This blog post originally appeared in Health Affairs on November 13, 2014.
Is Medicare adequately meeting the needs of seniors, or are there ways that its core attributes could be improved? Numerous elected officials, policymakers, and other thought leaders have offered perspectives on ways to change the program. Few efforts, however, have been directed at understanding how the public—given accurate information, a variety of options, and a valid structure for weighing the pros and cons—would change Medicare’s basic design.The MedCHAT Project
Recently, the American Enterprise Institute and the Brookings Institution co-hosted a briefing on the results of a California project that did just that. The “MedCHAT” project, sponsored by the nonprofit, nonpartisan Center for Healthcare Decisions, asked 800 residents—the lay public, as well as health care professionals and community leaders—to consider Medicare’s current benefits and decide if those should be changed. Respondents represented the full spectrum of age, race, ethnicity, education, and income level.
Using an interactive, computer-based system, participants were asked to respond as “social decisionmakers;” they were tasked with making Medicare more responsive to the needs of current and future generations without imposing a greater cost burden on the country. The computer-based CHAT (“Choosing All Together”) program uses actuarial estimates to show the relative costs of health care benefits, allowing participants to make trade-offs with an understanding of the fiscal impact each benefit has on the program.
There are 12 MedCHAT categories of possible changes to Medicare coverage. Most describe common health care needs, including “early chronic” conditions (such as high blood pressure, diabetes, and obesity); “complex chronic” conditions (such as heart or lung disease requiring on-going treatment); and long-standing incurable illnesses of patients in their “final phase” of life. Within each category are from one to three levels of benefits, where participants can decide to stay at the current level, opt for more or less inclusive coverage, or reject coverage altogether. Participants can also add new benefits that Medicare currently does not provide.
Eighty-two groups throughout the state met in 3-hour intensive small-group sessions. Each session had four rounds of decision-making: 1) as individuals, participants decided what they would want for themselves; 2) in groups of 2 to 3, they chose the best plan for the country; 3) as a group of 8 to 12, participants debated/decided together what a national plan should include; and 4) as individuals, they made their final decisions for the country.
Since they were working within a finite budget—what Medicare currently spends—any new benefits proposed had to be offset by reductions in other aspects of Medicare spending. Using traditional Medicare as the basis for this task, the majority of decisions revealed a program that looks startlingly different from today’s Medicare.The Public’s Approach to Improving Medicare
The results in the MedCHAT report are from the final round of decision-making, and most of the added benefits are not surprising: 77 percent added a long-term care benefit; 95 percent included dental; 85 percent added vision and hearing; 81 percent added non-emergency medical transportation; and 69 percent enhanced the current mental health coverage.
To cover the added benefits, participants imposed greater restrictions on other aspects of Medicare:
- Traditional Medicare would no longer include unrestricted choice of providers and hospitals: 82 percent decided that everyone would enroll in a provider network. However, 65 percent also included the compromise that primary care providers could refer Medicare patients outside the network if there was sufficient reason to do so.
- Low-value care—e.g., when a treatment is highly unlikely to provide a meaningful benefit—would no longer be covered by Medicare in the same fashion as high-value care. Eighty-eight percent felt this stricter coverage should apply to those with complex chronic conditions for whom marginally effective treatments were viewed as not helping the patient enough to warrant the cost. In effect, this reflects a judgment that limited resources should be directed where they would do the most good. Here, too, 54 percent sought a compromise: patients would face a 50 percent co-insurance for low-value treatment, rather than no coverage at all.
- Although palliative care and hospice would be readily available for patients in their final phase of life, 65 percent of respondents thought that Medicare should no longer pay for “long-shot” treatments, and 97 percent would not have Medicare cover the cost of ICUs when patients are dying.
In addition, 85 percent agreed to reduce the use of current Medicare resources to ensure Medicare’s solvency for at least another 50 years. Participants recognized that shifting resources means some additional sacrifices would be necessary to preserve the program for future generations. Perhaps not surprisingly, younger participants were more likely to support this policy.
In just two of the 12 MedCHAT categories—treatment of unexpected, severe illness (labeled catastrophic care) and basic services for common short-term illnesses (“routine care”)—did the majority of participants stay with the current benefit (which covers all services ordered by the physician regardless of their evidence of effectiveness), but opinions were fairly evenly split between the status quo and a more restrictive policy. When they chose to provide less than the current coverage, participants commonly sought out a middle ground (cutting back but not completely eliminating coverage) as they did with provider choice and low-value care.Expanding the Debate
The MedCHAT project provides compelling evidence that average citizens would re-design Medicare if they could. What MedCHAT adds is the finding that the public is willing to give up some coverage to get additional benefits, and they are willing to sacrifice some spending today to ensure that Medicare will remain financially sound in the future.
There are limitations to this process. The views of 800 Californians cannot be assumed to reflect those in other states. The willingness to enroll in a provider network rather than continuing to have access to any provider may not be shared by citizens in other parts of the country, where the roots of such networks are shallower. And not all aspects of Medicare’s structure could be included in the 3-hour discussions because the extent of information would have been overwhelming.
Yet this project has brought to light some critical issues in how average citizens think about the needs of seniors. Its realistic approach—requiring people to make decisions within the context of a finite budget—is a powerful approach for understanding the views and values of those with a stake in the largest health insurance program in the country.Authors
- Marge Ginsburg
- Joseph Antos
- Kavita Patel
The Engelberg Center for Health Care Reform recently hosted “The State of Accountable Care: Evidence to Date and Next Steps” to discuss the development, challenges, and potential future for accountable care efforts across the country. Sean Cavanaugh, Deputy Administrator & Director of the Center for Medicare at CMS, kicked off the event, and highlighted progress and challenges of the Medicare ACO program and potential regulatory changes that could be included in the soon to be released Medicare Shared Savings Program (MSSP) proposed rule.
A Key Takeaway: Patient Engagement is Critical to the Success of ACOs
The need for greater patient engagement was a prevailing theme of the day for ACOs at Brookings. Patient engagement is viewed as a key to improved health outcomes and lower costs; well-designed patient engagement strategies can also improve patient experience by allowing individuals to become more active participants in their care. For example, shared decision making and patient activation are proven strategies for engaging patients at the direct care level. These approaches help providers and patients to recognize that a clinical decision is necessary, understand the evidence on best available interventions, and ensure patient preferences are built into treatment decisions and plans. A recent study by Jennifer Sweeney and colleagues highlights some successful examples.
Several examples of effective strategies for engaging patients with chronic disease were highlighted at the Brookings event. Kelly Taylor, Director of Quality Improvement at Mercy Clinics, highlighted Mercy’s chronic disease outreach program, which employs health coaches to motivate patient behavior change. The program creates actionable lists for patients due for hospital visits, helps with coordinating care transitions, and conducts pre-visit and post-visit assessments. Patients that receive these services typically score in the 90th percentile for HEDIS measures, such as control of blood pressure and blood sugar levels. A financial analysis demonstrated that for every dollar spent on the health coaching program, four dollars in revenue is received.
Morey Menacker, President and CEO of Hackensack Alliance Accountable Care Organization discussed Hackensack’s remote monitoring and care management tool that allow patients to monitor their diseases in their own homes. This program has contributed to a reduction in unnecessary hospital visits and improvement in patient self-management.
A number of organizations have also used web-based tools such as online or smartphone applications for patient engagement purposes. For example, Beth Israel Deaconess Medical Center developed patientsite.org, an interactive web-based portal decision aid giving patients access to their clinical records and the ability to check accuracy of allergy and medication lists. A recent study of 30,000 patients found that even after adjusting for health status and other factors, patients with the lowest activation scores incurred costs of 8 percent to 21 percent higher than those with the highest activation scores. Despite these encouraging innovations, more work is needed to empower patients in health systems across the country.
