Relevant and even prescient commentary on news, politics and the economy.

More Shopping Around . . .

I want to stress the need to shop around when looking for healthcare insurance on the exchanges by citing one example of how it can make a difference. As mentioned earlier here and on Charles Gaba’s ACA Signups blog, Shopping Around does make a difference. If you did not do so, you could be suckered into paying far more than what is necessary for healthcare insurance. This is supposedly the impact of the free market and as there is a sucker born every minute, there are those who will invest the time to look for and find the best policy at the best price. The market is not static.

I pulled another example of how the market can vary by going from a state to state view to looking within one particular state. In particular, I chose Missouri as an example to portray as it is showing an advertised high increase of cost at 27 and 22%. Charles Gaba does an excellent job of explaining the impact of these two increases within Missouri, which I will portray at AB. Charles Gaba fills the gap which Healthcare.Gov does not fill by pointing out the number of policies which have lower rates of increase than 10% (Healthcare.Gov only mentions increases >10%).

invisible hand

As you read the top half of the chart (click on the chart for a larger chart), you can see Coventry Health and Life appears to dominate the market place with >80% market share. If we look at the number of participants in the market, Coventry is only being measured against 48% of the market place. The other half of the market place which is reporting less-than a 10% rate hike is not reported by Healthcare.Gov. It is there, Healthcare.Gov does the consumer a great disservice by not reporting market place increases less-than 10%; the PPACA a disservice as it creates only a picture of out-of-control increases; and a disservice by feeding the naysayers with data of >10% increases only. While the PPACA is not perfect, it is certainly a step in the right direction as we waited ~22 years since Hillarycare for the healthcare industry and the Republicans/Congress to bring something to the table.

The bottom half of Charles Gaba’s chart depicts what could be happening using an estimated increase of 9.9% with the other healthcare insurance companies. If Charles is to be wrong in his calculations, he has erred to the high side of a potential increase by them. The total increase for the state is not 33% or 42% as reported in the news media. Nor is it 21% using a weighted average calculation as Charles Gaba determines. It is an ~ 15% total increase (Charles Gaba calculated) as determined by a high estimate of what is being paid by >50% of the market place insured participants. Could the state’s 15% be decreased? Yes, if more people shopped around in the lower half of cost in the market place.

Is this a failure of the market place, a failure of people not to “Shop Around,” or a failure of Healthcare.Gov to advertise low increases by not reporting on those lower-than 10%? Some of each I suspect; but, do not expect the healthcare insurance companies to come to your door and tell you they are going to gouge you this year as they will not. Maybe Healthcare.Gov should report on the low increase companies and maybe people should spend more time looking for a low cost and better policy . . . the same amount of time they will spend investigating an automobile and looking for the lowest cost than what they will for something impacting their health. After all, which is more valuable?

Tags: , Comments (19) | |

The Challenges of the Greek Crisis

by Joseph Joyce

The Challenges of the Greek Crisis

The Greek crisis has abated, but not ended. Representatives of the “troika” of the European Commission, the European Central Bank and the International Monetary Fund returned to Athens for talks with the Greek government about a new bailout. This pause allows an accounting of the many challenges that the events in Greece pose to the international community.

The main challenge, of course, is to the Greek government itself, which must implement the fiscal and other measures contained in the agreement with the European governments. These include steps to liberalize labor markets as well as open up protected sectors of the economy. While these structural reforms should promote growth over time, in the short-run they will lead to layoffs and reorganizations. At the same time, Prime Minister Alex Tsipras must oversee tax rises and cuts in spending. The combined impact of all these measures, which follow the virtual shutdown of the economy during the protracted negotiations with the European governments, will postpone any resumption in growth that past efforts may have generated.

It is not clear how long the Greek public will endure further misery. Any form of debt restructuring may give policymakers some justification to continue with the agreement. New elections will clarify the degree of political support for the pact. But the possibility of an exit from the Eurozone has not been removed, either in the eyes of Greek politicians or those of officials of other governments.

