The payroll report was even worse than expected. The economy looks to have added 54,000 jobs in May. As always, these are estimates that will be revised in coming months and years. Nonetheless, they are among our best real-time snapshot of the economy.

A few notes.

First, as you probably know 54,000 is not enough job growth to keep up with natural labor force growth. On average, somewhere around 125,000 jobs need to be added each month to keep up with kids coming out of high school and college. So even though the economy is gaining jobs, 54,000 is consistent with a worsening job market.

Second, this was going to be a rough month. All of our early signals were bad. The Federal Reserve conducts regional surveys throughout the month — mostly of manufactures — and all of those looked weak. Retail sales outside of gasoline were also weak, and there is nothing in the construction data that would make us think we were in the midst of a turnaround

So given all of that, a low number isn’t shocking but it’s still disappointing.

To start, we’d like to thank Ezra for the opportunity to play in his yard this week. It’s been fun for us, and we hope his readers have enjoyed our posts enough to follow us back to our home at the Incidental Economist.

***

In two posts on this blog, Karl Smith wrote that the supply side of health care has a lot to do with the rising cost of care. We agree. Health-care costs will not be tamed without addressing the provision of care. One issue Smith raised is whether that should be done by loosening regulation in health care. 

[T]he current health-care system is riddled with regulation, litigation and occupational and pharmaceutical licensing. We have levels heaped upon levels of protection against bad drugs, bad doctors and bad health-care consumers.  While all of these rules provide us with a sense of security, they most likely undermine the evolution of health care and make what care we do have outrageously expensive.

It is no doubt true that regulation limits innovation. However, “innovation” is not unambiguously welfare increasing, and this fact is not confined to health care. For example, what do we now make of the lightly regulated innovations in the financial sector over the last decade or so? It seems to us, and many others, that in that domain a little more protection through regulation is in order. Similarly, in a recent NBER paper, Charles Jones pointed out that if the Cuban Missile Crisis had ended in nuclear war, as it very well could have, we would have a decidedly different view of the atomic and nuclear innovations that had occurred in the preceding 30 years. If not for some government diplomats, the costs would have outweighed the benefits.

Notwithstanding the substantial benefits bestowed upon society by medical science, innovation in health care is fraught with uncertainty, as well as high costs. The uncertainty is multifaceted. It includes, on the one hand, whether a new drug, device, or technique will be a financial success and, on the other, whether it will improve health. The latter is a matter of science; the former depends in large part on marketing. Both aspects are in need of regulation.

In a now-infamous 40-year study that began in 1932, 600 low-income, African American men were provided free medical care, meals and burial insurance, but never told if they had syphilis. Two-thirds of them did. Even though treatment for the disease existed during the study, it was not offered. This study, known as the Tuskegee syphilis experiment, is now the prime example of unethical treatment of human subjects in medical research. As a consequence of the appropriate outrage that followed the Tuskegee experiment, health-care research is now more regulated via institutional review boards (IRBs), as required by the National Research Act.

In light of this history – and this was not an isolated incident – we should be careful about deregulating the enterprise of health-related scientific research. There are other aspects relating to the science of medicine that could use more regulation. One of us (Aaron) posted on just this point earlier in the week, echoing Rita Redberg’s recent NY Times op-ed. Both illustrate how we squander substantial resources on ineffective health-care treatments. Is this due to too much regulation or too little?

Ever since Kenneth Arrow’s seminal 1963 paper on the welfare economics of health care, health economists (among others) have recognized the information asymmetry in the provider-patient relationship. It’s well established that patients are often unable to distinguish between effective, helpful health care and ineffective, wasteful care. Consequently, much of the decision-making in the realm of health care is influenced by physicians, giving rise to huge variations in practice patterns. In many cases, little scientific guidance exists, and physicians do what they learn and practice by accumulated wisdom of an unscientific type (which is not to say it is wrong, but it isn’t provably right). And, yes, they are generally highly rewarded for their work, whether based on sound science or, as is sometimes the case, not. Imposing more science on the practice of medicine is a role for more regulation, not less.

Smith makes another excellent point about health care being an information and communication technology industry. However, right now, it is in the business interests of many involved in medicine to thwart information sharing and communication. If a company creates an electronic medical record, it usually doesn’t want it to talk to anyone else’s. An interoperable EMR system can mean lost customers; it opens the door to the possibility that providers might buy a competitor’s program. It’s much better for an EMR company if providers are forced to buy their laboratory system, their scheduling system, and their radiology system.

Yes, that means that all the doctor’s offices can’t interface with the system at the hospital, or the emergency department, or with each other, but too bad. That’s how the unregulated marketplace works. We all suffer for it.

Could we not use more regulation to provide incentives for physicians to practice according to guidelines informed by science? Could we not use more regulation to develop, fund and follow the results of comparative-effectiveness research? Could we not use more regulation to set standards for EMR systems so that information could flow more freely?

Bloodletting doesn’t work. Yet with no controls over the system, we’re sure someone would push it, or some snake-oil equivalent, on unsuspecting patients. The history of medicine suggests that this, or something like it, is far from implausible. In fact, it suggests that such things are happening today (useless knee surgeries and the like).

Remember Thalidomide, Fen-phen, Vioxx? They’re all potent drugs that harmed patients, and they were pulled from the market due to regulatory oversight.

We could go on.

So, yes, by all means, we need to involve providers – the supply side – in any solution to our health-care spending problem. But we should be careful with “deregulation.” To be sure, more regulation isn’t always better regulation (regulatory capture happens), but less isn’t always the answer, either. We need to be smarter about regulating. Not all regulation is created equal. And, in health care, if not elsewhere, much of it does far more good than harm.

