Does PPACA Contain a Surprise?

One of the reasons that employer-based healthcare is so prevalent in the United States is that it's a good deal: unlike the normal income they recieve, employees don't have to pay taxes on their healthcare benefits. A $5,000 policy costs $5,000. Conversely, if your employer simply paid you a cash wage in lieu of healthcare benefits, you'd have to receive, say, $6,000 in order to buy the same policy. Why? Because you have to pay taxes on the $6,000 and still have $5,000 left over to pay the premium.

This difference in tax treatment is something that wonks on both left and right generally oppose, though in somewhat different ways and as part of somewhat different overall structures. Still, pretty much everyone opposes it. And guess what? Thanks to the healthcare reform bill, it might be going away. The details are complex, but Austin Frakt provides the gist:

PPACA may make it possible for workers to get the same tax break for purchasing health insurance on the individual market (via an exchange or otherwise) as they would if they bought their employer-sponsored plan (if they’re offered one). If this is the case, it removes one huge incentive for maintaining employer-sponsored coverage. With respect to taxation, it levels the playing field between the group and non-group (individual) markets.

There’s still the issue that until 2017 only employees of firms with fewer than 100 workers are eligible for exchange coverage. Beginning in 2017, states can open exchanges to employees of larger firms. Workers of firms of any size could buy coverage on the individual market that is outside the exchange, they just can’t obtain federal subsidies for them. Still, it’s the tax subsidy that makes employer-based coverage so valuable to workers. If it can be applied in the non-group market it would hasten the erosion of employer-based coverage (which is not a bad thing, necessarily).

This all depends on a particular interpretation of provisions in PPACA, but if regulators write the enabling rules properly it might well allow individuals to buy insurance on the exchanges with pretax dollars. This would reduce the cost of insurance substantially for anyone using the exchange. It's worth keeping an eye on.

The WikiLeaks Charade

Republicans have made their stand on WikiLeaks clear: the Obama administration needs to destroy both the organization itself and its founder, Julian Assange. "Why was he not pursued with the same urgency we pursue al Qaeda and Taliban leaders?" demands Sarah Palin. "Is there no way to counter-attack against the attackers?" asks Bill Kristol. The Obama administration's response, writes Jonah Goldberg, has been pitiful, little more than a "tersely worded cease-and-desist letter to Assange, asking him to pretty please stop publishing thousands of state secrets." WikiLeaks should be designated a terrorist group, thunders Rep. Peter King (R–NY).

I don't know how much of this is pure politics and how much is just ignorance, but surely all these people know that WikiLeaks itself isn't the problem. It's the people who supply WikiLeaks with their leaks who are the problem. Even if the U.S. government somehow magically shut down WikiLeaks all over the world and tossed Julian Assange into a Supermax cell, there's nothing they can do to keep someone else from doing the exact same thing. It's just too easy to do. All it takes is access to the internet from some friendly country, and there's simply no way to shut down every possible entry to the internet. Like it or not, that's the era we live in.

In any case, I doubt the United States has any legal recourse against Assange or WikiLeaks. Assange is an Australian national not living in the U.S. and WikiLeaks is a distributed site not dependent on any single country's goodwill. What's more, despite some huffing and puffing to the contrary, I find it extremely unlikely that Assange has actually broken any existing laws. Perhaps new laws could be written, but it's hard for me to conceive of a law prohibiting actions like this that was both (a) effective and (b) not so broad that even Bill Kristol would oppose it. The United States has considerable control over actions by its own citizens on its own territory, but not over noncitizens who reside overseas and work primarily in cyberspace.

But then, I suspect most of the bloviators know this. WikiLeaks is, for most of them, just a good opportunity to bash the Obama administration (as if George Bush would have been able to act any differently) without having to actually offer any concrete solutions. And what makes this especially great for Obama's critics is that there's not really a lot Obama can do about it, aside from bloviating a bit in return.

Bloviating aside, though, we should be focused not on Julian Assange, but on figuring out how to keep anyone from providing this kind of information to him in the first place. That's more boring, but much more effective.

