Monday, October 15, 2007
Jason Shafrin (Healthcare Economist)
Jason Shafrin is the author of the healthcare economist blog, and currently completing his Ph.D. in economics at the University of California, San Diego. He holds a B.S. in Economics from Wharton School. While his primary research interest is in health economics, he is also interested in labor economics, among other things. He has previously worked as a financial analyst for General Electric, where he worked on sales revenue analysis for GE's industrial systems unit.
Education: Student - Ph.D. Economics, UCSD, 2004 - Present
B.S. in Economics, Wharton School
B.A. in Spanish, College of Arts and Sciences, University of Pennsylvania
Career: Financial Analyst, General Electric, 2002-2004
NYC Housing Authority Capital Budget Fellow, 2001
Editor's Note: I first contacted Jason Shafrin because of his interest in healthcare economics and his experience as a financial analyst working for GE, and I wanted a comment from him on the GM-UAW deal. But with SCHIP taking over the news cycle, I thought it best to have Mr. Shafrin comment on the merits of this legislation, and it's veto by President Bush. Published below are Jason Shafrin's thoughts on SCHIP, the President's veto and its likely impact.
Today, President Bush vetoed the SCHIP expansion bill (see " Bush Defends..."). The right is celebrating (see Ernest Istook), while the left is up in arms (see Blue Indiana). What are we to make of this SCHIP program?
First we need to define what the State Children's Health Insurance Program (SCHIP) is. The program was created in 1997 to expand health insurance coverage to all poor--and even some middle class--children. A common phenomenon was for the children of the working poor to be uninsured. Since the parents of these children had relatively low income, but not a low enough level of income to qualify for Medicaid, they were left without health insurance. SCHIP was created to eliminate this problem.
SCHIP allow states flexibility as to how the program is designed while the federal government kicks in substantial financial support. In some states, SCHIP is rolled under the current Medicaid structure while in others it is own separate agency. Nevertheless, SCHIP should be seen as a de facto Medicaid expansion.
SCHIP in an ideal world
Without question, SCHIP is not an ideal policy. Now, lower middle class individuals will have to face the same decisions that the working poor did before the SCHIP expansion: should I work to make more money and lose the SCHIP insurance benefit for my child or should I quit my job/take a part time job in order to maintain SCHIP insurance eligibility for my child. The issue of work disincentives has not changed, only that the people affected by this decision are now the more productive lower middle class than the upper lower class.
Further, I am not a fan of government run health insurance schemes. In a static environment, the government could certainly provide adequate health insurance, but as new treatments evolve, the government has a difficult time determining which ones are effective. Without competition, how can the government tell which treatments consumers truly value? Likely, lobbying from the AMA and other interest groups will determine what treatments are covered, not the preferences of the public. Further, if Americans wanted to help improve the quality of life of the poor, why wouldn't society simply create a larger cash transfer (i.e.: welfare system) and allow the poor to use the money as they saw fit?
Nevertheless, insuring poor children is a commendable goal and not providing health insurance to the poor may have additional costs to society (increased costs of the poor using hospital emergency rooms). More extreme libertarians than myself would correctly point out that although feeding a child is very important, there has been no uprising of support for the government to start cooking meals for kids. A solution to the problem would be to create "food stamps" for health insurance. Kids could receive a voucher for health insurance which would pay for most or all of private health insurance. If society wanted to maintain a government-run medical system, the public could include Medicaid as one of the insurance options families could choose for their child.
The new Dutch system may provide a compelling model for the U.S. (see Healthcare Economist post on Sept. 7, 2007). It mandates a minimum benefit package but allows insurers to charge different prices and create different benefit packages. Further, the voucher is risk-equalized so that insurers do not shun sick children.
SCHIP in reality
Of course, we do not live in an idealized world. Should the American taxpayer insure all American children with an inefficient, government-run insurance scheme or should we leave many children without health insurance? Republicans stress that a SCHIP expansion adds to the government bureaucracy and moves Americans closer to a completely socialized system of medicine. They claim that there are many better alternatives to SCHIP that would be more efficient and also provide health insurance to children. Republicans are right. Democrats stress that without SCHIP many children will go without health insurance . Providing medical care for children is one of the most cost effective investments society can make and is one with a great deal of popular support. Democrats are right.
Whichever side wins will have a profound impact on the shape of the American healthcare system for years to come.
That was Jason Shafrin, editor and founder of the healthcare economist blog.
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