Austin Frakt is a health economist and an assistant professor of health policy and management at Boston University’s School of Public Health. Aaron Carroll is a pediatrician, health services researcher and associate professor of pediatrics at Indiana University School of Medicine. Both blog at the Incidental Economist.

The first time the Obama administration decided to hike fuel-economy standards for cars and light trucks, it wasn’t a terribly hard sell. This was back in May 2009, and the government had just bailed out GM and Chrysler, while California was threatening to move forward with its own plan for even more stringent fuel rules if the federal government couldn’t come up with a workable plan. Under the circumstances, the auto industry didn’t take long to agree to raise fleetwide CAFE standards to 35.5 miles per gallon by 2016. Easy enough.

 But now comes the hard part. The EPA and Department of Transportation are currently working on phase two of the CAFE plan, which would ratchet up fuel-economy standards anywhere from 3 percent to 6 percent per year between 2017 and 2025 — at its most ambitious, this new plan could mean a fleet-wide average of 62 miles per gallon by 2025. Is that even doable? If you ask advocacy groups like the Union of Concerned Scientists, cars and light trucks could probably get there with existing technology:

Conventional internal combustion engine vehicles can be made much more efficient by applying, for example, downsized turbocharged engines, six- and seven-speed transmissions, high-strength lightweight materials, enhanced aerodynamic designs, and more climate-friendly air conditioning systems. Some vehicles already on the road use a limited number of these technologies. However, all new vehicles could apply the full range of technology to maximize fuel efficiency.

 On the other hand, if you ask auto industry spokesmen, they sound a little more dubious. And, as Politico’s Darren Samuelsohn reports today, now that GM, Chrysler, and Ford are all profitable again, they plan to lobby a lot harder on the issue.

Strapped for cash in a lagging economy, Americans still aren't going to the doctor as often as health insurers have been expecting. Higher deductibles, co-pays and other rising out-of-pocket expenses have also depressed health-care utilization. The result? Huge first-quarter profits for some of the country's biggest health insurers, who weren't anticipating such behavior from their customers in 2011, as UnitedHealth Group's CEO explained at an investor conference this week.

But for consumers — along with the health-care system as a whole — the development is a double-edged sword. To a certain extent, insured individuals may be forgoing unnecessary, costly procedures that have contributed to out-of-control health-care spending and rising costs that policymakers have vowed to contain. They'll take a pass on the pricey MRI or dental crowns that they might have gone for without a second thought in earlier years. But Americans may also be forgoing vital preventative medicine and early treatments to nip potentially seriously problems in the bud. While they may save themselves — and other health-care stakeholders — money in the short-term, everyone could end up paying more down the road.

The issue raises big questions about the best way to convince insured Americans to cut back on unnecessary health expenses without forgoing vital treatment. Government cost-cutting provisions like the new Independent Medicare Advisory Board have raised concerns that bureaucrats will end up "rationing" care. But the reality is that someone is going to have to say "no" to excess spending at some point, as I've explained previously. "Rationing is going to go on within the Medicare system. It's a fact of life. … The question's going to be, is that decision going to be made by government and imposed top down under the current system?" the Cato Institute's Michael Tanner told Politico last month.

As Tanner points out, Paul Ryan's Medicare plan intends to empower individuals to make such decisions, giving them a subsidy to purchase insurance on their own rather than having the federal government cover all their expenses. But as the recession may show, if individuals have less to work with up front, they could end up "self-rationing" and forgoing important treatment due to financial hardship or poorly informed decisions.

"You want to be changing habits in a good way. A lot of care was not terribly necessary, but you really want to make sure that people are still getting appropriate care," Kate Sullivan Hare, a long-time health policy observer, tells me in an interview. "Is it 'self-rationing' or rational care?"

If individuals are going to be left on their own to make these tough choices about health spending, they may still need outside support if policymakers really want to improve health outcomes and curb costs in the long run, Sullivan Hare adds. "They'll still need a third party to guide them, either a plan that financially incentivizes them, or a doctor providing them that guidance," she suggests.

To put it another way: If individuals have less available money available to them from the start — whether due to economic hardship, higher deductibles, or increased cost-sharing in government health programs — there's likely to be a drop in their use of both unnecessary and necessary care. The question is how to curb the former without sacrificing the latter.

Suzy Khimm is a staff reporter in the Washington bureau of Mother Jones.

Taegan Goddard has some fun with Reps. Terry Lee and Darrell Issa, who mocked President Obama’s (correct) statement, made during his meeting with the House GOP, that the tax burden now is lower than it was under President Ronald Reagan. Federal tax revenues as a percent of GDP averaged 18.2 percent under Reagan, and 14.9 percent under Obama. In fairness, Lee and Issa credit Obama with saying tax rates are lower than they were under Reagan, which is true insofar as the highest rate under the 1986 tax reforms was 33 percent (with an additional 28 percent bracket above that), to the current high of 35 percent. But for most of Reagan’s presidency, the top rate was 50 percent. Indeed, Reagan fought for a 50 percent rate, as the top rate before he took office was 70 percent. So even if you look just at income tax brackets — a very limited and highly misleading way of measuring the tax burden — Obama is correct that rates were higher under Reagan.

More the point, Lee and Issa should be proud that the tax burden is this low. After all, the main reason it’s so low is that congressional Republicans successfully fought for the lowest rates under the Bush tax bill (rates lower than those in effect during Bush’s actual presidency, mind you) to be extended, and with a payroll tax cut added for good measure. It’s a testament to the legislative skill of Lee and Issa’s Senate colleagues that revenues have bottomed out. The right response to Obama’s claim, then, should have been a “Damn straight!” not a “Yeah, sure.”

Dylan Matthews is a student at Harvard and a researcher at the Washington Post.

I got such a great response to yesterday’s meme-busting post on tort reform and cost control that I decided to give you another.

