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E M P L O Y E E B E N E F I T S , C O M P E N S A T I O N
& P E N S I O N L A W
Vol. 6, No. 5: March 10, 2005
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Publisher: Employment, Labor, Compensation & Pension Law Journals
a division of
Social Science Electronic Publishing, Inc. (SSEP)
and Social Science Research Network (SSRN)
Editor: PAMELA PERUN
Urban Institute
Mailto:pamela@planetnow.com
Copyright: SSEP, Inc. 2005. All rights reserved.
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Topic of This Issue:
Health Insurance
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T A B L E of C O N T E N T S
_________________________________________________________________
NEW and FORTHCOMING ARTICLES
"Behavioral Economics and Health Policy: Understanding Medicaid's
Failure"
Cornell Law Review, Vol. 90, No. 3, 2005
BARAK D. RICHMAN
Duke University School of Law
"The Most Important Health Care Legislation of the Millennium (so
Far): The Medicare Modernization Act"
Yale Journal of Health Policy, Law, and Ethics, 2005
TIMOTHY STOLTZFUS JOST
Washington and Lee University
School of Law
WORKING PAPERS
"The Interaction of Public and Private Insurance: Medicaid and
the Long-Term Care Insurance Market"
JEFFREY R. BROWN
University of Illinois at Urbana-Champaign
Department of Finance
National Bureau of Economic Research (NBER)
AMY FINKELSTEIN
National Bureau of Economic Research (NBER)
Massachusetts Institute of Technology (MIT)
Department of Economics
"Wage and Benefit Changes in Response to Rising Health Insurance
Costs"
DANA P. GOLDMAN
RAND
National Bureau of Economic Research (NBER)
NEERAJ SOOD
RAND
ARLEEN LEIBOWITZ
University of California, Los Angeles
School of Public Policy & Social Research
National Bureau of Economic Research (NBER)
"Tax Policy for Health Insurance"
JONATHAN GRUBER
Massachusetts Institute of Technology (MIT)
Department of Economics
National Bureau of Economic Research (NBER)
"Stemming the Tide? The Effect of Expanding Medicaid Eligibility
on Health Insurance"
LARA DAWN SHORE-SHEPPARD
Williams College
Department of Economics
National Bureau of Economic Research (NBER)
"Health Insurance, Treatment and Outcomes: Using Auto Accidents
as Health Shocks"
JOSEPH J. DOYLE
Massachusetts Institute of Technology (MIT)
Economics, Finance, Accounting (EFA)
National Bureau of Economic Research (NBER)
S S R N I N F O R M A T I O N
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Benefits, Compensation & Pension Law we do not referee working
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N E W and F O R T H C O M I N G Articles
_________________________________________________________________
"Behavioral Economics and Health Policy: Understanding Medicaid's
Failure"
Cornell Law Review, Vol. 90, No. 3, 2005
BY: BARAK D. RICHMAN
Duke University School of Law
Document: Available from the SSRN Electronic Paper Collection:
http://papers.ssrn.com/paper.taf?abstract_id=580461
Paper ID: Duke Law School Legal Studies Research Paper No. 62
Contact: BARAK D. RICHMAN
Email: Mailto:richman@law.duke.edu
Postal: Duke University School of Law
Box 90360
Durham, NC 27708 UNITED STATES
Phone: 919-613-7244
Fax: 919-613-7231
ABSTRACT:
This paper employs a behavioral economic analysis to understand
why Medicaid has failed to improve the health outcomes of its
beneficiaries. It begins with a formal economic model of health
care consumption and then systematically incorporates a survey
of psychosocial variables to formulate explanations for
persistent health disparities. This methodology suggests that
consulting the literature in health psychology and intertemporal
decision theory - empirical sources generally excluded from
orthodox economic analysis - provides valuable material to
explain certain findings in health econometrics. More
significant, the lessons from this behavioral economic approach
generates useful policy reforms to Medicaid policymakers, who
largely have neglected psychosocial variables in implementing a
health insurance program that rests chiefly on orthodox economic
assumptions.
The paper's chief contributions include an expansion of the
behavioral economic approach to include a host of variables in
health psychology, a behavioral refinement of empirical health
economics, a behavioral critique of Medicaid policy, and a menu
of suggested Medicaid reforms.
