This article is part of a series of articles this week examining the Affordable Care Act as the Supreme Court considers a challenge that could imperil the law. You can read the rest of the series here.

Is that surgery really worth it? Do I really value that cancer screening? Is that extra imaging service necessary?

These are the kinds of questions consumers ask themselves when their insurance plans require higher cost-sharing for medical services. This is a new reality in the US health care system as large employers offering coverage have moved aggressively toward less generous, high-deductible insurance offerings.

This shift was accelerated by the “Cadillac Tax” provision contained in the Affordable Care Act (ACA), which, starting in 2018, places an excise tax on employers offering insurance plans that cover very high levels of medical spending. Further, many of the consumers enrolling in the public state exchanges created under the ACA have enrolled in lower- coverage financial plans that cover an average of 60% (bronze) or 70% (silver) of medical expenditures, similar to typical high-deductible coverage.

Though these policies are in part motivated by the goverment’s need to reduce its share of total health care spending, they are also driven by the expectation that they will lead consumers to use higher-value, lower-cost medical services.

In my recent research with Zarek Brot-Goldberg, Amitabh Chandra, and Jon Kolstad, we dug into the mechanisms for how and why consumers reduce medical spending when faced with higher cost-sharing.

To do this, we studied the medical claims and medical spending of more than 150,000 employees and dependents from one large firm that moved everyone from an insurance plan that provided completely free health care to a high-deductible plan covering 78% of medical spending on average.

During the switch, the in-network providers that consumers could access and the services covered remained the same. As a result, this switch presented an excellent opportunity to assess in detail how consumers respond to markedly increased cost-sharing.

Primarily, we wanted to know whether employees would reduce their medical spending as a result of the change and, if so, by how much. Further, we hoped to learn where specifically they’d cut back. Would they spend less on nonessential services or reduce spending across the board? Would they try to find cheaper sources of health care? Do some employees cut more than others? Do employees correctly perceive the true marginal price of care in a complex insurance contract?

Health care spending plunges

We first established that increased cost-sharing does reduce medical spending at the firm. Age- and inflation-adjusted medical spending dropped by 19% – from a base of approximately US$750 million in spending – when employees switched to high-deductible coverage.

Strikingly, many of the spending reductions come from the sickest employees. The sickest 25% (based on prior diagnoses each year) reduced spending by one-quarter after shifting coverage. This is especially notable, and somewhat surprising, since these employees earn relatively high incomes and their maximum out-of-pocket payment in high-deductible coverage for the calendar year was approximately $6,500 for a family.

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How did consumers reduce spending? A detailed data analysis reveals that medical prices did not go down. Further, we show that consumers did not price-shop after the switch – that is, they did not move toward cheaper providers, for example, when they were going to undergo a specific procedure.

It turns out that all spending reductions were directly linked to quantity reductions: consumers just consumed less medical care.

Cuts across the board

Importantly, it didn’t seem like consumers were particularly choosy about what kind of health care they cut: consumers appeared to reduce consumption across a range of medical services, from low to high value.

For example, quantity reductions led to a 22% drop in spending on imaging services (such as MRIs or CT Scans), some of which are likely unnecessary. However, consumers also reduced how many preventive health services they used – which policymakers typically believe are underutilized – by 16%.

The cuts were across the board. Spending on mental health care fell 8%, inpatient and outpatient hospital services declined 14% and 17%, respectively, drug purchases dropped 20%, and emergency room services plunged 27%. Of the top 30 medical procedures (by revenue) that we investigated, we found that consumers reduced spending for 23 of them.

Simply put, consumers did not look for cheaper services but consumed less medical care, and did so across almost the entire range of medical services.

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Insurance price misperceptions

One possible reason for why these sick, relatively high-income consumers reduced potentially valuable medical spending is that they perceived the marginal price of their medical care to be higher than it actually is.