Every time I talk about health care policy with physicians, one inevitably tells me of the doctor he or she knows who ran away from Canada to practice in the United States. Evidently, there’s a general perception that practicing in the United States is much more satisfying than in countries such as Canada.

If only that were so.

Let’s start with the underlying rationale. Satisfaction is measurable. The Commonwealth Fund measured it in its Survey of Primary Care Physicians in 11 Countries, 2009: Perspectives on Care, Costs, and Experiences:

Mail, phone, and e-mail survey of primary care physicians from February to July 2009 in Australia, Canada, France, Germany, Italy, Netherlands, New Zealand, Norway, Sweden, United Kingdom, and United States

Samples: 1,016 Australia, 1,401 Canada, 502 France, 715 Germany, 844 Italy, 614 Netherlands, 500 New Zealand, 774 Norway, 1,450 Sweden, 1,062 United Kingdom, and 1,442 United States

Here’s what they found:

(Mark Lennihan - AP) Matthews is writing Wonkbook while Ezra is on vacation.

Five in the morning

1) Moody's says it may downgrade US debt if the debt limit isn't increased, report Zachary Goldfarb and Felicia Sonmez: "Moody’s Investors Service warned Thursday that it may soon downgrade the U.S. credit rating because of mounting concerns that the government will default, adding new urgency to negotiations between President Obama and congressional Republicans over the nation’s debt. Moody’s, one of the premier credit-rating agencies, said that political gamesmanship over raising the government’s $14.3 trillion debt ceiling has been worse than expected. If progress toward increasing the limit isn’t made by mid-July, Moody’s said it would take another step toward reducing the country’s top-of-the-line AAA rating by putting the United States under review for a possible downgrade."

2) The US is selling off its remaining stake in Chrysler, reports Peter Whoriskey: "The U.S. Treasury announced Thursday night that it has reached an agreement to fully withdraw from its ownership stake and other investments in Chrysler and that it will recapture most of the $12.5 billion it has put into the automaker’s rescue. The United States will sell its 6 percent equity stake in the company to the Italian automaker Fiat, which already has a stake in the company and whose chief, Sergio Marchionne, now runs Chrysler. The transaction is expected to allow Fiat to take a majority stake in the fabled U.S. brand. With that sale and other related transactions, the United States will have recovered $11.2 billion, or about 90 percent of the rescue money."

3) It's do-or-die time for many Obama nominees, report Abby Phillip and Josh Gerstein: "It’s crunch time for the White House to get key executive branch jobs filled before the end of President Barack Obama’s first term. Dozens of top posts in both the executive branch and the judiciary remain vacant, while some of those who started near the beginning of the administration are bailing out. Nominees who aren’t confirmed by the Senate by the end of this year likely will become tangled in election-year politics, given Republican hopes of taking the White House, the Senate or both. If Obama wants a good shot at getting his nominees through this year, Hill veterans say, names need to reach the Senate by the summer recess. Adding to the heightened urgency for action: Many of the unfilled posts deal with Obama’s major policy priorities, including financial regulatory reform, immigration and health care."

4) Today's jobs report will indicate how much the economy's backsliding, reports Neil Irwin: "After a string of disappointing reports on the economy in recent weeks, Friday will be an acid test on whether the recovery can endure, as the Labor Department releases its May unemployment report. One of the few bright spots in the economic picture in the past three months has been solid and steady job creation by the private sector. Private employers added an average of more than 250,000 positions to their payrolls during that time...But some analysts are now predicting even slower job creation. If the May jobs numbers disappoint -- particularly if job creation skids to fewer than 100,000 positions added -- it would deflate remaining optimism that the economy is in a solid and self-sustaining expansion."

5) A meeting with Tim Geithner didn't satisfy the House GOP rank and file, report Jake Sherman and Marin Cogan: "House Republican freshmen emerged from a closed meeting with Treasury Secretary Timothy Geithner with much of the same frustration they had after the White House meeting yesterday, saying they do not expect a plan from the White House on massive spending cuts to accompany the debt hike. The hang-up from Republican newbies mirrored the concern from leadership -- that President Barack Obama has not put forth a plan to raise the debt ceiling. Rep. Tim Scott, a South Carolina Republican who is a member of the GOP leadership, said, 'We need the specificity and the details from the other side for us to have a serious conversation about any increase in the debt ceiling.'"

Swedish pop video interlude: Robyn's "Call Your Girlfriend".

Got tips, additions, or comments? E-mail me.

Still to come: Tim Geithner and his European counterpart are at odds on bank regulation; House Democrats want Obama to hold firm against Medicare cuts; there's a new White House Counsel; energy companies are influencing public school curricula; and the best motivational speech you've ever seen a grade schooler give.

If you'll join me on a journey deep into the wonky weeds, I'll reveal a few things about health insurance exchange subsidies that suggest that they are not ready for prime time. That doesn't mean they are bad policy. It just means that between now and 2014, they need some work.

As anyone reading this blog knows, a key piece of the ACA's reform of the non-group market will be the 2014 establishment of state-based health insurance exchanges. Premiums for exchange-based plans will be subsidized for those who qualify for exchange coverage and have incomes below 400 percent of the federal poverty level.

How those premium subsidies (officially, tax credits) vary by income and grow over time is established in the law, naturally. In particular, the government pays the difference between an individual's income-based contribution and the premium of the second-cheapest silver plan. Clear enough. But the law is vague and/or confusing in other respects relevant to the subsidies. That fact is no trifling matter, as state authorities are beginning to lay the statutory and regulatory foundation for exchanges. It's hard to traverse a confusing terrain with an incomplete map. But as I'll show, the exchange subsidy map definitely has a few holes.

