Papers

A well-functioning health-care sector supports well-being and is a prerequisite for a well-functioning economy. Unfortunately, the problems with U.S. health care—from high prices to excessive administrative costs to insufficient competition—are substantial. These 12 facts about the economics of U.S. health care provide context for important policy discussions.

The United States spends a larger share of its GDP on health care than any other advanced economy. This high private sector health-care spending in the United States is driven mostly by higher prices, with little evidence to suggest that high prices reflect better quality of care. In this proposal, Michael Chernew, Leemore Dafny, and Maximilian Pany discuss how price regulations could be used to constrain commercial provider prices in an efficient manner.

U.S. health-care spending on administrative costs far exceeds the amount necessary to deliver effective health care. David Cutler proposes several reforms to reduce administrative health-care costs and improve satisfaction for both patients and providers.    

Martin Gaynor of Carnegie Mellon University describes the substantial consolidation that has occurred in health-care markets, showing that it is has generally resulted in higher prices without gains in quality or other improvements. Gaynor proposes three types of policy reforms that would increase competition in health care and improve market functioning.

Slowdowns in the economy are inevitable. While it may be tempting to rely on Federal Reserve policy as a lone response to recessions, this would be a mistake; we know that fiscal stimulus is effective. Rather than wait for a crisis to strike before designing discretionary fiscal policy, we would be better served by preparing in advance. Enacting evidence-based automatic stabilizer proposals before the next recession will help the next recovery start faster, make job creation stronger, and restore confidence to businesses and households.

Development economics research has made substantial progress in addressing poverty, poor health and education, and other problems of struggling areas. In this paper, Stephen C. Smith relates findings from the development economics literature to U.S. policy problems, highlighting programs and policies that have the potential to assist lagging areas in the United States.

Over the past few decades there have been troubling indications that dynamism and competition in the U.S. economy have declined. Markets are more concentrated than they were a few decades ago, and entrepreneurship is less common, with both the number and employment share of new firms well below the levels of previous decades. Carefully assessing these trends as they relate to public policy is necessary to achieving a more competitive, productive economy that generates broadly shared growth.

High levels of U.S. health-care spending and inadequate health outcomes make it vital for policymakers to explore opportunities for enhancing productivity in the health-care sector. However, the potential for these gains is sharply limited by anticompetitive policy barriers in the form of restrictive scope of practice laws imposed on physician assistants and advanced practice registered nurses. Adams and Markowitz examine evidence on the impacts of these restrictions, concluding that states should move to fully authorized scope of practice for these practitioners. The authors explore state and federal policies that could help facilitate this shift.

In this economic analysis, THP analyzes the relationship between age, income, and measures of health status, as well as how these relationships have changed between the late 1970s and today. While overall there have been remarkable gains in life expectancy in the United States over the past half-century, these have not been reflected in other measures of health which have declined over time.

During the past 100 years, life expectancy at birth has increased by about 25 years in the United States. However, certain groups—notably older whites and low-income Americans—find their mortality rates either stagnating or rising in recent years. In a new framing paper, The Hamilton Project examines the widening gap in life expectancy and explores policy reforms aimed at extending life expectancy gains for more Americans.

Substantial evidence shows that consumers often lack the high-quality information to select the best insurance plan, and once they have selected a plan they are less likely to switch, even as better plans become available. In response, Ben Handel and Jonathan Kolstad propose that exchanges develop a personalized decision support tool to give consumers the information they need to select the best plan. Additionally, they propose that exchanges establish a system of smart defaults, where an algorithm is used to move consumers to new plans if those plans deliver more value. 

Substantial evidence shows that consumers often lack the high-quality information to select the best insurance plan, and once they have selected a plan they are less likely to switch, even as better plans become available. In response, David Dranove, Craig Garthwaite and Christopher Ody propose that exchanges develop a personalized decision support tool to give consumers the information they need to select the best plan. Additionally, they propose that exchanges establish a system of smart defaults, where an algorithm is used to move consumers to new plans if those plans deliver more value. 

It is still too soon to completely know the effects of the Affordable Care Act on the health-care system. But looking beyond these considerations, it appears that many enduring economic challenges persist in the markets. In particular challenges like accessing care, delivering high-quality care without waste, and managing new technology. The Hamilton Project offers six economic facts that highlight continuing challenges and complexities in health care and health insurance markets on which the policy debate should focus.

When Americans select health insurance, they cannot choose what technologies and treatments to include in their coverage. The fact that Americans have little choice but to buy widely-inclusive coverage sends a distorted signal to medical technology developers—that society is willing to pay practically any price for treatments that offer only incremental health benefits over existing technology. Nicholas Bagley, Amitabh Chandra and Austin Frakt propose three reforms to make health insurance, and ultimately medical innovation, reflect what consumers value.

