Health Care Reform, the Uninsured, and Decision 2008

Last night's Democratic Presidential debate featured a 15 minute opening segment on health care. Senators Clinton and Obama went back on forth on their respective plans. Clinton contended that adverse selection necessitates the use of insurance mandates in order to achieve universal coverage without gross increases in costs. Obama, on the other hand, argued that subsidies would be more effective that mandates, especially among those who are too poor to afford insurance.

Both Senators' policies are broader and more proactive (especially from the government involvement standpoint) than what the Republican candidates are peddling. And, for the first time in at least 15 years, the Democratic universal coverage type-schemes appear to be politically feasible, though recent experiences with exploding costs in Massachusetts, as well as the legislative failure of a similarly-themed program in California, may get in the way of this.

But will these policies work as intended? And more fundamentally, what is the anatomy of the uninsured problem in the United States? Who are the uninsured and why aren't they covered?

An excellent working paper by Jonathan Gruber attempts to shed light on each of these questions. Gruber, an MIT economist, begins by characterizing the problem in its scope, and then proceeds to get into the nitty-gritty of whos and whys. He then moves on simulation models looking at putative effects of various policies, including those very close to variants proposed by the Republican and Democratic presidential candidates.

Gruber ends with an interesting discussion of the uninsured problem in the context of the other oft discussed health policy issue: increasing costs. He makes the following points, which I tend to agree with:

1) "Measures that are being discussed today under the guise of cost control are very modest. Initiatives such as medical electronic records, increased preventive and maintenance care, and reduced medical errors will at best reduce health care costs by only a few percentage points, and are just as likely to raise costs (with increasing quality). With health care costs rising at 7-10% per year, this is not enough. To fundamentally control health care costs we need to actually be willing to deny care that does little for health – but which consumers now want."

2) "...until we can resolve these discrepancies and understand more fully which health care spending is justified and which is not, we are not prepared to take on the American public on cost control. The fundamental insight of this round of reform is therefore to not hold the attainable goal (universal coverage) hostage to the (currently) unattainable goal, fundamental health care cost control."

This is a great, thought-provoking read. I highly encourage this paper if health care is an important issue for you in the coming election.

Elaborate Hoax

I received the following e-mail this morning from the "Internal Revenue Service":

Internal Revenue Service (IRS)
United States Department of the Treasury
Date: 01/22/2008

After the last annual calculations of your fiscal activity we have determined that you are eligible to receive a tax refund of $184.80.

Please submit the tax refund request and allow us 6-9 days in order to process it. A refund can be delayed for a variety of reasons.

For example submitting invalid records or applying after the deadline. To access the frm for your tax refund, use the following personalized link:

http://0xCA.0x27.0x30.0xDD/www.irs.gov/

Regards,
Internal Revenue Service

This is clearly a hoax, as you might surmise from the stuff I've highlighted in bold. If you follow the attached link, you'll find a very official looking website, complete with the IRS seal and everything. However, the stench of falsehood becomes quite rank when you see that they request your credit/debit card information right up to your ATM PIN. (Also, the website does not link you to any other page on irs.gov).

This is probably the most elaborate hoax I've ever received and I actually believed it at first glance. The fradulent e-mail I generally receive involves winning the UK lottery or some poor sap in Africa who is in duress and needs an emergent wire-transfer. I've gotten so many of these, that I often wondered why internet thieves have stuck with these strategies for so long. After all, even the most reluctant Bayesians would come to see through the strategy.

One explanation might be differential rates of adoption of various gambits among internet thieves. The innovators who first came up with the emergent wire transfer strategy might have done quite well. Given that the (marginal) cost of sending mass e-mails is low and that these ideas are essentially public goods, others with some spare time started to adopt the strategy in increasing numbers. My sense is that, today, the original perpetrators have likely moved on to glitzier things like this IRS scam, while the late adopters are responsible for the continuing flow of UK lottery winnings messages and such.

Any other ideas?

Economics at Work

Check out this great NYT piece on the relevance of economics in public policy. The article focuses on the Jameel Poverty Action Lab (JPAL) and the development economists that comprise the heart and soul of the organization.

The beauty of JPAL is their use of randomized field experiments, which are becoming quite hot in the social sciences, to understand the effectiveness of specific policies and programs aiming to improve economic outcomes and well-being among the poor. A quick perusal of the JPAL website reveals some interesting projects, ranging from provision of textbooks and educational inputs for schooling, malarial bed-nets, and a variety of innovate financial products designed to increase savings and investment.

