A well-said defense of Obamacare

[anvi]

Ok, so what about the adjustments Australia made to its community rating policies some years back, known as LHC (Lifetime Health Cover)?  They found that community rating was leading to an adverse selection problem for the young, leading them to rely only on the national policy and not purchase supplemental private plans.  So, they adopted additional reforms that modified the community rating rules to allow individual companies to sell policies whose premiums were adjusted for age entry, allowed young adults to buy policies that insured some things and excluded others, allowed them to choose between different deductible amounts, and, as I understand it, in some cases adjustment of pooling and policy prices for older enrollees as well.  They allowed, that is, what is apparently called "implicit rating" within the larger structure of a community rating framework.  The product differentiation and its effect on premiums seems to have led to a dramatic increase in the number of young people enrolled in private plans in Australia.  The author of the linked paper that presents this analysis notes toward the end (p. 607) that a few U.S. studies have also found that community rating doesn't have as much effect on numbers of people insured in states that have it, but has more an effect on policy sorting.

http://www.genevaassociation.org/PDF/Geneva_papers_on_Risk_and_Insurance/GA2008_GP33(4)_Buchmueller.pdf

[anvi]

I read some studies of this online this evening, and I do think, if we just stick with pure community rating, the cross-subsidy issue could indeed be quite burdensome on the young.  I agree in principle with the cycle of life idea.  But if the young can't afford it, it's hard to observe the principle.  I think we may either have to make modifications to the community rating policies akin in some way to how Australia handled it, or just go with means-tested subsidization, which is more straightforward and arguably fairer.  I'm glad the mandate held, but that doesn't solve all the policy problems.

[anvi]

Something is rotten in Denmark. Probably the government pumping money in, had something to do with it, but it would be great if someone directed me to some intelligent paper on the subject, that has been peer reviewed and sustained that review.

Not a peer-reviewed paper (I'd have to do some digging for that) and this is a bit dated of a FinAid research report.  But despite the ten-year old numbers, I think the identification and breakdown of cost-drivers is still basically good.

http://www.finaid.org/calculators/tuitionanalysis.pdf

[anvi]

Well, I will ask a few administrator friends of mine and get you some peer-reviewed research references.  (I'd be interested to read them too, anyway.)

[anvi]

The cases of private and public increases are of course distinct in important ways.  Private universities are in fierce competition with each other, and since Boards of Trustees are importuned to spend more at the same time that cuts are blamed on their decisions and no one else's, the spending increases continue as do the tuition hikes.  There are a lot more factors in the case of public schools.  State cutbacks are one factor, but so are steadily increasing state reporting requirements, which accounts for some of the increased administrative hiring and extra faculty compensation in cases where they do help there.  But the pumping of more financial aid moneys in also encourages public schools to rely more on tuition at the same time that other sources of funding are in short supply.  There's no doubt that increased instructional costs is a factor too, as well as additional student services that have been piled up by universities which accounts for another good bit of increased administrative hiring.  There are lots of factors, and I think sometimes, because there is a dynamic relation between so many of them, isolating them from one another in quantitative analyses can get tricky.