ACO Attribution: A Challenge for Engaging Patients
Over the next twenty years, we will see the baby boomer population inflate the number of Medicare beneficiaries by 60 percent; increasing from 50 million to 80 million. This statistic, emphasized by Cavanaugh, underscores the need to engage these patients in their care through more innovative approaches. If not, “slipping through the ACO cracks” will become all too real for too many patients.
While ACOs acknowledge they have work to do to more fully engage patients in their care, they also point out that program design issues need to address patient engagement. For example, a major fault in the MSSP patient attribution process is that some patient may not be aware they have been assigned to an ACO. In this case, they may seek care outside the ACO network of providers and in fact be assigned to a different ACO from year to year. Most importantly, there are no incentives for patients to remain loyal to an ACO when the attribution process does not reflect patient preferences.
Recent research highlights concerns with current approaches to patient attribution in ACOs. A recent study by Harvard Medical School researchers analyzed whether, over a two year period, Medicare beneficiaries would continue their care within their attributed ACO, or seek medical attention outside the network. Approximately 80 percent of beneficiaries would have chosen to remain with doctors inside their ACO. Not surprisingly, the research indicates that primary care doctors have more “sticking power” than specialists, who would have lost 66 percent of their beneficiaries to competitors outside the ACO. More worrisome, however, was the finding that most of the beneficiaries that strayed from the ACO were those with chronic conditions. ACOs need to address the fragmented system and consider why they are unable to retain so many high-risk patients.
The potential turnover of ACO-attributed patients from year to year (or patient churn) warrants attention, but little evidence exists to suggest that patient dissatisfaction is the cause. In fact, Medicare ACOs are achieving overall high performance on patient satisfaction measures to date. So far, there is no clear relationship between patient satisfaction measures (CAHPS) and turnover. However, it is not unreasonable to assume that more direct patient engagement in selecting an ACO might reduce patient turnover.
Policy and Regulatory Solutions
There are a number of structural adjustments that CMS could make to the MSSP program to more effectively engage patients through financial and other incentives.
- Provide financial incentives for beneficiaries: These incentives may include reduced co-pays or deductibles for choosing providers within the ACO network or other high-performing or high-value providers. ACOs could also provide rebates or extra benefits to patients who successfully adhere to medications or provide additional discounts to patients who meet specific outcomes, such as reduced BMI or blood pressure control. Finally, beneficiaries could potentially share in some of the savings generated by the ACO, assuming that they meet a set of patient requirements or compliance metrics. While allowing patients to share in savings would be a more complex and controversial proposition, it could transform how patients think about ACOs and their own personal behavior to improve their health.
- Implement “Welcome to ACO visits” (similar to a “Welcome to Medicare visit”): These visits could provide an opportunity for ACOs to educate patients about the benefits of being in an ACO. Patients could learn how an ACO model will affect the care they receive, and how patients can become more activated and engaged.
- Transition away from the current attribution model to allow beneficiaries to actively and directly enroll in an ACO: Active enrollment could enhance patient commitment to organization, and help them better understand the implications for their care. Potential challenges to this approach include increased opportunity for adverse selection (unhealthy patient disproportionately enrolling in the ACO, thereby disrupting the overall risk pool) and not enough beneficiaries agreeing to join the ACO. While adverse selection could be addressed through additional technical changes to the program (e.g., more frequent updates to benchmarks, etc.), without a sufficient patient population, the ACO would likely not succeed. Furthermore, it is not clear how such a model would differ significantly from current Medicare Advantage and why patients would choose to join an ACO over an MA plan. We may soon have a better idea of whether an enrollment model will work; the CMMI has launched a demonstration program with a selected number of Pioneer ACO participants to test whether and to what extent beneficiaries will elect to enroll in an ACO, and what the consequences may be on the ACOs population and performance.
Patient engagement interventions and programs highlighted during the recent Brookings event are encouraging, but much more work needs to be done. Effectively engaging patients will require ACOs to think differently about what patient engagement really means; it will also require a willingness and desire on the part of patients to become more engaged as active participants in their care. A regulatory environment that encourages provider organizations to pilot new approaches to patient engagement, including innovative financial and other incentives, could be a starting point for innovation in patient engagement. The health care system will not be transformed without the patient; moreover, the real promise of ACOs—continuous improvements in quality and reduced costs—cannot be realized over the longer term without more active involvement of patients in their care.
- S. Lawrence Kocot
- Ross White
- Carmen Diaz
- Pratyusha Katikaneni
Student loan debt increases likelihood of financial hardship
Using 2007-2009 Survey of Consumer Finances data, Jeffrey Thompson and Jesse Bricker of the Federal Reserve Board find that families with average student loan debt loads were more likely to be late on bill payments and more likely to be denied credit than those families with no student debt. They note that families with student loan debt but no degree drove much of this phenomenon.Local lenders are critical to small and young business job creation
Analyzing county level data in the wake of natural disasters, Kristle Romero Cortés of the Federal Reserve Bank of Cleveland concludes that local lenders play a vital role in job retention and creation, particularly for young and small firms. Cortés finds that a one standard deviation increase in local finance typically leads to 1% to 2 % higher employment growth at these firms, and that this increased lending is not associated with higher default rates or reduced lending in the future.Better management quality leads to better educational outcomes
Nicholas Bloom of Stanford University, Renata Lemos and John Van Reenen of the London School of Economics, and Raffaella Sadun of Harvard University find that better management of high schools is strongly linked to better educational outcomes. According to their measure, the UK, Sweden, Canada, and the US have the best-managed schools, on average. They also find that more autonomous government schools, such as U.S. charter schools, have higher management scores than other public or private schools.Chart of the week: Corporate Taxes Speech of the week: People must not lose sight of the long-term benefits of regulatory and structural reforms
“There are several reasons why I don't think the regulatory agenda has gone too far. First of all, my experience is that important regulatory and structural reforms are all too often hindered by myopia. People tend to focus on costs and pains in the short run, leaving aside the longer term gains that reforms aim to achieve. The perceived short-term costs are simply much easier to sell politically, compared to the abstract benefits of lowering the risk of crises. This is especially so, since the benefits may accrue only to future generations - a group that has difficulties making its voice heard in today's policy debate.”
– Stefan Ingves, Governor of the Sveriges Riksbank and Chairman of the Basel Committee on Banking Supervision
- Brendan Mochoruk
- David Wessel
Not surprisingly, Hong Kong came up at the summit between U.S. President Barack Obama and Chinese President Xi Jinping. Both governments have spoken out about the continuing crisis, but the way the two leaders addressed it at today’s press conference was interesting.
In his statement, Obama was responding to a question about the wave of anti-American rhetoric and the specific charge that the United States was the “black hand” behind the Occupy protest movement. He confirmed that Hong Kong was one issue in his talks with Xi, and then said: “I was unequivocal in saying to President Xi that the United States had no involvement in fostering the protests that took place there [Hong Kong]; that these are issues ultimately for the people of Hong Kong and the people of China to decide.” The denial has the virtue of being true, but it was very important that President Obama say it, both in private and in public. He would not have provided such an “unequivocal” assurance unless he himself was confident that it was true.
Commenting on the current situation in Hong Kong, Obama then said that he had told Xi that “the United States, as a matter of foreign policy but also a matter of our values, we are going to consistently speak out on the right of people to express themselves, and encourage the elections that take place in Hong Kong are transparent and fair and reflective of the opinions of people there.” While avoiding details, he thus reaffirmed U.S. support for a political process in Hong Kong that would allow a competitive election for chief executive.