The Greek crisis, however, is not the only hazard that the Eurozone faces. The Eurozone’s government have yet to come to terms with the effects of the global financial crisis on its members’ finances. A split prevails between those countries that ally themselves with the German position that debt must be repaid and those that seek with France to find some sort of middle ground. Other European countries with debt/GDP ratios of over 100% include Belgium, Portugal, and Italy. Weak economic growth could push any of them into a situation where the costs of refinancing could become daunting. How would the Eurozone governments respond? Would they bail out another member? If so, would the terms differ from those imposed on Greece? Would European banks be able to pass the distressed debt on to their own governments?

Comments (4) | |

Social Security Defender Archive: Including Northwest Plan Docs/Spreadsheets

I have been working off and on, well mostly off because of ‘life’ and ‘laziness’, since 2010 on a project I modestly called the Social Security Defender. It is all built around a Google account and so has a Google+ page, a blog, an e-mail address and a Google Drive.

Today I am going live with a Public Folder in its Google Drive called the Social Security Defender Archive. In this folder are a series of other folders including ones devoted to The Northwest Plan for a Real Social Security Fix and to Social Security Reports and to CBO & OMB Documents and Reports. Plus others. In all cases the documents should be viewable, linkable, and downloadable even as there is no ‘write’ capacity.

So this is an open invitation to try out the Archive, to see what works, what doesn’t, what is useless and could be deleted and what is missing that should be added. I expect to be actively curating the Archive over the next week or so, in particular adding in a lot of material relating to the 2015 Social Security Report, including broken out Figures and Tables, as well as updated versions of the Northwest Plan with 2015 Report data included.

The e-mail address for this account, which is also my e-mail for Angry Bear related matters is:
socsec dot defender at gmail.com. Comments there or left her are more than welcome. Thanx.

Tags: , , Comments (14) | |

Is trade zero-sum between workers in different countries?

Vox.com had a long, interesting interview with Senator Bernie Sanders covering a large number of political and economic issues. In this post, I want to focus on just one issue he raised: Whether rising incomes for Chinese workers have to come at the expense of U.S. workers. Here is what Sanders told Vox’s Ezra Klein:

I want to see the people in China live in a democratic society with a higher standard of living. I want to see that, but I don’t think that has to take place at the expense of the American worker. I don’t think decent-paying jobs in this country have got to be lost as companies shut down here and move to China.

What Sanders doesn’t mention is that the market, left to itself, will indeed force a tradeoff between U.S. and Chinese workers. We can see this via the Stolper-Samuelson Theorem, which says that increasing trade will raise the real incomes of a country’s abundant factors of production and reduce the real incomes of the scarce factors of production. The reason is that abundant factors of production (relative to the rest of the world, of course) will find new markets abroad as trade increases, while scarce factors of production will face increased import competition. Since China is a labor-abundant country and the United States a labor-scarce one, the theorem implies that real wages will rise in China and fall in the United States as they increase trade (all trade, not just with each other). And this effect can be sped up if U.S. companies close factories in the United States and open them in China, just as we have seen happen.

To disable the tradeoff requires political intervention in the market. If you want to preserve gains from trade that are predicted by the theory of comparative advantage, and you want to not worsen income inequality in the United States, you need to find a way, as Ronald Rogowski pointed out, for the winners to compensate the losers from trade. This isn’t easy: As Rogowski also noted, the winners increase their clout in the political system while the losers see their influence decrease (look at the long-declining influence of unions here). As I’ve discussed before, the increased mobility of capital exacerbates this problem in the U.S., since capital is much more mobile than workers. And so we have seen a steady decrease in the tax burden paid by corporations and the rich, more trade agreements signed, and a constant drumbeat to cut Social Security (despite the coming retirement crisis) and “phase out” Medicare.

What would compensating the losers from trade look like? Most obviously, and most focused, is trade adjustment assistance, which is often criticized as inadequate. Yet it does not really make sense to compensate only those who lose their jobs directly to foreign competition, because those workers then spill into other sectors of the economy, driving down wages as they go. Thus, we need to go beyond trade adjustment assistance.

