Hi David - your suggestion that the cost/benefit analysis we are doing at policy impacts and beyond does not account for the DWL of taxation is incorrect. The point we make on policyimpacts.org and in our academic writing is that the relevant threshold is not 1, rather it's the MVPF of the policy you're envisioning being used to raise revenue. So, you're right that the statistic does not embed an assumption about the DWL of taxation, but rather the relevant thresholds one uses should be the mvpfs of the policies you're envisioning being used to raise revenue. We provide benchmarks in our papers. For example, changes to taxes at the bottom of the income distribution have mvpfs around 0.9-1.2 or so, while changes to taxes at the top of the income distribution are more in the 1.5-2 range, sometimes higher.
I read this and I read your response on my post. Thank you. I don't follow. If the statistic does not embed an assumption about DWL, that seems to be a problem.
So of the $1,000, 60% goes to reimburse providers for uncompensated care they would have done anyway. Presumably, if the government wasn't providing the Medicaid they would have had to charge more to private pay to make up the loss.
This more or less fits my model that Medicaid is mostly about compensating providers, who are the main beneficiaries.
Patients would have gotten that care anyway, but payment related issues would have been a hassle for all involved even if it ultimately gets charged off by providers.
The remaining $400 in new healthcare is "worth" $200-$400 to patients, based on some kind of subjective survey or what have you.
1. "Presumably, if the government wasn't providing the Medicaid they would have had to charge more to private pay to make up the loss." That's actually an unanswered question in the field to my knowledge - relates to the incidence of uncompensated care. We don't have a good sense to the best of my knowledge.
2. "The remaining $400 in new healthcare is "worth" $200-$400 to patients, based on some kind of subjective survey or what have you." -- the paper is all about how we estimate the 200-400 - it's not a subjective survey; the academic contribution is to develop 3 methods to arrive at those numbers. We also wrote a follow-up paper using variation in prices of health insurance charged to low-income people in MA that led to similar findings.
It's inherently difficult to parse out the value of something in a non-market context. I'm in health insurance so I feel like I spend my entire career hashing out stated vs revealed preferences in a third party payer context. Recently I watched people spend billions more on care they didn't think they needed before because something like a few % in cost share was removed.
I love the civility with which both you and Nathan conduct themselves. There is more to say on the cost-benefit analysis, though. I'll post later on "I Blog to Differ."
As I mentioned in a comment last week, such empirical studies don't capture the full range of costs associated with transfer payments. Government promises of economic security (including Social Security and Medicare as well as Medicaid) teach people that they don't have to be thrifty to deal with their future needs. Instead, they can boost their present consumption at the expense of their savings, secure in the knowledge that when they become old enough, or if they become sick, disabled, or otherwise unemployed or have diminished labor incomes, the government will step in to take care of them.
The shift from private thrift towards present consumption means a less-capital intensive economy, resulting in a lower standard of living for workers--real labor incomes are diminished, and economic growth rates are lower. Such problems have been afflicting many industrialized welfare states in recent decades. In the American case the data show that there has been a dramatic displacement of net private domestic investment by transfer payments and an overall collapse of domestic net savings since shortly after Medicare and Medicaid were enacted in the mid-1960s (see https://cdn.mises.org/inline-images/image_80.png and https://fred.stlouisfed.org/series/W207RC1Q156SBEA for the relevant FRED charts).
The class component of America's deindustrialization (and indeed in Britain and France as well) should be noted too. The incomes of people whose incomes depend mainly on a continual supply of artificially-cheap credit furnished by monetary expansion (mostly those with decent college credentials working for large organizations or in lucrative licensed professions) have done o.k., so the costs of deindustrialization have mainly been borne by the rest of the working class (mostly in the uncredentialed blue collar labor sectors). The political dilemma here is that the groups that have become most dependent on transfer benefits also tend to be foremost victims of the deindustrialization process, so there is very little public appetite for tolerating any cuts to transfer payment benefits.
To the extent that Medicaid is even a partisan issue, it is because the beneficiaries that Republicans are targeting for exclusion skew strongly towards the Democrat side anyways. To the extent that deindustrialization is an issue, it is because each party in their own peculiar way are in denial concerning deindustrialization, either about its causes (Republicans, who prefer to blame immigrants and imports) or about its very existence (Democrats, who prefer to blame "the rich" for allegedly having boundless wealth that is undertaxed), and don't want to undertake the highly unpopular (and thus political career-ending) task of addressing its real causes.
This might be a bit tangential from the exchange and the paper, so feel free to ignore, but Is there good data on what additional services/treatments that Medicaid expansion provided? In thinking about the value of Medicaid expansion it would be useful to know if any of the additional medical care provided had any kind of positive externalities.
What we learned during Covid is that poverty and not age was the biggest factor after initial wave. Poverty is what you attack because poverty makes people unhealthy.
I just gonna say that that was as clear as mud.