As interesting as Obama’s statement was Xi’s response to it. He did not directly dispute Obama’s statement that Washington was behind the protests, but instead addressed the issue more generally. He said that “Hong Kong affairs are exclusively China's internal affairs, and foreign countries should not interfere in those affairs in any form or fashion.” Of course, this is a standard Chinese formulation when it comes to any American activity concerning any territory that Beijing claims. Taking the two statements together, however, we have an interesting narrowing of the disagreement.
- Xi said that China opposed any interference of any form in its internal affairs.
- Obama denied any role in the protests, so that is no longer an issue (or shouldn’t be).
- Obama promised that the United States would continue to speak out on Hong Kong issues, which Xi would say falls outside the scope of what he regards as acceptable activity. On this point, the two sides will continue to disagree.
Now that this exchange of interlocking statements has occurred, it will be interesting to see whether the Chinese propaganda apparatus will continue its “black hand” attacks on the Obama Administration, even though Xi Jinping passed up an opportunity to explicitly challenge Obama’s pledge.
On the current situation in Hong Kong, Xi Jinping stated that he had told President Obama that: Occupy Central is an illegal movement in Hong Kong; Beijing is “firmly supportive of the efforts of the Hong Kong Special Administrative Region Government to handle the situation according to law” to maintain social stability and to protect life and property; and that the rights and interests of foreign citizens and business organizations in Hong Kong would be protected. Xi did not tip his hand on how he thought the Hong Kong government should in fact “handle the situation,” but a reasonable inference is that he neither ruled out some degree of coercion nor some measure of conciliation. From the point of view of both Hong Kong people and the United States, the latter is clearly preferable.Authors
After centuries of little change, the basic “sage on a stage” business model of higher education is beginning to undergo a radical transformation. Buffeted by high tuition costs and loan debt, students and their parents are seeking better value for money. Meanwhile technological change spearheaded by online education and such innovations as “massive open online courses” (MOOCs) is shaking up the economics of educational information and teaching. And new business models, introducing such approaches as competency based degrees and blends of online and campus-based learning, are reducing costs and offering more customized degrees.
Thanks to these developments, the cost of acquiring the skills needed to be successful in the future economy is likely to fall sharply. That will be good for the economy. It will also open up opportunities for skill-based economic advancement for the many Americans who today cannot afford college without incurring crushing debt.
For this transformation to achieve its full potential, however, three things are needed.
First, would-be students must be able to obtain clear information about costs and quality, so that they can locate the best value for money. As Wellesley College economics professor Phillip Levine explains in his new Brookings study, that is no easy task. Much like the health industry, higher education is woefully inadequate at providing accurate and usable information on the actual costs a student is likely to incur, given a student’s economic circumstances and other factors. So it is difficult to engage in comparison shopping. Levine notes that “net price calculators” developed by the federal government are difficult to use and often inaccurate for particular students – but fortunately some colleges like Wellesley recognize the market value of good information and are developing more effective tools.
Second, we need comparison information that recognizes “quality” means different things to different people. Students place different values on different features of a college, from the availability of certain courses and professors, to the employability associated with certain majors, to the “college experience.” The weighting of such factors has a strong subjective element. That’s why national and international “scorecards” will always vary widely and be disputed, and why the federal government cannot develop a supposedly objective checklist of quality criteria. So it is important is for students to have access to scorecards that reflect their own criteria for value in education. Fortunately customized information is becoming increasingly available from private sources. It’s not just US News & World Report anymore. Parents and high-schoolers concerned about the earning potential of particular degrees can consult the Forbes and Kiplinger ratings, for instance, while those seeking a broad education can now consult the What Will They Learn rankings of the American Council of Trustees and Alumni
The third essential step is to open up the cozy world of higher education to more competition from institutions with new business models. That is certainly happening, but competition is held back by the outdated accreditation system, which protects the traditional providers because federal aid is limited to use in institutions with traditional accreditation. Fortunately the accreditation oligarchy is under pressure. Degrees based on competency rather than “seat time” are gaining traction, while low-cost degrees are reducing the need for loans. Meanwhile there are a range of proposals to amend traditional accreditation, from legislation to permit states to develop their own accreditation systems that would retain eligibility for student loans to steps to open up the accreditation system to new kinds of institutions.Innovation combined with information drives change. Administrators of the hallowed halls and ivy-clad towers of the world’s universities are now learning that lesson. Authors
The global crisis—which challenged paradigms about the functioning of financial markets and had significant consequences in other markets—and the sluggish recovery since 2009, are a reminder of the importance of understanding interconnections and risks in the global economy. The increasing trend in global trade, and even more significant, in cross-border financial activities, suggests that spillovers can take many different forms.
The understanding of transmission channels of spillovers has become essential, not only from an academic perspective, but also policymaking. The challenges faced by policy coordination after the initial response to the crisis in 2009—illustrated by the debate on the impact of unconventional monetary policy in emerging economies—raise wide ranging issues on fiscal, monetary, and financial policies.
Against this backdrop, the IMF’s 15th Jacques Polak Annual Research Conference, “Cross-Border Spillovers,”on November 14-15 is timely. While spillovers are at the core of the IMF’s surveillance mandate, it is clear that a lot of work is taking place outside the IMF.
This year’s conference program brings together contributions by researchers both inside and outside the IMF, aimed at understanding the different channels through which shocks can be transmitted among economies, and how policies can help mitigate their impact. In particular, the conference will look at the main challenges posed by the outcome delivered by market forces, and whether there are adequate policy instruments at the national level to deal with these challenges. And if not, what can be realistically done in terms of policy coordination.
Global financial cycles and monetary independence
Hélène Rey, Professor of Economics at the London Business School, and Research Fellow at the Center for Economic Policy Research (CEPR) and the National Bureau of Economic Research (NBER), will give the keynote Mundell-Fleming lecture on the controversial issue of global financial cycles and the extent of monetary policy independence of national central banks.
The conference will also discuss 12 papers on key transmission channels of cross-border spillovers from monetary and fiscal policies, linkages in debt markets and trade integration, as well as policy instruments to manage capital flows and international policy cooperation.
Just to give you a flavor of what to expect, here are some of the questions that we will be discussing:
- What is the impact of changes in US monetary policy on foreign bonds yields? Does it differ depending on the policy instrument used? Do conventional and unconventional policies have a different impact on the yield curve?
- How has unconventional monetary policy by the European Central Bank worked? What was the impact on Europe and the on the rest of the world? What are the relevant transmission channels; are these similar to the ones under US UMP?
- What is the impact of government spending on the exchange rate? Is it really associated to exchange rate depreciations, i.e. ‘beggar-thy-neighbor’ type of effects?
- Do sovereign debt defaults in one country trigger defaults in other countries? Do they change the cost of financing and incentives to default in other countries?
- What are the conditions under which international spillovers effects are Pareto efficient? How does equilibrium with strategic policy setting at the global level compare against equilibrium with global policy cooperation?
- Is it optimal to restrict international capital flows amid financial markets incompleteness, i.e. prices sending signals that do not induce socially optimal outcomes?
- Have capital controls been effective? How is their potential effectiveness affected by leaks—i.e. the limited enforcement of these measures?
- Does deeper trade integration through international input linkages amplify cross-border spillovers?
- Can fiscal and capital market integration dampen the transmission of leveraging/deleveraging shocks within a monetary union –i.e. Europe?
- Did growth in countries with higher trade and financial integration fall more during the Great Depression?
The conference will conclude with an Economic Forum. A panel of experts, Jean Boivin (Deputy Chief Strategist at BlackRock and former Canada’s deputy finance minister), Hector Torres (Brazil’s Alternate Executive Director at the IMF Executive Board), Maurice Obstfeld (United States Council of Economic Advisers and University of California at Berkeley), and David Vines (Professor of Economics at the University of Oxford), will discuss their views on cross-border spillovers and policy coordination.
As in the past, we hope that research presented at this conference will contribute to new policy thinking here at the IMF and elsewhere, and that you can find time to read the papers posted online, and via the webcast of the Economic Forum at www.imf.org.
