What is the purpose of medical insurance?

Recently Oregon did a field experiment (the experiment part was initially unintentional, but intentional as soon as famous health economists Kate Baicker and Amy Finklestein heard about their plans) in which they expanded Medicaid to some people and not to others.

More and more of the results are coming out.  They’ve found that Medicaid stops catastrophic medical expenses.  They’ve found improvements in mental health just from having coverage.  At this point, they haven’t found improvements in health compared to the control group.  Some conservative groups are citing this last fact as evidence that health insurance is unnecessary for poor people.

Now, there’s several reasons they might not have found improvements in health compared to the control group.  Oregon might have a better social safety net than other places.  Or, Oregon may have a worse problem with the ability to find doctors who take Medicaid because it doesn’t reimburse enough, in which case both insured and uninsured people would be getting the same emergency room treatment.  Or, we may see health improvements down the road as we see the effects of people taking their diabetes and heart medications more regularly.

It is, in fact, a little odd to think that health would be improved with access to coverage– after all, didn’t Mitt Romney say that anybody can get health care because emergency rooms can’t turn people away?  Still, plenty of other evidence suggests that some baseline of insurance helps people to get preventative care, to stay away from emergency rooms for routine care, to take medications for chronic conditions, to see the doctor before problems become complicated, and so on.

But even if Medicaid expansions don’t improve health, that doesn’t mean they’re a failed policy (unless, of course, it is lack of access to doctors who will take Medicaid that is the problem, but the solution to that problem is to increase reimbursements).  The purpose of insurance isn’t to provide access to care, although it may have that effect.

The purpose of insurance is to smooth consumption over states of the world.  It is there to make sure that you don’t end up with a catastrophic loss when times are bad.  Car insurance doesn’t prevent you from getting into a car wreck, but it helps pay out when you get into an accident.  Life insurance doesn’t prevent you from dying, but it compensates your heirs when you lose your life.  Home insurance doesn’t prevent you from getting robbed or keep your house from burning down, but it pays you back when you suffer a loss.  Unemployment insurance pays out when you lose your job through no fault of your own but doesn’t do much to keep you from getting laid off.

Medical insurance is the same thing– it provides financial protection when you’re hit with large medical bills.  In the case of Medicaid, the government is picking up the premiums, but it is still health insurance.  Better health would be a great outcome, and it’s one we were expecting, but lack of better health doesn’t mean we should toss out Medicaid expansions.

What do you think the purpose of health insurance is?  Why (or why not) do you buy coverage?


link love

Radish reviews notes that how to suppress women’s writing hasn’t changed.

A CNN reporter walks the path of the OK tornado.

Patrick Rothfuss gives an in-depth book review on one of our favorite classics.

Student debt survivor with a cute story involving a mattress.

Evolving PF doesn’t want to retire early.

Anything goes, 1 hr long, abbreviated version available on hulu.  You can also watch the earlier version on youtube… Ethel Merman was so young!

Wonder if you’re banned from Mr. Money Moustache for even polite disagreement?  You probably are.  Here’s an example.

Doctor Sardonicus gives us ass clowns on parade, caution rape triggers.  Discusses recent events in sci fi and comedy and explains why they’re not cool and words can hurt.

Oops, we totally forgot to link to this excellent post from Rachel Swirsky on the SFWA thingy.  It will make you laugh and think.

An update from a previous ask the grumpies post… what did tenured rock star end up deciding to do?  Check out the comments!

We were an editor’s pick in this weeks carnival of personal finance!  Squee!

Ask the grumpies: econ book recommendations for a gifted 9 year old

Monica asks:

Can you recommend a good intro book? I’m thinking about The Cartoon Introduction to Economics; the kid in question has a high level of comprehension and adores the graphic novel format.

We meander into lots of random conversations that touch on economics–I’m not the one who starts them! I don’t have a solid handle on the subject myself, so would most likely read the book too.  So far we’ve discussed supply and demand, inflation, opportunity cost, auctions, externalities…

The kid is almost 9 but a bit of an outlier. Middle school reading level is probably the sweet spot, I’m guessing…ze reads Smithsonian but not the New Yorker? I’m not so great at describing the level. Not up to algebra yet but probably will be in another year.

I have to admit that this question stumped me, and also any of my colleagues whom I’ve asked since getting it.  We’ve never really thought about econ and kids.  That’s not to say that people don’t– I know children of famous economists whose parents liked to do “studies” and play “games”, setting up elaborate exchanges at Christmas time involving trading unwrapped presents from Santa, for example.  Oddly, those children all became physicists.