To raise wages in the economy more generally, we need broader measures. One would be to raise the minimum wage: It pushes up workers’ pay, but it also reduces turnover and training costs for employers, and puts money into the hands of people with a high propensity to consume, creating multiple channels to counteract the seemingly self-evident fact that raising something’s price means people will buy less of it.

Another broad-spectrum approach to raising wages is to restore the power of unions. As I have pointed out before, the United States has the fifth-lowest union density in the 34-member Organization for Economic Cooperation and Development (OECD). Senator Sanders, in the interview linked above, notes that the increased power of unions in Nevada’s gambling industry has enabled house-cleaning staff in the state’s casinos to earn “$35,000 or $40,000 a year and have good health-care benefits.” Having a National Labor Relations Board that is not in the pocket of industry is critical for us to see this take place.

Third, less targeted still but having the political benefit of universal coverage, an expansion of the social safety net would make it possible for people to simply refuse to take crappy jobs. Yes, this is about bargaining power! It would also encourage entrepreneurship because failure would not mean the loss of one’s health insurance, for example. Medicare for all has long been one of Senator Sanders’ standard prescriptions, a program that benefits from having far lower overhead costs (it avoids outrageous executive salaries, the need for profit, and does not have to advertise much) than private insurance. We could do a lot worse than considering it — and we have.

Finally, to pay for these programs, it’s necessary to raise taxes on corporations and rich individuals. Thomas Piketty, in his monumental Capital in the Twenty-First Century, suggests that the top marginal income tax rate should be 82% for individuals in the top 1/2% or top 1% of income. He notes that this will not raise much money, in part because it will reduce various lucrative but economically unproductive financial shenanigans. Instead, he thinks a tax of 50-60% on the top 5% of incomes would produce substantial revenue to create what he calls a “social state” for the 21st century. One could go further, of course, by adding a financial transactions tax (I hope to write about this soon) and shutting down tax havens.

To return to our original question, there is no reason that Chinese workers and U.S. workers can’t both prosper from trade. But to make it possible in the United States requires a great deal of rule rewriting that will not be achieved overnight.

Cross-posted from Middle Class Political Economist.

Comments (23) | |

Dean Baker on the 2015 SocSec Report and Real Wage

CEPR’s Dean Baker: Wage Growth Continues to be the Key to Social Security Solvency

Dean Baker and colleague Mark Weisbrot have been making a steady case since their publication of the aptly named Social Security: the Phony Crisis back in 1999. In short Social Security does not face a structural demographic problem, instead it has encountered a contingent economic one, marked mostly by a failure of wages to grow with productivity in the ways it did in past decades. The ‘Phony Crisis’ link goes to the Introduction to the book, if you haven’t read it you should. And equally worth reading is the Press Release linked above published last Wednesday. I just want to isolate and emphasize two paragraphs from the Press Release.

Wage growth is the key to the program’s solvency for two reasons. The first is that the upward redistribution of wage income over the last three decades has played a large role in the projected shortfall. As income has been transferred from ordinary workers to those at the top of the wage distribution, a larger share of wage income has escaped taxation. When the Greenspan Commission set the cap for taxable wages in 1983, it covered 90 percent of wage income. Currently the cap only covers around 82 percent of wage income. If the cap had continued to cover 90 percent of wage income, the projected shortfall would be roughly 40 percent less than it is now.

“The other reason why broadly based wage growth is key to the program’s continuing solvency is that the burden of possible future tax increases would be much less consequential if most workers will share in the gains of economic growth. The Social Security trustees project that real wages will rise by more than 34 percent over the next two decades. (They are projected to rise by another 30 percent over the following two decades.) Even if the payroll tax is increased by three percentage points, it would take back less than one-tenth of the projected rise in before-tax wages if wage growth is evenly shared. On the other hand, if most of the gains from growth continue to go to those at the top end of the distribution, any tax increase will be a major burden.