Asthma can be a frightening disease, especially for young children struggling to breathe during an asthma attack. Parents can be equally scared watching their child gasp for breath, not sure how to help. 800,000 times a year panicked parents rush their asthmatic child to the emergency department (ED) and cost the health system $27 billion a year.1,2 Non-medical costs are also significant, as children with asthma miss over 14 million school days, and their care results in parents missing over 14 million work days.3 Further, uncontrolled asthma is most common among families living in substandard housing, where environmental triggers such as dust and mold in addition to limited understanding of how to avoid attacks. There must be a way to break this pattern, help families reduce asthma attacks, and save money at the same time.
Fortunately, many practices and clinical leaders are developing strategies to help children and their families manage asthma more effectively. One example is the Community Asthma Initiative (CAI) based in Boston, Massachusetts. CAI uses community health workers to visit families of children with serious asthma, help them understand what can trigger attacks and how to avoid them. The CAI even pays for equipment such as vacuum cleaners and pest management supplies to help reduce indoor environmental pollutants that exacerbate asthma symptoms. These programs work: the CAI saved more than $80,000 in the first 3 years of the program and demonstrated a return on investment (ROI) of 1.33. The initiative also contributed to reductions in ED visits (57 percent) and hospital admissions (80 percent), and fewer reported school and work absences.4
These results suggest a win-win: children can be healthier and communities can save money. But the medical system is set up to treat illness, not necessarily to improve health. Health payers, such as Medicaid and private insurance, are used to paying for traditional medical services—often very expensive ones, such as ED treatment or hospitals stays— but not for less expensive non-medical services, such as parent education, home inspections, and cleaning supplies. The successful CAI demonstration could not be continued without cobbling together grants from other funding sources to offset the costs of non-medical services. However, the sustainability of grant funding is uncertain, and illustrates why proven interventions like the CAI never get built into normal practice and the cycle of poor health and high costs continue.
What Can Be Done?
The big challenge is to restructure the health system to reward good health rather than only compensating in the event of illness. Doing so would involve paying less for treating the complications of asthma, for example, and offer more significant incentives for services that prevent and mitigate complications. This would involve attempting to measure events that do not happen and costs that do not occur, an approach that does not align with current payment models.
Both public and private payers are currently experimenting with alternate payment models such as Accountable Care Organizations (ACOs) and patient-centered medical homes (PCMH) that provide opportunities for increased delivery flexibility, enabling physicians to provide care that patients need to be truly healthy. (For more information, check out our asthma MEDTalk.) These models encourage and reward management and tangible improvements in population health so that events that do not happen and costs that do not occur are valued.
However, several difficulties remain, even in a delivery system where payments reward prevention, wellness, and outcomes.
Accounting for financial and clinical risk. Public and private insurance systems are risk averse. They understand that prevention can work, but not all of the time. They are fearful that they could end up paying twice: once for the intervention, such as education and home visits; and again for treatment if prevention does not work and the child goes to the hospital anyway.
Clinical risk-adjustment is important too. In order for savings to outweigh the costs of prevention, the intervention must be delivered to the patients most likely to benefit. Identifying these high-risk patients takes time and money, but is critical to maximizing resources.
Tracking Where Savings Accrue. Many social interventions paid for by the medical system, such as Medicaid funded supportive housing for the chronically homeless, accrue benefits to other agencies such as the criminal justice, housing, public health, education, Supplemental Nutrition Assistance Program (food stamps), Veterans Affairs, etc. Any organization would be hard-pressed to foot the entire bill for potential savings that would accumulate to others.
Who Can Help?
- Physicians and other health providers are aware of the inefficiencies in the care they deliver based on the constraints they face, and have an opportunity to take leadership roles and help drive the system toward rewarding health.
- Payers who see their costs rising without quality improving, can help transform the system. Layering on incremental, complex rules won’t help. Data sharing is also important.
- Policy makers at the local, state, and federal level should encourage an environment of innovation and legislative support for the health system to evolve into a highly functioning, efficient, and patient-focused ecosystem.
If clinicians, payers, policy-makers, and patients can work together, there is great promise to truly achieve the triple aim — and help us all breathe a little easier.
1 American Lung Association. (2013). Asthma & Children Fact Sheet. Retrieved from: http://www.lung.org/lung-disease/asthma/resources/facts-and-figures/asthma-children-fact-sheet.html
2 Barnett, SL. and Nurmagambetov, TA. (2011). Costs of asthma in the United States: 2002-2007. Journal of Allergy and Clinical Immunology, 127 (1), 145 – 152. Retrieved from: http://www.jacionline.org/article/S0091-6749(10)01634-9/abstract
3 Harty, M and Horton, K. (2013). Using Medicaid to Advance Community‐Based Childhood Asthma Interventions: A Review of Innovative Medicaid Programs in Massachusetts and Opportunities for Expansion under Medicaid Nationwide. Issue Brief from the Childhood Asthma Leadership Coalition. Retrieved from: http://www.nchh.org/Portals/0/Contents/HCF_Community-Based-Asthma-Interventions-and-Medicaid-CALC-White-Paper_2.28.13.pdf
4 Bhaumik U, Norris K, Charron G, Walker SP, Sommer SJ, Chan E, et al. (2013). A cost analysis for a community-based case management intervention program for pediatric asthma. J Asthma, 50(3), 310–7. Retrieved from: http://www.ncbi.nlm.nih.gov/pubmed/23311526Authors
- Alice M. Rivlin
- Meaghan George
Hi, my name is Mateo. I am 9 years old. Every night my mom reads me a story. Many times she tells me a story about how some boys are fortunate to be born rich, and some are not. My mom always reminds me that I am among the fortunate. My mom helps a program called the Program Keluarga Harapan that teaches less fortunate mothers to educate their kids. The less fortunate mothers work extra hard, because they want their children to have a better future than them.
Halo, nama saya Mateo. Umur saya 9 tahun. Tiap malam Ibu selalu membacakan cerita. Katanya di dunia ini ada anak-anak yang beruntung karena lahir dari keluarga mampu, ada pula yang tidak. Menurut Ibu saya termasuk di antara mereka yang beruntung. Ibu bekerja membantu sebuah program yang diberi nama Program Keluarga Harapan. Program ini membantu mengajarkan para ibu dari keluarga tidak mampu bagaimana mendidik anak-anaknya. Ibu dari keluarga tidak mampu harus bekerja ekstra keras, karena mereka mau anak-anaknya punya masa depan yang lebih baik.
China is still a distant and exotic country in the mind of many people in Latin America. Yet, with the Asian giant rapidly expanding its ties with the region (the share of exports going to China is now ten times larger than in 2000), their economic fates seem to be increasingly connected. And in fact, a sharper slowdown in China now represents one of the key risks Latin Americans should be worried about—and prepare for. So, what is at stake? How much do shocks to China matter for economies in Latin America?
In an earlier study presented in our April 2014 Regional Economic Outlook, we analyzed growth spillovers in a large model of the global economy, focusing on the link through commodity prices. Here, we complement that analysis by using a simple yet novel approach that exploits the reaction of financial markets to the release of economic data. We find that growth surprises in China have a significant effect on market views about Latin American economies.
Capturing the effects of Chinese shocks through the lens of financial markets
Fast-rising commodity prices in the 2000s, largely fueled by China’s double-digit growth, led to an unprecedented income windfall in many Latin American countries. Against this backdrop, output growth soared from an average of 2.5 percent in 1982-2002 to 4.5 percent in 2003-11. But now the Chinese economy has been slowing, and its long-term projected growth has been cut by 2¼ percentage points since mid-2010 (Figure 1). And something comparable has happened across major economies in Latin America. Are these facts related or do they just reflect a common reaction to something else?