I spent some time this summer meeting with individuals associated with JPAL-South Asia and the affiliated Institute for Financial and Management Research (both in Chennai, India) and I can attest that both institutes are veritable hothouses of ideas, innovation and excitement. My time there cemented a long-standing desire to be more policy-relevant with my own work (though I'm not sure how successful I have been on that front!).

Best Picture

I've now seen all five Academy Award nominated films for 2008. Here are my rankings:

1. There Will Be Blood: I hated this movie immediately after I saw it. Three days later, I realized it was great. It's up to you to decide what the theme is: the unfettered excesses of capitalism versus the unfettered excesses of organized religion in industrial America? A misanthrope oil-tycoon's (played brilliantly by Daniel Day Lewis) slowly disintegrating soul? Whatever it is, there is a lot packed into this movie.

By the way, the score for the music is by Jonny Greenwood, lead instrumentalist of Radiohead. It's about as daring and jarring (in a good way) as anything you'd expect from anyone associated with this band.

2. Michael Clayton: A tired middle-aged lawyer (the always fantastic George Clooney), who long ago gave up his scruples, money, free-time and marriage, is faced with a dilemma in the form of a Constant Gardner like-puzzle. The best part of this movie is the end, where Clooney's character gets into a taxicab as the credits roll - one wonders where his life goes next, or if things have already played out for him . This movie will likely not win the Oscar, but that's because the Academy is a bit weird about these things (ex: The English Patient and #10 below).

3. Juno: This movie is just a lot of fun, with witty banter and pop-culture references. The treatment of teenage pregnancy is interesting, but not flippant or glorified (as some Republican-types seem to think): Juno does move back into the typical life of a teenager, but her decisions have consequences for the Jennifer Garner character, who gets an incredible gift even as her marriage falls apart.

4. No Country for Old Men: A lot of people loved this movie. I thought it was decent and thought provoking, but I'm not sure how I feel about it just yet. Actually, I just saw it yesterday, so maybe I need a few days to process and get back to you.

10. Atonement: A jealous and annoying little girl makes a stupid decision that alters the lives of her older sister and friend forever. If you have to skip one movie on this list, make it this one. How did this get nominated ahead of Eastern Promises?

Personality Traits and Economics

People often attribute their own success or the success of others to various individual attributes like motivation, determination and curiosity. Historically, the academic study of these personality traits lay within the realm of psychology. Economists concerned with the life and labor market successes of individuals were always mindful of the impacts of individual traits, but did not include these in their formal models. As such, the effect of these factors in regressions were either captured in the disturbances or, more troubling, in the coefficients on other variables of interest, such as education.

However, economists are now explicitly modeling the generation and ultimate effects of various personality traits. A recent paper (gated version here, non-gated here) by Borghans, Duckworth, Heckman and Weel summarizes the literature from psychology and economics and attempts to build a framework upon which economists and other social scientists can work to understand the influence of personality traits on life outcomes, as well as their genesis. The paper is a whopping 165 pages long, which is enough to deter most souls. However, here are a few reasons why I think it is worth reading in its entirety (or, alternatively, a few reasons why I am reading it in its entirety):

1) Personality traits affect most outcomes we care about: Are you a health economist interested in, say, smoking? To the extent that starting/quitting behavior is driven by discount rates (roughly, the value of the future relative to the present) and motivation, it is worth understanding how these personality traits interact with other economic and biological influences to influence healthy behaviors.

2) Economic imperialism and interdisciplinary collaboration: Economics is getting popular in part because its' disciplinary lens is being focused on a wide variety of questions and human behaviors. Part of this "imperialism" requires a strong understanding on the part of economists of fundamental research in other disciplines. The other side of this is that economists, who believe in comparative advantage, will likely require expert inputs from other fields to build the best possible research project.

I guess there are really three things here. First, if you are interested in economics in the armchair sense, this paper is a great way to see how the scope of the field is growing. Second, if you are an economist, it is a frontier of the field worth paying attention to. Third, if you are a non-economist researcher reading the work of economists in fields outside the traditional scope may alert you to opportunities for collaboration.