Hole number 1: Subsidies might be far lower than expected. The ACA requires state exchanges to include Medicaid managed-care plans and to facilitate enrollment into them. This is sensible because individuals may move in and out of Medicaid eligibility, and the exchange is a natural choice to help manage that. Moreover, one-stop shopping for insurance plans is part of the purpose of exchanges. So, bundling Medicaid and non-Medicaid plans into one exchange is good, right?

Not so fast. Some health policy experts see a problem. It's expressed by Urban Institute's Stan Dorn just after the 54:30 mark in the video of a recent Alliance for Health Reform and Commonwealth briefing. Dorn sketches out what happens when a Medicaid managed care plan turns out to be the second-cheapest (in premium) silver plan, and thereby drives subsidy levels. Medicaid has premiums well below commercial plans because it reimburses providers at much lower rates. But if subsidies are based on a low Medicaid premium, then those who are ineligible for Medicaid would receive a subsidy inadequate to cover the non-Medicaid plans for which they are eligible. In short, the required individual contributions would be much higher than expected. Nobody outside of Medicaid-eligible individuals could find decent coverage without paying a lot more than designers of the law expected or wanted.

Hole number 2: Subsidies might not be available to children who need them. Some employers do not offer health insurance plans with dependent coverage. Parents who work for such employers may be ineligible for exchange-based coverage themselves, but may seek child-only policies in the exchange. According to a recent Robert Wood Johnson Foundation/Urban Institute brief, such policies must be offered, but it is unclear how federal subsidies will be calculated for them. One uncertainty, among many, is whether or not the premium contributions parents make to their employer plan count toward fulfilling their premium responsibility to qualify for exchange subsidies.

Hole number 3: Subsidies might erode over time. The law is incredibly complex in how it characterizes the manner in which premium subsidies will grow over time. If you want the hairy details, CBO has them. At issue is what proportion of the second-cheapest silver plan the government pays. That proportion varies by income and  changes over time. In fact, it may erode over time, so individuals end up paying more and more of their premiums. (Critics of the Republican plan for a voucher-based Medicare should find this familiar.)

What drives the erosion is how government subsidy contributions are indexed. The indexing formula changes in 2019 if total government spending on them exceeds about 0.5 percent of GDP. If that happens, and some think it will, subsidies will erode, as illustrated by Jed Graham.

Conclusion: Clearly the problems above threaten the spirit and purpose of the exchange subsidies. The point of the subsidies is to make coverage affordable. If it fails to do that for the reasons above, or any others, the individual mandate cannot work.

I was among those who thought that a 2014 start date for subsidized exchange coverage was a political liability. It provides too many years for the law to be attacked, weakened,or possibly repealed before its main feature kicks in. However, given the issues I've outlined above (and there are many others), it is clear that moving too quickly would have been a disaster, too. The exchange subsidies are not ready for prime time.

To the extent that fixing these problems will require new legislation, that may not happen until after the 2012 election, if at all. No improvement to the law would pass today's Congress, particularly ones that will cost more.

So, perhaps I was wrong about the 2014 start date. In this political climate, it may be a blessing that exchanges don't begin until then, though certainly not for those who could use a bit of help obtaining health insurance. Such individuals have already waited too long.

Acknowledgment:   Brad Flansbaum   provided key background for some portions of this post.

Austin Frakt is a health economist and an assistant professor of Health Policy and Management at Boston University’s School of Public Health. He blogs at the Incidental Economist and tweets via @afrakt.

In 2008 and 2009, the world was in the grips of a brutal recession and there wasn't much to be cheerful about. There was, however, one tiny consolation: Greenhouse gas emissions were plummeting, thanks to reduced energy use, and it looked like all those worries about global warming could be put on hold for a bit — or at least temporarily postponed. But the reprieve turned out to be more temporary than expected. The International Energy Agency has just released new data showing that carbon dioxide emissions shot way back up in 2010, thanks to rapid growth in developing countries. Since this is Ezra’s blog, here’s the obligatory graph:

I got that chart from John Cook's indispensable Skeptical Science site, which is a great depot for scientific arguments about climate change (if you think you’ve come up with a novel reason why global warming is all hokum, search Cook's site first). He's lined up the observed growth in CO2 emissions against the various scenarios laid out by the Intergovernmental Panel on Climate Change. From 2003 to 2008, we were exceeding even the IPCC's worst-case scenarios. Then we dropped down to safer territory. Now we're going back up. The takeaway message is that we're on pace for about 4°C of warming by 2100.

Now, whenever you see a headline that says, “Scientists predict X degrees of warming by the year 2100,” that's basically a function of two things. The first variable is climate sensitivity — how much the world will warm in response to changes in radiative forcing (such as stronger solar activity or increased carbon-dioxide in the atmosphere, which traps heat). The second variable is how much extra carbon pollution we'll have wafted up into the atmosphere by the time 2100 rolls around.

Unfortunately, climate sensitivity is a function of basic physics and we don't have a lot of wiggle room there. The rough consensus among climatologists is that every doubling of CO2 will warm the Earth around 3°C. Yes, that figure has been largely derived from computer modeling, but there are good external reasons to believe those models. For one, scientists can check the models against natural experiments — looking, for instance, at how the Earth's temperature responds to things like the massive Pinatubo eruption in 1991. And paleoclimatologists can look at how the Earth's climate has reacted in the past to changes in carbon-dioxide (in the past, those changes were often due to shifts in the Earth's orbit rather than coal-fired power plants, but the effect on Earth's average temperature was still measurable). All of this research has tended to converge around one answer — double CO2 in the air, get about 3°C of warming.