To find out how economic agents reassess the economic prospects for different countries in reaction to surprises about the Chinese economy, we examine the response of FX markets immediately after the release of key economic indicators. The logic is the following. If China matters for the economic prospects of a given country, we would expect its currency to react whenever there is a deviation between the actual outcome and the expected value for that indicator.
Figure 2 (left panel) shows the response of different exchange rates to a surprise on the growth rate of China’s industrial value added. Indeed, we found that the response of the exchange rates of commodity exporters in Latin America, such as Brazil, Chile and Colombia, are large and significant. (The surprisingly low and insignificant response for the case of Peru could reflect its more frequent exchange rate interventions). The change in JP Morgan’s Latin America currency index is also significant and relatively large (in particular, larger than the change in the analogous Asian currency index). Commodity exporters from other regions, such as Norway, also experience a significant exchange rate response.
The response is strong as well in the case of some other emerging markets, such as Mexico, Poland, and Turkey. While these economies are not highly dependent on commodities, this is not really surprising. Positive news in China tend to lift global confidence and risk appetite, and these are liquid currencies which often act as proxies for other emerging market assets.
Exploring the transmission channels: the role of commodities
With many Latin American countries highly dependent on commodities and China the largest world buyer of these products, the commodity sector must play a key role in the transmission of shocks from China to Latin America. If this is the case, international commodity prices should be affected when activity in China deviates from what the market had expected. Figure 2 (right panel) confirms that, indeed, China’s growth surprises have a significant and large effect on the price of many commodities that are very relevant for Latin America.
The behavior of investment in the commodity sector is also consistent with the relevance of this channel. Figure 3 shows that capital expenditure by the world’s top mining companies started slowing last year, in a context of revisions to long-term growth in China and declining metal prices. Companies in this sector are now reportedly focused on dealing with structural challenges, such as improving operational efficiency and investment selectiveness.
Preparing for Chinese shocks
A gradual transition to a path of slower and more balanced growth in China is welcome. But shocks to China do matter for Latin America, so the region needs to be prepared for unexpected departures from this smooth transition. Moreover, even if China’s overall slowdown unfolds without bumps, the envisaged rebalancing of its demand, away from commodity-intensive investment and toward consumption, might weaken demand for some commodities, such as metals, by more than currently projected and priced in.
How can the region get prepared? Ensuring prudent fiscal policy, low inflation, and flexible exchange rates, is crucial to increase the resilience of the region to eventual shocks. Beyond macro policies, the region needs to embrace a credible and bold agenda of structural reforms, focusing on improving education, infrastructure, and the business environment. These reforms would boost productivity and the ability to move up the value chain. All of the above would help not only to raise potential growth, but also to reduce the likelihood that negative growth surprises in China would trigger a confidence crisis in Latin America, making the impending adjustment even more difficult.
The Wall was brought down in 1989—when I was a German graduate student in the U.S. and, at twenty-seven, the same age as the man-made frontier between West and East Berlin—by the courage and determination of many: the 70,000 who marched in Leipzig, the East German Volkspolizisten who decided not to shoot, their leaders who decided not to resist, Mikhail Gorbachev, Helmut Kohl, Hungarian and Czech activists, Polish shipbuilders and steelworkers, Ronald Reagan, Willy Brandt, Russian dissidents, and multitudes of others. Some West German students pitched in, smuggling samizdat, printers‘ ink, or dissidents‘ letters. Regrettably, I was not one of them.
So for me, and probably for most of my West German generation, the reunification of Germany and of Europe, for which so many had risked so much, was a miraculous gift. A gift which we had done nothing to deserve, for which we were unprepared, and whose meaning we took a long time to decipher.
Twenty-five years later, we are fifty-somethings—about the age when Germans are reluctantly acknowledged to be possibly-good-for-something by their elders—and we find ourselves in the midst of the greatest challenge to our prosperity, freedom, and peace that Europe has seen since 1989, indeed in our lifetime. The economic crisis (which is not over) has exposed the fragility of our institutions and of our social contracts, which we have taken for granted. It has opened a gaping divide between the continent's resilient north and its vulnerable south, and has led us to question the viability, even the legitimacy, of the European project. Some member states, such as Britain, are demanding that Europe turn back the clock of integration, and that it restrict fundamental principles of the EU, like the freedom of movement—barring which (they insist) they will leave the Union.
The Euromaidan movement in Ukraine has reminded the doomsayers that, as a community of free liberal democracies, and despite our flaws, Europe remains a model for its neighbors. Now, however, Ukraine's aspirations are being threatened by Russian threats, subversion, and outright aggression. Islamist extremism in Syria and Iraq is menacing our neighbor, NATO ally, and EU candidate Turkey, propelling floods of refugees towards our borders, and inciting young European Muslims to join the jihad abroad—or to bring it back home.
At this watershed moment, Germany, dubbed the "reluctant hegemon" not so long ago, finds itself the pivotal player in Europe. The reasons are many: because of Germany‘s economic strength, and political clout, because Britain and France are going through phases of introspection and self-doubt, because of Berlin‘s newly warm relationship with Poland and the Baltic states, its historic "special relationship" with Russia, and its alliance with the United States.
Germany also has the largest stake in these multiple and mutually reinforcing crises, as Europe and the eurozone are the source of almost all of its wealth, influence, and power. Key German politicians have declared that they want to shift Germany’s foreign policy from its deeply ingrained "culture of restraint" to one of greater leadership: one that matches its responsibilities to its clout. And while it is arguable whether Russia’s President Vladimir Putin is receptive to Western warnings, if anyone has his ear, it is Germany‘s Chancellor Angela Merkel.
German leadership still means German cheques. Berlin remains the largest guarantor of European sovereign debt. It is already paying a significant price for sanctions against Russia. It will also have to underwrite much of the costs of transforming Ukraine, and of supporting the EU economies that are most vulnerable to Russian pressure.
However, Germany will also have to overcome its reluctance to use force. True, German troops have been engaged in combat in Afghanistan for years, and Berlin is now sending weapons to Kurdish fighters in Iraq; but we must also spend more on deterrence and defence, and on putting the muscle back in NATO.
Yet that is not where German responsibility ends. Russia’s actions have made it clear that it sees itself as engaged in a systemic conflict with the West; China’s silence suggests that it is waiting to see which side emerges as the winner. Germany can no longer free-ride on the liberal world order created, maintained, and protected by America; nor should it hope to surf the waves of chaos as others sink. It must develop a vision of its own for what a free and peaceful order for the 21st century should look like—and join forces with others to make it.
This is our chance, and our time, to earn the gift of 1989.Authors
Shifting Retirement Security Paradigms: When “Save Like Hell and Hope You Don’t Live Too Long” Isn’t Enough
The Retirement Security Project at Brookings recently released a new research paper by Katharine G. Abraham of the University of Maryland and National Bureau for Economic Research and Benjamin H. Harris of Brookings. "Better Financial Security in Retirement? Realizing the Promise of Longevity Annuities" discusses the potential for longevity annuities to impact retirement security, examines barriers to the market for these products, and offers solutions to heighten consumer awareness and strengthen the market.
Experts from a variety of backgrounds reflected on the paper and its implications during a public event at Brookings on Thursday, November 6th. Henry Aaron of Brookings and David John of AARP joined Harris on a panel devoted to the economics of longevity insurance, moderated by David Wessel, also of Brookings. Donald Fuerst of the American Academy of Actuaries, J. Mark Iwry of Treasury, and James Mumford of the Iowa Insurance Commission participated in a second panel, moderated by Howard Gleckman of the Urban Institute, dedicated to understanding barriers to the development of the market for longevity annuities.
Audio, video, and a transcript of the event are available here and a summary of the key takeaways from the paper and the event follows.
