Insurance Company Abuse of the Medically Necessary Decision

Health Insurance companies often deny benefits for health services that they deem medically unnecessary even when there is no other option and even when the option may be cost effective in the long term. This post examines insurance company abuse of the medically necessary determination and potential policy responses.


Health Insurance companies often deny benefits for health services that they deem medically unnecessary even when there is no other option and even when the option may be cost effective in the long term.  This post examines insurance company abuse of the medically necessary determination and potential policy responses.

Background:  Insurance company denials of claims based on the view that the procedure is not medically necessary is widespread and can involve serious life-threatening health care cases.

This Kaiser Family Foundation article shows many requests for benefits are denied and the denials for medical necessity are seldom challenged.

A denial based on the view that a procedure is medically unnecessary can occur when a patient is in great pain and faced with a life-threatening condition. This ProPublica article describes a decision by United Heath Group to deny the only viable treatment for a patient suffering from a severe case of ulcerative colitis.  

Symptoms of the disease for this patient included severe arthritis, diarrhea, fatigue, and blood clots.  The medical bills were running $2.0 million per year.   Bills of this magnitude are not unusual for new biologic drugs.  The expensive drugs were the only therapy that worked.   The patient could not function and would die without the treatment.   

The family responded with a lawsuit, which revealed that employees at United Health Group misrepresented findings and ignored warnings from doctors about risks of altering an expensive drug treatment. 

The amazing ProPublica article, reveals that insurance companies will basically lie to avoid expensive claims.  The denial in the ulcerative colitis was motivated by the cost of the drug.  The insurance company was willing to lie and commit fraud to avoid paying for the expensive treatment. 

Insurance companies will also resist making claims when a procedure is economical in the long term.  For example, insurance companies have denied patients access to the Coflex medical devise for spine surgery even though there is evidence that the procedure is safe and actually cost effective compared to other procedures.  

The denial of benefits in the Coflex device decision was motivated by a desire to force or encourage people with expensive back problems to switch to a different more expensive insurance plan.  This process of tailoring benefits away from people who are likely to be big health care spenders or denying benefits for expensive health conditions is a practice call “Cherry Picking.”

Policy Implications:  The ACA eliminated lifetime and annual health expenditure limits under insurance plans.  Insurance companies responded by restricting access to care and by deeming more procedures medically unnecessary.

One response to this problem might be to move the decision on whether a process is medically necessary to an independent board outside of the insurance company. I doubt this would work. 

Most people currently don’t appear adverse decisions and insurance companies have much more resources for the appeal process. However, moving the appeals process to an external board might speed up decisions and encourage more people who are denied benefits to appeal the decision.  A streamlined appeals process can be extremely important when the patient has been approved for a less expensive option but is appealing for access to the newer potentially better procedure.  (This occurs with denials of access to the Coflex medical devise because patients are often approved for a less expensive, less effective surgery that does not involve use of the device.) 

A second more practical approach is to have government pay part of the cost of the most expensive health care procedures through a reinsurance program.  I might have government pay 50 percent of all health care costs over $100,000. This type of cost-sharing arrangement would result in several benefit – including lower premiums and tax expenditures on the private health plan, decreased demand for short-term health plans that do not provide comprehensive coverage, and a reduction in claim denials.

An increased use of expensive biologic drugs will lead to either higher denials as discussed in the ProPublica article or higher health insurance premiums.  This problem can only be resolved by a partnership where the costs of these high-cost cases is shared with taxpayers. 

My first paper on the use of reinsurance to improve health insurance options and increase access to health care can be found here.  A cost-sharing program is part of my 2023 Health Care Reform proposal.  Go here for a quick outline of the proposal. 

The Abortion Debate After Dobbs

The abortion debate is more complex after the Dobbs decision. Women with life-threatening health conditions are being denied access to medical care and Republicans are seeking new restrictions on reproductive rights. Democrats need to do more than just assert support for abortion. They must outline how repeal of abortion has endangered the health of many women, the new legal threats to reproductive rights, and the steps they want to take going forward.

The abortion debate is more complex after the Dobbs decision. Women with life-threatening health conditions are being denied access to medical care and Republicans are seeking new restrictions on reproductive rights.  Democrats need to do more than just assert support for abortion.  They must outline how repeal of abortion has endangered the health of many women, the new legal threats to reproductive rights, and the steps they want to take going forward.

Introduction:  

In the recent State of the Union Address President Biden called for Congress to pass legislation that would reinstate the abortion rules under Roe v. Wade.  This is unlikely to happen in the new Congress because Democrats lack control of the House and are unable or unwilling to break a filibuster in the Senate. 

President Biden did not outline the impact of the Dobbs decision on women’s health and the new Republican initiatives to further restrict reproductive rights.  The complex post-Dobbs abortion debate deserves a more complete or robust response.

Abortion Issues After Dobbs:

Issue One:  Women are not receiving necessary health care, when their life is in danger, or they have a miscarriage.

There are many examples of women who nearly died or had suffered from lack of access to medical care because of new abortion laws.

Here are links to some articles on women being denied access to adequate medical care because of laws restricting access to abortion.

https://www.yahoo.com/now/ohio-woman-denied-emergency-abortion-014000108.html

https://www.cnn.com/2023/02/08/health/ohio-abortion-long/index.html

https://www.independent.co.uk/news/world/americas/idaho-woman-abortion-ban-treatment-b2254982.html

https://www.cnn.com/2022/11/16/health/abortion-texas-sepsis/index.html

https://khn.org/news/article/bleeding-and-in-pain-a-pregnant-woman-in-louisiana-couldnt-get-answers/

https://slate.com/news-and-politics/2022/05/roe-dobbs-abortion-ban-reproductive-medicine-alabama.html

Issue Two:  There is a lot of litigation involving restrictions of mifepristone, a medicine that provides an abortion early in a woman’s pregnancy.  These cases could easily end up at the Supreme Court.

Here are some articles on these cases.

https://www.cnbc.com/2023/02/10/abortion-pill-judge-extends-deadline-in-lawsuit-seeking-to-pull-medication-from-us.html

https://www.cnbc.com/2023/02/02/gop-attorneys-general-warn-cvs-walgreens-against-mailing-abortion-pill-in-their-states.html

https://www.cnbc.com/2023/01/25/abortion-pill-genbiopro-sues-west-virginia-argues-fda-pre-empts-state-ban.html

Issue Three:  States are considering banning inter-state travel to obtain an abortion.

Can states punish women for traveling out of state to get an abortion?

Issue Four:  Many prosecutors are refusing to prosecute women or providers who violate state abortion laws.  Some governors and legislators want to eliminate prosecutorial discretion and remove some duly elected pro-choice prosecutors.

