Are COVID Deaths Changing The Electorate? Wisconsin Edition

I just wrote about a detailed calculation of COVID deaths and their potential electoral impact in Georgia, my home state. One factor that causes COVID deaths to have little political impact in Georgia: the state has a large black population which is disproportionately impacted by COVID, and this balances out deaths (politically speaking) among the older white population.

What about if we look at a swing state like Wisconsin, which is 87% white per the Census Bureau?

White deaths roughly approximate the white share of total population in Wisconsin.

This ought to mean that COVID would push the Wisconsin electorate leftward, correct?

Here are 2020 exit poll results for white voters in Wisconsin, and 2020 exit poll results for black voters in the Midwest (black Wisconsin voters weren’t available as a subset):

President Biden won Wisconsin precisely because he lost the older white vote by a relatively small margin.

Let’s do some simple math:

8064 deaths * 86.5% white = 6975 deaths

6975 deaths * (10% Trump margin amongst age groups at risk) = 698 net loss in Trump voters

8064 deaths * 7.7% black = 621 deaths

621 deaths * (62% Biden margin among black voters in Midwest) = 385 net loss in Biden voters

The Wisconsin GOP appears to have lost 300-350 net votes due to COVID thus far. It’s possible that this understates the impact, since the white voters that died post vaccine-era are increasingly represented by GOP voters (since they are more likely to refuse vaccination). But 80% of COVID deaths in Wisconsin occurred prior to general vaccine availability (prior to 1/31/21), lowering partisan effects due to vaccine hesitancy. Even if we assume a 20% Trump margin among white voters that died post 1/31, this only increases the GOP’s net vote loss to 500 votes (add 1/5th of the white vote * additional 10% margin).

The impact of a 500 vote swing could be meaningful in states where politics is a game of inches these days – but we can’t overstate it. Voters’ overall reaction to how the pandemic has been handled is by far the larger factor in how COVID impacts American politics.

Are COVID Deaths Changing the Electorate?

Given that COVID-19 has become intensely politicized, I started wondering – will the death patterns seen to date have an impact on elections in 2022 and beyond? On the one hand, we’ve heard that minorities are dying at higher rates, whether due to poorer medical treatment or more exposure to the virus (a lower rate of work-from-home). On the other hand, the number one factor in terms of COVID mortality risk (other than vaccination status) is age – and the older you go in the US population pyramid, the whiter the demographics become.

I decided to try cross-referencing two data sources in Georgia to see how COVID might have changed the electorate. Given that President Biden won GA by only 12,000 votes, here, even small shifts in the electorate could have meaningful results. The Georgia Department of Public Health breaks COVID deaths down by age and race, and 2020 exit polling data provides a (rough) guide to how different demographics voted.

We can do some simple math to gauge the impacts, weighting the deaths by Biden/Trump voting split to determine the total impact on the Red/Blue dynamic. Here is 2020 exit polling data by age and race from CNN – since black and white were the only racial categories measured, we’ll focus on these (the number of COVID deaths in other groups in GA is dwarfed by these two groups).

From the Georgia Dept. of Public Health, here are COVID deaths by race:

In absolute terms, the number of white deaths greatly exceeds all other groups, principally because the vast majority of Georgians (and Americans) over 70 are white.

Now let’s do the math. We’ll use a simple model – we’re just using the age groups by race, and the voting margins by age and race, to determine how many votes each side has likely lost due to death by COVID. COVID has resulted in substantial excess mortality in the US since March 2020, so most of these people would still be alive and voting. Here’s the spreadsheet.

Results:

GOP candidates are likely to lose 4,661 votes due to COVID deaths.

Democratic candidates are likely to lose 4,895 votes due to COVID deaths.

This leads to a swing of 234 votes in the GOP’s favor. This result is influenced by a few factors:

  • While white deaths do substantially exceed black deaths in total, the black population of Georgia is experiencing substantial excess mortality – total deaths of black Georgians exceed that of white Georgians for ages 18-49, despite being roughly 1/3 of the population in that age group.
  • Biden won Georgia by chipping away at Trump’s margin among white voters – while older black voters favored Biden 94-6, older white voters favored Trump by 72-28. Since COVID mortality is centered on the elderly, the lopsided voting patterns help cushion the GOP’s losses.