During the first panel Harris remarked that the current retirement framework where Americans “save like hell during your working years and hope you don’t live too long” is insufficient. He called for a paradigm shift, indicating that instead of taking chances guessing at our own lifespan, we should actively mitigate our own longevity risk—the risk that we’ll outlive our assets—by using a small share of retirement assets to purchase a longevity annuity. If you know your longevity annuity will kick in at, say, age 80, you can more comfortably spend down your retirement savings between your retirement date and your 80th birthday.
In their paper, Abraham and Harris propose five ideas to accomplish this shift and encourage growth in the longevity annuity market:
However, other panelists were somewhat skeptical about the market for longevity annuities. Responding to a question from Wessel about the fact that longevity annuities seem to be targeted at those in the 75th to 90th income percentile, Aaron described it as a niche product that doesn’t fully address the problem of asset depletion among retired Americans. John observed that market size would depend in large part on product structure and presentation to consumers. He also noted that longevity annuities won’t be right for everyone, since we all have different life expectancies—based on factors such as race, gender, and socio-economic status—and therefore different levels of longevity risk.
The second panel delved into more technical issues related to longevity annuities. Iwry commented on recent Treasury guidance on annuities, saying that he and his colleagues hope to transition “the 401(k) plan from a do-it-yourself model to a more effective retirement security vehicle” by encouraging employers to offer annuities. Fuerst addressed the question of adverse selection, which cropped up during both panels, by noting that it didn’t seem to pose a real threat to the longevity annuities market. People are bad at predicting their own longevity more than five years out, he said, and longevity annuities are typically purchased decades before they are expected to start paying out. “It’s very difficult to predict today what your health status is going to be like 20 years from now.” He also recommended that consumer funds used to purchase longevity annuities be invested in high-quality fixed-income instruments, so that monthly payments would be determined in part by market performance—as a low-risk option to grow interest in longevity annuities. Instead of receiving a specific, pre-determined monthly payment, consumers might receive a little more than expected if their investment earned more than expected, or a little less if their investment earned less than expected. In keeping with Abraham and Harris’s optimism about future growth in the longevity annuities market, Mumford said to expect stronger insurance companies in the future and called on regulators and insurance companies to educate the public about longevity products and their associated risks.Authors
- William G. Gale
- Sarah E. Holmes
When the U.S. Federal Reserve first mentioned in 2013 the prospect of a cutback in its bond buying program, markets had a “taper tantrum.” Many emerging markets saw large increases in volatility, even though outflows from their domestic markets were small and short-lived. Now the Fed has ended its bond buying and is looking ahead to rate hikes, and portfolio flows continue to arrive at the shores of emerging market economies. So everything’s fine, right? Not quite.
In our latest Global Financial Stability Report, we show that the large concentration of advanced economy capital invested in emerging markets acts as a conduit of shocks from the former to the latter.
Emerging market economies can have financial stability problems even if they don’t have portfolio outflows. Declines in market liquidity arising from changes in the structure of financial markets and volatility are policymakers and investors’ main rival.
Keep an eye on the ebb and flow of portfolio investment, and on the size as well
Despite retail portfolio outflows following 2013’s “taper tantrum,” total portfolio flows into emerging market bonds and equities have continued largely uninterrupted.
The allocation of emerging market assets in the portfolios of developed market investors has increased by 2.5 times over the last decade—from 5% in 2002 to 13% in 2012.
Low interest rates in advanced economies have sent investors looking elsewhere for higher returns. And even though this increase in portfolio investment outpaced nominal GDP growth in emerging markets, what makes the risk systemic is the concentration of the $4.1 trillion of allocations in a few source economies and the concentration of allocations to the major recipient emerging market economies.
We found that 12 out of 190 emerging market economies receive 80% of all portfolio flows from advanced economies. And portfolio equity allocations from U.S. residents alone, account for more than a third of the total for each major emerging market economy (see Chart 1).
This is happening at the same time as other changes are taking place across financial markets, which can mean a decline in the price of emerging market assets and associated financial stability concerns.
Indeed, in our latest Global Financial Stability Report we estimate the largest increases in volatility between the low (normal) and the high (risk averse) states to be for emerging market assets such as bonds, currencies, and equities in addition to high-yield bonds (see Chart 2 for bonds).
In fact, rather than interest rates, volatility may be the biggest worry for policymakers and emerging market investors, as the estimated sensitivity of emerging market local currency government bonds tends to be higher for a volatility shock than a commensurate U.S. interest rate shock across the major emerging market economies (Chart 3).
Policymakers need to recognize the latent risks arising from this synchronized relationship between advanced and emerging market economies financial systems, and put in place policies to ensure smooth market functioning and financial stability.
This weekend President Obama departs for a long-awaited trip to Asia, packing in four summits with some of the world’s most important leaders and a state visit to China. The first stop will be the Asia-Pacific Economic Cooperation (APEC) Summit in China, the next will include the Association of Southeast Asian Nations (ASEAN) Summit and the East Asia Summit (EAS) in Burma, and the final stop will be the G-20 Summit in Australia. During his last trip to Asia in April, Obama described his foreign policy in limited terms: “You hit singles; you hit doubles; every once in a while we may be able to hit a home run,” he said. This trip to Asia offers him an opportunity to play ball and bring home some needed wins.
The summits and other meetings provide a moment to demonstrate U.S. leadership on security challenges. They also offer the prospect of deepening economic integration, not just in Asia but also more broadly with Europe and other regions. In addition, the trip gives the White House the chance to emphasize foreign and economic policy goals that can be broadly embraced by Democrats and Republicans. Increasing trade, creating more jobs and fueling greater economic growth in the United States and globally will be a focus at each stop, and a critical area where the United States and its partners, as well as the Obama administration and Congress, need to get on the same page.The Asia-Pacific Economic Cooperation Summit
The first stop will be the APEC Summit, hosted by China on the 25th anniversary of APEC’s efforts to boost trade and investment across the region. There has been considerable discussion about whether APEC leaders should begin preparatory work for launching negotiations on a Free Trade Area of the Asia-Pacific (FTAAP). As the United States and 11 partners continue to narrow the list of outstanding issues involved in the Trans-Pacific Partnership (TPP), and negotiations get under way on a separate regional initiative led by China—the Regional Comprehensive Economic Partnership (RCEP)—the time is ripe to undertake a study but not to commit to launching a third effort. Rather, the focus needs to remain on completing the TPP negotiations, beginning with an agreement by the United States and Japan on market access for automobiles and agriculture. U.S. and Japanese negotiators have come close enough to a deal for their leaders now to muster the courage to push it across the finish line. There are still serious differences to be bridged among all TPP parties on other issues, but resolving the U.S.-Japan impasse next week would create the momentum to persuade other leaders to make similarly tough compromises. Given the tremendous strategic and economic importance of concluding TPP—whose partners together represent 800 million people and account for nearly 40 percent of global GDP and one-third of global trade—failure here is not an option.The U.S-ASEAN Summit and the East Asia Summit
The next stop is Burma, for the U.S-ASEAN Summit and the East Asia Summit (EAS). Together, ASEAN comprises the seventh largest economy in the world and the fourth largest U.S. trading partner. The U.S.-ASEAN forum enables the United States to work closely with smaller Asia-Pacific countries, such as Cambodia, Laos and Burma, and encourage further political and economic reforms. The signature initiative of Enhanced Economic Engagement (E3) designed to further increase investment and regulatory cooperation, however, needs a strong push from its ASEAN members.