On my reading Dean is calling for a dual approach: one that emphasizes wage growth in increasing revenue to Social Security but which also envisions accompanying tax increases. Whose affordability is that much more eased by the wage boosts. It doesn’t have to be either or, it can be MJ.ABW and NW.

More Jobs. At Better Wages. plus the Northwest Plan.

Tags: , , , Comments (53) | |

Shopping Around . . .

Quite a few blogging PPACA naysayers are out there advertising the 25 to 50% increases in premiums for healthcare plans under the PPACA. Charles Gaba@ACA Signups blog points out it is just an opportunity to “shop around” and the premium increases may not be big anyway in dollars and cents. “Looking past the scary headlines” as Richard Mayhew of Balloon Juice suggests in Pennsylvania could make a huge difference in what the buyer pays in premiums. Many of the insurers are advertising lower rates while the news media and some bloggers are hanging their hats on a few errant insurance companies. Those asking for higher rates exceeding 10% up to 58% are now asking for decreases.

Competition matters as two of the insurers as UPMC has the lowest rate for a 40 year smoker in comparison to Highmark. UPMC lowest priced plans will increase by < 10% as Highmark's sets a new high with a 25% increase. The coverage being similar as detailed by the PPACA, it is hard to justify a huge increase when compared to a competitor.

Take a few moments and visit Chales Gaba's blog and read. Charles Gaba cites the good, bad, and ugly on what is going on in state healthcare exchange insurance plans. It is important to shop around as it pays off in the long run. Charles does post some of the state exchange costs for the plans. Here are some state results:

Pennsylvania: Another example of how misleading the Scary Rate Increase headlines can be “Over at ‘Balloon Juice,’ Richard Mayhew has posted a great piece illustrating, once again, the importance of looking past the scary headlines to find out 1) what the true picture is (ie, taking all of the rate changes into account–not just the biggest ones–and weighting them by proportionate market share), and 2) what’s going on with your situation, not someone else’s.”

Colorado: (requested) semi-weighted avg. rate increase: 13.1%

Connecticut: OK, strike that: 2016 requested rates revised downward AGAIN to 5.2% weighted avg.

District of Columbia: 2016 Rate Requests: 5.3% individual, 2.6% small group (with major caveats).

Hawaii: Weighted Avg. 2016 Rate Request: 33.7% (ouch), plus a Mystery Solved . . .

Kentucky: “Anyway, assuming that I have the partial data above accurate, it looks like Kentucky’s individual market changes will range from an 11% decrease (for Well Care Health Plans of Kentucky, Inc.) to a wince-inducing 25% increase (for the Kentucky Health CO-OP). I don’t know how many are enrolled in Well Care right now, but the CO-OP has 53,000 customers, so expect some shuffling around . . . except, again, I have no idea what that’s a 25.1% increase from.

For all I know, the CO-OP may be charging $200/month for the same type of plan that WellCare is charging $400/month for…which would mean that a 25% hike for the CO-OP would only bring it up to $250, while an 11% cut for WellCare would only bring it down to $356.”

Maine: 2016 Rate Request: 0.7% weighted average increase

Maryland: UNWEIGHTED 2016 rate requests: 9.3% (WEIGHTED more likely 22.5%)

Michigan: Weighted 2016 rate increase requests appear to be 9.8%
Oregon: Final 2016 Rate Hikes approved…24.2% weighted average increase, but . . .

“The silver lining here (pun intended) is that, as noted in the Oregonian article, even with these hikes, the rates are still pretty much in line with other states, and shopping around could result in a decrease for some people. For instance, using the 40-year old Portland example above, someone enrolled in a Silver plan via Pacific Source (currently paying $284/month this year and looking at a 37% hike to $389/month) could switch to a Kaiser plan and only pay $271/month…a decrease of 4.5%, or $13/month!”

Rhode Island: 2016 Rate Requests 7.9% (weighted average)

Vermont: 2016 rate requests: 7.8% individual, 8.1% small group

Washington State: Case study in why HC. gov’s Rate Review tool CANNOT BE USED to figure statewide rate increase averages!