My prior assumption, when glancing at the Georgia Dept of Public Health graphs, was that COVID might have a non-trivial impact on GOP support, simply given the large number of deaths among older white voters. This analysis has ignored differential vaccination rates by political leaning – so it’s possible that going forward, this calculus might change, since conservatives appear most vaccine resistant. In Georgia at least, it appears that COVID deaths are not leading to much net change in the electorate. States with a more homogeneous white population might experience a more profound impact, since age would then be the only important variable.

Half of Police Homicides are Justified – A Data Analysis

Analysis of all 2019 US police homicides indicates that half are not justified – over 500 individuals per year die unnecessarily at the hands of police.

In 2019, police in the United States killed 1,099 people – and US police are tracking toward 1150 for all of 2020 [1]. While there is no uniform government database for police homicides in the United States, non-profit efforts like Mapping Police Violence have emerged to track the issue. While great work has been done collecting data, I’ve seen no analysis as to whether the homicides are justified. At one extreme, police unions argue that the police are always right – they believe that police homicides have a nearly 100% justified rate. BLM protesters and others argue the opposite – but where does the truth lie? If all police violence were justified, then there’s no reason for concern. As hundreds of videos and photos now show, it appears that the fraction is much lower – necessitating this analysis.

I analyzed fifty 2019 police homicides by hand, reading media reports, reviewing video evidence, and reading police reports. All 1,099 police homicides in 2019 were then analyzed using an automated approach – see the spreadsheet at bottom for the full details [2]. I used calendar year 2019 data, and manually scored 50 homicides using a list of rules as follows:

Rules Used in Manual Scoring: (51% of police homicides determined to be justified using these rules)

  1. Was the deceased provably (video, non-police witnesses) attacking officers or a victim with a firearm? If so, set to 100% justified
  2. Did the deceased kill anyone else prior to or during police intervention?
    If so, set to 100% to justified
  3. Was the deceased armed with a firearm or knife? If so, add 25% to the probability. (Cars, tools, and other implements are not counted here)
  4. According to the police, was the deceased threatening the police or a victim with a weapon? Is so, add 25% to the probability.
  5. According to non-police witnesses or footage, was the deceased threatening the police or a victim with a weapon? If so, add 25% to the probability
  6. Was the deceased shot in the back, while running away, or while driving away? If so, set the probability to 0%. (Shooting at drivers in cars has been proven to be extremely dangerous to the public and to officers, and is outlawed in many countries)

For the automated data analysis, I used only data available within the Mapping Police Violence spreadsheet.

Rules Used in Automated Scoring: (54% of police homicides determined to be justified using these rules, with all data per police reports)

  1. Was the deceased armed in any fashion? If so, add 25% to the probability.
  2. Was the alleged weapon a firearm? If so, add 25% to the probability.
  3. Was the deceased attacking the police or others at the moment they used lethal force? If so, add 25% to the probability.
  4. Was the deceased holding their ground and not fleeing? If so, add 25% to the probability.
  5. Was the deceased fleeing at the moment the police used lethal force, whether by car, foot, or other means? If so, subtract 25% from the probability.
  6. Did the deceased exhibit symptoms of mental illness? If so, subtract 25% from the probability.

Both analyses show that roughly half of all police homicides were found to be justified. When reading through and scoring individual homicides, I noted a wide range of cases ranging from truly heroic action to absurd and ridiculous [3]:

  • Heroic: Killing active assailants engaged in firing on officers or the public
  • Dubious: Shooting suspects in the back or in a car while they were trying to run away or drive away, even when they posed no threat
  • Absurd: A mentally ill person called 911 too many times, resulting in 911 dispatching officers to arrest him for excess calling, leading to his death unarmed and in his own home, after struggling with police

If half of all police homicides are not justified, then police are responsible for over 500 preventable deaths per year. This result cries out for change, even before potential racial inequities are studied! For those who think the police deserve the benefit of the doubt – the numbers indicate that the problem is real, and needs real attention. For those who think the police are always wrong – there are hundreds of instances in 2019 where the police rightly used lethal force. As usual in America these days, the solution is not binary – we need to acknowledge this and take reform seriously, but not to absurdity.