Take the example of a consumer who knows he/she is quite sick entering the year and expects to spend a lot on health care. That consumer should not worry about the deductible and cost-sharing when making medical decisions early in the year because he/she knows that by the following January, all medical care used after passing the plan’s out-of-pocket limit will be free. Thus, the true marginal price of health care for this predictably sick consumer is close to $0, no matter how high the deductible is, so care consumed early in the year is essentially free as well.

But we found that these consumers substantially reduced spending early in the year when under the deductible, but once they passed it spent more. In other words, many consumers whose true marginal price for care throughout the year is essentially zero because of their impending high spending don’t treat incremental care as free when under the deductible. Instead, they respond as if the price of care under the deductible is the relevant price, despite the fact that they will spend that money during the year regardless.

This suggests that they misperceive their own health risks, misperceive how much medical care costs or don’t understand how the high-deductible insurance contract actually works. Similar consumer price misperceptions are also documented in Medicare Part D, electricity markets and broadband markets.

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What this means for reform efforts

Giving consumers direct incentives to think about their health care spending is a cornerstone of health reform in the US and plays a large role in several national health systems around the world, such as in France.

An important prerequisite for these reforms to be successful is that consumers, who may or may not be making medical decisions in conjunction with physicians, understand the costs and benefits of different health care services. Our evidence suggests that consumers don’t seem to be responding to increased cost-sharing with nuanced expertise and instead reduce consumption across the range of medical services, some valuable and some likely wasteful.

Additionally, they reduce care heavily when sick and under the deductible, even when their true marginal price of care is very low.

Thus, while increased consumer cost-sharing can be an effective instrument for reducing health care spending, it may be a blunt instrument for encouraging higher value medical spending, especially relative to supply-side interventions that target physician incentives or interventions that reduce the use of high-cost low-value medical technologies.

As health reform pushes forward, policymakers will need to recognize the limits of consumer cost-sharing policies and focus more on how to appropriately incentivize providers to deliver high-value, low-cost care.

Author:  Ben Handel: Assistant Professor of Economics at University of California, Berkeley

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The article was originally published on The Conversation (www.conversation.com) and is republished with permission granted to www.oasesnews.com

The Republican National Committee’s 2016 Straw Poll features 19 announced or anticipated presidential candidates. Just Thursday, Rick Perry officially threw his hat in the ring, and Jeb Bush announced he will formally launch his bid on June 15.

The Democratic National Committee’s web page features just four.

Sound familiar?

In 2000, 13 individuals sought the Republican presidential nomination, while the Democratic primary contest featured just two.

Why is the 2016 presidential election looking increasingly like 2000?

The 2016 election reflects an increasingly predetermined quality of the American political process, with the notion of a competitive primary campaign largely an illusion. Despite the fact that there are almost two dozen candidates, there is actually less choice. So Americans have to ask themselves: just how democratic is the presidential nominating process?

The Republican tradition of anointment

Since 1976, the Republican Party has developed a tradition of anointing the runner-up from the previous presidential nomination contest as its candidate for the next election.

In 1976, Gerald Ford narrowly won the Republican nomination over Ronald Reagan. In 1980, Reagan was the party’s nominee.

In 1980, George H.W. Bush was runner-up to Reagan, and in 1988, Bush won the nomination, defeating Bob Dole.

In 1996, Dole was the nominee, with Pat Buchanan finishing second. In 2000, however, Buchanan was not rewarded per tradition, with the party instead looking to an establishment favorite, George W. Bush, who won the nomination over John McCain.

In 2008, the Party returned to tradition by awarding the nomination to McCain, who defeated Mitt Romney. And in 2012, Romney beat Rick Santorum to the nomination.

Despite formally announcing his campaign, Rick Santorum – like Pat Buchanan – will not be the Republican nominee in 2016.

Why the GOP is just not that into Santorum and Buchanan

What is it about Santorum and Buchanan that the Republican Party does not like? Despite his runner-up status in 2012, Santorum is not regarded as a front-runner for the nomination, or in fact, anywhere near it.