We usually think of introducing economics sometime after algebra.  For adults I generally recommend Bob Frank’s Microeconomics and Behavior and Jon Gruber’s Public Finance and Public Policy.  These are both “reality-based” texts– Frank focuses on the difference between how people *should* act given economic theory and how they actually *do* act.  I feel like Gruber’s should be required reading because it explains that yes, there is a (limited) role for government and when and why and how and what are the consequences.  They’re both pretty good reads, IMO.

Age here is important because a lot of light economics reading tends to talk about sex.  I don’t know if we’re an over-sexed profession or we’re just not used to kids or what.  So Freakanomics (which I don’t like anyway) is definitely out.  The Worldly Philosophers, another popular read, discusses economist infidelities, such as Marx impregnating his housekeeper when his wife was sick.

Now, if you were just interested in “popular” economics like the stock market or the affordable care act, there’s probably more out there on those topics that’s safe and doesn’t require higher-level math.  My father used to have us track Exxon and we learned about things like stock splits and so on.  Jon Gruber has a comic book on the ACA that’s a good read.  But you’re actually interested in hard-core economics, and kudos for that.

So basically, our answer:  We have no idea– but that Cartoon Introduction looks pretty awesome!  Let us know how it worked out.

Do you all have any better recommendations for Monica?

Is it better to have loved and lost or to have never loved at all?

Another installment in our ongoing series, deep thoughts from our chat logs.

#1: http://zenpencils.com/comic/theodore-roosevelt-the-man-in-the-arena/

#2:  that cartoon is kinda sad.

#1: how so?  I suppose it’s like saying tis better to have loved and lost than never have loved at all, which is debatable.

#2: it seems like it’s saying the man could have been more, could have been great, but instead he drinks beer and watches TV. I like to stay home.

#1: oh, I think they’re saying that man is a critic
not that there’s anything wrong with staying home and drinking beer and being an accountant
but that if you do that, you shouldn’t criticize people who do more stuffs.  Personally I am a big proponent of temperature control.  Climbing mountains seems dumb

#2: but being a critic is important too; otherwise how would we know which books are crap? I mean, I have some problems with professional critics, but sometimes somebody needs to say that the emperor has no clothes.

#1: point taken.  ok, you win.  The context I’d seen it offered in was “if you don’t get rejected from time to time you’re not aiming high enough” which is a totally valid suggestion, especially for women.  But you are right, it doesn’t fit that at all

#2: I agree that if you don’t get rejected you aren’t aiming high enough. That part is right. Making it sad to be an accountant is wrong.

#1: yes
though honestly
being an accountant is kind of sad
except for people who like that sort of thing

#2: maybe they like it though!
maybe it’s like solving a big puzzle for them

#1: but being a mountain climber is also pretty sad.  Except for people who like that sort of thing.  Like, what’s the point?

#2: mountain climbers are kinda dickwads, from the books I’ve read

#1: at least accountants provide value

#2: YES

#1: except the ones who work for arthur anderson or enron
those provided negative value<

#2: went over to the dark side

#1: yes

So… who do you agree with?  Are we misreading (or reading too much into) a cartoon?

So much to do! A busy summer ahead

OMG, I am so overextended this summer, but if I can pull it off, it will be AWESOME.

What happened, in case you’re wondering, is that I submitted a bunch of short-term grants and got three of them.  On top of that, there’s regular submitted papers coming back from journals and so on.

So I have 4 big projects that need major work for the summer.  Mentally I’m only capable of keeping track of two or three, so this is going to need extra organization.

I have:

1.  The R&R paper that is getting split into 2 papers (a small one for the journal I sent it to, and a regular-sized one for the journal I’m sending the main paper to).

2.  Restricted data project for which only I am allowed to touch the data.  I was supposed to have access to these data last summer but SNAFU FUBAR @##@.  But I have it now, and am going to need to get a no-cost extension to keep it.

3.  Pilot study needs to get done for grant proposal for big grant.  Coauthor moved slowly so we’re behind schedule.   Lab manager graduated.  New lab members.  Do not want to talk about the weeks of administrative SNAFUs.

4.  Stupid NSF thing I got added to for the $.

[update]:  #5.  Mildly crappy paper that I sent into a conference got accepted unexpectedly.  I guess I passed the threshold from being accepted too infrequently to being accepted too frequently, at least in some venues.  No more crappy submissions to this conference in the future!  It’s going to be hard getting an hour and 15 min talk out of the material.

I have a small army of RAs of varying quality to manage, including one guy who just got a low C on the final for his methods class.  Damn it.  He did well on the midterm, but ugh.  Fortunately he won’t be working the entire summer.

So, that’s my story.  I’m doing Dame Eleanor‘s thingy for #1, and I’ve got RAs to keep me going for 3 and 4 and a coauthor whose sabbatical is ending for #2.  Who needs sleep or weekends?