(Fun tangent: I'm sure most people are vaguely familiar with the brouhaha over Michael Mann's famous hockey stick graph showing that the Earth is heating up at a faster rate than at any time in the past 1,000 years, right? The climate-skeptic argument is that Mann — and all the other scientists who have reproduced his work — downplayed the Medieval Warm Period. That's doubtful. But if the skeptics did happen to be right, and it was warmer in the medieval era than Mann thinks, that would actually be more worrisome, not less — it would mean the Earth is actually more sensitive to changes in radiative forcing than climatologists have suspected.)

Anyway, that leaves the second variable. It's a lot harder to predict how quickly greenhouse gas emissions will grow between now and 2100. Energy policies could change. New technologies could develop. Solar panels could become so fantastically cheap that coal plants become obsolete. It's extremely tricky for the IPCC to predict these things, which is why the panel laid out so many different emissions scenarios. But right now, we're on pace to hit the IPCC's A2 scenario, which would probably warm the planet roughly 4°C over pre-industrial levels.

And, what a coincidence, not too long ago there was a special January 2011 issue of the “Philosophical Transactions of the Royal Society,” a scientific journal, laying out just what a 4°C warmer world would look like. Here's a sample paper, about the implications for agriculture: “[T]he kind of changes that would occur in a 4°C+ world would be way beyond anything experienced in recent times. There are many options that could be effective in helping farmers adapt even to medium levels of warming ... but it is not difficult to envisage a situation where the adaptive capacity and resilience of hundreds of millions of people in [sub-Saharan Africa] could simply be overwhelmed by events." Good times.

Brad Plumer is an associate editor at the New Republic.

State-supported mental health care, like many social services, has been especially vulnerable in the recent rounds of budget cuts. Over the past two years, some $1.6 billion has been slashed from non-Medicaid state spending on mental health, according to the National Alliance on Mental Illness. But a growing number of law enforcement officials — along with mental health advocates — are voicing concerns that such cutbacks not only hurt mental health beneficiaries but also overburden the country’s prison system.

In Illinois, where mental health spending has dropped 15 percent since 2009, the Cook County sheriff may file a lawsuit against the state for allow the county jail to “essentially become a dumping ground for people with serious mental health programs,” reports a local ABC affiliate, WLS-TV. The details:

Sheriff Tom Dart says it has gotten so bad Cook County Jail is now the largest provider of mental health treatment in the state. … As much as 20 percent of the jail's population has been diagnosed with some type of mental illness. That's 1,300 to 1,400 people receiving psychiatric care while behind bars.

“What ends up happening is, there’s no safety net to catch them, so they end up committing crimes, getting swept up by the police and coming to jail,” said jail psychiatrist Dr. Jonathan Howard.

The head of Illinois’ mental health department says that the state is trying to make do with limited resources — but acknowledges that it still can’t afford treatment programs such as community-based care that might be more effective, as WLS-TV points out.

Similarly, the Los Angeles Times has examined a public safety program in Nevada that’s also under threat because of mental health budget cuts. The effort pairs police officers in Reno with mental health counselors to reach out to the mentally ill, whether they’ve committed crime, are a threat to themselves, or could be in the future. “Already starved for services, troubled citizens sometimes tumble into homelessness and alcoholism and tussle violently with police, who are usually ill-equipped to help them,” the story explains.

In Nevada and Illinois, as in states across the country, mental health services will continue to be vulnerable to budget cuts. According to University of Chicago Professor Harold Pollack, states deliver many mental health and behavioral services outside of Medicaid and are thus freed from federal coverage requirements — as well as matching dollars — making these services a more tempting target for legislators committed to fiscal austerity.

Mental health advocates have long banged the drum about the connection between mental health and crime, noting especially strong links between recidivism and mental illness. In a recent report on the phenomenon, “Cost-Shifting to Criminal Justice,” NAMI notes that as much as a quarter of prisoners in the United States suffer from a serious mental illness, citing a 2006 Department of Justice study. The group adds that 50 percent of previously incarcerated individuals with serious mental illnesses end up returning to jail — at times because untreated mental illness has led them to violate parole, citing the Council of State Governments.

Such findings may undercut the economic rationale for cutting mental health benefits if states are simply shifting — or increasing — costs to the prison system in doing so. As I've reported previously, many states are also battling to contain prison costs as well as health services. So budget-conscious legislators may be especially willing to think twice if research continues to support this argument.

Suzy Khimm is a staff reporter in the Washington bureau of Mother Jones.

( National Archives )

At this point, most everyone agrees that Americans are way too dependent on oil in our daily lives. Set aside pollution issues, even. There’s still the raw fact that the economy is hideously vulnerable to wild swings in the price of crude. Another well-timed spike could hurtle us back into recession. All sorts of solutions have been proposed, from drilling the Arctic (not likely to help much) to alternatives like electric cars (which could take years). Then there are urbanist types who point out that if people simply had more alternatives to driving — from mass transit to biking — then oil spikes wouldn’t hurt as much. Even though a significant subset of people would still have to drive, more options for more people would, at the margins, make our economy more resilient in the face of, say, civil war in Libya.

 The trouble with this urbanist approach is that it has a P.R. problem. Americans are pretty culturally attached to the suburbs, and it’s not terribly popular to suggest that more people should learn to love denser living and the joys of cramped city life. So here’s another way to think about the problem. Earlier today, Rep. Earl Blumenauer (D-Ore.) released a new report, “Freedom from Oil: How Transportation Choices Can Provide Gas Price Relief” that subtly raised an interesting point: Right now, people don’t really have enough information to make reasoned transportation decisions. And simply providing that information could have a big impact.