JEL Classification: H51, I12, I18, I38, J24, Z13
______________________________
"The Most Important Health Care Legislation of the Millennium (so
Far): The Medicare Modernization Act"
Yale Journal of Health Policy, Law, and Ethics, 2005
BY: TIMOTHY STOLTZFUS JOST
Washington and Lee University
School of Law
Document: Available from the SSRN Electronic Paper Collection:
http://papers.ssrn.com/paper.taf?abstract_id=661081
Paper ID: Washington & Lee Legal Studies Paper No. 05-2
Contact: TIMOTHY STOLTZFUS JOST
Email: Mailto:JOSTT@WLU.EDU
Postal: Washington and Lee University
School of Law
Lexington, VA 24450 UNITED STATES
Phone: 540-458-8510
Fax: 540-458-8488
ABSTRACT:
Whether or not one believes that the Medicare Prescription Drug,
Improvement, and Modernization Act (MMA) in fact "improves" or
"modernizes" Medicare, it is obvious that the legislation
radically changes the program. The extent and nature of these
changes make the MMA the most important piece of health care
legislation to be adopted by Congress to date in this young
millennium. This Commentary describes the identifying
characteristics of the current Medicare program, then examines
the significant changes that the MMA makes in the program, and
finally discusses the importance, and danger, of these changes.
______________________________
W O R K I N G P A P E R Abstracts
_________________________________________________________________
"The Interaction of Public and Private Insurance: Medicaid and
the Long-Term Care Insurance Market"
BY: JEFFREY R. BROWN
University of Illinois at Urbana-Champaign
Department of Finance
National Bureau of Economic Research (NBER)
AMY FINKELSTEIN
National Bureau of Economic Research (NBER)
Massachusetts Institute of Technology (MIT)
Department of Economics
Document: Available from the SSRN Electronic Paper Collection:
http://papers.ssrn.com/paper.taf?abstract_id=637486
Paper ID: NBER Working Paper No. W10989
Date: December 2004
Contact: JEFFREY R. BROWN
Email: Mailto:brownjr@uiuc.edu
Postal: University of Illinois at Urbana-Champaign
Department of Finance
1206 South Sixth Street
Champaign, IL 61820 UNITED STATES
Co-Auth: AMY FINKELSTEIN
Email: Mailto:afinkels@nber.org
Postal: National Bureau of Economic Research (NBER)
1050 Massachusetts Avenue
Cambridge, MA 02138 UNITED STATES
ABSTRACT:
We show that the provision of even incomplete public insurance
can substantially crowd out private insurance demand. We examine
the interaction of the public Medicaid program with the private
market for long-term care insurance and estimate that Medicaid
can explain the lack of private insurance purchases for at least
two-thirds and as much as 90 percent of the wealth distribution,
even if comprehensive, actuarially fair private policies were
available. Medicaid's large crowd out effect stems from the very
large implicit tax (on the order of 60 to 75 percent for a
median wealth individual) that Medicaid imposes on the benefits
paid from private insurance policies. Importantly, Medicaid
itself provides an inadequate mechanism for smoothing
consumption for most individuals, so that its crowd out effect
has important implications for overall risk exposure. An
implication of our findings is that public policies designed to
stimulate private insurance demand will be of limited efficacy
as long as Medicaid continues to impose this large implicit tax.
JEL Classification: H4, H51, I11, J14
______________________________
"Wage and Benefit Changes in Response to Rising Health Insurance
Costs"
BY: DANA P. GOLDMAN
RAND
National Bureau of Economic Research (NBER)
NEERAJ SOOD
RAND
ARLEEN LEIBOWITZ
University of California, Los Angeles
School of Public Policy & Social Research
National Bureau of Economic Research (NBER)
Document: Available from the SSRN Electronic Paper Collection:
http://papers.ssrn.com/paper.taf?abstract_id=652362
Paper ID: NBER Working Paper No. W11063
Date: January 2005
Contact: DANA P. GOLDMAN
Email: Mailto:DANA_GOLDMAN@RAND.ORG
Postal: RAND
P.O. Box 2138
1700 Main Street
Santa Monica, CA 90407-2138 UNITED STATES
Co-Auth: NEERAJ SOOD
Email: Mailto:sood@rand.org
Postal: RAND
P.O. Box 2138
1700 Main Street
Santa Monica, CA 90407-2138 UNITED STATES
Co-Auth: ARLEEN LEIBOWITZ
Email: Mailto:Arleen@ucla.edu
Postal: University of California, Los Angeles
School of Public Policy & Social Research
Box 951656
Los Angeles, CA 90095 UNITED STATES
ABSTRACT:
Many companies have defined-contribution benefit plans requiring
employees to pay the full cost (before taxes) of more generous
health insurance choices. Research has shown that employee
decisions are quite responsive to these arrangements. What is
less clear is how the total compensation package changes when
health insurance premiums rise. This paper examines employee
compensation decisions during a three-year period when health
insurance premiums were rising rapidly. The data come from a
single large firm with a flexible benefits plan wherein
employees explicitly choose how to allocate compensation between
cash wages and other benefits. Under such an arrangement, higher
health insurance premiums must induce changes in the composition
of total compensation - either in lower after-tax wages or in
decreased contributions to other benefits. The results suggest
that about two-thirds of the premium increase is financed out of
cash wages and the remaining one-thirds is financed by a
reduction in benefits.