[1] Through August 24th 2020, policed had killed 751 people, according to Mapping Police Violence – that’s through the first 237 days of the year. Multiplying by 365 / 237 to normalize for a full year yields a rate of 1157 homicides per year for 2020 thus far.

[3] It’s important to note that the vast majority of the data for this analysis comes directly from the police. By 2019 anti-police violence protests movements had already gained traction across much of the country, leading police departments to proactively provide evidence when shootings are justified. When a police department refuses to comment or provide evidence on a shooting, the innocent-until-proven-guilty standard should be applied, meaning that the justification percentage is 0% in the absence of evidence.

Real Change: Push for a DOJ Ban on Hiring Killer Cops

Protesters across the nation (and the world) are expressing their rage, anger, and frustration at the killing of George Floyd and so many others at the hands of police in the United States. I have no issue with the rage against injustice – I have written about how over 20% of all random homicides in the United States are committed by the police! But as I watch events unfold, my instinct is to try to grasp for solutions. The protesters ask for the arrest of all involved officers – but surely this anger, this protest, can further be channeled toward institutional change? Protests and movements end, and without actionable demands, they often end empty-handed.

Here’s a simple actionable demand to make of both President Trump and Democratic Presidential Candidate Joe Biden:

Direct the Department of Justice to instruct police departments that they will receive $0 in federal funding if they hire any officer previously terminated or disciplined for killing a civilian:

  • Newspapers and non-profits have already compiled substantial lists of officers involved in killing unarmed civilians and other misconduct.
  • If any officer has been involved in such an incident, and is terminated, disciplined, they should be placed on a Department of Justice list. If a jurisdiction pays out a civil settlement with respect to an incident involving an officer, the officer’s name should likewise be placed on the list.
  • Any police department continuing to employ officers listed should no longer be eligible to receive any federal funding or benefit of any kind.

Some have argued that the federal government cannot change the behavior of individual police departments. This policy approach changes that equation – if a department wants to keep employing dangerous officers, they can do so without federal funding. Billions are sent to local police by the federal government annually, through programs including the Department of Defense 1033 program, the COPS Hiring program, the NHTSA’s funding support for traffic safety, and more. This idea is not new, as this Congressional Research Service article indicates.

In economics, we often talk about how incentives drive behavior. The federal government does not directly control the 18,000 law enforcement agencies in the United States – but changing the incentives will change their behavior. No department wants to risk its grant funding, its equipment donations, or other federal support. While everything is politicized these days, this need not be a political football – who wants bad police on the street? If a doctor losing his medical license in one state is unable to practice in another, why is a police officer fired for misconduct able to be re-hired in the same state? I don’t think most police officers want to work with the small minority who engage in criminal conduct either – so this is a simple step to cleaning up law enforcement across the country.

If, as a people, we want real change, let’s come up with concrete solutions. This is my attempt to do that – I hope we can channel the rage on the streets toward solutions, so we don’t find ourselves in the same place in another decade’s time.

Coronavirus: Why the US Might Fare Better than Expected

Update 5/31/2020 – It’s been two months exactly since this post. Some aspects have aged well – US deaths to date did in fact peak around 2500 per day, and the rate of death has declined substantially since. The notion that we’d stay below 100k deaths overall has not, however. I believed that the opportunity created by April shutdowns would be used to ramp testing 10x, and that mask usage might dramatically increase. It now appears that the US is instead focusing on a vaccine as the only solution, with ongoing deaths the price paid for an unwillingness to wear masks or test aggressively.

Original Post – 3/31/2020

With the steady drumbeat of negative news, it’s easy to slip into despair about the state of the nation and the world. The present moment has enabled journalists and well-meaning prognosticators of all sorts to shout out the depth of our peril. While the danger is real, I’d like to take a moment to point out a myriad of reasons why the Coronavirus pandemic may end in something less than the worst case outcome (for the skeptical, you will find ample sourcing along the way).