The EAS group brings other regional powers into discussions with ASEAN, in particular India. Determining how New Delhi can assume a more constructive role in Asia’s economic cooperation is important both for India and the region. Obama’s meeting with Prime Minister Narendra Modi just a few weeks after Modi’s visit to Washington can keep up pressure on India to remove its objections to the recent World Trade Organization (WTO) agreement on trade facilitation—an agreement that is needed to cut red tape and delays at international borders and, more broadly, for the credibility of the WTO.The G-20 Summit
The final summit is the G-20, hosted by Australia in Brisbane, where the focus will be on ways to improve global growth. Measures to be discussed include boosting investment in infrastructure, minimizing barriers to trade, promoting fair competition, and identifying steps to stimulate employment. While not new, these themes take on heightened importance this year. The IMF has again downgraded prospects for global growth and is warning of increased risk, both financial and geopolitical. In a similar vein, the WTO has lowered its forecast for global trade growth amid weaker than expected GDP growth and reduced demand for imports.Other Opportunities
Sandwiched between the formal summits are a state visit to China and dozens of formal and informal meetings with other leaders to advance U.S. interests. The visit with Chinese President Xi Jinping should be a frank discussion between two partners that depend on each other as to how they can continue to ease tensions in the East and South China seas and promote political reforms (including in Hong Kong). Obama should also press Xi on whether there is enough common ground to forge ahead with a new investment treaty, and whether China is finally ready to join other countries in adopting a new agreement to expand trade in information technology products.
Meetings with other leaders on the margins of the summits will focus on common challenges in Europe, the Middle East and Africa, including greater contributions to help West African countries devastated by Ebola, and increased coordination on fighting the Islamic State (known also as ISIS or ISIL). Russian President Vladimir Putin will be attending the APEC and G-20 summits for the first time since Russia invaded Crimea last spring and began a proxy war in Ukraine. There will be ample time for Obama, as well as German Chancellor Angela Merkel and others, to raise continuing concerns with Putin as well as reaffirm a willingness to work together elsewhere, such as on nuclear negotiations with Iran. In addition, Obama will see Jean-Claude Juncker for the first time in Juncker’s new role as president of the European Commission. The other major U.S. trade negotiation under way, the Transatlantic Trade and Investment Partnership (TTIP), now needs a stronger push from the new Commission and European leaders, as well as the United States, if it is to succeed in boosting European economic recovery and further strengthening U.S.-EU bonds.Facing Leaders Abroad, Congress at Home
The common thread to these summits and international meetings is a desire to improve collective economic and political security in an era of growing insecurity and uncertainty. But just as important as the message Obama sends to the rest of the world about America’s strategy and commitment towards Asia and other regions will be how he articulates his priorities to U.S. voters and Congress. This is especially true following the latest election results and what they say about Americans' hunger for more widespread economic growth.
The Republicans this week set forth several areas of potential cooperation with the Obama administration, including on trade. The incoming chairman of the Senate Finance Committee, Senator Orrin Hatch, indicated he was eager to move trade promotion authority, known as TPA or “fast-track,” forward. At his first post-election news conference, Obama said he is ready to work to grow U.S. exports and open new markets, although he avoided mentioning the word “trade” or the need for TPA.
While TPA legislation is not necessary now as a legal matter, it is vital to enabling the United States to achieve the best deal possible, both in TPP and afterwards in TTIP. Trading partners have made clear that they are not ready to complete negotiations until Congress has given the Obama administration the promise of a fast-track process that limits amendments to a signed trade deal. Passing a fast-track bill has never been easy. Unambiguous presidential leadership will be needed to do that, especially if the president views robust economic growth and cementing stronger economic and national security ties with Asia and Europe as a core part of his legacy.Authors
The Hutchins Center on Fiscal and Monetary Policy was launched 10 months ago. Its mission is to improve the quality of fiscal and monetary policy and public understanding of it. We’ve hosted some of the biggest names in fiscal and monetary policy in the past year. One can learn a lot from studying the transcripts and watching the full videos posted at www.brookings.edu/hutchinscenter.
But for those who’d like a taste of what we’ve been up to, we’ve made a six-minute highlights reel featuring:
- Berkeley’s Christina Romer on what will guarantee Federal Reserve independence.
- Brookings’s Ben Bernanke, the former Fed chairman, on whether he had sleepless nights.
- The Fed’s Jay Powell on Treasury Secretary Larry Summers’ proposal for more Fed-Treasury cooperation.
- Bernanke’s reply to India’s Raghuram Rajan’s complaints about quantitative easing.
- The ECB’s Mario Draghi’s reply to Martin Wolf’s questions about Germany.
And we’ve got more coming later this year and next.Authors
What a difference 25 years can make. The fall of the Berlin Wall on November 9, 1989 was a day that changed world history and transformed Europe.
Central and Eastern Europe embarked on a historic transition from communism to capitalism and democracy. We thought this landmark anniversary was a good time to look back at the achievements and also forward to the future, as we do in a new IMF report on 25 Years of Transition. The IMF’s First Deputy Managing Director David Lipton also gave a recent speech in Warsaw, Poland on this important chapter in history.
Philippines: One Year after Typhoon Haiyan: Social Protection Reduces Vulnerabilities to Disaster and Climate Risks
- Countries can respond to natural disasters better and assist victims faster if social protection systems are in place
- Social protection systems have a role in addressing the human side of disaster and climate risks.
- Global collaboration on mitigating disaster and climate risk through social protection systems facilitates solutions
Together with government counterparts and donor partners, they extracted lessons and came out with a compelling message: countries can respond to natural disasters better and assist victims faster if robust social protection systems are in place.
Sometimes just knowing what questions to ask is as important as the answers. In that light, as the U.S.-led coalition continues its efforts against ISIS, it is worth taking a step back and asking a few questions about the conflict.Is ISIS Really a Threat to the United States?
A real threat must have three attributes: intent, capability, and opportunity. Clearly, ISIS has the intent, declaring that the black flag of ISIS will fly over the White House. It also has the capability. Suicide bombers are not the most tactically advanced weapons, but their utility has been demonstrated for decades in the Middle East. That leaves opportunity, and the coalition of nations committed to defeating ISIS is in place to harden the Western target and diminish the chances of attack. Consequently, ISIS is only a threat if America stands by and lets it be a threat. When we stop fighting, however, we allow their fighters a chance to plan overseas operations and focus on a conceptual threat (the West) instead of daily threats at home.How Will ISIS Know It Has Lost?
The enemy decides when a war is over. ISIS will have lost when they no longer have safe haven, can’t sustain funding, their recruitment dries up, and disillusioned young Islamic extremists go home. But even then the fight will certainly not be over. Cottage industry terrorist organizations will still take advantage of young, disillusioned extremists much like Al Qaeda offshoots have done across the Middle East and Africa, to include Al Qaeda in the Arabian Peninsula, Islamic Magreg, Al Shabab, Al Nusra, the Khorasan Group, and even the newest franchise in India, thus continuing a cycle of Jihadist Whack-A-Mole. Destroying ISIS is not enough; America is conducting a war on terrorism, and ISIS is only the latest manifestation of the threat.Should We Defeat ISIS?
Rather than defeat, containing their activities within failed or near-failing states is the best option for the foreseeable future. The United States has no desire to build nations, and without a stable Middle East, terror groups will continue to find safe haven; if not in western Iraq or Afghanistan, then in Yemen or Somalia. The Middle East and Africa have no shortage of ungoverned or poorly governed territories. The current strategy of prolonged engagement, development and training of local militias, logistic support and air strikes against real targets may be the best solution after all. This strategy keeps ISIS tied up overseas and draws radical extremists away from Western borders. While this doesn’t mean they can’t attempt to expand operations overseas in the future, keeping extremists focused overseas is the best policy.
Many influential voices have called for the United States to put boots on the ground, but a larger American ground presence could serve as a greater recruiting tool for ISIS leadership and cost American lives in an unending battle.How Long Will This Take?
