March 26, 2012
Wow, nothing gets by Robert Samuelson. He tells us today that he has uncovered the secret as to why President Obama insisted on pushing for the Affordable Care Act (ACA). It all boils down to his big ego.
At the end of a piece titled “Obama’s Ego Trip,” Samuelson cites a section of book by Noam Scheiber on the Obama presidency:
“Obama’s advisers tell him he can be known for preventing a second Great Depression. ‘That’s not enough for me,’ Obama replies.”
There it is: President Obama’s big ego. Well, perhaps someone should share a little secret with Samuelson: all presidents have big egos. They wouldn’t end up with the job otherwise.
Also, perhaps Samuelson missed it, but President Obama campaigned on health care reform. This is a very important political issue to a large portion of his constituency. They would have been very angry, or least disappointed, if he failed to deliver.
In terms of making the case that it is a bad bill, Samuelson should do a better job of reading his own sources. He dismisses the impact of health insurance on health outcomes telling readers:
“Consider a study of Massachusetts’s universal coverage program, enacted under former governor Mitt Romney, by economists Charles J. Courtemanche of the University of Louisville and Daniela Zapata of the University of North Carolina at Greensboro. It estimated that about 1.4 percent of the state’s adult population moved into the ‘very good’ or ‘excellent’ health categories.”
Here’s part of the abstract from the study:
“Using individual-level data from the Behavioral Risk Factor Surveillance System, we provide evidence that health care reform in Massachusetts led to better overall self-assessed health. An assortment of robustness checks and placebo tests support a causal interpretation of the results. We also document improvements in several determinants of overall health, including physical health, mental health, functional limitations, joint disorders, body mass index, and moderate physical activity. The health effects were strongest among women, minorities, near-elderly adults, and those with incomes low enough to qualify for the law’s subsidies. Finally, we use the reform to instrument for health insurance and estimate a sizable impact of coverage on health. “
That doesn’t sound too shabby on its face. Samuelson is unimpressed that only 1.4 percent of the adult population moved into the “very good” or “excellent” health categories following the extension of insurance, but of course the vast majority of the adult population (over 88 percent) was already insured. This implies that close to 15 percent of the people who gained coverage as a result of the reform (coverage is now around 96 percent) saw a marked improvement in their health status.
There have been many other studies done over the years, such as this one on breast cancer and this one on the health of newborns, showing the health benefits of insurance coverage. Samuelson is fighting a losing battle if he is trying to argue that increased coverage rates will not lead to better health outcomes.
It is also arguable that extending coverage is the less important effect of the ACA. The law also effectively ensures the people have genuine insurance. As it stands now, most people are insured through their job. If a person develops a serious illness that causes them to lose their job (e.g. cancer), they will also lose their insurance. Then they are forced to seek in the individual market.
Because they have a pre-existing condition, insurers will typically charge exorbitant fees that will make insurance unaffordable to all but the wealthiest people. One of the key provisions of the ACA is a ban on charging higher fees for pre-existing conditions, ensuring that people in this situation will be able to purchase affordable coverage.
Next we have Samuelson complaining about the $1.5 trillion cost over ten years. This is supposed to be a big scary number. Let’s put in a little context. GDP over this period will be roughly $200 trillion, which means that the tab will be roughly 0.8 percent of GDP.
Furthermore, Samuelson is just flat out wrong when he says that the revenue raised to cover this cost could have been used for other purposes. Much of this projected revenue is specific to health care, as in the fines that large companies will pay for not insuring their workers. In principle we could fine companies for not insuring their workers to pay for a tax cut for rich people or another war, but that might be a hard sell politically.
Samuelson also gets the economics wrong on the burden of this cost. He says that it will increase the cost of labor, making firms less willing to hire. Economists across the political spectrum agree that non-wage compensation costs (like health insurance premiums or penalties) come out of wages. This means that some workers may see lower take-home pay as a result of the ACA, but there should be little impact on employers’ willingness to hire.
Samuelson also ignores the cost control measures in the bill. The Republicans in Congress have been yelling about “rationing” and “death panels” based on the ACA’s Independent Payment Advisory Board (IPAB), which is supposed to limit increases in the cost of Medicare.
We can’t know how effective this and other measures will be in containing costs, but it is worth pointing out that you can’t have it both ways. Either the Republicans are off on another planet in claiming that IPAB will limit care or Samuelson is wrong in saying that ACA does nothing to contain costs.
There is one final point worth noting in reference to the quote from Scheiber’s book. President Obama cannot honestly take credit for saving the United States from a second Great Depression. The first Great Depression came about because of a decade of inadequate responses to the downturn, not just from mistakes in the initial crisis.
We now know how to get out of a depression, we just have to spend money. Even if we had seen a full-fledged financial collapse in the fall-winter of 2008-2009, this would not have condemned us to a decade of double-digit unemployment.
This point can be seen clearly in the case of Argentina, which did have a full-fledged financial meltdown following its default in December of 2001. It took the country 1.5 years to make up the ground lost in the crisis after which it sustained strong growth until the world economic crisis led to a downturn in 2009.
Source: International Monetary Fund.
Even if we assume that the economic policymakers in the United States are less competent than Argentina’s, so that it takes twice as long to recover lost ground, that would imply it would only take 3 years to recover the ground lost in a financial crisis. That is well short of what would be considered a second Great Depression.
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