First, let me define what I mean: a worst case outcome would be something approximating the Imperial College of London study, with millions of deaths in the United States. While President Trump initially stalled and downplayed the crisis, the response is now rolling nationwide, with 75% of the US under lockdown and 90% of Americans saying that they are staying home in some manner. If the US manages to traverse a path similar to that of Italy, we might keep total fatalities at or below 100,000.

Italy Coronavirus Status as of 3/30/2020:

Italy entered a nationwide lockdown on March 9th, and the positive results of this action have become evident over the last 10 days (roughly two weeks after lockdown). Worldometer’s Coronavirus charts tell a striking story – new Coronavirus cases as of March 30th are below that of March 19th, and total daily deaths remain below the peak set on March 27th. While the trend could yet reverse, this follows the path set by China  in which strong lockdown measures resulted in a drop in new cases a bit under two weeks later. If Italy’s trends continue, coronavirus should become less lethal in the country once the curve is sufficiently flattened and hospital capacity is again able to deal with all critically ill patients.

US Favorable Metrics Relative to Italy (and China):

The US has the dubious distinction of having the world’s most Coronavirus cases, but we also have quite a few factors working in our favor. Let’s walk through each and then apply an Italy-style scenario to the US:

  1. The population density for the lower 48 is roughly 329M / 3.1m sq miles = 106 people/sq mile, versus 533 people / sq mile in Italy. This is not a linear factor as populations are grouped into much denser metro areas, but in general metro area density in the US is still much lower than in Italy.
  2. 22.7% of Americans are above the age of 60, versus 29.8% of Italy. Since the vast majority of Coronavirus deaths are of those beyond the age of 60, this factor alone should reduce America’s risk by 25% relative to Italy.
  3. There is some early statistical evidence that sun, warmth, and absolute humidity might reduce the spread of Coronavirus. According to these models, the later onset of the outbreak in the US and warmer climate (relative to northern Italy in early March) could prove ameliorating.
  4. Results of testing every individual in the village of Vo, Italy revealed that for every positive test in a broader population, up to 10 times as many individuals may have contracted the virus. These kinds of results indicate that the mortality rate might stabilize below the current 1% estimate.
  5. Over 50 different drugs or treatments are currently being investigated – the worst case scenarios imply that all of these treatments fail or are so delayed that they prove ineffectual.
Summing it up, what’s the potential outcome?

Since the US has now instituted many of the measures put in place in Italy and elsewhere, let’s assume that we follow Italy’s lead. President Trump extended initial “social distancing” guidance on March 16th, but most of the US did not follow suit until March 23rd (when restaurant, school, and other closures became widespread).

Italy started a full lockdown on March 9th as noted earlier, roughly 14 days before the US entered a partial lockdown. Let’s assume that the US didn’t achieve anything approximating full lockdown until March 30th – this would place the peak of the epidemic in mid-April, following the Italian pattern of a 2-week delay. Italy appears to have peaked under 1,000 deaths per day  – this would equate to roughly 5,000 deaths per day in the United States if conditions were equivalent. As mentioned earlier, age distribution alone lowers risk by 25%. US density is 80% less than Italy, but let’s assume this reduces peak impact by less than half that, taking our overall risk relative to Italy down to 50%. This would imply 2500 deaths per day at peak.

Italy sustained roughly 4,000 deaths prior to hitting the current plateau March 20th – if they remain at these levels for 30 days before descending, that would lead to another 30,000 deaths, followed by another 4,000 if the descending phase mirrors the ascent. This would represent a conservative outlook relative to China, which stayed on a plateau near peak death rates for only two weeks.

If the United States follows Italy’s lead, we might experience 8,000 deaths climbing to the peak, 75,000 deaths on the peak plateau (30 days at 2500 deaths/day), and a similar number on the way down – for a total number of deaths just under 100,000. These estimates assume the net positive impact of climate, treatments, and lower mortality rates is zero.

Does this sound like fantasy? Italy is already beginning to look optimistic that it is turning the corner, with new cases down from the peak – and it’s quite possible that the United States is just a few weeks behind, provided we keep the doors shut, stay at home, and let the storm pass, while we get our testing and treatment capabilities ramped up.

