Thursday, February 1, 2018

Predicting the news cycle in every state post marijuana legalization

Now that several states have legalized marijuana, it has become almost comically easy to predict how the news cycle will develop in each new state. It always follows this basic pattern:
We are now getting to see the pattern start all over again in California.

Tuesday, January 23, 2018

My four year-old marijuana prediction was off by just three weeks

Vermont has become the ninth state to legalize marijuana and the first state to do so via the legislature instead of a ballot measure. So I'm going to take a moment to toot my own horn.

Back in January 2014, I published After Legalization: Understanding the future of marijuana policy. In it, I predicted that by 2018 roughly nine states would have legalized marijuana and that Vermont was likely to be the first to legalize marijuana via the state legislature. I also predicted Canada was likely to be the first major country to move forward with legalization in 2017.
2017 –This is when the fight is likely to move from the ballot to the state legislature. After voters in multiple states approve legalization, politicians in other states will feel comfortable backing the idea—or political pressure will force them to approve it. It's very likely that Vermont, Hawaii, and Rhode Island will move forward with marijuana legalization in early 2017 or 2018. They are three of the most liberal states in the country and have a history of being progressive on marijuana reform: Hawaii was the first state legislature to adopt medical marijuana, Vermont was the second, and Rhode Island was the third. I also expect the changing political environment created by a wave of victories in 2016 to push many state legislatures to adopt smaller reforms, such as reducing their penalties for simple possession.
At the same time, several foreign countries will probably adopt legalization. The political situation in Canada regarding this issue is worth watching, because it could put some real pressure on the United States to finally act. In 2013, the leader of the Liberal party of Canada endorsed marijuana legalization,i and there is a very good chance his party could win back control after the next federal election likely to take place at the end of 2015. If the Liberals are serious about moving forward with marijuana reform, a smart time to do it would be right after the United States’ 2016 election, when several American states on or near the Canadian border are likely to legalize marijuana.
While not every one of my predictions has been perfect, I'm very happy with how well I have done so far. One my biggest mistakes was that I thought the District of Columbia wouldn't legalize until 2020 because people in the District would be too afraid of Congress interfering. The people of the District did approve marijuana legalization in 2014, but Congress stepped in to block the city from adopting a regulatory model -- so I got it half right.

Friday, December 29, 2017

Making new state payroll taxes better with health insurance

Several progressive economists and thinkers are promoting the idea of a new state payroll tax to get around the fact that the Republican tax plan has limited the deduction on state and local income taxes. I think this is a good idea, but if we are changing blue states' tax structures we can also improve health insurance coverage at the same time. 

The Republican tax also repealed the individual mandate. While there is a serious debate about how much impact the loss of the mandate will have on enrollment and premiums, it is likely it will reduce the number of people with health insurance. This has given Democrats an opportunity to come up with a new, better, and more popular way of expanding coverage. 

My suggestion is to make the new state payroll tax roughly $2 per hour more than what is needed to replace the state income tax but to give employers a $2 per hour deduction for providing health insurance. For the vast majority of employers/employees who already have coverage via work, this would have zero impact, but it would work as a soft employer mandate for companies that don’t offer coverage. This is similar to the Healthy San Francisco program adopted in 2007, which successfully expanding coverage/access in the city.

This employer mandate would directly increase the number of people with health insurance since some companies would likely offer coverage as a result. It would also provide a pool of money to improve affordability and/or access. It could be used to do a reinsurance program, provide coverage for immigrants not eligible for Medicaid, provide wrap around tax credits on the state exchanges, or provide funding for public health insurance efforts.

My preferred policy would be for states to also create a public option/Medicaid buy in and use the money from the employer mandate to provide subsidies to make it affordable for everyone. Between the cost savings from the public plan being able to negotiate lower prices and the extra money from the employer mandate, the state should be able to actually make coverage truly affordable for everyone.

Monday, November 27, 2017

Los Angeles’ marijuana plan: the illusion of social equity

Los Angeles is deciding to focus on racial equity in their recreational marijuana licensing system, but I think the way they are going about it suffers from a serious problem in framing. Their concept of equity relies too heavily ensuring that the small number of people who get marijuana licenses includes some local low-income minorities. Instead of making sure a few minorities are among the small number getting rich off of the recreational marijuana business, true equity would be the not letting any individuals get rich off of it. All the potential profits should go to help people across the city.

Portland, Oregon has 155 recreational marijuana stores and a population of 639,863. Assuming Los Angeles ends up with a similar ratio of stores to people, that would be 963 marijuana stores. This estimate is close to projections of the number of medical marijuana dispensaries operating legally or illegally in LA: 1500.

Let's assume LA actually manages to create a system that is even capable of giving out licenses in a way that corrects for the city's history of racist arrests, so the vast majority go to low-income minorities. Let’s also assume everyone who gets a license is capable of running a successful small business -- something that is also not guaranteed given high failure rate for small businesses -- and manages to create a business worth a million dollars.
  • The best possible scenario is that these efforts effectively serve as a lottery with just a few hundred winners in a city of 4 million people. Big rewards delivered to a tiny group is a strange way to correct for broad social discrimination.
  • The worst case scenario is the city spends a significant amount of money and effort helping a few low-income individuals trying to start marijuana businesses, but due to a federal crackdown or normal business problems, many end up worse off.

If Los Angeles wants to focus on true social equity, the better strategy would be not to worry who gets the licenses but who gets all the profits. The profits should go to the public, not to individuals or companies. The Los Angeles government could directly run all the marijuana stores, like North Bonneville, Washington has. Or the city could give licenses only to existing community non-profits with a proven track record and an explicit commitment to use all proceeds for certain activities like free health clinics. Or the city could focus on maximizing taxes and licensing fees to allow the city to extract almost all the value.