Here are some articles:

https://www.vera.org/news/the-prosecutors-refusing-to-criminalize-abortion

https://www.politico.com/news/2022/06/26/blue-city-prosecutors-in-red-states-vow-not-to-press-charges-over-abortions-00042415

https://www.bloomberg.com/news/articles/2023-01-20/desantis-wins-battle-with-prosecutor-ousted-for-abortion-stance

Concluding thoughts:  The Democrats need to do a lot more than assert they want to restore Roe.  Democrats need to react the threats and anguish that exist in the world because of Dobbs.   

A political advertisement that says “my opponent opposes abortion so vote for me” is not enough.  Democrats, to be successful, need to discuss the way that Roe is creating misery, how things could get even worse, and outline the actions they are taking on each aspect of the abortion debate.

David Bernstein is the author of A 2024 Health Care Reform Proposal on Kindle and on Sell Wire.  Also, this manuscript on long term care insurance, while a bit dated, provides a valuable perspective that differs from the insurance industry line. 

Bring Back the Jackson-Vanik Approach to Russia

Many policy makers want to give Russia an exit ramp from the war. The existence of the exit- ramp option, gives the aggressor an incentive to continue hostilities because if events on the battlefield go poorly the aggressor can take the ramp. The United States and NATO need to convince Putin that consequences from this aggression cannot be easily reversed. Targeted economic sanctions have not caused western businesses to leave Russia. The key to resolution of the war in Ukraine is a difficult-to-reverse restriction on economic activity with Russia patterned after the Jackson-Vanik Amendment.


Background on the Jackson Vanik Amendment:

The Jackson-Vanik Amendment to a Trade Act passed in 1974 restricted trade with non-market economies that restricted Jewish emigration and violated other human rights groups.

The Jackson-Vanik restrictions on trade were repealed in 2012 in the same law that imposed trade sanctions on some Russian officials for the murder of Sergei Magnitsky.    The repeal of Jackson-Vanik led the United States to grant most favored nation trade status to Russia and Russia was granted entry to the WTO in August of 2012.

Russia remains a member of the WTO in good standing despite Russian involvement in the downloading of civilian airliner over Ukraine, the invasion of Crimea in 2014, and the current war in Ukraine.

The Current Situation:

Russian aggression and genocide In Ukraine haven’t been prevented by targeted sanctions that would be easily reversed.  Go here for a discussion of child abductions by Russia in Ukraine.  Go here for a discussion of Russian war crimes since 1991.  Go here for a discussion of recent civilian casualties in Ukraine.

Economic sanctions have not prevented many western nations from continuing business in Russia as discussed here.

The appeasement advocates claim to be motivated by fear of a wider conflict.  There already is a wider conflict.  Russia committed human rights violation in Georgia, a regime that jailed its former president.  Russia supports the dictator in Belarus.  Go here for an article on Belarus.

Bring Back Jackson Vanik:

Targeted economic sanctions have not affected Russian behavior.

The linkage of the Magnitsky sanctions to the repeal of Jackson-Vanik did not deter Russian aggression.  On balance the combination of the repeal of Jackson-Vanik with the enactment of Magnitsky sanctions was a good deal for Russia.

The WTO claims that it contributes to peace and stability.  Let’s be clear.  Russia’s entry into the WTO did not contribute to peace and stability.

Despite sanctions, western firms have not left Russia.  The western firms and the Russian government both believe sanctions can be largely ignored and will be reversed.

Only Congress and the Administration working together can send a signal to the Russians that they will not get away with aggression and crimes.  The way to do this is to abolish most favored nation trade status, remove Russia from the WTO, and prohibit trade and investment with Russia until Congress passes legislation removing these penalties. 

A key to ending the Ukraine war and deterring future Russian aggression involves broad penalties imposed on the entire Russian economy not narrow sanctions on the elite who will be compensated for their sacrifices.

A successful deterrent strategy requires penalties that cannot be reversed unless there is proof supporting the view that the aggression will end and will not be repeated.

We need a return to the Reagan philosophy of Trust but Verify.  A law similar to the Jackson-Vanik Amendment is a first step in instituting this approach.

David Bernstein is the author of A 2024 Health Care Reform Proposal.  

A 2024 Retirement Security Agenda

Pension and Social Security reform are inextricably linked because many retirees are highly dependent or Social Security, many workers nearing retirement are not in good financial shape and young adult are spending retirement funds early in their career. The recently enacted Secure Act 2.0 does very little to assist workers who are having the hardest time saving for retirement. Republicans and Democrats are far apart in their ideas on how to fix Social Security and neither party recognizes that meaningful enhancements in private retirement savings are essential to a successful Social Security reform. This post discusses ways to fix both the private retirement system and Social Security.

Introduction:

Many American workers are not preparing well enough for retirement.

Around half of older workers do not have any funds in a defined contribution plan (401(k) or IRA.)

The median amount of retirement assets for people with retirement plans is around $109,000.

Around 13.7 percent of the 65-and-over population lives in poverty.

More older workers are entering retirement with mortgage debt or consumer debt.

Many older workers cannot remain in the workforce because of poor health.

Economic downturns tend to result in a larger increase in unemployment for older workers than for younger or middle-aged workers.

Around 40 percent of older Americans are entirely dependent on Social Security.

Current law links future Social Security payments to the balance in the trust fund. Projected decreases in the trust fund would lead to a 20 percent in Social Security benefits in 2035, barring changes to the trust fund or current law.

Nearly 60 percent of young workers between the ages of 18 and 34 have already taken funds out of their retirement accounts to maintain current spending.   Early disbursements from retirement plans by young adults are especially high for people with high levels of student debt.

The traditional 60/40 portfolio held by many retirees loses substantial value in a period where the stock market falls, and interest rates rise. 

Congress and the Administration have not prioritized retirement income issues and are not close to addressing the looming Social Security problem.

Documenting the lack of progress:

Our leaders are not moving us forward on efforts to increase private savings for retirement or on efforts to fix the looming Social Security problem.  

Congress has passed some legislation, most recently, the Secure Act 2.0, impacting savings through 401(k) plans and IRAs.  Unfortunately, the recently enacted law does more to benefit investment firms and high net-worth savers than the workers who are struggling the most to save for retirement.  A more complete description of the Secure Act 2.0 can be found here and some of its shortcomings are listed below. 

  • Delays in implementation of Required Minimum Distribution do not assist retirees with low levels of retirement assets, people who tend to deplete their retirement accounts early in their retirement.  Provision increases fees received by investment firms.
  • Shorter waiting period for participation in 401(k) plans does not shorten vesting requirement and may benefit relatively few workers because many part-time workers do not stay at the same firm for a long time.
  • A provision clarifying that employers can contribute matching funds to 401(k) plans for student loan payments does not assist workers at firms without a 401(k) plan or firms with a 401(k) plan that do not match employee contributions.
  • The automatic 401(k) enrollment provision and automatic increases in contribution will reduce savings through other vehicles and will lead to relatively little additional savings if funds are distributed prior to retirement.