The Great GOP Stimulus

The 2018 Trump stimulus exceeds the Obama-era stimulus package in size – will it pay off at the top of the economic cycle?

In 2010, when Barack Obama pushed for a stimulus package to help boost the American economy, it was decided by many in the GOP as wasteful spending. While there are more productive (infrastructure) and less productive¬†(tax rebates) ways to stimulate the economy, any form of spending (or tax cut) is a form of economic stimulus – this is a point agreed by both economists and businessmen like Warren Buffet. In fact, any form of budget deficit is a form of stimulus, as the government borrows (or prints) money that it doesn’t have to spend it into the economy.

The past year has seen the GOP enact not one but two stimulus measures – first a budget which ended Obama-era budget caps and boosted spending by roughly $150B per year, and second the tax cut which reduces taxes by another $150B per year. Taken together these measures are adding roughly $300B per year in stimulus to the US economy, potentially adding 1.5% to GDP for each of the next few years. Adding this stimulus to a core GDP growth rate of 2-2.5% might thus make 4% possible in the near term, with the bill due much later. The total federal (non-central bank) stimulus under President Trump’s first will hit at least $1.2 Trillion, exceeding President Obama’s 2010 stimulus package by $350 Billion [1], but this time at the top of the economic cycle!

What does this tell us? A few key takeaways emerge:
  • While most economists agree that it’s better to do fiscal stimulus when the economy is at or near recession, democracies don’t work this way, and there’s little correlation between economic need and actual governance.
  • When either party has complete control of government, they take the opportunity to spend on favored initiatives – in Trump’s case the DoD received most of the benefit, while in Obama’s case a variety of energy efficiency, infrastructure, and other initiatives were funded.
  • Budget deficits haven’t been a major issue over the last decade, but the tax cuts in particular will layer on top of Social Security and healthcare spending trends to drive debt-to-gdp well past 100% [2].
  • The best stabilizers in the US economy (unemployment insurance) are effectively automated – extending this sort of stabilizer to infrastructure spending (spending more on transportation funding etc as unemployment rises) would not just help buffer downturns – it would also get taxpayers a better deal.

Time will tell whether the GOP’s late-cycle spending will extend the business cycle substantially, but in the long run US policy will improve if more of these decisions are put on auto-pilot, removing the uncertainty of the political winds and the desire to spend at the least opportune times.

 

[1] The Obama administration stimulus plan cost around $850B in the end, including only the 2010 Stimulus measure and its implementation. Extension of Bush-era tax cuts and similar are not counted here, as these were extensions of existing measures, rather than new tax cuts or new spending as in the Trump administration’s recent moves.

[2] Many charts and news reports on the debt refer only to the publicly-held portion of the US debt, but when debts to the Social Security trust fund are included as in this data from the Federal Reserve, the US debt-to-gdp ratio already exceeds 100%.

AHCA Update: Let Red States Secede from Universal Healthcare

The House is likely to vote today on an updated version of the AHCA (the GOP’s Obamacare replacement) today. I’ve written previously about the bill, and noted that for a GOP-introduced bill, it was originally quite moderate – it embraced the notion of universal healthcare.

The latest AHCA update is considerably more conservative, as it effectively allows states to eliminate most of the ACA’s universality. By bringing back medical underwriting, states will be able to roll the clock back to 2013 (pre-ACA exchanges), when individuals with pre-existing conditions generally could not obtain health insurance.

But several forces combine to make it highly unlikely that pre-existing conditions coverage will disappear from any American state:

  • Once the bill makes it to the Senate, it will likely have to be made considerably more moderate, as the GOP can only lose two GOP Senate votes, and a number of Senators have expressed reservations about the latest changes.
  • The bill will still have to pass through reconciliation between House and Senate, and might die in that process, or might emerge more moderate in that process. It appears unlikely that it will pass through Congress as currently written, or in more conservative form.
  • Even if the bill does become law as written, the 31 states that expanded Medicaid are unlikely to seek to remove pre-existing conditions coverage. Within the 19 remaining states, it’s unclear that state officials are willing to take the blame for rescinding that coverage.