Bipartisanship at Last

There's something odd about this:

The Senate on Tuesday approved the biggest overhaul to the nation's food safety laws since the 1930s, voting 73 to 25 to give vast new authorities to the Food and Drug Administration; place new responsibilities on farmers and food companies to prevent contamination; and — for the first time — set safety standards for imported foods, a growing part of the American diet.

....Despite strong bipartisan support and backing from a diverse coalition of major business and consumer groups, the bill was been buffeted by politics in recent weeks. It drew fire from some tea party activists, who see it as government overreach. On his television program this month, talkshow host Glenn Beck suggested that the measure was a government ruse to raise the price of meat and convert more consumers to vegetarianism.

If there's one thing that Republicans have been plain about, it's their opposition to the Democratic agenda of big government and job-killing regulations. Thus you have the tea party and Glenn Beck hostility to this bill. And yet it passed 73-25. A massive overhaul of the FDA's regulatory authority got not just one or two Republican votes, but 15. In fact, according to the New York Times, this bill was the first one in two years that managed to produce a bit of bipartisan comity: "Some Republican and Democratic Senate staff members — who in previous terms would have seen each other routinely — met for the first time during the food negotiations. The group bonded over snacks: specifically, Starburst candies from a staff member of Senator Mike Enzi, a Wyoming Republican, and jelly beans from a staff member of Senator Richard J. Durbin, an Illinois Democrat."

I don't get it. In normal times, I'd expect that a slew of high-profile food poisoning incidents would produce bipartisan consensus in favor of a food safety bill. But then, I'd expect the same of a huge recession and an epic financial failure, and there was certainly no cooperation on fiscal stimulus or financial reform. So what happened? Is food safety genuinely different? Or did big ag fail to cough up enough dough this year during election season?

Image vs. Reality

Compare and contrast. Here is the FT's Gillian Tett explaining some of the changes she had to make in her book Fool's Gold in order to appeal to both British and American audiences:

The real fun erupted when I wrote the preface. Initially I planned to start the book by admitting that I was not a true expert on high finance: instead I crashed into this world in 2005, after a background spent in journalism-cum-social anthropology — making me a well-intentioned amateur, but without complete knowledge.

My friends in the British publishing world loved that honesty; in the UK, self-deprecation sells, particularly for “well-meaning amateurs” such as the writer Bill Bryson. But my American friends hated it. In New York, I was sternly told, absolutely nobody wants to listen to self-doubt. If you are going to write a book — let alone stand on a political platform or run a company — you must act as if you are an expert, filled with complete conviction. For the US version, the preface was removed entirely.

And here is Washington Post ombudsman Andrew Alexander admitting that reporters at the Post can't do basic arithmetic and pretty much don't seem to care about it:

A review of published corrections for the past three months shows that few days passed without a numbers error...."I think what's going on is that when journalists see a number, they take it at face value and don't question it," [Scott] Maier said. "With numbers, I think journalists tend to abdicate that scrutiny."

....Many newsrooms provide remedial math training, but that's not been done at The Post. It should be considered. And given the increasing usage of numbers in reporting and graphics, The Post should pay heightened attention to math and statistical literacy when evaluating prospective hires.

In America, no one wants to listen to self doubt. Also in America, our reporters don't have a working knowledge of arithmetic, which underlies practically every topic commonly reported on the front page or the evening news. Somehow, I suspect the latter makes the former a lot easier.

WikiLeaks and the Private Sector

Over at Forbes, Andy Greenberg interviews Julian Assange of WikiLeaks, who tells him that they're planning a release early next year of a huge cache of internal documents from a big U.S. bank:

What do you want to be the result of this release?

[Pauses] I’m not sure. It will give a true and representative insight into how banks behave at the executive level in a way that will stimulate investigations and reforms, I presume.

Usually when you get leaks at this level, it’s about one particular case or one particular violation. For this, there’s only one similar example. It’s like the Enron emails. Why were these so valuable? When Enron collapsed, through court processes, thousands and thousands of emails came out that were internal, and it provided a window into how the whole company was managed. It was all the little decisions that supported the flagrant violations.

This will be like that. Yes, there will be some flagrant violations, unethical practices that will be revealed, but it will also be all the supporting decision-making structures and the internal executive ethos that cames out, and that’s tremendously valuable.