June Mortgage update and another wishy-washy post on our uncertain money plans

Last month (May):

Balance: $79,500.45
Years left: 6.333
P =$893.52, I = $320.89, Escrow = 613.58

This month (June):

Balance: $77,928.74
Years left: 6.25
P =$899.71, I = $314.69, Escrow = 613.58

One month’s prepayment savings:  $2.66

I’m getting summer money so we’re still pre-paying the mortgage at our regular rate.  That will probably stop in September or October.  We’ll see.

For the past year or two we’ve been trying to decide how to deal with a 40% drop in income when it comes [DH resigned his TT job], and what to do with any surplus before said drop came.  As of last month we still hadn’t decided.  We kept tantalizing readers with the idea we’d decided, but then I’d run the numbers again and we’d change our minds again.

We’re also not doing the best job of keeping our spending below my regular (sans summer money) income.  And that’s mainly because I’m not convinced that we’re really going to be in a situation in which we need to do that.  I keep wanting to smooth my consumption based on my expected lifetime income, probably because I took far too many macroeconomics classes in school.

These big expenditures are primarily things involving the children– I want them to have educational and cultural opportunities and I want us to have time to do work.  And that can be done on my income alone, but not without making other cuts that we could make, but those cuts tend to add stresses and decrease joy.  And we could make those cuts and we’d adjust and so on (we both certainly grew up with much less), but if we don’t need to, then it seems like a lot of unnecessary stress to no real end.

Before the recent stock market surge, we were doing just fine for retirement.  We now have enough money stocked away in our retirement accounts that any number of early retirement blogs would be demanding that DH quit his job (and me mine, though they might let me keep it for the little lady’s mental health and uh, her group health insurance) if he hadn’t already… although the majority of this wealth is locked away in retirement accounts and untouchable for a few decades.

The point being, if we spend more than we earn even a couple years in a row we’re still doing far better than the majority of the US population.  I should probably thank my ERE father for the training to create this bounty.

So, when I was trying to decide how much extra money we’d have at the end of the summer, and how much we’d have to save for next summer, I thought, well, why just put big lumps away?  Why not play it by ear each month and stop doing the extra saving once you run out of money?  If DH brings in extra income, or you finally get your spending down, then you won’t have to go through all the additional hassle of trying to figure out where to put the extra money each time you have it.

So… previously we said were going to stop prepaying the mortgage, stop contributing to DH’s work retirement funds, stop contributing to my extra 403(b), stop funding our Roths, stop contributing to the 529 plans and so on.

DH’s retirement funds are still going away with his job.  And we’re going to only prepay the mortgage enough to get the check up to 2000/month rather than 2500/month.

But I’m going to let the 529 and the 403(b) keep auto-deducting until we run out of extra money.  After taxes we will make a separate decision about the IRAs.  This new plan is essentially splitting our money across the 529 plans and extra retirement saving while leaving an additional cushion in case of emergencies or other opportunities.

So rather than putting away big lump sums, I’ll let our extra money just sort of dribble away into various tax-preferred savings vehicles. This has the advantage that if the bucket starts getting to empty I can shore up the leak.

If we weren’t doing so well with retirement savings, I’d prefer the lump sum approach because it would force us to cut our spending.  But since we’re doing just fine on that front, it seems silly to not enjoy food or to keep DC1 from going to the ballet with hir aunt etc. just to leave the kids an inheritance they (hopefully) won’t need later.

So… what do you think?  Are you disappointed that I’m not putting big lump sums into the mortgage or retirement?  Is the possibility of spending more than we earn a bad thing?

link love

Jlcollinsnh explains why your house is a terrible investment.

Eco cat lady with a post on the ethics of food choices.

Ferule and Fescue explains how teaching math and teaching reading are different things.

Big think with popularity of names by geography.

The language log brings us The Penultimate Penn Ultimate Ultimate Penn Pen

The little professor makes us crack up yet again.

binary this:  mmmm david bowie,  also internet cat privilege

Academic readers, mommy/prof needs advice for what to write for her colleague’s tenure case in terms of their coauthoring.

In case you’re wondering what all that SFWA drama Scalzi was talking about is, we looked it up for ya.  Here’s ecatherine’s take.  Eerily reminiscent of the Womanspace drama last year.  I can’t believe Nature doubled down on that.  Ugh.  Update:  Apparently Mike Resnick is Ed Rybicki’s long lost twin, complete with leaving comments on blogs complaining about being criticized.  He must have such a teeny tiny penis.  Update:  This one by geeking out about on how the editor screwed up is good too.

Harvard Business Review explains why men work so many hours.

“I do whatever I damn please. Whenever I damn please. IF ever I damn please!” –my grandmother at 96