Americans like their conflicts to have clear obtainable objectives and end-states. That will not be the case with the ISIS conflict. The administration is correctly informing the public that the war on ISIS will be a long, slow process, and it will be. While the goal of containment is not necessarily an end-state, it is a process that is executable. There is a parallel here between the war on Islamic extremists and the war on drugs: the absolute end-states for both may be unachievable, but that in no way diminishes the need to execute counter operations. Some wars cannot be won but still must be fought.
There are other hard questions for even bigger threats in the Middle East, such as how to ensure a nuclear free Iran and how to deal with the Assad regime in Syria. For ISIS, though, we may have it right.Authors
- Robert N. Hein
Some of the Republican faithful imagine the party’s capture of the Senate means repeal of the Affordable Care Act (ACA) – or Obamacare. But, given filibuster rules the notion that a full repeal bill could pass the Senate, let alone be signed into law, is unthinkable.
So what can we expect after the election turnover?
One view is that a Republican Senate, in tandem with the House, will rip out the vital organs of the ACA. By attaching key ACA changes to must-pass bills, the argument goes, Republicans would so weaken the central core of the ACA that it would essentially fall apart. On the hit list are the individual and employer mandates. Also vulnerable is federal funding for insurance “risk corridors” – a subsidized cross-subsidy that encourages insurers to take part in the ACA because it reduces the financial risk of ending up with costly enrollees. Weaken that provision, some believe, and many insurers would pull out of the ACA health exchanges altogether, causing the whole edifice to crumble.
But that’s an unlikely scenario, mainly because these organs aren’t so vital anymore. For one thing, the Administration recognizes that the mandates will likely have to be watered down to maintain much public support. But as individuals and businesses adapt to the law, and more Americans obtain often-subsidized insurance, the mandate stick is less necessary to achieve enough coverage for the ACA to be viable. Meanwhile expect worried insurers to pressure the GOP enough to prevent adjustments to the risk corridors from causing a collapse.
A lethal blow is unlikely to come from the Republican Congress. Rather a more likely threat is from the Supreme Court’s Halbig case. If the Court does strike down federal insurance subsidies in states with federal rather than state-run exchanges, that would be quite a body blow. At the very least it would eliminate a central plank of the ACA in over 30 states.
It’s true that some congressional measures might make it to an Obama signature in certain circumstances, such as eliminating the medical device tax or curbing the role of the ACA’s various boards. But while these efforts would frustrate the White House and add to the costs of the law, they wouldn’t critically wound the ACA.
Far more important will be what happens at the state level, where actions by state legislatures and governors could shape the future of the ACA, eventually changing it considerably even if not ending it.
Thanks to Democratic control and Administration encouragement, it’s likely that more states will move ahead with an expansion of Medicaid, though Republican victories in several states will slow that momentum. But also expect several states, following Arkansas, Ohio and others, to get the Administration’s go-ahead to pursue a “private option” and other variations of Medicaid expansion.
Two other developments outside the Beltway could mean significant changes that don’t actually conflict with the ACA, but could mean a future health system that departs from the original White House vision in crucial ways.
One is the enormous growth in private employer exchanges. Some predict that within a few years more working Americans will get coverage through these exchanges than through the state or federal exchanges. With weakened individual and employer mandates, private exchange coverage rather than the ACA could be the future for millions of households.The other, deep within the ACA itself, is a provision – Section 1332 – which allows states to ask for waivers from central features of the law, including the mandates and the standardized benefits package, providing states can assure equivalent coverage. That provision, which takes effect in 2017 with a new president in the White House, could do far more to transform the ACA than anything Mitch McConnell’s Republicans can accomplish. Authors
Election results in Maine, Wisconsin, Kansas, and Florida indicate that Medicaid expansion in the states will likely remain unchanged, i.e., no ‘expanders’ have replaced ‘non-expanders’ and vice versa.
However, if we can agree on one result, it’s that all eyes are on Arkansas. The state has demonstrated the power of a creative approach to bridging a seemingly intractable political divide, combined with federal flexibility. The Governor-elect Asa Hutchinson, has opposed the Affordable Care Act (ACA) and views the private option “as a pilot project; a pilot project that can be ended if needed.”
The Arkansas Compromise
The ACA sought to expand Medicaid to every resident earning below a certain income, but a 2012 Supreme Court decision made the expansion optional—sparking one of the law’s most politically divisive issues in certain state houses. Many states continue to squabble over the future of their Medicaid programs, while just 27 states and D.C. have officially expanded. However, Arkansas has emerged as a national leader with a more creative and diplomatic approach.
Much of the credit goes to outgoing Democratic Gov. Mike Beebe (and the state’s Medicaid leadership and key members of the state legislature) for insisting on leveraging the flexibility of a federal waiver and working around traditional ACA Medicaid expansion. The waiver creates a “private option,” allowing the state to use Medicaid funds to purchase private health coverage from Qualified Health Plans in the health insurance marketplaces. Both substantively and politically, the program is brilliant, and has become a template for many Republican governors as a grand compromise.
In recent months, Arkansas has been broadly lauded for its innovative approach, and it’s certainly warranted. The program has resulted in improvement across a range of key indicators, including:
Uninsured rates: A recent Gallup poll indicates that Arkansas has seen the country’s steepest reduction in uninsured this year—from 22.5 percent to 12.4 percent—and has covered 205,000 Arkansans. The other good news is that these enrollees make up 77 percent of individuals in the state’s ACA health insurance marketplace and skew younger and healthier than the rest of the marketplace, which can be helpful in diversifying risk. Preliminary results demonstrate that after adjusting for the actual age of the population, Arkansas’s costs were lower than the target (see our earlier analysis of the program in a Health Affairs Blog).
Premium rates and market competition: In October, the Arkansas Insurance Commissioner announced that average premium rates across the state would decrease by 2.2 percent. This was expected because of the enrollee demographics mentioned earlier, particularly as younger, healthier individuals entered the pool. Market competition is also increasing with five carriers competing on the exchange in all areas of the state in 2015-- up from four in 2014.
Uncompensated care: In a recent survey conducted by the Arkansas Hospital Foundation covering the first six months of 2014, they found that hospitals across the state saw a 46.5 percent decrease in patients admitted without insurance, which led to a decrease of $69.2 million in uncompensated care costs.
Disability benefits: Some state officials and researchers also believe that expansion of the private option contributed to a 19 percent decrease in Supplemental Security Income (SSI) enrollment as people no longer need to use SSI as a gateway to health care. This could also have a positive impact on the state budget because beneficiaries who qualify automatically for Medicaid through SSI are covered under the previous 70 percent federal matching rate (as opposed to the new 100 percent rate under the ACA).
The Future of the Private Option
The Arkansas program requires reauthorization annually in the state budget process and requires approval from three-quarters of members of the state legislature. Earlier this year, the House voted down reauthorization four times before finally passing it. The private-option plan cleared the Senate without a single vote to spare.
Although Arkansas’ “private option” will be somewhat vulnerable in future years, it will be difficult to reverse course. Any reversal could cause hospitals to lose revenue, premiums to increase and thousands of individuals to lose coverage. Moreover, the Arkansas model has already proved incredibly valuable to likewise politically embroiled states, such as Pennsylvania, Utah, Indiana and Missouri.
Governor-elect Hutchinson has promised to “assess the benefit for the Private Option and measure the long-term costs to the state taxpayers. As Governor, I will weigh the cost and benefits of the program and determine whether the program should be terminated or continued.” That position is in line with the basic federal authority under which Arkansas was given flexibility, which is a basic research and demonstration provision of the Social Security Act. The results are promising so far, and the program needs to continue to fully understand the results. Moreover, because quality and access to health care is so contingent on the local market, and because each state is unique, having a few more states test this approach would be highly valuable for federal policy making purposes.Authors
- Keith Fontenot
- Caitlin Brandt