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Reconciliation

Recap: The media have trouble covering the issues behind the news; state budget woes are driven by state unemployment numbers; and Peter Orszag had huge policy successes leavened by some political failures.

Elsewhere:

1) Most Americans support paid sick leave.

2) Orszag and Zeke Emanuel make their case for how the Affordable Care Act will control costs.

3) Why exactly does financial regulation have to finish by Thursday?

4) Tony Judt has raised an awesome kid.

Recipe of the day: I've been into grilled romaine salads lately.

By Ezra Klein  |  June 22, 2010; 6:10 PM ET
 
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Comments

1) Well sure Americans support paid sick leave. They probably look at it from two angles:

- "Hey this is great! I'm getting a free raise - normally I don't get paid when I'm sick, and heck maybe I'll sneak a vacation day out of this too!"

This is a case of seen vs. unseen effects. The seen effect looks great. However, employers aren't just going to increase their wage bills permanently. Real wages will adjust (probably via inflation and lower money wage raises) in a year or two so that no extra money is made. In that people who aren't very sick/aren't sick use sick days, wages will fall more as productivity falls (although presumably productivity would increase if the very sick stayed home more often).

In other words, theres no free lunch here.

- "Thank God. Bob is always at work when he's hacking up a lung. I swear that guy got me sick last year. Maybe he'll stay home now that he's being paid."

I'm more sympathetic to this line of reasoning. It's like smoking in bars - there's a clear annoying externality, and politeness prohibits going up to Bob and yelling at him, as he is sick, to go home especially if it would be without pay.

Then again, 45% of employees work for firms that have paid sick leave. If paid sick leave is really important to you, maybe you should look into getting hired by those type of companies.


2)"Projections suggest that with reform, total health care expenditures as a percentage of the gross domestic product will be 0.5% lower in 2030 than they would otherwise have been. "

If that projection turns out accurate that it would be like getting a hole in one on a hole 10,000 miles away. I'm certain the 95% confidence interval on that value is greater than 0.5% of GDP.

Now some of the cost saving proposals outlined have merit (but only $7 billion in fraud detection savings over 10 years? I thought up to 10% of Medicare payments were fraudulent). But that assumes we are plugging all of the leaks and properly anticipate new leaks. Yes there are dynamic structures to constantly react to an evolving situation, but the bureaucracy is never gone. If a cost control measure is unpopular, I see politicians swooping in and blocking said measure.

Also, I think it overlooks the possibility of unintended effects. Suppose conservatives are correct, and that 2-3x more people wind up on the exchange out of the gate than expected as penalty/subsidy arbitrage takes place. The federal government will be paying a lot more than expected. On top of that, these exchange plans will probably have better cost insulation than existing plans in many cases which could drive utilization up.

Posted by: justin84 | June 22, 2010 7:15 PM | Report abuse

The article and its 5 references are interesting, as is the disclosure form (http://content.nejm.org/cgi/data/NEJMp1006571/DC1/1) in which the authors claim no "financial relationships (regardless of amount of compensation) with any entities that have an interest related to the submitted work." The topic of "Employment" is specific in the disclosure form.

Both authors are, in fact, paid by an entity having a definite financial interest in promoting the PPACA and in suppressing any dissenting views. It's troubling that the authors would gloss over such a financial relationship -- perhaps there are other omissions which merit scrutiny.

Posted by: rmgregory | June 22, 2010 7:35 PM | Report abuse

---"Most Americans support paid sick leave."

In other news, most Americans support free ponies, pictures of cute puppies, and 2-for-1 drinks on Fridays.

Posted by: ab13 | June 22, 2010 11:19 PM | Report abuse

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