 Here’s what I mean. Last week, Annie Lowrey wrote a wonderful piece for Slate about all the myriad ways that long commutes make us miserable. People absolutely loathe sitting in traffic, and long commutes increase the risk of obesity, divorce, stress, sleeplessness, neck pain. So why do we keep opting for long commutes? Here’s Lowrey:

“Morning Meeting” at Blackstone Valley Prep charter school in Rhode Island, where one-third of students are middle-class or affluent, and about 45 percent are white. (Dana Goldstein) In Sunday’s Daily News, lawyer Eric Grannis, a charter school board member and the husband of New York City charter school missionary Eva Moskowitz, wrote an op-ed lamenting the racial and socioeconomic homogeneity of most charters. Grannis called for new laws to allow charter operators to design expanded admissions zones with the goal of achieving more diverse schools.

I’ve written extensively about the underappreciated social and academic benefits of integrated student bodies, so I’m thrilled to see influential charter school advocates embracing the cause. That said, there are some troubling questions about whether the most politically popular charter school model — the “No Excuses” model popularized by KIPP and embraced by Moskowitz’s Success Charter Network — is palatable to middle-class and affluent parents.

Consider the experience of Rhode Island, whose state legislature, in 2008, passed a law allowing mayors of neighboring towns and cities to form partnerships to issue school charters. The resulting schools must be regional, accepting students by lottery from both urban and suburban districts. The explicit goal of the legislation is to create racially and socioeconomically diverse schools.

At the heart of Paul Ryan’s plan for Medicaid is a tectonic shift in the federal government’s authority over the entitlement. In the Wisconsin Republican’s proposal to “block grant” the program, states would receive a fixed amount of federal money for Medicaid — and much greater leeway to change the program’s structure — rather than an uncapped, formula-based contribution with many strings attached. The Ryan plan, along with other more incremental GOP proposals, would fundamentally alter the federal government’s role in structuring, overseeing, and administering Medicaid, abdicating much of this authority to the states.

In the face of such challenges, the Obama administration is quietly taking steps to reassert and strengthen the federal government’s authority over Medicaid. A few weeks ago, the Centers for Medicare and Medicaid Services rolled out a proposal that could make it more difficult for states to cut rates for doctors, hospitals, and other providers in Medicaid—one of the many ways that cash-strapped statehouses are trying to save money.

The proposed rule requires states to implement new standards by 2013 “to review access to Medicaid annually, based on enrollee needs, the availability of health professionals and medical care, and the use of services,” reports American Medical News. The administration will also require state officials to make the results of these evaluations public, in hopes of holding states more accountable for changes they make to Medicaid and to dissuade them from squeezing large numbers of Medicaid beneficiaries out of the program. “The federal government is asserting its role as steward of the program,” says Peter Harbage, a health-care consultant and former Clinton administration official.

Former LBJ aide Joseph Califano’s op-ed on how his old boss handled congressional intransigence on the debt limit is interesting, but I don't think it provides much in the way of advice for the Obama administration on the matter. Here’s Califano’s description of how Johnson responded to Congress voting down an increase in the debt limit:

Johnson was furious. “There’s plenty of money for domestic programs,” he told me. “Tell them we’re prepared to put big public housing projects right in the middle of their districts to show their constituents how much money is available for domestic programs. Maybe that’ll change their minds.”

This wasn’t just an idle threat; he knew that a little hardball, combined with some well-placed promises, could save the bill. Indeed, after some choice conversations with liberal representatives — and a quiet commitment to conservatives to curb domestic spending — the increase passed the House on June 21.

This says more about how much Congress has changed since the ’60s than about the importance of playing hardball. For one thing, the specific mechanism wouldn’t work, as the federal government hasn’t generally been in the business of building big new public housing projects in recent decades. Indeed, it’s hard to think of a federal program whose spending decisions Obama has more or less unilateral control over, and which he could similarly wield against skeptical lawmakers. Given the GOP’s unilateral moratorium on earmarks, he can’t even threaten to veto those anymore.

More to the point, the “liberals” and “conservatives” Johnson was dealing with were within the Democratic Party. There were Democratic majorities within the House and Senate, and the filibuster hadn’t become a de facto supermajority requirement yet, so any given bill could pass with only Democratic support. Yes, there was more internal disagreement then than now, what with liberal Democrats’ frustration over the Vietnam war and the sizable Southern Democrat contingent that was still present, but fundamentally Congress and Johnson were on the same team. The same legislators he was pressuring had a few years earlier voted for all of his major policy priorities.

If Obama had to persuade congressmen who voted for health-care reform, cap and trade, FinReg, and all the rest to support an increase in the debt limit, then maybe looking to LBJ’s methods for guidance would make sense. But he has to persuade people who oppose everything he stands for. That’s an entirely different problem in need of an entirely different solution.

Dylan Matthews is a student at Harvard and a researcher at The Washington Post.

One of the critiques of the Affordable Care Act is that the mechanisms that are intended to bend the cost curve leave too much room for uncertainty. Will accountable care organizations really work? How will the Independent Payment Advisory Board keep Medicare spending on a more sustainable track? Nobody knows. These are bold experiments and they're the best we have. And, though they may fail, we must try.

But suppose they work, as demonstrated by much lower growth in Medicare spending in, say, 2020. The next leap of faith is that the innovations that saved Medicare will transfer to the private sector, saving the entire health system. How? It's unclear. It's the underpants gnomes strategy embedded in current health policy (see phase 2).

The strategy is expressed by the Center for American Progress’s long-term budget plan:

[P]redicting the exact effect of the myriad test programs and reforms in the new health law is fraught with uncertainty. Thus we also include a failsafe mechanism that would ensure significant savings.

Our failsafe would be triggered if, starting in 2020, total economywide health care expenditures grow at a rate faster than the economy. Should that happen then we would empower the Independent Payment Advisory Board to extend successful reforms in Medicare and other public programs to insurance plans offered in the health care exchanges and then potentially to all health care plans, such that the target is met. This will ensure that costs are constrained across the health care sector, preventing cost-shifting and maintaining access for all.

The cost savings mechanism is crystal clear, right? Just transfer that Medicare magic to the private sector. Done.