Around 40 percent of retired households are totally dependent on Social Security and many more are highly dependent on Social Security.    Expansion of private retirement spending is important by itself and has major implications for Social Security reform efforts.  

The implementation of some Social Security reform proposals that would lead to abrupt changes in benefits could not be applied to workers nearing retirement without causing large increases in poverty among the elderly.   

The Social Security trustees project that automatic benefit cuts to Social Security could occur in 2035 and that automatic Medicare benefit cuts could occur as early as 2028.

Democrats and Republicans are wide apart on what needs to be done to prevent automatic cuts to entitlement programs.  Democrats stress the need for additional revenue.  Republican proposals often call for large benefit cuts, many of which are applied to workers nearing retirement.

One proposal that could receive some bipartisan support inside a larger package involves increasing the cap on wages subject to Social Security taxes.  Current rules apply Social Security taxes to the first $160,200 of wages.  Go here for a discussion of proposals to eliminate or modify the cap on Social Security taxes.

Republicans tend to favor plans to reduce benefits, raise the retirement age, and create private accounts to replace all or part of the current Social Security system.  Some of the Republican proposals discussed herewould result in quick changes impacting potentially impacting workers close to retirement.   For example, a proposal to increase the retirement age for full Social Security benefits by 3 months per year until 2040, when the full retirement age reached 70 would result in substantial poverty among the elderly because private retirement savings could not be increased in this time frame.

Timely changes to Social Security are essential to prevent automatic benefit cuts that would lead to large increases in poverty because of the lack of private retirement savings.  

Reforming private retirement savings:

Reforms of private retirement savings that expand savings for low-income and middle-income households are a prerequisite for meaningful Social Security reforms because so many households are dependent on Social Security.   

There are six problems preventing workers from accumulating sufficient retirement savings prior to retirement.  Steps must be taken to address each problem. 

First, workers are free to disburse all entire savings from their 401(k) plans prior to retirement. Around 60 percent of young workers have tapped part of their retirement savings prior to age 34.  Steps must be taken to restrict pre-retirement disbursements from retirement plans and to incentivize workers from reducing retirement savings prior to retirement.

Proposed policy changes to address pre-retirement leakages from retirement accounts include:

  • Prohibit pre-retirement distributions from retirement plans for 25 percent of all contributions.   The prohibited distributions could be used to purchase an annuity that would not pay out until the retiree reaches a certain age.
  • Require automatic rollover into IRAs for all workers making a job transition with 401(k) balances less than $50,000.  (Current law allows but does not require automatic rollovers.)
  • Prohibit loans from 401(k) plans. Replace loans with limited tax-free and penalty-free distributions from the newly created emergency funds inside a 401(k) plan.

Second, workers reliant on Individual Retirement Accounts (IRAs) have less generous saving incentives than workers with access to employer-based 401(K) plans. Workers dependent on an IRA without access to a 401(k) have a lower contributions limit, do not have access to an employer match, and do not have access to retirement incentives for student loan payments.

Proposed changes to rules that reduce or eliminate discrepancies between savings through IRAs and savings through 401(k) plans include:

  • Create automatic contributions to IRAs for people without access to employer-sponsored 401(k) plans, patterned after the rules that are currently applied to automatic enrollment into 401(k) plans.
  • Change tax law to allow for employers to make matching contributions to worker contributions to IRAs like the ones currently allowed for 401(k) plans.
  • Equalize IRA and 401(k) contributions limit and deductibility limits on IRA and 401(k) contributions.  
  • Change tax law to allow tax-free contributions to IRAs by firms hiring contractors or gig workers instead of direct employees.

Third, the current tax preference for contributions to 401(k) plans and deductible IRAs favors higher income people with higher marginal tax rates.  Tax savings from expenditures from Roth IRAs in retirement also disproportionately benefit higher-income taxpayers.  Income related gap in subsidies could be altered by changes to the tax code.

  • Replace existing tax exemption for contributions to traditional 401(k) plans and the tax deduction for contributions to deductible IRAs with a tax credit.
  • Create a tax credit for first $2,000 contributed to a retirement plan and allow tax deduction for additional contributions up to a cap.

Fourth, many workers are now diverting retirement savings to health savings accounts and flexible savings accounts to pay for health expenses that are no longer covered by health insurance.  This is a growing problem due to the growing use of high-deductible health plans.

Proposed policy changes to offset the loss of retirement income due to the growth of cost-sharing between insurance companies and insured households include:

  • Allow for the use of health savings accounts for people with lower deductible health plans to reduce the need for large contributions to health savings accounts.
  • Change rules governing flexible savings account to allow people to place unused flexible savings account funds in a 401(k) plan or IRA rather than lose the unused funds.  It would be appropriate to tax funds transferred from a flexible savings account to a retirement account.

Fifth, fewer than 15 percent of retirees have an annuity inside their retirement plan.   The primary reason for the low level of annuity income is the cost of annuities.

  • Mandate that 25 percent of funds contributed to a retirement plan be used to purchase an annuity.

The source of funds for the mandatory annuity purchase could be the funds the person is not allowed to disburse prior to reaching retirement age.

The rule requiring all workers make an annuity purchase would lower annuity prices because voluntary annuity purchases are favored by healthy people with long life expectancy.   

Sixth, retirees often suffer when inflation erodes the value of bond and stocks. Many workers cannot afford to save much outside their retirement plan and current tax law does not allow individuals to purchase series I bonds inside a 401(k) plan or an IRA.  Many assets inside a 401(k) plan that proport to be inflation hedges lose value in an inflationary or high interest rate environment.

  • The most effective way to prevent reduction in retirement plan wealth in a period when inflation and interest rates rise, and stock prices fall is to allow and encourage the purchase of Series I savings bonds inside a 401(k) plan or IRA.  Series I savings bonds never fall in value and have substantial upside in an inflationary environment.   Go here for a discussion of advantages of Series I Savings Bonds.

The primary effect of the current restrictions on Series I Savings bonds is to increase the demand for financial assets and ETFs that are less effective in protecting investors from inflation than Series I Bonds.

Reforming Social Security:  

The expansion and improvement of private retirement savings options will reduce dependence on Social Security by future generations and allow for the consideration of a broader range of Social Security reform options including eventual reductions in benefits.

The Social Security reform measures considered here include:

  • A new tax earmarked for Social Security and Medicare.    The tax would be imposed on all forms of income and would have a progressive tax structure.
  • Increase in both the minimum retirement age for Social Security benefits and the age for full benefits, by one year each phased in over a 24-year period with a one month increase in the retirement age every two years.   The age at which people receive the maximum allowable Social Security benefit would remain unchanged.
  • Guarantee future Social Security benefits by allocating some general tax revenue towards future benefits if the Trust fund balance falls to a certain level.