At this point, assuming the bill does make it through the House, it’s the Senate modifications and reconciliation process that will determine whether the final product is worthwhile. If the Senate is able to preserve universality, while strengthening tax credits for older age groups, a credible final product may emerge.

AHCA: Insured to Rise by 7M by 2026 – CBO Misses Power of Free Plans

The CBO generally performs careful, in depth analyses – but their approach is susceptible to inaccuracy when policy proposals differ sharply from existing norms. The CBO projects that over 24m individuals will lose insurance coverage as a result of the AHCA, as older individuals and Medicaid recipients lose insurance faster than younger individuals gain it. This projection misses the power of free plans, however. The table below shows how much different age groups might pay for coverage under the AHCA, with prices based on 2017 ACA exchange prices for states with low (Oregon), medium (Ohio), and high (Nebraska) insurance costs [1]. As the table shows, the AHCA tax credits can provide catastrophic coverage to the majority of Americans below age 45.

Monthly Cost after AHCA Tax Credit
(Plan cost as found on healthcare.gov, cheapest available plan)
State Age 20 Age 30 Age 40 Age 50 Age 60 Family Ages 40,10,8 Family Ages 30,30,5,3
Oregon (Low Cost State, Zip 97035 Used) Free ($112) Free ($208) Free ($234) $35 ($327) $160 ($493) Free
($466)
Free
($648)
Ohio (Medium Cost State, Zip 43004 Used) Free ($121) $12 ($216) Free ($244) $49 ($341) $186 ($519) Free
($487)
Free
($677)
Nebraska (High Cost State, Zip 68010 Used) Free ($131) $66 ($274) $59 ($309) $139 ($431) $323 ($656) $33 ($616) $105 ($855)

Using the information compiled above, we can estimate the change in uninsured rates for each of the groups in the chart below. For age groups below 40, the uninsured rate is projected to drop close to the same level as that of children below 19, since these groups will have access to free plans paid for by tax credits (and insurance companies will market these subsidized free plans mercilessly). For age groups above 45, the uninsured rate will rise, though not quite to pre-ACA levels, when no support was provided.

Projected Uninsured Rate Under AHCAThe CBO estimates that 14 million Americans will lose Medicaid coverage, and that 9 million more will lose either individual or employer-based coverage.

Using population estimates for 2026, I calculate that the number of insured Americans aged 19-34 rises by 7 million, aged 35-44 rises by roughly 2 million, and aged 45-64 drops by roughly 2 million [2]. While it’s important to note that these plans will be much less generous than ACA-subsidized plans, the total number of insured actually rises by around 7 million under these estimates. The GOP will have installed universal, nearly-free catastrophic plans as the future of American health care – if the AHCA passes, as Mssrs. Trump and Ryan continue their struggle to get it through Congress.

P.S. If you are interested to find out more about how the AHCA might impact you or your clients’ investments, my company HiddenLevers has modeled that in our TrumpCare scenarios. Have a look through one of our free demo accounts.

 

[1] The 2017 ACA prices are a reasonable guide as the Trump administration plans to relax the essential benefits associated with plans, and to widen the max price differential between plans for young and old. The risk pool under the AHCA will also likely be healthier, as young, healthy Americans will be drawn into free AHCA plans – because they are free.

[2] Roughly 23% of the population is aged 19-34, and a 9% point drop in uninsured rate for this group in 2026, translates to a rise of 7m more insured Americans. A similar calculation for the 35-44 group yields another 2m insured Americans, while the 2.5% rise in uninsured among older Americans yields a loss of insurance for 2 million. The CBO appears not to contemplate that many of those losing Medicaid will receive tax credits sufficient to provide them with free catastrophic plans, as shown in the table above. This mitigates the Medicaid cuts to some extent.

[3] The original chart above can be found here at the CommonWealth Fund.

TrumpCare (AHCA) – Welcome to Universal Catastrophic Health Insurance

The AHCA would move the USA toward universal catastrophic healthcare coverage, by enabling insurance companies to sign up individuals to $0 monthly premium plans with high deductibles and limited coverage.