With the presidential election coming up, and health care still a hot issue, I’ve been preparing a series to highlight some of the “memes” that continue to permeate our debate, even when evidence suggests they aren’t true.

For better or for worse, whenever many are asked about how they would help control the cost of the health-care system, tort reform always seems to be one of the first things offered as a solution.

The argument goes that doctors, afraid of being sued, order lots of extra tests and procedures to protect themselves. This is known as defensive medicine. Tort reform assumes that if we put a cap on the damages plaintiffs can win, then filing cases will be less attractive, fewer claims will be made, insurance companies will save money, malpractice premiums will come down, doctors will feel safer and will practice less defensive medicine, and health-care spending will go way down.

Ergo, tort reform = cost control.

Let’s start with some basics. How much does the malpractice system really cost in the U.S.? The most recent, comprehensive estimate, which was published in Health Affairs in December, estimated that medical liability system costs were about $55.6 billion in 2008 dollars, or about 2.4 percent of all U.S. health-care spending. Some of that was indemnity payments, and some of it was the cost of components like lawyers, judges, etc.; most of this, however, or about $47 billion, was defensive medicine. So yes, that is real money, and it theoretically could be reduced.

The question is, will tort reform do that?

I’m not a physician, but I’ll go out on a limb and guess that operating with a hatchet instead of a scalpel would run counter to best practice.

Likewise, taking a meat ax to Medicare is also not a sound strategy. Yet, that’s what is often suggested, figuratively speaking, in the name of health reform. The temptation is to solve Medicare’s spending problem by cutting payments to providers either outright or by shifting them to beneficiaries, as Republicans in Congress have voted to do. A slight variation is to reduce regional variation in Medicare spending by cutting (or reducing the growth in) provider payments in high spending areas and increasing them in low spending areas.

However, none of these approaches are health reform we should welcome if they don’t improve health. Would they? No.

In a new paper in Health Services Research, Jack Hadley, Timothy Waidmann, Stephen Zuckerman, and Robert Berenson explain why. (The paper is gated, but you’ll find more at the Robert Wood Johnson Foundation). In a beneficiary-level analysis using survey data linked to Medicare administrative records, they found that higher medical spending predicts better health.

To the extent that our results indicate that on average, across the entire range of medical spending and health conditions, the relationship between medical spending and health is positive, then across-the-board reductions in or limits on Medicare spending may result in poorer health for some Medicare beneficiaries. Moreover, because the variation in medical spending in our analyses was driven by variations in practice patterns across geographic areas […] then targeting Medicare spending reductions on geographic areas with high average Medicare costs per beneficiary would also appear to be unwarranted.

In other words, according to their findings, cutting Medicare reimbursements to providers would harm health, even in areas with above average spending. A hatchet is the wrong tool.

Yet, there is other work that suggests high spending areas have worse health outcomes. However, paradoxically, cutting spending in that case is the wrong thing to do too. The reason is explained with a figure by Jill Bernstein, James Reschovsky, and Chapin White in a National Institute for Health Reform paper (ungated PDF), reproduced below. (The figure was adapted from an earlier one published by Jonathan Skinner, Douglas Staiger, and Elliott Fisher in Health Affairs (ungated PDF).)

I was lucky enough to go to a small liberal arts college that encouraged you to try and take classes in a variety of subjects. One of my favorites was “Legal Institutions and Democratic Practice.” The thrust of it was a discussion of how the Supreme Court has used judicial review to effect social change throughout American history. It was totally irrelevant to my pre-med education, but there’s no class I think about more often two decades later.

Many people are focused on how the courts might rule on the individual mandate. Here in Indiana, though, we’re also watching how the courts might rule on HB 1210:

Prohibits state agencies from entering contracts with or making grants to any entity that performs abortions or maintains or operates a facility where abortions are performed. Cancels state funding for any current contracts with or grants to any entity that performs abortions or maintains or operates a facility where abortions are performed.

This is, of course, the bill that defunds Planned Parenthood.

Really, though, what this bill says is that Medicaid money can no longer go to Planned Parenthood. No one is stopping you from spending your own money there. Nor is anyone prohibiting private plans from covering services at Planned Parenthood. This is just stopping Medicaid recipients from getting care at Planned Parenthood.

Now, it’s important to note that no Medicaid money was going to abortions; that would violate federal law. If you were a Medicaid recipient and you went to Planned Parenthood to get an abortion, you had to find some other way to pay for it. What’s new is that the bill now prevents Medicaid recipients from going to anyone who provides abortions, including Planned Parenthood, for any type of care.

This is a potential problem, according to the Indiana Legislative Services Agency (pdf):

(JIM YOUNG - REUTERS) Matthews is writing Wonkbook while Ezra is on vacation.

Five in the morning

1) An Obama-GOP summit didn't result in progress toward a debt deal, report Zachary Goldfarb and Paul Kane: "A Wednesday meeting between President Obama and House Republicans about the nation’s debt ended with neither side showing a willingness to give ground on any substantive points or rhetorical differences...The most dramatic moment of Wednesday’s 75-minute meeting came when Rep. Paul Ryan (Wis.), the man behind the GOP’s budget plan, said Obama is playing politics in the debt debate. He accused the president of mischaracterizing the GOP budget proposal as turning Medicare into a 'voucher' program that would hurt seniors. Ryan’s comments earned him a standing ovation from his colleagues...Obama replied that both sides have demagogued the debt issue.