Economic Notes on the Policy Package:

  • The combination of tax credits to stimulate private retirement savings, tax increases to fund current Social Security and Medicare benefits and long-term increases in the retirement age create a healthy macroeconomic environment and will lower household financial distress in retirement.
  • Short-term changes in tax revenue will be modest because losses in tax revenue from tax credits to stimulate private retirement savings are offset by increases in tax revenue from the new tax to maintain Social Security and Medicare benefits.
  • The phased in increases in the retirement age will not have an immediate impact on government deficits but will reduce future Debt-to-GDP ratios.   Since markets are forward looking the projected lower future debt burdens will have a beneficial impact on asset prices even if near term deficits rise. 
  • The tax base to continue funding Social Security and Medicare benefits should be relatively broad.  The tax could be imposed for all households making more than $50,000.  The tax would be progressive.  The marginal tax rate might range from 0.5 percent to a cap of 5.0 percent.  The tax would be applied to both wages and investment income.

Concluding Remarks:  Unless changes are made to rules governing Social Security and Medicare there will be automatic benefit cuts once trust funds assets are partially depleted. Many Republicans favor large and abrupt changes to Social Security benefits and the retirement age.  Any abrupt change in benefits would have an extremely adverse impact on household poverty and on aggregate demand.

A reduction in Social Security benefits that is not preceded by a substantial expansion in private retirement savings by the workers who are now having the most difficulty saving for retirement would lead to catastrophic financial impacts for many households.  This outcome can only be avoided by coupling private pension reforms with Social Security reforms.

David Bernstein is the author of A 2024 Health Care Reform Proposal.

A 2024 Health Care Agenda

Progress on health care and health insurance appears to be two steps forward followed by one step back. This memo outlines ongoing health insurance problems and proposed solutions.


Introduction:

The ACA reduced the number of people without health insurance coverage by creating state exchange health insurance markets and expanding Medicaid coverage.  The Biden Administration expanded the premium tax credit for state exchange insurance and facilitated additional continuous Medicaid coverage.  However, the Biden-era reforms will lapse.

The enhanced premium tax credit will remain in place through 2025.  A Covid-era program facilitating continuous Medicaid coverage expires April 1, 2023.

Many health insurance and health care problems persist.  Some appear to be worsening.

Cost sharing, including deductibles, maximum allowable out-of-pocket limits, and coinsurance rates, for people with comprehensive health insurance coverage has increased for decades.  

People with employer-based health insurance are still susceptible to a loss of health insurance coverage, increased premiums, and additional out-of-pocket costs during job transitions.  Loss of coverage and increase uninsured costs will still routinely rise during recessions.

Middle-income adults with state-exchange insurance still pay substantially higher premiums than middle-income adults with employer-based health insurance.  

Workers at firms with relatively few health insurance options are usually ineligible for the premium tax credit for state exchange insurance and are often locked into a policy that is not best suited for their needs. (The Biden administration did eliminate the family glitch impacting the affordability of family-plan state-exchange policies.  However, many families with an offer of employer-based insurance are still precluded from claiming the premium tax credit for state-exchange policies even when the state-exchange policy is superior to the employer-based policy.)

Many households unable to afford comprehensive health insurance have purchased short-term junk insurance policies that leave them de-facto uninsured and exposed to high medical expenditures. 

Despite passage of the no-surprises act many households are still receiving bills from out-of-network providers, especially out-of-network specialists at in-network facilities. 

Many narrow-network health insurance plans do not provide sufficient access to top hospitals or specialists.

The memo outlines potential policy responses to these health insurance problems.  A more in-depth discussion of the problems and proposed solutions can be found in A 2024 Health Care Reform Proposal available at Sellwire and at Kindle.

Potential 2024 Health Care Policy Proposals:

Proposal One: Modify Rules Governing Health Savings Accounts and Flexible Savings Accounts to mitigate problems associated with higher cost sharing between insurance companies and households.

Issues:  Health plan deductibles and other forms of cost sharing between insurance companies and households have been increasing for the last two decades.  Many low-income and middle-income people either cannot afford to fund their health savings account or can only fund the health savings account by reducing contributions to their retirement accounts. The growth of out-of-pocket health care expenses has resulted in higher levels of medical debt, has caused some people to reduce savings for retirement to fund health savings accounts or flexible savings accounts and has resulted in many people foregoing necessary medical procedures and drug regimens.   

Potential Solutions:

Many of the problems associated with the use of high-deductible health plans, health savings accounts and flexible savings accounts can be remedied with changes to tax rules.   Proposed changes include:

  • Expand eligibility for contributions to health savings accounts to people with health plans that have modest deductibles and other forms of cost sharing including high coinsurance rates and high deductibles.
  • Replace the deductibility of contributions to health savings accounts with a tax credit to better assist low-income and middle-income households.   Alternatively, provide a tax credit for contributions to health savings accounts for low-income households and deductibility of contributions for households with income greater than a specific threshold.
  • Modify rules governing unused funds in flexible savings accounts to allow individuals to transfer some unused fund to an Individual Retirement Account or a 401(k) plan.

Proposed changes to rules governing high-deductible plans and health savings accounts could improve health outcomes and financial security and could increase retirement savings.

Proposal Two: Modify rules governing the premium tax credit for state-exchange insurance and the employer mandate to maintain continuous health insurance coverage during job transitions and to reduce disparities in health insurance outcomes and costs.

Issues:  The existence of separate employer-based and state-exchange health insurance markets causes disruptions in coverage during job transitions and disparities in health insurance costs and outcomes.  Three issues need to be addressed. 

  • Most people with employer-based insurance must find new health insurance or experience a disruption in coverage during a job transition.  Loss of health coverage is always high during economic downturns.
  • Middle-income young adults with state-exchange health insurance pay substantially more in health insurance premiums than a similarly situated middle-income young adult with employer-based coverage.
  • Many people with employer-based coverage are ineligible for the premium tax credit for state exchange health insurance even if the employer-based plan is not the best plan for the household.  

Proposed Solutions:

  • Allow employers to contribute to the purchase of state-exchange health insurance instead of purchasing employer-based health insurance.
  • Allow for conversion of employer-based insurance to state-exchange insurance when employees are being laid off.
  • Create a new tax credit covering part of the cost of state-exchange insurance for workers at small firms with income less than 400 percent of the federal poverty line.
  • Maintain a premium tax credit that limits workers share of premiums to 8.5 percent of income.
  • Modify the employer mandate to guarantee a minimum subsidy of premiums by large employers.  The combination of the new tax credit and the employer subsidy will pay the entire health insurance premium for most households.  Some low-income households would be eligible for additional assistance through the premium tax credit.  

Proposal Three:  Outlaw most short-term health insurance policies and create a new private/public low-cost health insurance option.

Issues:  A 2019 Trump Administration rule expanded the use of short-term health plans which did not cover essential health benefits. Many problems are associated with the use of short-term health plans.

