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Article Artículo

Affordable Care Act

Can We Kill the "Young Invincibles" Once and For All?

Don't worry, I'm not advocating mass murder; I want to put to death a silly myth about Obamacare that keeps getting spread by people who should know better. The basic story is that Obamacare is dependent on getting large numbers of young and healthy people into the system. The premiums these people pay will help to cover the costs incurred by older and less healthy people.

The latest repetition of this myth appears in a NYT editorial urging Republicans not to destroy the Affordable Care Act (ACA). The piece notes the sharp increases in premiums last year and then told readers:

"Still, the cost of insurance, deductibles and co-payments is too high for many people, especially middle-class families that earn too much to qualify for subsidies. But the solution is not to take away the benefits of the law but to strengthen it. Costs could be lowered if more young and healthy people were encouraged to sign up to spread costs over a larger pool of people."

This comment wrongly implies that the problem of the system is that not enough young people have signed up. This is not true, the age distribution of enrollees has little impact on the cost of the program. While the distribution of premiums works slightly against the young, it is not enough to have a substantial impact on the finances of the system.

The Kaiser Family Foundation showed that even an extreme age skewing of enrollees would raise costs by less than 2.0 percent. It matters much more whether there is a skewing based on health conditions.

To see this point, think of the premium people pay as a tax. Under the ACA, people in the oldest age bracket (ages 55 to 64) pay premiums that are three times as large as people in the youngest age bracket (ages 18 to 34). This means that each older person pays three times as much into the system as a younger enrollee. This would mean, other things equal, we should value getting an older enrollee into the exchanges three times as much as a younger enrollee.

CEPR / December 24, 2016

Article Artículo

Robert Samuelson and the Second Great Depression Myth

Robert Samuelson decided to once again push the second Great Depression, applauding the Obama administration for preventing the Great Recession from turning into a depression. This is the great myth (I'm tempted to say "fake news") that establishment types push endlessly with zero foundation.

It is important for the worldview they like to promote, in which we have seen a massive upward redistribution of income over the last four decades, well you know, that's just because that is the way the world is. We may not like this rise in inequality, and after all President Obama did raise taxes on the rich and propose an increase in the minimum wage, and gave us Obamacare (all very good policies), but growing inequality is just baked into the genetics of the modern economy.

The Wall Street bailout that stands at the center of the second Great Depression avoidance myth is the world's largest slap in the face of promoters of the baked-into-the-genetics story. After all, other aspects of the rigging (yes, I'm promoting my free book, Rigged: How Globalization and the Rules of the Modern Economy Were Structured to Make the Rich Richer) are more subtle.

We have free trade in manufactured goods but rigged protectionist measures that no one knows about that protect doctors, dentists, and other highly paid professionals. We have ever stronger and longer patent and copyright protections. These protections take hundreds of billions of dollars each year out of the pockets of the bulk of the population and give them to the people in position to benefit from them. Protection adds more than $350 billion a year to the cost of prescription drugs alone. We have a Federal Reserve Board that raises interest rates to throw people out of work, and keep workers from getting bargaining power, as a way of ensuring that an arbitrary inflation target is not breached.

CEPR / December 19, 2016