This gave me pause when I read it. As I said earlier, I'm on the fence a bit about whether an indiscriminate release of thousands of U.S. embassy cables is useful. After all, governments have a legitimate need for confidential diplomacy. But when I read about WikiLeaks' planned financial expose, I felt no such qualms. A huge release of internal documents from a big bank? Bring it on!

And yet, just like governments, big corporations have both a legitimate need for confidential deliberations as well as many of the same pathologies that secrecy breeds. It's not a perfect analogy, of course, on a variety of levels, but still: it's not all that different either. So why do I feel so differently about it? I'm not quite sure. But it suggests that my thinking about this is not as clear as it should be. I will continue to mull this over.

The Pay Freeze Message

It's common for members of the wonkosphere to point out that elections are dominated by the state of the economy and that communication strategies have little impact. Jonathan Bernstein pushes back:

There's good reason to believe that there are rarely big gaps between the effects of Democratic and Republican electioneering (including messaging), because both parties and their candidates try hard to do well in those areas. If one side abdicates, "the margins" may get a bit less marginal. So while I'd certainly recommend simply as a matter of electoral politics that presidents place a higher priority on economic growth than on spin, that's not the same thing as saying that they should ignore spin. Plenty of stuff that only matters on the margins is still worth doing.

I think this is worth keeping in mind. It's true that the economy matters the most, but most models show that structural factors (including the economy) account for perhaps 70% of the variance in election results. The remaining 30% is obviously a smaller share, but still: 30% ain't nothing. And as Jonathan says, it would probably be a lot more than 30% if it weren't for the fact that both sides are always pushing hard against each other. If one side just gave up because they decided messaging wasn't important, they'd be a lot more likely to lose regardless of how the economy was doing.

(This is a testable proposition, by the way, though probably a tricky one. I'd guess, for example, that congressmen who run unopposed have higher approval ratings than those who don't. Obviously a higher approval rating tends to discourage competition in the first place, but even if you control for that I'd bet that uncontested politicians rate higher with their constituents. This is largely because they get to create their own messaging strategy without anyone else pushing back.)

So: messaging does matter. Communication strategy matters. You can't just cede the field. That said, though, I have to agree with the consensus on the left that in the particular case of President Obama's decision today to freeze federal pay, it's not going to work. On a substantive level, it's far too small to have any serious effect. On a messaging level, I simply can't believe that anybody is going to care. Obama seems endlessly besotted with the idea that he can use small executive decisions (supporting nuclear power, allowing offshore drilling, freezing federal pay, etc.) as a way of convincing the electorate that he's really a moderate, but there's no evidence that suggests this stuff has even the slightest impact. And it's certainly not going to make a dent on the Republican caucus in Congress. I really have no idea what the point of this kind of thing is.

UPDATE: That was Jonathan Bernstein I was quoting up there, not Jon Cohn as I originally had it. I've corrected the text.

Attention Philadelphians

After I wrote about the Philadelphia origins of the term "Black Friday" for the shopping day after Thanksgiving, I got the following email from a reader:

I had recently dropped out of college for the first time. I had just turned nineteen and had no clue what I wanted to be when I grew up. The dire warnings came from the sweet older women that took me under their wings in the arts and crafts department at John Wanamaker's department store in center city Philadelphia shortly after I was hired as temporary holiday help in October, 1971. They warned me to be prepared for the hoards of obnoxious brats and their demanding parents that would alight from the banks of elevators onto the eighth floor toy department, all racing to ride see the latest toys on their way to visit Santa. The feeling of impending doom sticks with me to this day. The experienced old ladies that had worked there for years called it "Black Friday." I'm quite sure it had nothing to do with store ledgers going from red to black.

Unfortunately, this doesn't push the frontiers of knowledge forward since we already knew that the term was in common use by at least 1966. But it does offer us an opportunity for some crowdsourced research. I figure this blog must have at least several dozen readers from Philadelphia. With some linkage help, maybe a few hundred will see this. Many of you will have older relatives who have lived and worked in Philadelphia for a long time. And many of those older relatives will have been cops or bus drivers or retail clerks in the 40s, 50s, and 60s.