Short-term health insurance plans provide extremely limited coverage.  Common problems include – (1) Denials of benefits for life-saving procedures (2) Strict limits on reimbursements for hospital stays, surgeries and for doctors. (3) Denial of benefits by requiring extensive documentation after a procedure has been conducted.  Short-term health plans often lack coverage for pharmaceutical benefits, maternity benefits, and mental health services. People with short-term health plans can often not obtain needed health services or have large financial exposures if they become ill.  

Insurance companies are allowed to deny short-term coverage to people with pre-existing conditions and to base premiums on the health status of the individual. As a result, the existence of the short-term market undermines the state-exchange markets.

Potential Solutions:

  • Abolish all health plans that do not provide coverage for essential health benefits as defined by the ACA.
  • Create a new lower-cost health plan that imposes an annual health expenditure limit.
  • Allow automatic enrollment in Medicaid for people with the new low-cost plan that meet the annual limit.
  • Limit enrollment in the new low-cost health plan to people who cannot afford current state exchange plans with no annual limits.

The combination of private insurance with an annual limit with public insurance coverage above the limit could in principle be applied to all workers.  Such an approach would lower costs and provide universal coverage while maintaining private control over health decisions.

Proposal Four:  Create additional regulations to limit surprise medical bills and assure that insurance companies provide adequate provider networks.

Issues:  Increasingly, health insurance and employers are attempting to reduce health expenditures by limiting access to providers.  Many health insurance policies impose higher deductibles and higher cost-sharing for out-of-network services. HMOS prevent consumers from ever going out-of-network.  (This approach is in many ways unique to the health insurance and health care industries. In most instance, competition is increased, and prices decreased when consumers have access to many service or good providers.)

Consumers with a narrow-network health plan are most likely to experience a surprise medical bill when they are forced to go outside their network for emergency services or when they go to an in-network facility that hires out-of-network providers.  A recently enacted no-surprises law attempts to reduce unexpected costs when consumers are forced to go out-of-network.

The no-surprises law does not fully address issues caused by narrow-network health plans.

  • The no-surprises law allows consumers to waive their rights to an in-network provider at facilities that offer both in-network and out-of-network providers.  It is often difficult to obtain timely non-emergency service without hiring at least on out-of-network provider.
  • Health care facilities often enter and exit a network.  In some part of an in-network facility could be out-of-network.  (I recent found that the hospital scheduled to give a biannual heart stress test was inside the network, but the radiology department was outside the network.) 
  • The responsibility of determining whether a network is inside or outside of the network lies on the individual consumer, not the insurance company or the provider.  Sometimes information obtained from the insurance company or the provider about network status is incomplete or not up to date. 
  • Some people with narrow-network plans often have a hard time obtaining access to specialists.  This problem is most severe for extremely narrow specialties and in rural areas.
  • Many narrow-network plans do not offer access to top hospitals, especially cancer hospitals.

Proposed Solutions: 

  • Create rules requiring insurance companies to provide reimbursement to all providers working at in-network facilities.
  • Create and enforce additional network adequacy regulations.
  • Require insurance companies to cover expenses for all providers working at an in-network facility.
  • Expand dispute resolution rules under the no-surprises act to cover all out-network situations, especially those involving use of specialists.
  • Create an insurance subsidy for high-cost health expenditures couple with a requirement that insurance companies provide greater access to top hospitals and specialists.

The recently enacted No-surprises law had bipartisan support.  However, the approach leaves many problems associated with narrow network health plans unresolved and does not incentivize insurers to broaden their networks.

Concluding Thoughts:   The 2020 health care debate in the Democratic Party involved a discussion on the merits of modifying the ACA versus the merits of replacing the existing health care system with a single-payer system.  The single-payer option was both politically and economically unfeasible. The Biden-era modifications to the ACA did not result in meaningful permanent changes to health insurance or health care. 

The Biden-era changes to the premium tax credit lapse in 2025. The changes in Medicaid eligibility rules, under the Covid emergency, expire in April 2023.  Problems related to cost sharing and high deductibles persist and were not addressed.  The issue of future loss of insurance coverage during economic downturns has not been addressed.  Despite elimination of the family glitch many disparities in health care price and outcomes persist due to the separation of state-exchange and employer-based health insurance outcomes. Short-term junk health insurance problems still exist.  The No-Surprises Act addressed some but not all problems associated with narrow-network health plans.

Long-term permanent solutions to health care problems can only be achieved if the Administration prioritizes health care over other concerns, including the spending in the Build Back Better Bill, some of the proposals for discharge of student loans, and even the expansion of the child tax credit.  Several of the health insurance reforms discussed here deserve prioritization over other proposals because the reforms also enhance financial and retirement security.

David Bernstein is the author of the 2024 Health Care Reform Proposal, a memo that is available at Sellwireand at Kindle. This paper does a good job discussing the academic literature and providing background on the health insurance problems and policy proposals outlined in this memo. David has also written David has also written Alternatives to the Biden Student Debt Plan.

The Debt-Limit Debate and Entitlement Spending

The Republican party is linking increases in the debt limit to cuts in entitlement spending. This approach will not lead to beneficial entitlement reform. A default on the debt would lead to catastrophic economic and political impacts. The 2023 fiscal debate should concentrate on how to phase out COVID-era relief benefits, instead of entitlement reform.


Introduction: 

A debt limit crisis that leads the United States to default on its financial obligations would be catastrophic. A U.S. debt default would lead to the demise of the dollar as the world’s reserve currency, increase interest rates, and reduce American influence abroad.  MAGA Republicans, who supported the insurrection and are supportive of Putin’s war in Ukraine, may not be opposed to these outcomes. 

GOP members of congress are threatening to refuse to support a debt-limit discharge unless the Senate and the President agree to cuts in Social Security.  Go here for some Republican ideas on linking increases to the debt limit to changes in Social Security and Medicare.  

The Debt Limit and Entitlements:

Many older people have very little in private retirement savings and are totally dependent on both Medicare and Social Security.  Efforts to change retirement and Medicare benefits must be preceded by reforms that decrease the number of older households with low levels of retirement assets or reserves for health expenditures.  

A proposal to increase the minimum age for Social Security benefits from 62 to 63 or longer would reduce the future debt to GDP ratio.  Financial markets are forward looking, hence the future expected debt to GDP ratio is a more important financial variable than current-year government deficits.  Entitlement reform should be more focused on the more important debt measure.

Immediate changes to entitlement spending would be detrimental to the economy, would reduce current consumption and would increase poverty among older households.

Reductions in entitlement spending cannot be implemented until after private retirement savings is increased, especially for households that currently do not save enough for retirement.

Efforts to expand private retirement savings will increase government deficits. 

Restrictions on government spending and tax expenditures for pension, health and other savings incentives stemming from a stringent debt limit will delay efforts to increase private retirement savings and will delay the needed increase in the retirement age.

The debt limit is not the only lever to force changes in entitlement spending.  The Trustees of the Social Security Trust fund project the trust fund will be depleted in 2035.  The projected depletion of the Trust fund will, under current law, lead to the automatic benefit cuts.   The avoidance of automatic benefit cuts, not the debt limit, is the best way to motivate actions on entitlement reform.