2) John Boehner says this month is do-or-die for a debt deal, report Bob Cusack and Molly Hooper: "House Speaker John Boehner (R-Ohio) said Wednesday that he wants to strike a deal on the nation’s debt limit over the next month. Boehner’s comments could change the timetable for a bipartisan agreement, which many lawmakers and Wall Street analysts had previously assumed would not be ironed out until right before the August congressional recess. His statements could also be an attempt to shield the GOP from blame if the stock market plunges next month in the absence of a deal. In a press briefing with reporters, Boehner said that waiting until later in the summer could negatively affect financial markets. He claimed an agreement 'needs to be done over the next month.'"

3) The recovery is slowing down, reports Neil Irwin: "The economic recovery is faltering, and Washington is running out of ways to get it back on track. Two bright spots over the past few months -- manufacturing and job creation by private companies -- both slowed in May, according to new reports Wednesday. The data come amid other reports of falling home prices, declining auto sales, weaker consumer spending and a rising pace of layoffs...Just a few months ago, the economy seemed poised to finally strengthen. Business confidence was rising, and extensive government efforts to foster growth were underway. But those hopes are being dashed...Instead of accelerating, the U.S. economy is puttering along at a growth rate of 2 to 3 percent -- barely enough to bring down joblessness slowly, if at all."

4) Lackluster economic figures should be making Obama sweat, reports Binyamin Appelbaum: "No American president since Franklin Delano Roosevelt has won a second term in office when the unemployment rate on Election Day topped 7.2 percent. Seventeen months before the next election, it is increasingly clear that President Obama must defy that trend to keep his job. Roughly 9 percent of Americans who want to go to work cannot find an employer. Companies are firing fewer people, but hiring remains anemic. And the vast majority of economic forecasters, including the president’s own advisers, predict only modest progress by November 2012. The latest job numbers, due Friday, are expected to provide new cause for concern. Other indicators suggest the pace of growth is flagging."

5) Republicans are taking aim at public health programs, reports Lyndsey Layton: "House Republicans are pushing back against a series of public health measures, including school lunch standards and tobacco regulation...The Republicans have used an agriculture appropriations bill to send several messages: They don’t want the government to require school meals that are more nutritional but also more expensive, they don’t want the government to prod food companies to restrain marketing to children, and they don’t want the Food and Drug Administration to regulate any substance based on anything but 'hard science.' They took aim at measures that are part of the Obama administration’s efforts to combat obesity among children and adults as well as some initiatives enacted by the previous Congress."

Cover song interlude: Queens of the Stone Age play "Needle in the Camel's Eye" by Brian Eno.

Got tips, additions, or comments? E-mail me.

Still to come: The US is staying mum on who it wants to run the IMF; accountable care organizations may not be the cost-cutting mechanism many hoped for; for-profit colleges are facing tougher regulation; a group of cities is teaming up to fight climate change; and a cat who's very good at shell games.

Struggling to cover their health-care costs amid a fiscal crisis, states are scrambling for new sources of Medicaid revenue. As I blogged here this week, red and blue states are now enrolling disabled and elderly Medicaid recipients in managed-care programs to cut costs. Elsewhere, legislators are trying to raise premiums for Medicaid and other low-income health-care beneficiaries, primarily to save states money.

In Wisconsin, Gov. Scott Walker could end up raising premiums for beneficiaries of BadgerCare Plus — the state health-care program for Medicaid and low-income families — as part of his budget plan to cut $466 million from Medicaid. “Federal law allows us to require families to provide five percent of family income to the cost of their care, and we think it’s appropriate for families above 100 percent of poverty to be contributing something to their health-care costs,” the state's health services secretary, Dennis Smith, said at a statehouse hearing last month. Likewise, Colorado Republicans recently passed a bill to raise premiums for low-income children enrolled in the state's Child Health Plan Plus — legislation that Democratic Gov. John Hickenlooper vetoed this week.

Proponents of cost-sharing argue that the move can save money, not only by giving states more revenue to work with but also because it will put patients in the driver's seat, pushing them to make better decisions about their health care — an argument that supporters of Paul Ryan's Medicare plan have echoed. "Cost-sharing flexibility frees up state dollars to expand covered populations, improve benefits, promote patient responsibility and encourage appropriate utilization of services," President George W. Bush's Health and Human Services secretary, Mike Leavitt, asserted after the passage of the Deficit Reduction Act of 2005, which gave states more leeway to alter their Medicaid programs.

But other advocates and researchers warn that even small premium increases could result in a significant exodus of families from the program. Currently, participants in Wisconsin's BadgerCare Plus above 150 percent of the poverty line pay 0.4 percent to 5 percent of their income toward health care.  In a recent study of possible reforms to the program, Georgetown's Center for Children and Families examined the impact of imposing premiums of 3 percent on families between 100 and 200 percent above the poverty line:

If premiums at this level were imposed, our research indicates that sharp declines in current BadgerCare Plus participation could occur. It would be expected that 49,422 fewer children and parents would be enrolled in BadgerCare Plus under the more these families would find other sources of coverage, but given the declining levels of affordable employer-sponsored coverage for families with low incomes, it is likely that many of these children and their parents would become uninsured.

It's unclear whether such a scenario would even be politically feasible, even if Walker were to throw his weight behind it. Federal law prohibits states from charging Medicaid premiums for families below 150 percent of the poverty line, which would force Wisconsin to apply for a waiver from the Obama administration if it wanted to impose premiums on those between 100 and 150 percent of the federal poverty line, as the Georgetown study uses in its model.

That being said, examples from other states could bolster the Georgetown researchers' argument. After increasing cost-sharing in its own Medicaid program, for example, researchers found that Oregon experienced its own exodus of poor participants, who used primary care less and hospital emergency rooms more after leaving the program.

But state governments caught between a fiscal rock and a hard place may try to at least consider every available option to pay for Medicaid. And legislators who are unwilling or politically unable to reduce benefits or eligibility could be more willing to give cost-sharing a closer look.

Suzy Khimm is a staff reporter in the Washington bureau of Mother Jones.