So here's your task, Philadelphians: talk to your relatives. Find out if they remember the term "Black Friday" being in common use and compare this to the era when they worked. If, say, clerks from the 40s don't remember this, but clerks from the 50s do, we'll be making some progress. Science demands that we do this. So ask away, and either email me your results or leave them in comments. Let's demonstrate the power of the internet to the infidels.

Healthcare and Its Discontents

Ezra Klein makes a good point today: contrary to much mythology, Medicare does control medical costs better than the private sector. Unfortunately, there's a limit to how much cost control Medicare can accomplish in a world that's still dominated by private insurance:

The problem is that Medicare can't control costs too much better than private insurers or, as you see from the article above, doctors will simply abandon Medicare. In a world where there's only Medicare and Medicare decides to control costs, doctors can either take the pay cut or stop being doctors. And as we see from other countries, lots of people want to be doctors, even if being a doctor doesn't make you particularly wealthy. But in a world where Medicare is just one of many payers and Medicare decides to control costs, doctors can simply stop taking Medicare patients and a lot of legislators will lose their jobs.

Keep this in mind when you hear congress critters bloviating about payment formulas and cost control mechanisms and how they're never going to work. In fact, they might never work. But it's not because there's anything inherently impossible about them. It's because the private sector does a terrible job of cost control, and there's only just so much distance that Medicare can open up with its private competitors. As Uwe Reinhardt puts it: "The private sector is the inflationary component of health care, not Medicare or Medicaid. Medicare and Medicaid haven't grown faster, even though they deal with the older population. It's the private sector that doesn't know how to control costs."

In other healthcare analysis, Tyler Cowen offers seven worries about healthcare reform, one bright spot, and, of course, the observation that Republicans still don't have any better ideas. His summary: "Overall, the policy is shaping up to be a mess more quickly than I had thought, though not through the mechanisms I had been expecting. It still seems to have too many jerry-rigged pressure points." My take is that he's overreacting to growing pains that will almost certainly work themselves out over time in far less apocalyptic fashion than critics think. Partly this will be via administrative rulemaking compromises and partly via congressional changes as it becomes clearer which pressure points are real problems and which ones aren't. It's still early days.

Statistical Zombies

Seth Michaels wants me to republish an old post setting out the top ten mistakes that infest day-to-day reporting of numerical and statistical information. Well, why not? Let's call them statistical zombies so that I can get in on the zombie craze. Here they are:

  1. What’s the real income? Money comparisons over time should almost always be reported in real inflation-adjusted terms or else they're worthless. In nearly all cases, they should be reported in per capita terms as well.
  2. What’s the survey error? Statistical sampling error in opinion polls is trivial compared to the error from other sources. Things such as question wording, question order, interviewer bias, and non-response rates, not to mention Bayesian reasons for suspecting that even the standard mathematical confidence interval is misleading, give most polls an accuracy of probably no more than ±15%. Example: a couple of years ago a poll asked respondents if they had voted in the last election. 72% said yes, even though the reality was that voter turnout in that election had been only 51%. Most polls and studies are careful to document the statistical sampling error, but who cares about a 3% sampling error when there might be 21 points of error from other causes?
  3. Does A really cause B or might there be another explanation? If A and B are correlated, A might indeed cause B, but it’s also possible that it's just a coincidence or — even more likely — that some third source is causing both A and B. This problem is especially rampant in social science studies where virtually everything is related to everything else and even well designed multivariate analysis is extremely difficult.
  4. Is it the first study? Even putting aside other errors, 95% confidence means there’s a 5% chance that the result is wrong. We only believe that smoking causes cancer because there have been hundreds of confirming studies. Always be cautious about accepting the first study on any subject.
  5. Maybe it really was just a freak chance. “That can’t be a coincidence” is usually the result of not understanding how many rare things are nonetheless likely to happen once or twice in a population of 300 million. In a large country, there will always be some cities, or some groups, or some people, that are way above average for, say, cancer. The flip side of this is that something that seems dangerous might not really be. 100 kidnappings a year might seem like a lot, but in reality those are odds of one in three million. That's less likely than the odds of two people randomly picking out the same word from an encyclopedia.
  6. Compared to what? A 5% rise might be good or might be bad depending on whether everything else is growing at 0% or 10%. Which is it?
  7. Is there contradictory data? Two types of publication bias are involved here: researchers often don’t publish null results, and newspapers don’t bother reporting them when they are published.
  8. Statistically speaking, why did the headline number go up (or down)? Did everyone’s income go up 5%, or was it just that Bill Gates’ income went up 1000%? Distribution is as important as central tendencies. Check for mean vs. median. The value of statistics is to summarize a large mass of data, but it’s important not to summarize too much.
  9. Was the sample large and unbiased? For example, the original gay gene study used only about 40 people, and that was simply all the data they had. What’s worse, even if you do have a large sample it’s still difficult to ensure that it’s unbiased. Chapter 29 of Dana Milbank’s book Smashmouth is a pretty good down-and-dirty introduction to the delicate and tricky decisions that election pollsters have to make under deadline pressure to try and get accurate results.
  10. Does all the data point a little too cleanly to a single cause? Life is messy. A single report can often produce masses of data and should probably be viewed with suspicion if it claims that every bit of its data can be explained by a single cause — especially if it's a cause that the researcher is already known to favor.