Concluding Thoughts:

Republicans do not have the votes for benefit reductions including changes in mean testing or increases in the retirement age.  Immediate changes in benefit formulas would be disastrous to current retirees and worker nearing retirement.  There is no support for MAGA-style entitlement reform in the Senate or in the current Administration.  The Democrats can’t link any entitlement change to a temporary increase in the debt limit because such an agreement would only lead to demands for additional changes in entitlements once the debt reaches the new limit. 

The 2023 fiscal discussion should center on efforts to reduce COVID-era emergency expenditures rather than efforts to force immediate changes in entitlement spending.  These debates will also be difficult and could lead to a government shutdown, an admittedly undesirable outcome but one that is less catastrophic than a default on the U.S. debt.  

David Bernstein, an economist living in Denver Colorado, is the author A 2023 Healthcare Reform Proposaland Alternatives to Biden Student Debt Relief Proposals. 

What is going on at the lower end of the yield curve?

Why is the 6-month T-bill rate so much higher than the 4-week T-bill rate?

Why is the 6-month T-bill rate so much higher than the 4-week T-bill rate?

Many analysts are concerned about the inversion between the 2-year and 10-year bond rate because such inversions typically foretell a recession.  There is a different story at the lower part of the yield curve.

The 6-month T-bill rate was 83 basis points over the 4-week T-bill rate in December 2022.  The average spread over 2001 to 2022 period was 17 basis points.  The median spread, 10 basis points.

The 6-month to 4-week spread had been elevated throughout 2022.

Why is the 6-month interest rate now so elevated compared to the 4-week rate? 

Investors could place 1/6 of their short-term assets in separate 6-month assets purchased at the beginning of each of 6 months.  This staggered schedule would allow access, if needed, to 1/6 of short-term assets each month.

The only reason why investors would choose to put all funds in a 4-week asset is the desire for increased liquidity without any price risk from selling an asset.  Why are investors now turning down the 83 basis points to put more funds in a 4-week T-Bill rather than staggering investments into 6-month T-bills with purchase and maturity dates in six consecutive months?

The author, an economist in Denver Colorado, has written a 2024 Health Care Proposal, which can be downloaded at Sellwire, https://app.sellwire.net/p/2Uv and at kindle https://www.amazon.co.uk/2024-Health-Care-Reform-Proposal-ebook/dp/B09YPBT7YS

Evaluating the Secure Act 2.0

Most of the provisions in The Secure Act 2.0 have at best a modest impact on 401(k) participation and retirement savings. The proposals do not target households likely to have inadequate retirement income. Congress should not enact this law. An alternative approach would expand incentives for people without employer-based retirement plans.

Introduction:

The major provisions of the Secure Act 2.0, summarized here by CI Private Wealth, include changes to rules governing required minimum distributions (RMDs), increased access to 401(k) plans for part-time workers,  larger catch-up contributions for older workers, changes to qualified charitable distributions, employer matching contributions  to 401(k) plans for student loan payments, mandatory automatic enrollment into 401(k) plans, and employer matching contributions for Roth 401(k) accounts.

There are merits to some aspects of these proposals.  However, changes to pension rules currently in Secure Act 2.0 do not provide major benefits to people who are struggling to save for retirement. 

Larger improvements to retirement savings for more households could be achieved at lower cost to the government by expanding Individuals Retirement Accounts (IRAs) instead of expanding firm-based retirement plans.

Discussion of Specific Proposals:

Modifications to RMD rules:  

Changes:

The Secure Act 2.0 has a proposal to delay required minimum distributions from retirement accounts.  The current RMD age is 72.  The proposal increases the RMD age to 73 in 2023, 74 in 2024, and 75 in 2031.  The Secure Act 2.0 also reduces the penalty for not making a RMD from 50 percent to 25 percent.

Comments:

These proposals are unlikely to benefit people with relatively modest income who must withdraw more than the RMD from their retirement account to fund current needs in retirement. This change will NOT reduce the number of households who might outlive their retirement savings.

It is unlikely that workers currently saving for retirement consider the RMD when makings savings decisions because tax savings from contributions to retirement accounts are already large. These changes to RMD rules will not incentivize increased retirement savings for current workers. 

RMD requirements only pertain to traditional retirement plans.  Roth accounts do not have RMD requirements.  These changes could discourage some workers from contributing to Roth accounts or converting traditional retirement assets to Roth assets.  

Many investment firms will automatically limit retirement plan disbursements to the RMD amount and will automatically increase the rate of spending of non-retirement assets for individuals who have not reached the RMD age.  This approach will increase fees to the firm managing the 401(k) plan but may be detrimental to the investor.  The major beneficiary of this proposal is pension fund managers who will receive more fee income because of the slower disbursements from retirement accounts.  

The increase in the RMD age will increase distributions and tax payments once the RMD age is reached because the retirement plan balance is larger, and the expected future life span is shorter.  The increased RMD age delays disbursements and taxes but could increase total lifetime tax payments for some households.  The increased RMD age could increase early depletion of Series I Savings bonds, (an asset outside of retirement accounts) leaving investors less prepared for an increase in inflation later in life.

Increased Access to 401(k) plans for part-time workers:

Changes:

The Secure Act 2.0 reduces the waiting time for part-time workers to make contribution to 401(k) plans.  The current waiting period is three years.  The proposed waiting period is two years.

Comments:

Many small firms with a large percentage of part-time workers do not offer 401(k) plans.

This proposal will not help part-time workers without a continuous employment history.   Many part-time workers are seasonal and do not have continuous employment at a firm.

This reduced waiting period does not affect vesting requirements.  Part-time workers are subject to the waiting period and the vesting requirement.  A part-time worker at a firm with a 401(k) plan that has a three-year vesting requirement would have to work at the same firm for five years to fully vest.

401(k) plans at firms with a high proportion of part-time workers tend to have high fees.  Many part-time workers would be better off contributing to a low-fee IRA instead of a high-fee 401(k).

It would be easier and more effective to motivate retirement savings for part-time workers by increasing incentives for contributions to IRAs.  This approach benefits all workers as soon as they are employed, workers at firms that do not offer 401(k) plans, and workers with multiple jobs.  

Larger catch-up contributions for older workers:

Changes:

The Secure Act 2.0 increases catch-up contribution to firm-sponsored retirement plans for people aged 62-64 from the current level of $6,500 to $10,000.  The current catch-up contribution remains the same for people between age of 50 and 61.  The proposal indexes the current catch-up contribution for IRAs to inflation and provides for a more modest increase in catch-up contributions for Simple Plans.


Comments:

The Secure Act 2.0 increases the disparity between allowable catch-up contributions for employer-based retirement plans and IRAs.  The goal of pension reform should be reducing all disparities between employer-based retirement plans and IRAs including disparities in catch-up contributions because the people most in need to additional retirement assets currently do not have access to employer-based plans.