It cannot be a coincidence that the only two occasions in the past 40 years that the Republican Party hasn’t followed its nominating tradition is when the runner-up is a staunch Christian conservative who would arguably not fare at all well in a general election. During the 2000 nominating contest, the Republican establishment coalesced around George W. Bush’s candidacy long before the primary season began, and as a result, Bush became the first Republican to win the presidency despite losing the New Hampshire primary (to John McCain).

Like 2000, the Republican Party establishment appears to be set to choose their favored candidate, at the expense of Rick Santorum. And once again a Bush is the front-runner, with Jeb Bush dominating the six leading polls (and Santorum faring no better than tenth).

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The Democratic Party coronation process

On the Democratic side, there are also similarities with 2000. That year, former US senator Bill Bradley was the only candidate who attempted to derail Al Gore’s coronation. In 2016, the Democratic Party is similarly yawning its way to the 2016 National Convention in Philadelphia, where Hillary Clinton will accept her party’s presidential nomination. At this point, she has four declared opponents: Vermont’s Bernie Sanders, Rhode Island’s Lincoln Chafee and Maryland’s Martin O'Malley, while Jim Webb is making a tentative exploration. None of these candidates – at this point – is considered a major challenger.

In September 1999, more than one year before Election Day and months before the first caucus in Iowa and first primary in New Hampshire, the phrase “air of inevitability” was being used to describe Bush and Gore as the eventual presidential candidates. The same term is being used 16 years later with Jeb Bush and Hillary Clinton, although on the surface Jeb’s claim appears slightly more tenuous than his brother’s was at the same point in the pre-primary season.

The limited choices for voters

Despite the apparent transparency of the nominating process, voters actually have very little say in determining their presidential nominees.

In his 2000 book, The Press and the Modern Presidency, Louis Liebovich wrote that George W Bush and Al Gore were crowned prohibitive favorites two years before the general election vote. And in A Citizen’s Guide to Presidential Nominations (2015), Wayne P. Steger also suggests that parties anoint their inevitable nominees long before the first primary election.

In addition, the mathematics of the Electoral College strongly predetermines results even before Election Day in November 2016. Based on how each state has voted over the past four presidential elections, the Democrats begin the election knowing they have already won 242 Electoral College votes, while the Republicans have just 180. California is as certain to vote Democrat as Alabama is to vote Republican.

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Further, if we add those states that have voted for one party three times out of the past four elections, then the Democrats' Electoral College vote count increases to 257, and the Republicans to 206. What this means is that the Democratic nominee doesn’t need to win either Ohio or Florida to win the presidency, but the Republican nominee must win both to even have a chance; further strengthening Jeb Bush’s claim.

American democracy?

The US now experiences – or some might say endures – a permanent political campaign. Between now and November 2016, billions of dollars will be raised and spent by candidates, parties, PACs and organizations, but what is it really for? In coining the phrase “the iron law of oligarchy” in 1911, Robert Michels argued that even in democratic organizations, political leadership would entrench itself in power, undermining the democratic principles of a level playing field.

What does all this mean for American democracy? My research in examining why voters elect members of the same family to public office reveals an interesting story about the nature of American politics: that despite the appearance of a democratic process, candidate selection and election outcomes appear to be predetermined, and consistent with the establishment of a political ruling class.

Author:  Bryan Cranston: Lecturer in Politics at Swinburne University of Technology

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The article was originally published on The Conversation (www.conversation.com) and is republished with permission granted to www.oasesnews.com

I have just returned to the UK from Trinidad and Tobago, from where I watched the FBI raids in Switzerland – the raids that brought FIFA’s house of cards down and, ultimately, caused the resignation of long-time president, Joseph “Sepp” Blatter. Central to the FBI investigations is Jack Warner, who hails from this small country of 1.3 million people.