JEL Classification: J33
______________________________
"Tax Policy for Health Insurance"
BY: JONATHAN GRUBER
Massachusetts Institute of Technology (MIT)
Department of Economics
National Bureau of Economic Research (NBER)
Document: Available from the SSRN Electronic Paper Collection:
http://papers.ssrn.com/paper.taf?abstract_id=633636
Paper ID: NBER Working Paper No. W10977
Date: December 2004
Contact: JONATHAN GRUBER
Email: Mailto:gruberj@mit.edu
Postal: Massachusetts Institute of Technology (MIT)
Department of Economics
Room E52-355
50 Memorial Drive
Cambridge, MA 02142 UNITED STATES
Phone: 617-253-8892
Fax: 617-253-1330
ABSTRACT:
Despite a $140 billion existing tax break for employer-provided
health insurance, tax policy remains the tool of choice for many
policy-makers in addressing the problem of the uninsured. In
this paper, I use a microsimulation model to estimate the impact
of various tax interventions to cover the uninsured, relative to
an expansion of public insurance designed to accomplish the same
goals. I contrast the efficiency of these policies along several
dimensions, most notably the dollars of public spending per
dollar of insurance value provided. I find that every tax policy
is much less efficient than public insurance expansions: while
public insurance costs the government only between $1.17 and
$1.33 per dollar of insurance value provided, tax policies cost
the government between $2.36 and $12.98 per dollar of insurance
value provided. I also find that targeting is crucial for
efficient tax policy; policies tightly targeted to the lowest
income earners have a much higher efficiency than those
available higher in the income distribution. Within tax
policies, tax credits aimed at employers are the most efficient,
and tax credits aimed at employees are the least efficient,
because the single greatest determinant of insurance coverage is
being offered insurance by your employer, and because most
employees who are offered already take up that insurance. Tax
credits targeted at non-group coverage are fairly similar to
employer tax credits at low levels, but much less efficient at
higher levels.
JEL Classification: H2, I1
______________________________
"Stemming the Tide? The Effect of Expanding Medicaid Eligibility
on Health Insurance"
BY: LARA DAWN SHORE-SHEPPARD
Williams College
Department of Economics
National Bureau of Economic Research (NBER)
Document: Available from the SSRN Electronic Paper Collection:
http://papers.ssrn.com/paper.taf?abstract_id=657603
Paper ID: NBER Working Paper No. W11091
Date: January 2005
Contact: LARA DAWN SHORE-SHEPPARD
Email: Mailto:lara.d.shore-sheppard@williams.edu
Postal: Williams College
Department of Economics
Fernald House
Williamstown, MA 01267 UNITED STATES
Phone: 413-597-2226
Fax: 413-597-4045
ABSTRACT:
Despite considerable research, there is little consensus about
the impact of Medicaid eligibility expansions for low-income
children. In this paper, I reexamine the expansions' impact on
Medicaid take-up and private insurance 'crowd-out'. Focusing on
the most influential estimates of the expansions' impact, I show
that while many of the critiques leveled at these estimates have
little effect on their magnitude, accounting for age-specific
trends in coverage produces estimates similar to others in the
literature. Estimating the impact of later expansions using
additional years of data, I find low rates of take-up and no
evidence of crowding out.
JEL Classification: I1
______________________________
"Health Insurance, Treatment and Outcomes: Using Auto Accidents
as Health Shocks"
BY: JOSEPH J. DOYLE
Massachusetts Institute of Technology (MIT)
Economics, Finance, Accounting (EFA)
National Bureau of Economic Research (NBER)
Document: Available from the SSRN Electronic Paper Collection:
http://papers.ssrn.com/paper.taf?abstract_id=663481
Paper ID: NBER Working Paper No. W11099
Date: February 2005
Contact: JOSEPH J. DOYLE
Email: Mailto:jjdoyle@mit.edu
Postal: Massachusetts Institute of Technology (MIT)
Economics, Finance, Accounting (EFA)
77 Massachusetts Avenue
Cambridge, MA 02139-4307 UNITED STATES
Phone: 617-452-3761
Fax: 617-258-6855
ABSTRACT:
Previous studies find that the uninsured receive less health
care than the insured, yet differences in health outcomes have
rarely been studied. In addition, selection bias may partly
explain the difference in care received. This paper focuses on
an unexpected health shock - severe automobile accidents where
victims have little choice but to visit a hospital. Another
innovation is the use of a comparison group that is similar to
the uninsured: those who have private health insurance but do
not have automobile insurance. The medically uninsured are found
to receive twenty percent less care and have a substantially
higher mortality rate.