Many low-income and middle-income workers nearing retirement are better off reducing debt than increasing contributions to 401(k) plans.  Go here for a post documenting the advantages of debt reduction prior to retirement.

Changes to Qualified Charitable Distribution Requirements:

Changes:

The Secure Act 2.0 increases potential charitable distributions from retirement plans and associated tax benefits.    The charitable distribution is also indexed to inflation.

Comment:

This is a useful change for well-heeled savers, charities and people benefiting from charities.  However, this provision does nothing for people with limited retirement resources who may out-live their retirement wealth.

Student Loan Matching:

Changes:

The Secure Act clarifies the tax code to make clear employers are allowed to contribute matching funds to retirement plans for workers making student loan payments, even if the worker does not make contributions to the plan. 

Comments:

This proposal does not benefit workers at firms that do not offer a retirement plan or workers at firms with a retirement plan that do not match employee contributions.  As a result, this provision will disproportionately benefit workers with better jobs and will do little to reduce student loan debt burdens for people most affected by student debt.

Mandatory Automatic Enrollment:

Changes:

The Secure Act 2.0 requires employers with an employer-based retirement plan to automatically enroll new employees who are qualified for enrollment into the plan.  The initial automatic enrollment is set at 3.0 percent of income.  The automatic enrollment is increased by 1.0 percent per year up to 10 percent of income.

Comments:

The government sanctioned automatic enrollment provision implies that the government believes that contributions to firm-sponsored retirement plan are the best use of funds.  This argument may not be correct in many circumstances including when workers have high debt levels, when the employer does not match contributions, and/or when the plan charges high fees.  

The case for automatic enrollment in 401(k) plans is strongest when firms match employee contributions.  A modified automatic enrollment provision limited to firms with matching contributions for contributions up to the amount needed to receive the entire match would be superior to the current provision.  Automatic enrollment of funds beyond this level is difficult to justify given the existence of other investment options including Roth IRAs and Series I Savings Bonds.

The case for automatic enrollment for newly eligible employees is stronger than the case for automatic increases in contributions.  Employers or plan managers could provide advice about desired contribution levels instead of assuming one strategy fits all workers.

Other automatic pension changes including automatic rollover of high-fee 401(k) funds to low-fee IRAs when employees leave a firm and automatic enrollment of workers at firms without a 401(K) plan into IRAs should be considered.

Matching Contributions to Roth Accounts:

Changes:

Starting in 2023, employer-matching contributions could be placed in a Roth account.  Current law places employer-matching contributions in a conventional account while the employee contributions are placed in a Roth account.

Comments:

Under current law, employer contributions are not taxed in the year of the contribution. A provision an untaxed employer contribution into a Roth account would result in the contribution never being taxed.  Presumably, if the employer contribution is placed in a Roth account it would be fully taxed in the year of the contribution.  

The proposal only benefits workers at firms with a 401(k) plan that matches contributions and has a Roth option.

This proposal does not pertain to Roth IRAs because no employer contributions are allowed in any IRA.  An expansion of matching contributions to IRAs would better assist households who are having difficulty saving for retirement.

Concluding Remarks:

The Secure Act 2.0 is not yet law.  It must be reconciled with Senate provisions that include provisions for expanded access to emergency funds through retirement accounts.  A blog post describing these proposals can be found here.  

The Secure Act 2.0 is not an effective way to improve retirement security for American workers. 

Many of its provisions give larger benefits to investment firms than to workers saving for retirement.  The bill provides scant assistance to the workers who are having the most difficult time saving for retirement. A more effective approach involves expanding saving through individual Retirement Accounts instead of firm-sponsored retirement plans.

Authors Note:  David Bernstein, an economist and author, has written An Alternative to the Biden Student Debt Plan.  This paper is a must read now that the Biden plan is tied up in court.  David is an economic consultant taking on new clients.  He can be reached here or can be emailed at Bernstein.book1958@gmail.com. 

Should Retirement Plans Include an Emergency Fund?

Many workers are currently disbursing a substantial share of their retirement fund prior to retirement. The addition of an emergency fund inside a retirement plan should be coupled with new limitations on pre-retirement disbursements

The House has passed a bill enacting several changes to rules governing IRAs and 401(K) plans.  The Senate is considering modifications to the House bill that will make it easier for workers to use retirement funds for emergencies.  This blog post examines three proposals that are currently under consideration by the Senate.

Proposal One:  The Emergency Savings Act of 2022:  A bill offered by Senator Booker and Senator Young would allow employers to create an emergency fund inside a firm-sponsored retirement plan.  The money in the emergency fund could be disbursed without penalty or tax at any time.   

Comment One:  One purpose of the emergency fund is to facilitate increased contributions to 401(k) plans by people with limited liquidity.  Paradoxically, the emergency fund might not increase funds for emergencies if the household is living paycheck to paycheck.  The new fund does not increase total financial resources available to households.    The new fund does not prevent households from overspending.  An increase in 401(k) contributions associated with lower rates of repaying consumer or student debt could make some households worse off.

Comment Two:  The bill does not increase liquidity or savings incentives for people with a Roth retirement account.  The Roth account already allows disbursements from contributions without penalty or tax prior to age 59 ½. An alternative way to increase use of retirement funds for emergencies is to encourage increased contributions to Roth rather than traditional retirement accounts.

Comment Three: The rationale for a tax deduction for contributions to 401(k) plans and IRAs is that the tax deduction incentivizes savings and makes both the worker and society better off. This bill gives workers a tax deduction even if they immediately spend all funds placed in the emergency account. The bill does not prevent workers from distributing all funds in their 401(k) plan by paying a 10 percent penalty and tax on the distribution.  The goal of facilitating retirement savings and the goal of having emergency funds could be better balanced if the new emergency fund was coupled with a limitation on pre-retirement withdrawals.  

Proposal Two:  The Refund to Rainy Day Proposal: This plan requires the Secretary of the Treasury to create a mechanism through which people can place part of their tax refund into a Rainy Day Fund.  

Comment One:  The Treasury already allows for direct deposit of refunds to financial institutions. Private financial firms could set up a direct deposit to an emergency fund. The Treasury Direct site could create an option where some of the proceeds were automatically invested in short-term Treasury securities.

Comment Two:  People with large tax refunds are probably less in need of emergency funds than people who owe taxes because people with little liquidity have a large incentive to increase their claimed exemptions to meet current needs.  This tax refund provision does not assist the people most in need of emergency funds.

Comment Three:  It is not clear why the government should favor direct deposit of tax refunds into emergency funds over other priorities including direct payments of student loan debt or direct contributions to health savings accounts.

Comment Four:  I don’t see anything in this bill that increases the financial capability of households or alters household savings behavior.

