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How Competitive Is the Health Insurance Market, Really?

TOTM Not very, according to the President in his recent health care speech, making the case that lack of competition and for-profit monopolists are what ails . . .

Not very, according to the President in his recent health care speech, making the case that lack of competition and for-profit monopolists are what ails the health care market…

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Antitrust & Consumer Protection

Thaler’s Unsound Argument About the Public Insurance Option

TOTM University of Chicago economist (and behavioralist doyen) Richard Thaler thinks “the question of whether a ‘public option’ should be part of the health care solution” . . .

University of Chicago economist (and behavioralist doyen) Richard Thaler thinks “the question of whether a ‘public option’ should be part of the health care solution” is just “one big distraction.” In Sunday’s New York Times, Thaler argues that the debate over the public option is a “red herring” if, as President Obama insists, the public plan will have to break even and won’t be granted “the power to impose special deals with suppliers like hospitals and drug companies.” If those two conditions are satisfied, Thaler contends, the public plan is unlikely to have much success and certainly won’t drive out private insurers.

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Antitrust & Consumer Protection

Expanding Insurance Coverage Is Not the Way to Reduce Health Care Costs

TOTM As his Council of Economic Advisers made clear in its recent health care report, President Obama sees two primary goals for his health care reform . . .

As his Council of Economic Advisers made clear in its recent health care report, President Obama sees two primary goals for his health care reform efforts: to slow the growth of health care costs and to expand coverage of health insurance. It’s pretty clear, though, which of these goals is steering the ship. While the President’s proposals include a few modest measures ostensibly aimed at reducing costs (digitizing medical records, collecting and disseminating data on treatment-effectiveness, etc.), the primary focus is on increasing insurance coverage. That’s unfortunate, for relentless pursuit of coverage expansion is almost certain to undermine the goal of cost containment.

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AIG Isn’t Too Big Too Fail

TOTM So says Lucian Bebchuk in the WSJ… Read the full piece here.

So says Lucian Bebchuk in the WSJ…

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Financial Regulation & Corporate Governance

Diabetes Treatments and Moral Hazard

Scholarship Abstract In the face of rising rates of diabetes, many states have passed laws requiring health insurance plans to cover medical treatments for the disease. . . .

In the face of rising rates of diabetes, many states have passed laws requiring health insurance plans to cover medical treatments for the disease. Although supporters of the mandates expect them to improve the health of diabetics, the mandates have the potential to generate a moral hazard to the extent that medical treatments might displace individual behavioral improvements. Another possibility is that the mandates do little to improve insurance coverage for most individuals, as previous research on benefit mandates has suggested that mandates often duplicate what plans already cover. To examine the effects of these mandates, we employ a triple?differences methodology comparing the change in the gap in body mass index (BMI) between diabetics and nondiabetics in mandate and nonmandate states. We find that mandates do generate a moral hazard problem, with diabetics exhibiting higher BMIs after the adoption of these mandates.

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The FTC Releases its Credit-Based Insurance Scores Report

TOTM Here are a few of the key findings of the study which examined the use of credit-based scores to determine automobile insurance rates:

Available here. Here are a few of the key findings of the study which examined the use of credit-based scores to determine automobile insurance rates…

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Financial Regulation & Corporate Governance

Where’s the outrage?

TOTM I don’t have much to add to Larry’s post about Eliot Spitzer’s persecution (and non-prosecution) of AIG and Maurice Greenberg, or to Larry’s ongoing crusade . . .

I don’t have much to add to Larry’s post about Eliot Spitzer’s persecution (and non-prosecution) of AIG and Maurice Greenberg, or to Larry’s ongoing crusade against the criminalization of agency costs.  But I just can’t resist registering my outrage. How can this sort of thing not make your blood boil? Other than a few lonely voices clamoring in the wilderness of the blogosphere, where is the outcry?  I’m not suggesting that those who are enraged by politicized prosecutions in other spheres should take up this cause, but a little sensible appreciation among the rest of us for the costs here would be nice. And while I’m thinking of it, let me add to Larry and Tom K’s despair about the egregious prosecution of Jamie Olis.

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Financial Regulation & Corporate Governance

Why Spitzer’s Payola Attacks Will Harm Consumers

TOTM WSJ Law Blog and the WSJ report that Universal Music has now settled with the NY AG’s office for $12 million as a result of . . .

WSJ Law Blog and the WSJ report that Universal Music has now settled with the NY AG’s office for $12 million as a result of Spitzer’s continued attack on what he describes as “corrupt practices” in the music industry. (HT: Bill) The settlement also requires Universal, like Sony BMG and EMG before it, to cease and desist all payola-related activities. The WSJ story reports that EMG, the final major industry player, should settle within the month, making final Spitzer’s payola ban.

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Telecommunications & Regulated Utilities

Government Regulation of Irrationality: Moral and Cognitive Hazards

Scholarship Abstract Behavioral law and economics scholars who advance paternalistic policy proposals typically employ static models of decision-making behavior, despite the dynamic effects of paternalistic policies. . . .

Abstract

Behavioral law and economics scholars who advance paternalistic policy proposals typically employ static models of decision-making behavior, despite the dynamic effects of paternalistic policies. In this article, we consider how paternalistic policies fare under a dynamic account of decision-making that incorporates learning and motivation effects. This approach brings out two important limitations on the efficiency effects of paternalistic regulations. First, if preferences and biases are endogenous to institutional forces, paternalistic government regulations may perpetuate and even magnify a given bias and cause other adverse psychological effects. Second, for some biases, it will be more efficient to invest resources in debiasing than to change legal rights and remedies or, in some cases, to do nothing in light of the natural variation in irrational propensities. We propose dynamic models for determining ex ante and ex post when accommodation of bias will be second-best efficient. These models direct decision-makers to consider (1) the efficiency cost of the bias; (2) the extent to which accommodation worsens the bias or, alternatively, the extent to which non-accommodation improves the bias or has other benefits; and (3) the potential for education or other mechanisms to debias an individual. We argue that the concept of “cognitive hazard” – the potential for the costs of a bias to increase as individuals are insulated from the adverse effects of the bias – should be added to the concept of moral hazard as important qualifications to paternalistic proposals.

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Financial Regulation & Corporate Governance