Rising life expectancy and potentially exorbitant long-term care costs have increased the financial resources required to support oneself and one’s spouse in retirement and old age. This set of economic facts offer bring attention to trends in Americans’ financial security and preparedness for retirement.

Americans currently spend over $300 billion a year on long-term services and supports (LTSS), paid for through government programs, private insurance, and importantly, individuals’ own out-of-pocket spending. Wesley Yin proposes changes to the financing of long-term care (LTC) insurance so that individuals can have more-affordable and more-complete insurance against long-term services and supports (LTSS) expenses, and so insurance firms can manage their risks more efficiently.

In this policy memo, Isabel Sawhill and Joanna Venator propose that the U.S. Department of Health and Human Services’ Office of Population Affairs, in conjunction with state governments, reduce unintended pregnancies through a social marketing campaign to encourage more young women to use long-acting reversible contraceptives (LARCs). This proposal, targeted at unmarried women between the ages of 15 and 30, aims to expand awareness so more low-income women use a LARC or other method of contraception, thereby reducing the number of unintended pregnancies and lowering the number of children born into poverty. This proposal is chapter three of The Hamilton Project’s Policies to Address Poverty in America, and a segment in Promoting Early Childhood Development.

The Supplemental Nutrition Assistance Program (SNAP)—formerly known as the Food Stamp Program—is an essential part of America’s social safety net. Diane Schanzenbach proposes five reforms that could strengthen SNAP, including incentives for participants to purchase healthier foods and improvements to the benefit formula.

In this economic analysis, The Hamilton Project focuses on two critical issues related to SNAP: (1) the widespread existence of both food insecurity and obesity among low-income children in the United States, and (2) the role of SNAP in fighting poverty during times of weak labor markets. SNAP participation rises and falls in lockstep with the unemployment rate, highlighting SNAP’s role as a safety-net program that bolsters family resources when employment and wages are low.

Jeffrey Liebman and Jack Smalligan propose a path to improve our disability insurance system, through demonstration projects and administrative changes, that could potentially increase employment and economic engagement among workers with disabilities and provide more rapid and reliable resolution of disability insurance claims for those who cannot work.

Slowing the rate of health care spending growth will likely require transitioning away from a fee-for-service system to a global payment system. Michael Chernew and Dana Goldman propose policies to promote efficiency in the Medicare program by providing incentives to treat disease rather than paying for individual services in a way that encourages improvements to the quality of care.

Cost sharing under the Medicare Parts A & B programs is both variable and uncapped, with an overall structure that is hard to rationalize. Jonathan Gruber proposes reforms to Medicare cost sharing that insures consumers against high out-of-pocket costs, aligns the costs faced by consumers with the actual cost of care, and discourages incentives in private plans that encourage excess use of Medicare benefits.

Comparative effectiveness research must assess a comprehensive array of health-related outcomes for diverse patient groups. This paper explores a variety of issues surrounding the implementation of CER.

This paper outlines a model for Medicare Part E(everyone), a program to provide universal, continuous, and affordable health insurance. This proposal adopts Medicare rules and payment systems to provide enrollees the same benefits that current Medicare beneficiaries receive.

This paper examines the interrelated problems of uninsurance and expensive or ineffective care in the American healthcare system. Universal insurance would eliminate uncompensated cost shifts and expand risk pooling and reduce the fragmentation of financing.

Jonathan Gruber discusses issues surrounding universal healthcare coverage and the uninsured and lays out a plan at the national level which builds on the Massachusetts model.

Ezekiel Emanuel and Victor Fuchs discuss a Universal Healthcare Voucher System, which would achieve universal health coverage by entitling all Americans to a standard package of benefits comparable to that received by federal employees.

For most working-age families, health insurance is directly connected to the workplace; but this form of coverage is steadily eroding. This paper outlines three key steps necessary to achieve a gradual transformation without disrupting successful parts of the system.

One important contribution to the challenges facing healthcare today is the increased insulation of Americans from the cost of care. To address this issue, this paper proposes a template for a progressive cost sharing plan.

Chronic and preventable diseases now account for most of the deaths and costs in the healthcare system, despite relatively low-tech and low-cost services that could limit them. This paper outlines a new agency to deliver preventive care.

This paper proposes a series of reforms to address the challenges facing Medicare’s Part D prescription drug benefit. These reforms include creating a standardized set of plans, increasing competition, and lowering prices paid for drugs.