While healthcare analysts have been in overdrive commenting on the new GOP health plan, it appears that some key points have been lost in the noise. Whether on Medicaid, total enrollment, or tax credits, it seems that many analysts fail to understand the large-scale implications of the bill. As written, the AHCA has the potential to be transformative – it would retain the goal of universal coverage, while shifting tax credits toward universal high deductible insurance. If fully implemented, the AHCA could actually lead to gains in coverage – but the US healthcare market would be transformed by a move toward high deductible catastrophic coverage.

AHCA Key Changes:

  • Covered Benefits: The AHCA does not change the essential benefits list, but Secretary Price is interested in reducing essential benefits to lower costs.
  • Tax Credits: Tax credits will be less generous, but will cover more of the population, potentially leading to a shift toward catastrophic plans.
  • Medicaid: The Medicaid expansion ends after 2019, but tax credits will be available to all lower and middle-income Americans.
  • Employer Coverage: AHCA creates a strong incentive for employers to drop coverage, since most American workers will receive tax credits.
  • Universality: AHCA provides tax credits to virtually all Americans without other coverage, cementing the goal of universal health care in the USA.
Detailed Findings:

Covered Benefits:
With the exception of abortion coverage, the AHCA does not change the essential benefits under the ACA. HHS Secretary Tom Price has indicated that he will reduce regulations that increase costs – he can do this by limiting the definition of essential benefits.

Tom Price has indicated on multiple occasions that HHS will seek to reduce regulations on health insurance markets, and recently both he and President Trump indicated that these changes would be part of “phase 2 & 3” of their healthcare overhaul. In the past Secretary Price has indicated that he will seek to specifically limit the essential benefits requirement while at HHS.

The AHCA is particularly punitive towards abortion, barring the use of tax credits for any plan that covers abortion services (page 72 of bill pdf).

Tax Credits:
The AHCA offers up to $14k in tax credits per family, at 2k-4k per person depending on age (pages 90-92 of pdf). It also enables insurance companies to claim tax credits on behalf of enrollees, enabling them to offer cheap or free plans to the public.

Much has been written on winners and losers with the proposed tax credit changes. Analysts both left and right fear many will lose insurance. But look at page 106 of the bill: “Not later than January 1, 2020, the Secretary … shall establish a program … for making payments to providers of eligible health insurance on behalf of tax payers eligible for the credit under section 36C.”

Consider what this means – insurance companies will be paid between $2000 and $14,000 per year for each enrollment. In a similar situation in the for-profit university industry, tuition essentially matched federal loan programs, creating a no-money-down product for students. With the AHCA, insurers will be strongly incentivized by the market to offer $0 premium plans in order to maximize their signups of younger individuals in particular.

With the change of young-old ratio to 5:1 (page 66), and Tom Price’s expected reduction of essential benefits, new catastrophic plans will likely flood the market, providing a no cost option for many. See Appendix I for specific examples using 2017 exchange pricing.

Medicaid:
The AHCA ends the Medicaid expansion in 2019, but states may have some incentivize to jump in now, because the future funding they receive is based on the number of enrollees at the end of 2019. Beginning in 2020 the Medicaid expansion will be repealed, and only those enrolled under pre-ACA rules (with stricter income and asset tests) can be newly enrolled into Medicaid.

The AHCA does close a gap caused in non-Medicaid expansion states, where many workers make too much to qualify for traditional Medicaid, but too little to qualify for ACA subsidies. These individuals will qualify for the new AHCA tax credits.

Employer Coverage:
The AHCA removes penalties for not providing insurance (page 84 of bill pdf), and could encourage employers to drop coverage as it provides tax credits to a much larger range of working age Americans.

Per the Kaiser Foundation, the average employer contribution to individual employee healthcare is around $4800, with the employee contributing around $1200. At a 25% federal tax rate, this leads to a tax deduction value of $1500, versus a tax credit of $3000 for the median-age American worker. For family coverage, a tax deduction value (25% tax bracket) of roughly $4500 compares to a tax credit of $9000 for a family of four with adults in their 30s. In both cases, both the employer and employee would benefit if the employer dropped coverage, raised wages, and let the employee take advantage of the tax credit.