The former FIFA vice-president and president of the Confederation of North, Central American and Caribbean Association Football (CONCACAF) was among 14 people indicted by a US grand jury on corruption charges. He has now vowed to release an “avalanche” of secrets about FIFA’s practices, says he knows why Blatter resigned and also claims to have evidence linking FIFA to his country’s 2010 election.

While we wait for further revelations, one thing is clear. Serious reform of FIFA’s operations must be undertaken for the good of world football. But the voices shouting loudest for reform don’t necessarily have the whole world’s interests in mind.

It is problematic that the US and UK – two countries with long histories of global intervention – are driving the charge for reform. These two countries share similar cultural and business practices, often asserting their way of doing things as universal or at least the norm. Others consider this behaviour as a continuation of attitudes from the imperial and Cold War eras where might equalled right.

Echoing comments by Russian President Vladimir Putin on the FIFA crisis, Jack Warner’s newspaper in Trinidad and Tobago, Sunshine, asserts the campaign against FIFA is really about attempts to discredit Russia, which is hosting 2018 World Cup. Tensions between Russia and the West are at high levels due to conflict in Ukraine and Russian jets undertaking fly-overs in the English Channel.

 

 

Blurred lines

Every story has more than one side – even Jack Warner’s. There are far more facilities for football in the Caribbean than before his tenure in CONCACAF and FIFA. Likewise with Sepp Blatter, who has raised FIFA income massively during his period in office.

While the Anglo-American discourse asserts there is a firm line between ethical behaviour and corruption, in much of the rest of the world that line turns into a blurry continuum with less precise divisions. As a result of similar scandals besieging the International Olympic Committee (IOC), sports studies scholar Douglas Booth has argued the culture of reciprocity and gift-giving common throughout the world suggests one person’s gift exchange may be another’s bribe and we must be careful of cultural determinism that leads to absolute condemnation.

Too often, we want to see sport as pure and noble, yet it exists in the real world like anything else. The US state department has not spent millions of dollars a year on its sporting diplomacy programmes for the past 50 years simply to spread goodwill. Indeed, it has lists of preferred countries, which are strategic priorities, where they operate programmes.

If it were simply about sport and goodwill, the programmes would be universal or indeed be used to provide sustainable sporting facilities in places unable to afford them without outside assistance.

Imagine yourself the president of the Antiguan Football Association. You have one vote for major decisions at an international organisation equal to the vote of the US, UK or China. Would you not want to leverage that vote into as much return as possible for the development of football in Antigua? Corruption does not lie in seeking advantage for your country or football, but in diverting those gains into personal wealth out of proportion to your efforts or the income generated.

The question remains: where is the line and who gets to draw it? These are fundamental problems for FIFA, as for any international sporting federation.

 

Real change

FIFA is in need of reform. Indeed, many would like to see it fall, but to be replaced by what? International football is too large an enterprise to be administered by anything other than a global body, which would need to develop a set of practices to ensure the future of the game is built upon the successes of the present.

The postcolonial era has been a long and difficult one, marred by the Cold War and continuation of exploitative economic practices on the part of those countries who benefited most from colonialism. One country, one vote may not be the perfect solution – perhaps proportional power based on population or other measures might be more equitable.

But the Anglo-centric worldview must be flexible enough to accommodate dissent, disagreement and differing philosophies so that the greatest good for the greatest number is practised in reality, not merely what is good for ourselves and our own global interests.

FIFA has an opportunity to lead the way and, with the IOC, be a voice for global equity and transparency. For a truly level playing field to be achieved, much needs to change. Real change, however, is not moving the 2022 World Cup from Qatar to England or the US. It needs to go to the heart of global inequities.

 

Author:  John Nauright: Professor of Sport and Leisure Management at University of Brighton

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The article was originally published on The Conversation (www.conversation.com) and is republished with permission granted to www.oasesnews.com