3) Behavioral Economics Plus: This paragraph alone hooked me on this paper (emphasis mine):

The evidence from personality psychology suggests a more radical reformulation of classical choice theory than is currently envisioned in behavioral economics which tinkers with conventional specifications of preferences. Cognitive ability and personality traits impose constraints on agent choice behavior. More fundamentally, conventional economic preference parameters can be interpreted as consequences of these constraints. For example, high rates of measured time preference may be produced by the inability of agents to delay gratification, interpreted as a constraint, or by the inability of agents to imagine the future. We develop a framework that introduces psychological variables as constraints into conventional economic choice models.

A "radical reformulation" of behavioral economics, a field that is considered radical itself? Count me in! In a future post, I will discuss what their reformulation is (I'm not that far into this paper yet) and why it is (or isn't) interesting.

Clemens-ometrics

Are you sick of the Roger Clemens-Brian McNamee flap? I am, but the infusion of some new statistical analysis has renewed my interest in the issue. A group of statisticians and an economist at the University of Pennsylvania have used some pretty simple analysis to address (and refute) Clemens' lawyers' claims that the statistical record exonerates Roger from allegations of taking performance enhancing drugs.

The take home point of the whole exercise is simple. The statisticians allege that the analysis in the "Clemens Report" is highly prone to selection bias: the "control group" for Roger Clemens is comprised of freaks of nature like Nolan Ryan. This new analysis looks at a different control group (all pitchers who make a given number of appearances over a reasonably long career) and finds that Clemens is certainly an outlier. Obviously, this does not suggest that Clemens used performance enhancers anymore than it implicates Nolan Ryan, but it does suggest that Clemens statistical record does not hold him above suspicions in these investigations, which is what the pitchers' lawyers are arguing.

For more information, see here. The Freakonomics blog has a guest post by economist Justin Wolfers, one of the analysts on the study, talking about the whole exercise. Also, I heard sometime before that statistical methods were used to analyze steroid use among hitters, as well. I have not been able to find any reliable links on that. If you have one, please post it.

Eric Finkelstein on the Economics of Obesity

Interviewed here at the Freakonomics blog. Dr. Finkelstein is a researcher at the Research Triangle Institute in Cary, NC, and taught my undergraduate health economics class at Duke. He's been obsessed with obesity for some time (I think our 2/3 of our health econ final exam had something to do with obesity), and the post plugs his new book on the subject.

The interview is not very long, but somehow covers everything from the cost of junk foods, to agricultural subsidies, to Dance Dance Revolution and the Wii. I found this particular statement of his quite provocative (emphasis mine):

In my book, I talk a lot about my Uncle Al, a smart and successful attorney who also happens, not by accident, to be very overweight. In fact, he’s overweight because instead of spending his time dieting and exercising, he has spent his time building a very successful law firm. I see no reason why the government should get Uncle Al to change his behavior if he does not want to. Even for low-income individuals, any effort to force people to change their behavior will only serve to make them worse off (even if they do become thinner). So no, for adults, I do not think the government can, or even should, legislate obesity away.

People at the School of Medicine or Public Health would be somewhat shocked by this. Many in these disciplines favor proactive government measures (taxes, regulations) to reduce obesity. Their argument typically combines paternalism (people want to lose weight, but suck at it so the government should intervene) and economics (obese people impose externalities on others).

Needless to say, I am looking forward to reading Finkelstein's book.

Resources for Causal Inference

In the last 15-20 years or so, statisticians and econometricians have made great strides in thinking about how to establish causality in the absence of a clean randomized experiment. In the economics literature, the bar as been raised quite high as far backing up causal statements, and the same sort of rigor is now developing in other disciplines such as medicine and public health, political science, and sociology. The increasing availability of technically accessible resources for those who are interested in applying cutting-edge statistical techniques to address causal questions, while making minimal assumptions on things that cannot be observed, should hasten the convergence in methodological rigor across these disciplines.

A good example of a rigorous, but still applied and down-to-earth, treatment of causal inference is Counterfactuals and Causal Inference: Methods and Principles for Social Research by Morgan and Winship. I am currently working through this book and have found it fantastic. The book begins by tackling the problem of causal inference using both the algebraic potential outcomes model as well more intuitive graph theoretic approaches. After building this foundation, the book goes through different approaches to establish causality, offering clear expositions on the utility of these estimators given certain data structures and, most importantly, the kinds of assumptions that are needed to justify making causal statements with each of the methods. Methods covered in the book include matching, IV, panel data approaches such as fixed-effects and difference-in-differences, and partial identification/bounding. I think any serious applied researcher, regardless of primary discipline, should have these methods in his/her toolkit. This book offers excellent introductions into each and will put said researcher on his/her way.