Proposal Three:  The Enhancing Emergency and Retirement Savings Act of 2021:

This plan offered by Senator Lankford and Senator Bennet would provide a penalty-free distribution from retirement plans, both in firm-sponsored plans and individual retirement accounts.  The plan provides for one emergency distributions per year if the account has $1,000 vested funds.  The maximum withdrawal would be $1,000. The legislation requires replenishment of the withdrawn amount prior to additional withdrawals.  

Comment One:  A worker who is replenishing an initial withdrawal has an incentive to reduce 401(k) contributions to maintain consumption.  This proposal will have at best a modest impact on retirement savings, especially for workers entering the workforce with substantial student debt.

Comment Two:  I presume (perhaps falsely) that this penalty-free option is optional.  Some firm 401(k) plans and some IRA management firms might choose to not offer this option to keep administrative costs and fees down. The impact of the provision on administrative costs and returns on retirement funds could be considerable. 

Comment Three:  Some 401(k) plans will provide emergency distributions and 401(k) loans.  Workers who take both an emergency distribution and a 401(k) loan will owe substantial funds to their plan.  Many of these workers will not replenish the emergency fund or repay the loan.  Many of these workers will have an incentive to tap their entire 401(k) plan if they switch jobs.  It would be easier to justify the creation of an emergency fund inside a 401(k) plan if the proposal were linked to some limitation on complete disbursements prior to retirement.

Concluding Remarks:  

The proposals considered in the Senate increase access to retirement funds for emergencies.  One goal of these provisions is to incentivize workers to increase contributions to retirement plans.  However, under the current system many workers routinely distribute and spend substantial funds in their retirement prior to retirement.

Several studies indicate that the use of 401(k) funds prior to retirement is widespread and is a major factor impacting the number of households who might retire with inadequate financial resources in the future. Research from E-Trade financial, reported on CNBC in 2015, revealed that nearly 60% of millennials had already taken funds out of their 401(k) account. A study by the Employment Benefit Research Institute (EBRI)reveals that 40% of terminated participants elect to prematurely take out 15% of plan assets.  A recent study by Wang, Zhai, and Lynch found that over 40 percent of employees cashed out their 401(k) plan at separation.

Intuitively, the people most likely to tap funds from their 401(k) plans prior to retirement are struggling financially.   My own study found here, reveals that people tapping funds prior to retirement tend to have high levels of debt and poor credit ratings.  The sheer magnitude of the number of people who are both lacking in liquidity and tapping retirement funds suggests leakages from 401(k) plans will weaken retirement security for many households.

Any revisions to rules governing emergency distributions from retirement plans should be coupled with rules limiting distributions from retirement plans prior to age 59 ½. 

Authors Note:  David Bernstein, a retired economist has written several papers advocating for innovative centrist policy solutions.

The kindle book Defying Magnets:  Centrist Policies in a Polarized World has essays on policies student debt, retirement savings and health care.

The paper A 2024 Health Care Proposal provides solutions to health care problems that are not currently under consideration.

The proposals in Alternatives to the Biden Student Debt Plan are less expensive to taxpayers than the Biden student loan proposals.  The reforms presented here provide better incentives and reductions for future students while the Biden debt-relief proposal offers a one-time improvement for current debtors.

Political Insights for the 2022 Midterms

I find writing this column every two years on or near election day cathartic. I have never seen this much hype and so many unforced errors on both sides. My resolution after clicking publish is to stay off cable news for a long time.

Some political insights – November 7, 2022

I find writing this column every two years on or near election day cathartic.  I have never seen this much hype and so many unforced errors on both sides.  My resolution after clicking publish is to stay off cable news for a long time.

Some insights:

The analysis on TV seems more motivated by campaign goals than data.  Republicans are talking up surprise victories in senate races in New Hampshire, Colorado, Washington, even though Senate races in North Carolina, Wisconsin, and Ohio are far closer. Republicans are exciting their voters to the poll.  Democrats are scaring their voters to the poll.   The Democrats may overperform in the Senate because they have good candidates in NC and OH and WI and NV are reasonably close.

Wisconsin should have been an easy pick up for the Democrats because the Republican candidate is a certifiable crazy. However, their 35-year-old nominee has not been able to address concerns about crime that were highlighted by unrest and vandalism in Kenosha.  

My methods when analyzing elections in Wisconsin is to compare them to races in the adjacent state of Iowa.  The states almost always vote for the same presidential candidate.  The 2016 poll numbers in Iowa suggested to me that Wisconsin could turn red and it did.  This year it is highly possible that the moderate Senate candidate in Iowa will overperform and the more liberal Democrat in Wisconsin will underperform, and the Democrats will lose both races. I expect Evers to win the governor’s race but could be wrong. 

The Democrats are highly dependent on the black vote and the party has nominated several black candidates in states that are overwhelmingly white.   The Democrat’s candidate for governor in Iowa, Deidre DeJear, an extremely young black woman with no experience in government had no opposition in the primary. She is 20 points behind and is not helping the Senate race.  The initial competition to Barnes. Demings, and Beasley was also non-existent or dropped out prior to the primary.  Republicans have tougher intra-squad games, which helps them in the regular season. 

Splits between the Senate and gubernatorial outcomes in several states including, PA, AZ, WI, OH are possible.  This should undercut Republican claims of rigged elections.

Voters in both parties are having buyers’ remorse in PA.  Fetterman should have been transparent about his health and Oz is not a smart wizard.  I personally could never vote for Oz and would vote for Fetterman if I lived in Pa.  However, an independent who sides with Republicans on some issues and wants robust discussion of debates could conclude that Fetterman, due to his health would be a rubberstamp.  The Democrats should have examined Fetterman’s health after the stroke, I believe in May prior to the primary and put in a pinch hitter.

Democrats may lose the House.  I hope it is close. Because centrist could unite and elect a centrist speaker.  Go here for a discussion of why the House is important.

Trump could be the big loser if Republicans underperform and if the most Trump-friendly candidates lose.

Concluding Thoughts:  The Democrats central message is you must vote for the Democrats because the Republicans don’t believe in democracy and a Republican victory will lead to dictatorship.  Well, if true, we have no choice and Democracy is already gone or on life support.

 Eventually, the Republicans will win a cycle.   If the Gambler’s Ruin Problem describes payouts dictatorship is inevitable. 

 Hard to see how Biden wins reelection in 2024 if Trump is gone and 2024 becomes a change election.  Trump may run to freeze the Democratic field.

Authors Note:  David Bernstein, a retired economist has written several papers advocating for innovative centrist policy solutions.

The kindle book Defying Magnets:  Centrist Policies in a Polarized World has essays on policies student debt, retirement savings and health care.

The paper A 2024 Health Care Proposal provides solutions to health care problems that are not currently under consideration.

The proposals in Alternatives to the Biden Student Debt Plan are less expensive to taxpayers than the Biden student loan proposals.  The reforms presented here provide better incentives and reductions for future students while the Biden debt-relief proposal offers a one-time improvement for current debtors.