The recommended approach of giving special loans or waiving licensing fees for a few ‘deserving’ individuals is not how to create true equity. That is the illusion of equity. The fact that the Los Angeles Cannabis Task Force: Social Equity Committee was made up of “ both inside and outside the cannabis industry in Los Angeles” including “existing business owners, entrepreneurs, [and] investors” is likely why it used this limited problematic framing. Their idea that give the licensing system the veneer of social justice and equity, but still assure a few well placed people will make the profits.

Currently, LA is planning to set aside some of its marijuana tax revenue to help communities hurt by the drug war. The city could amplify this plan to make sure all of the profits from the marijuana industry go towards programs like free pre-k for all low-income residents.

Finding ways to make sure almost every dollar of profit goes to the city government would do way more to help communities hurt by the drug war than effectively handing out a handful of lottery tickets.

Monday, October 30, 2017

Trump's accidental health care experiment

The Trump administration's ham-fisted attempts to sabotage Obamacare are going to make this open enrollment one of the biggest natural experiments in health care, and we should learn from it.

Trump has done two big things to try to hamstring the Affordable Care Act exchanges.
  • One was to dramatically cut funding for outreach ads and navigators to help people select insurance plans, but many blue states that run their own exchanges will continue to spend as much on outreach as they did in the past.
  • The other was to end cost sharing reduction payments to insurers, which is having a very weird impact. In some states it has resulted in big increases of affordable tax credits, making insurance much more affordable for those making between 200-400% FPL. How big the impact is varies significantly across states.
What this has created is a massive natural experiment on two metrics. Some states will see a large increase in premium tax credits for this group but very little outreach spending. Some will see large increases in premium tax credits and strong outreach spending. Some will see only small increases tax credits and little outreach spending, and others will see small tax credit increases and strong outreach spending.

It will be a real chance to see what impact the tax credit level and outreach spending have on enrollment, as well as to test just how rational individuals are when it comes to buying health insurance. We will get to see how much impact outreach efforts really have and how big a difference more subsidies make.

Trump has created needless chaos, but it would be stupid not to learn from it. I would hope experts in health care would make predictions now that can compared against the real world data.

 (I personally think the impact of outreach spending is being overstated and the impact of providing more tax credits will be far more significant. The CBO predicted the short term impact of ending the cost sharing reduction payments would be a modest drop in the number of insured, but I suspect the number could easily increase.)

Friday, October 13, 2017

Democrats should only accept permanent cost sharing reduction payment

Now that President Trump has stopped payments for the cost sharing reduction for low income individuals on the Affordable Care Act exchanges, he is talking about using this as leverage for negotiations with Democrats. Democrats should make it clear they will vote for nothing short of a full and permanent appropriation of the cost sharing reduction. They should reject any short term, one-year or two-year appropriation or any attempt by Trump to trade it for something he wants.

This move by Trump was a spiteful act of policy nihilism. It is going to cause real chaos for insurers and individuals. Some people will be financially hurt, but the damage is fairly manageable. Thanks to the design of the ACA, not paying the cost sharing reduction just causes the premium tax credit to go up even more, making insurance cheaper for some people. Ironically, this move might even have, on net, a positive impact on the number of people who can afford care. Even if it doesn’t, Trump will very likely lose the coming lawsuits about it anyway.

So while this is a vengeful and dramatic act of sabotage, Democrats should make it clear it is one they are willing to live with.

Trump has proven himself to be a bully, which is why it is critical Democrats stand up and say they will not be bullied. Make it clear they will not negotiate to undo Trump's inflicted chaos.

This is a great issue for Democrats to take a stand on and not give an inch for because even if they lose, the policy fallout is manageable. But if Democrats reward Trump's bullying tactics by voting for anything short of permanent appropriation with no strings attached, it will only encourage him to do it again and again.

This fight is already bad enough, but I shudder think about how, if successful, Trump might use this tactic when the stakes are much higher, like over the debt ceiling or starting another war.

Tuesday, September 5, 2017

Private insurance is about making things die

Many people don't realize one of the main social benefits of any private insurance system is to let things die. Insurance is often viewed as primarily about spreading risk, and that is part of it, but pricing risk is often an arguably more important function of insurers.

This is often a good thing. You want an insurance system that effectively kills a project to build houses on a dangerous slope prone to mudslides by refusing to offer insurance or setting premiums way too high. It is good when a company with unsafe equipment/practices is shut down because they can no longer afford liability insurance.

A system that effectively kills dangerous real estate developments or businesses due to pre-existing conditions is good because people can live or work elsewhere. A system that effectively kills people by pricing them out of care because they were born with a genetic disorder is profoundly immoral. People can't choose another body.

Pre-ACA, the health insurance system didn't do a bad job; private health insurance did a very good job at something most people think is deeply unfair.

Once you remove what is normally the main social benefit of private insurance --pricing risk to make things die-- you are left with health insurance companies with only three other functions: spreading risk, negotiating with providers, and customer service. The problem is, the industry is terrible at two of these.

Private health insurance companies openly admit they can't effectively spread risk on their own since some individuals have very high cost health care problems, and these individuals can no longer be priced out. The private health insurance lobby (AHIP) has actively been calling for the government to recreate a government reinsurance program -- government insurance for the insurers that spreads the risk for them.

The private health insurance lobby also admits they are terrible at negotiating with hospital and drug makers. For most procedures, they have negotiated rates much higher than what the government did for Medicare.

We now have a weird health insurance system where the private insurance companies can't do their main job because we consider it immoral, they are asking the government to step in to perform their second most important function for them, and they admit they are really bad at their third most important job.