating this characteristic, we link the type of selection (adverse or propitious) with the existence of risk‐related information asymmetries. Using the British Household Panel Survey, we find evidence that adverse selection is present in the PHI market, which leads us to conclude that such information asymmetries exist.
via Testing for Asymmetric Information in Private Health Insurance by Pau Olivella, Marcos Vera‐Hernández :: SSRN.
March 11, 2013
Even though most American retirees benefit from Medicare coverage, a mounting body of research predicts that many will face large and increasing out-of-pocket expenditures for healthcare costs in retirement and that many already struggle to finance these costs. It is unclear, however, whether the general population understands the likely magnitude of these out-of-pocket expenditures well enough to plan for them effectively. This study is the first comprehensive examination of Americans’ expectations regarding their out-of-pocket spending on healthcare in retirement. We surveyed over 1700 near retirees and retirees to assess their expectations regarding their own spending and then compared their responses to experts’ estimates. Our main findings are twofold. First, overall expectations of out-of-pocket spending are mixed. While a significant proportion of respondents estimated out-of-pocket costs in retirement at or above expert estimates of what the typical retiree will spend, a disproportionate number estimated their future spending substantially below what experts view as likely. Estimates by members of some demographic subgroups, including women and younger respondents, deviated relatively further from the experts’ estimates. Second, respondents consistently misjudged spending uncertainty. In particular, respondents significantly underestimated how much individual health experience and changes in government policy can affect individual out-of-pocket spending. We discuss possible policy responses, including efforts to improve financial planning and ways to reduce unanticipated financial risk through reform of health insurance regulation.
via Retiree Out-of-Pocket Healthcare Spending: A Study of Consumer Expectations and Policy Implications by Allison Hoffman, Howell Jackson :: SSRN.