Employer-provided health insurance is not that bad

Health insurance is, among OECD countries, uniquely organized in the United States. It is provided by employers, if they can, and is a benefit that is not taxable for employee. The others either buy individual insurance, which is much more expensive than group insurance, or simply bypass insurance. This reliance on insurance by the employer, instead of a group insurance for everyone independent from employment seems clearly suboptimal. For one, the implicit tax subsidy can only lead to over-insurance for the insured. And then, there is clear under-insurance for the others. And lack of mobility of the workforce.

Kevin Huang and Greg Huffman argue that the US system may have advantages that overcome its disadvantages. The basic reasoning is that through this tax subsidy and the fact that insurance is better provided by employers, there is a clear incentive not to fool around and get a job. This decreases unemployment, increases output and possibly welfare despite higher consumption of medical services than optimal.

They argue this welfare improvement through the tax subsidy is possible. But it may also not. It all depends on how much health and leisure are valued, and how risk averse people are. So not everybody prefers the current regime, probably. And the public debate about the subsidy provision while a removal was mulled during the Bush Junior administration clearly shows that. Huang and Huffman, however, argue against using heterogeneous agents, because it is unlikely to have a macroeconomic impact. I am not convinced. Indeed, just look how diverse the insurance packages are that people choose. This highlights fundamental diversities in the perception of risk, and actual risk, in the value of life and health and attachment to work. This has clearly an impact on optimal policy because marginal utilities vary, and there are winners and losers for every policy. This becomes a political economy problem, and heterogeneity is crucial.

Syphilis cannot be eradicated

Syphilis is back. As the most widespread venereal disease in the 1930's it was curtailed after huge efforts, both in developed and developing countries. And ten years ago a push was made to finally eradicate it. But syphilis is quietly making a comeback, hidden in the shadows of AIDS. And because the transmission of this disease is primarily driven by risky sexual behavior, it can be a leading indicator of other sexually transmitted diseases on the rise.

David Aadland, David Finnoff and Kevin Huang use a model of human behavioral response to study this resurgence and come to the conclusion that there is a fundamental cycle that cannot be broken. The point is that the transmission model that epidemiologists use has constant parameters tracing back to biological features of the disease, but these parameters can change through human intervention, and they do. Call this a Lucas Critique of epidemiology. The key here is that when prevalence is low, individuals in a riskier fashion and in particular have more sexual partners. No reasonable policy can overcome this.