“When you look at the overall average increase when weighted by relative market share for each company, it’s either 5.4% if the data provided by the state insurance commissioner has already been weighted, or 6.1% if it hasn’t. What it looks like at https://ratereview.healthcare.gov when you run a search for 2016 Individual Market products in Washington State. Yes, that’s right: It appears to be an “average” 18.44% rate increase request…over 3x the actual average.”

California: 2016 Rate Hikes: As if millions of ACA opponents suddenly cried out in terror . . .

“Average Increase Is 4 Percent; Consumers Who Shop Can Lower Their Premium by an Average of 4.5 Percent. SACRAMENTO, Calif. — Covered California announced its rates for 2016 and unveiled which health insurance companies will be offering plans through the marketplace. The statewide weighted average increase will be 4 percent, which is lower than last year’s increase of 4.2 percent and represents a dramatic change from the trends that individuals faced in the years before the Patient Protection and Affordable Care Act.”

Some bloggers have claimed there is no decrease in healthcare costs as brought on by the PPACA. If you have not noticed Medicare has again extended the solvency or the funding of its funding by 13 years or till 2030. Medicare is the game in town and few doctors, clinics, or hospitals are ignoring it as a customer. Now if the president would only allow it to negotiate. Ask Congress why not . . .

ACA extends Medicare funding by 13 years; CMS releases Medicare enrollment report by state.

- “First, that “indirect impact” I just mentioned has resulted in the Medicare Hospital Insurance Trust Fund, previously expected to run out of money just 2 years from now, now being expected to be solvent through 2030 thanks to the ACA bending the cost curve.” This is due to slow growth which has extended well beyong the Wall Sreet and TBTF lunacy.

- “The second Medicare-specific tidbit is the nifty report released just today by the Centers for Medicare & Medicaid, breaking out current Medicare enrollment not just by state, but by program. As you can see, total Medicare enrollment nationally is just a hair over 55 million as of May 2015.” The growth in Medicare certainly makes it a factor in the healthcare sector to be dealt with and which to be paid attention. Medicare does discount payments to doctors, clinics, and hospitals at a far greater rate than insurance companies and with greater efficiency.

Comments (5) | |

Is Jeremy Corbyn the Bernie Sanders of Britain?

Who is Jeremy Corbyn? Well it turns out that the British Labour Party is two weeks out from a leadership election after their shellacking in the last election. And the contest very much mirrors that of Sanders vs Clinton, with Corbyn representing Old Labour (Democratic Socialism) and the other candidates represent New Labour (Blairite Neo-Liberalism). And also the races are similar because the VSPs in the Labour Establishment and the media are simply dismissing Corbyn as the voice of the past not to be taken seriously by sensible people.

Well I don’t follow British politics that closely, but Corbyn doesn’t seem to be meekly following the script here. And like Sanders is getting support that makes the Establishment nervous. So hopefully some Angry Bear readers who DO know something can chime in here. I find the whole thing fascinating and perhaps illustrative of a broader movement away from Neo-Liberalism worldwide.

Jeremy for Labour website

establishment freakout:
Labour donor: Jeremy Corbyn win could cause SDP-style split

The election of Jeremy Corbyn as Labour leader could trigger an SDP-style split in the party, one of the party’s biggest donors has said. John Mills also said victory for the leftwinger could lead to donations from wealthy supporters drying up, although he conceded that funding from the trade unions could increase if Labour morphed into a party of the far left.

Horrors! A party organized by and for the working class might not retain the support of the 1%! Might have to sink to getting support from labor unions!

The prospect of Corbyn winning had been largely dismissed as a fantasy until a YouGov poll of Labour members and supporters on Tuesday night showed him easily ahead of his three rivals on first preferences and on course to beat Andy Burnham in the final round by 53% to 47%, following the elimination of Liz Kendall and Yvette Cooper.

I for one will be following this with attention. Because the main difference between Jeremy and Bernie is that Corbyn seems to know a barber.

Tags: , , Comments (1) | |