Saturday, July 14, 2012

Will ObamaCare Make Us Fat?

Miles Kimball reports on a paper co-authored by Isaac Ehrlich entitled The Problem of the Uninsured—Implications for Health Insurance:
Sam Peltzman’s argument that requiring people to wear seat belts would make them feel safer, and therefore lead them to drive faster. This is now called the Peltzman effect, and I will refer you to Greg Mankiw’s post on “The Peltzman Effect” for a discussion of it. In his presentation, Isaac points out that there will be the same kind of effect if you require people to have health insurance. They will feel safer in relation to their health, and so will take more risks. For example, a young person who has to pay full price for the visit to the doctor for antiobiotics to treat an STD may be more careful to use or insist on a condom. He and his coauthor Yong Yin have a theoretical model showing that such effects can be substantial in size. Notice that it should be possible to get good empirical evidence on such effects.
In other words, Ehrlich is claiming now that the poor have health insurance, they will work out less and will eat more junk food. Isaac Ehrlich – where have we heard this name before? His 1975 publication The Deterrent Effect of Capital Punishment is often cited by advocates of capital punishment but be mindful of the various critiques of Ehrlich’s alleged evidence, which we noted here. Miles notes that this paper is not readily available yet and admits it is only a theoretical argument. I just hope that those who decide to do empirical work are mindful of what Ed Leamer wrote years ago.


jeff said...

STD clinics are already FREE administered by the county health departments. Sex shame is a right wing tactic used to discriminate against Gay people.

Nateo said...

Wouldn't that argument assume people have a clear idea of the increased healthcare cost attributed to eating a hamburger, or the decreased cost of jogging for an hour? I don't believe anyone is capable of making that kind of rational evaluation, especially when compared to all the other reasons to be healthy (sex appeal, long life, etc.)

Don Levit said...

Well, that's an interesting concept of adverse selection.
What we need to look at are policies in which people are encouraged to be healthy.
3 of my partners and I are working with Milliman, an actuarial firm, on just such a plan.
Coverage is available from dollar 1, but if the person does not file a claim, he gradually builds up paid-up coverage, of which he never pays another premium.
At $700 per month of paid-up coverage, for a premium of $200-$300 per month, he builds $25,0000 of coverage in 24 months and $50,000 of coverage in 60 months.
This lowers a traditional premium by 60-80%, and does so, on a monthly basis.
Conversely, if claims are made, this raises his premiums on a monthly basis, as his paid-up coverage is lowered.
By paying fully community-rated premiums, even those with high claims receive a significant break on their premiums.
Our discussions with Milliman are progressing well.
In their latest correspondence they wrote, "Based on our modeling of expected product results, it is possible to create a set of product features and premiums that produce acceptable financial results for both the insured and the insurer(s). This finding rests on the use of an alternative claim filing distribution that assumes changes in participants' behavior due to the design of the product. The net effect is to reduce participant claims."
Don Levit

Jack said...

The Leamer article is interesting both for its content and the fact that it was written about 30 years ago and seems to have had little effect on the profession. Unfortunately the article is hidden behind a pay wall which I guess is appropriate for an economics journal. Heaven forbid that science and related discussions be free to the public.