Lol, Agreed
Here's my post laying out the problem with Hendren's cost/benefit analysis. He ignores the deadweight loss from taxes:
https://davidrhenderson.substack.com/p/hendrens-basic-error-in-costbenefit
Hi David - your suggestion that the cost/benefit analysis we are doing at policy impacts and beyond does not account for the DWL of taxation is incorrect. The point we make on policyimpacts.org and in our academic writing is that the relevant threshold is not 1, rather it's the MVPF of the policy you're envisioning being used to raise revenue. So, you're right that the statistic does not embed an assumption about the DWL of taxation, but rather the relevant thresholds one uses should be the mvpfs of the policies you're envisioning being used to raise revenue. We provide benchmarks in our papers. For example, changes to taxes at the bottom of the income distribution have mvpfs around 0.9-1.2 or so, while changes to taxes at the top of the income distribution are more in the 1.5-2 range, sometimes higher.
I read this and I read your response on my post. Thank you. I don't follow. If the statistic does not embed an assumption about DWL, that seems to be a problem.
So of the $1,000, 60% goes to reimburse providers for uncompensated care they would have done anyway. Presumably, if the government wasn't providing the Medicaid they would have had to charge more to private pay to make up the loss.
This more or less fits my model that Medicaid is mostly about compensating providers, who are the main beneficiaries.
Patients would have gotten that care anyway, but payment related issues would have been a hassle for all involved even if it ultimately gets charged off by providers.
The remaining $400 in new healthcare is "worth" $200-$400 to patients, based on some kind of subjective survey or what have you.
Do I got it?
Yes, broadly you got it -- a couple reactions:
1. "Presumably, if the government wasn't providing the Medicaid they would have had to charge more to private pay to make up the loss." That's actually an unanswered question in the field to my knowledge - relates to the incidence of uncompensated care. We don't have a good sense to the best of my knowledge.
2. "The remaining $400 in new healthcare is "worth" $200-$400 to patients, based on some kind of subjective survey or what have you." -- the paper is all about how we estimate the 200-400 - it's not a subjective survey; the academic contribution is to develop 3 methods to arrive at those numbers. We also wrote a follow-up paper using variation in prices of health insurance charged to low-income people in MA that led to similar findings.
#2, got it. thanks.
It's inherently difficult to parse out the value of something in a non-market context. I'm in health insurance so I feel like I spend my entire career hashing out stated vs revealed preferences in a third party payer context. Recently I watched people spend billions more on care they didn't think they needed before because something like a few % in cost share was removed.
I love the civility with which both you and Nathan conduct themselves. There is more to say on the cost-benefit analysis, though. I'll post later on "I Blog to Differ."
HINT: Its a basic error Hendren makes on the cost side.
I think that’s arguable. Before 1965, doctors and hospitals provided far more charity care. Hardly any do now unless forced to.
I think hospitals still do it due to EMTALA.
As I said, “unless forced to”.
As I mentioned in a comment last week, such empirical studies don't capture the full range of costs associated with transfer payments. Government promises of economic security (including Social Security and Medicare as well as Medicaid) teach people that they don't have to be thrifty to deal with their future needs. Instead, they can boost their present consumption at the expense of their savings, secure in the knowledge that when they become old enough, or if they become sick, disabled, or otherwise unemployed or have diminished labor incomes, the government will step in to take care of them.
The shift from private thrift towards present consumption means a less-capital intensive economy, resulting in a lower standard of living for workers--real labor incomes are diminished, and economic growth rates are lower. Such problems have been afflicting many industrialized welfare states in recent decades. In the American case the data show that there has been a dramatic displacement of net private domestic investment by transfer payments and an overall collapse of domestic net savings since shortly after Medicare and Medicaid were enacted in the mid-1960s (see https://cdn.mises.org/inline-images/image_80.png and https://fred.stlouisfed.org/series/W207RC1Q156SBEA for the relevant FRED charts).
The class component of America's deindustrialization (and indeed in Britain and France as well) should be noted too. The incomes of people whose incomes depend mainly on a continual supply of artificially-cheap credit furnished by monetary expansion (mostly those with decent college credentials working for large organizations or in lucrative licensed professions) have done o.k., so the costs of deindustrialization have mainly been borne by the rest of the working class (mostly in the uncredentialed blue collar labor sectors). The political dilemma here is that the groups that have become most dependent on transfer benefits also tend to be foremost victims of the deindustrialization process, so there is very little public appetite for tolerating any cuts to transfer payment benefits.
To the extent that Medicaid is even a partisan issue, it is because the beneficiaries that Republicans are targeting for exclusion skew strongly towards the Democrat side anyways. To the extent that deindustrialization is an issue, it is because each party in their own peculiar way are in denial concerning deindustrialization, either about its causes (Republicans, who prefer to blame immigrants and imports) or about its very existence (Democrats, who prefer to blame "the rich" for allegedly having boundless wealth that is undertaxed), and don't want to undertake the highly unpopular (and thus political career-ending) task of addressing its real causes.
Do these two interpretations of the study (the accurate and inaccurate one) lead to different policy implications?
This might be a bit tangential from the exchange and the paper, so feel free to ignore, but Is there good data on what additional services/treatments that Medicaid expansion provided? In thinking about the value of Medicaid expansion it would be useful to know if any of the additional medical care provided had any kind of positive externalities.
What we learned during Covid is that poverty and not age was the biggest factor after initial wave. Poverty is what you attack because poverty makes people unhealthy.