In a monograph explicitly designed to have broad appeal, it is to be expected that some important points are underdeveloped or glossed over, entirely. For example, the section on weak instruments in IV estimation left a lot to be desired. However, the authors cite all of the important theoretical and empirical literature up to 2006: if you want to learn more, it's not hard to find out where you need to go.

Some other (more advanced) resources that I have found interesting and useful:

1) Identification for Prediction and Decision, by Charles Manski: Manksi has a different take on causal inference than most. Rather than try to find point estimates of a causal parameter, Manksi begins with very weak assumptions about the underlying social process and studies the extent to which one can create treatment effect bounds with these assumptions. As he notes in the introduction, some people find this to be unnecessarily conservative. However, in many situations, perhaps it is best to recognize that explicit causal inference may not be possible and/or may require very strong assumptions about things we cannot observe. It is in these situations where the utility of bounding is most apparent. Manksi makes a concerted effort to tie in his methodology with efforts to recover policy relevant parameters that, as the title suggests, help motivate prediction and decision. Here is a health care application (looking at Swan Ganz catherization) of the Manksi's approach - good stuff.

2) NBER Summer Course on Econometrics: This site supposedly has some 18 hours worth of high-quality lecture video and slides on topics ranging from program evaluation and causal inference, to different estimators getting at causal inference, to panel data, to GMM, etc. The talks are given by Guido Imbens and Jeff Wooldridge, both excellent econometricians. (The latter has written some phenomenal introductory and advanced econometrics textbooks.) I'm about halfway through the lecture series now and they are quite good. Most require prior knowledge of econometrics.

3) Handbook of Econometrics: James Heckman has will have some articles about program evaluation in the forthcoming version of the Handbook of Econometrics he is editing. As you'll see from the Morgan and Winship book, Heckman's name comes up a lot in the causal inference and identification literature. He's a superstar who has done some amazing work. I'll post a link once these resources become available.

Does Contributing to a Political Campaign Make You Irrational?

A few months ago, I blogged about the phenomenon of cognitive dissonance in politics, where individuals may makes changes in their attitudes or actions in order to make the two consistent. The driving force behind this is that individuals do not be inconsistent. Santosh over at Brown Man's Burden talks about cognitive dissonance in the context of basketball.

I had my own experience with cognitive dissonance a few days back. Several weeks ago, I made my first ever campaign contribution, throwing a token or two over to the "Straight Talk Express." A few days back, I watched the Republican Debate. Intellectually, it was quite clear to me that Gov. Romney won the day, with Senator McCain sounding a bit confused, even defensive, on several policy issues.

However, when I spoke to a friend of mine afterwards who made this point, I debated him vociferously, offering excuses for McCain's tactics and performance. I obviously knew my friend was right, but I didn't want to believe it because I wanted my mouth to be where my money was (or vice versa).

Campaign contributions are salient very early in political contests: funds are important both in getting campaigns started and sustaining them through the grueling primary and general election season. Given this, I wonder how much "stickiness" there is in political support among those who donate money to political campaigns. Obviously, if you are willing to part with money, you are likely more invested in your candidate than others are. However, controlling for intensity of support, I wonder if those who donate to a candidate are more likely to stick with that candidate even when less than flattering information is revealed about him/her during the course of the campaign. This question is similar in spirit to, but ultimately distinct from, that explored in the Mullainathan and Washington paper linked in my previous post.

The 'Dar he Blogs! Guide to Blogging

According to my sister, the typical 'Dar he Blogs post follows this formula:

1. Tell some personal story, usually from childhood.
2. Link (1) with an economics paper or theory (can be a stretch).
3. Talk about a few more papers.
4. Conclude abruptly or return to the original story.

Now you, too, can write for 'Dar he Blogs. To quote our middle school band conductor, Mr. Rinaldi: "It's just that easy."

More seriously, I appreciate the comments and support you've provided for this space. I ran out of blogging steam around the turn of the year, but after a solid end to January I'm back and ready to share my thoughts whether you like it or not. Also, I'm trying to make some improvements in the blog. If you have any thoughts on what you'd like to see, please let me know.