Laurence Kotlikoff, 19 February 2020

The US has spent the entire post-war period running a massive and ever-growing Ponzi scheme that takes from the young and gives to the old. This column discusses how the scheme has been and is being run by expanding take-as-you-go-financed Social Security, Medicare, and Medicaid systems, by running huge official deficits, and by imposing a larger share of taxes on the young and a smaller share on the old. Take as you go, whether done on or off the books, has done precisely as theoretically predicted – reduced the US’s national saving rate from 13% in the 1950s and 1960s to 3% in the last two decades. This underlies, in large part, a commensurate drop in the domestic investment rate, which was also 13% between 1950 and 1969 and is now running at 4%. The textbook predicted consequence? Lower median labour productivity and median real wage growth.

Michael Geruso, Timothy J. Layton, Grace McCormack, Mark Shepard, 16 November 2019

Sicker consumers tend to exhibit higher demand for health insurance, which drives up costs. This column argues that this adverse selection takes place along two margins: whether to buy insurance at all and how much coverage to buy, It develops a new framework that incorporates both selection margins, and shows that policies aimed at addressing one margin can often exacerbate selection along the other. It is therefore vital for optimal policy to consider both margins simultaneously. 

Timothy J. Layton, Nicole Maestas, Daniel Prinz, Boris Vabson, 17 October 2019

There is much debate, and nowhere more than in the US, about whether public services such as healthcare should be provided by private companies, which may offer greater efficiencies but which are more susceptible to moral hazard and adverse selection of consumers. This column uses evidence from a provision change in Texas to show that contracting healthcare provision out to private companies increased the level of care patients received, but increased overall costs for the government.

Anna Chorniy, Janet Currie, Lyudmyla Sonchak, 24 November 2017

Diagnoses of asthma and ADHD among children in the US have increased over recent years. This column argues that one contributor to this increase has been a change in Medicaid from a fee-for-service model to a managed care model. This change created incentives that reward higher diagnosis and prescription rates, while not necessarily improving health outcomes.

Joan Costa-Font, Edward C. Norton, Luigi Siciliani, 12 September 2017

Long-term care services are at the forefront of a new wave of reforms extending public intervention into healthcare, but it is unclear how the government should intervene to fund and organise such services. This column suggests some strengths and weaknesses of public financing and organisation of long-term care, including its weak financial sustainability and some potential knock-on effects on saving behaviour. However, publicly funded systems deliver better equity of access. Non for profit and autonomous organisations provide better care.

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