Plus I'll add another pet peeve that's numerical but not strictly statistical in nature: the reluctance to simply report percentages as percentages. This leads to sentences like this: "Although 40% of voters support spending reductions, nearly a third don't want defense spending cut and two in ten decline to identify any reductions at all." This is almost unreadable. Why not just provide the percentages in parallel form? I really don't think readers are so stupid that they can't handle it.

And via Seth, here's another approach to identifying bad everyday statistics, but with examples! Take a look and see if you can spot the errors.

Thoughts About WikiLeaks

So what do I actually think about the WikiLeaks dump of U.S. embassy cables? A bunch of contradictory things, it turns out. Here's sort of a stream of consciousness of what was going through my mind yesterday as I read about this:

  • This isn't a whistleblower case. In fact, surprisingly little official lying of any kind has been revealed so far. Rather, it's an action aimed very generally at weakening American influence and exposing American intentions.
  • To the extent that this is done by, say, Australians and Germans, there's nothing unpatriotic or even wrong about this. If foreign nationals who oppose American hegemony get a chance to lob a stink bomb at America, why shouldn't they?
  • At the same time, the American citizen who leaked this stuff — Pfc Bradley Manning, apparently — should do serious time as long as the government can convince a jury of his peers that they've nailed the right guy. No government in the world can, or should, tolerate this kind of massive security breach from one of its own.
  • Governments have lots of legitimate reasons for wanting to keep communications confidential. This is not some kind of weird pathology exclusive to nation states, either. You keep secrets. I keep secrets. Companies keep secrets, families keep secrets, labor unions keep secrets, nonprofits keep secrets, and your neighbors keep secrets. There's always the risk of this stuff going too far, and there's always the risk of your secrets getting spilled. But this is all part of the human condition, not a sign of depravity in the State Department. 
  • In general, this kind of indiscriminate data dump is a bad thing. This particular dump, for example, could conceivably hurt chances of ratifying the START treaty, strain relations with the UN, strain relations with Russia, make an attack on Iran a little bit likelier, and reduce even the meager leverage we currently have over Hamid Karzai. More broadly, it could hobble American efforts at replacing saber rattling with genuine diplomacy, which is really in nobody's interest. 
  • And yet....even secrets that are justifiable in the short term can often end up being toxic in the long term. Routine secrecy quickly becomes a crutch, as it plainly has in the United States, and an occasional informational enema like this can have a salutary effect. Governments might have a legitimate need for secrecy, but they should also be keenly aware that there's a risk to doing business like this. I wouldn't want this kind of mass disclosure to become a regular occurrence, and I do think the leaker should pay for his crime, but at the same time I can't honestly say that I'm entirely sorry this happened.

I suppose this is all very unsatisfactory, but those were the thoughts buzzing through my brain yesterday. They still are. Perhaps they'll gel into something more definite as I give it more thought and the ramifications become more clear.