Appendix II presents a fully worked example for a family of four making $100k per year, and shows that the family would likely benefit under AHCA changes.

Universality:

The AHCA offers tax credits to all Americans without employer-based healthcare (except those with higher incomes), and as a result the AHCA accepts the ACA’s premise of universal health insurance.

The only Americans excluded from the new AHCA tax credits are those already receiving healthcare from a government program (Medicare, Medicaid, VA, etc) or from employer-based coverage (page 97 of bill pdf).

The GOP has produced a plan that implicitly accepts that universal healthcare is here to stay. The end game (relative to the ACA) will look very different, however, with large swaths of the population covered by high-deductible catastrophic plans.

Appendix I: Are $0 premiums for catastrophic plans really possible?

Is $2000 ($166/month) sufficient to offer a “free” plan to a young adult, or $10,000 ($833/month) sufficient to offer a “free” plan to a family of 4?

Using Healthcare.gov, in the Atlanta area the current cheapest plan for age 21 is exactly 1/3 of the $597 charged to a 64 year old, as a result of the ACA 3:1 limit on costs for older Americans. A bronze plan for age 20 is only $126/month in Atlanta, since the 3:1 limit doesn’t apply below age 21 (even in New York City, individual catastrophic plans are available from around $165/month). Since the AHCA raises the ratio limit to 5:1, this shows how $0 plans will fit within the $2000 tax credit.

How about for a family of four ages 31, 31, 4, and 2? This priced out at $713/month in Atlanta, below the $10k AHCA annual tax credit. Since the AHCA allows excess tax credits to be placed into an HSA, the family could bank around $1500 per year toward future medical expenses while paying $0 in premiums. In New York City, the family premium would be around $1050/month, leaving the family bearing around $200/month in premiums – but this is before accounting for the impact of the new 5:1 ratio and curtailment of essential benefits, which would likely bring net costs to $0 even in NYC.

What about older Americans? A $4000 ($333/month) tax credit will not cover a single 64 year-old’s $600/month premium in Atlanta. If HHS substantially reduces essential benefits, that may close the gap, but with a corresponding loss of benefits. Pre-Medicare age older Americans are clearly the biggest losers under the AHCA reform. But if the AHCA is able to substantially increase enrollment by the young and healthy due to $0 premiums, this may enable more affordable plans further up the age spectrum.

Appendix II: Why Employers May Drop Coverage – A Specific Example

Let’s consider again a family of four, ages 31, 31, 4, and 2. Using Kaiser numbers, on average the family and their employer spent a total around $18,000 on health insurance premiums, with the employer contributing roughly $13,000 of that amount. In the 25% tax bracket, the family is receiving $4500 in value from the existing tax deduction. In total, the family is spending about $500 out of pocket on health insurance when employer assistance and tax deductions are considered.

What if the employer were to drop coverage, enabling the family to receive a $9k AHCA tax credit, and to raise the employee’s salary by $13,000 instead? The employee would receive $9750 in new after-tax income (considering only a 25% federal rate) plus $9000 in tax credits, or $18,750 total. Assuming similar premiums, the family would then spend $18,000 on health insurance, leaving $750 unspent. In total the family might come out $1250 ahead versus the existing system, and the employer would be able to offload the risk and expense of managing benefits.

Election 2016: Democrats Score an Own-Goal

Donald Trump won the 2016 presidential election, but he didn’t win the election. Hillary Clinton scored an own-goal – she turned out the lowest share of voters of any Democrat since 1996, and was bested (in vote share) by numerous losing Democrats of the past. See fine candidates of the past like Kerry, John, and Gore, Al. Contrary to much current analysis, Donald Trump didn’t really expand his base – he performed about as well as a generic Republican, while Clinton under-performed badly. The CNN chart below shows candidates’ share of eligible voters since 1996 [1]:

https://i0.wp.com/i.cdn.turner.com/cnn/.e/interactive/html5-video-media/2016/11/10/turnout_full_scale_all_voters_v2update.png

  • GOP vote share peaked in 2004 and has been bleeding down steadily, losing about 1.7% in total vote share per election since 2004 [2]. Trump actually under-performed this downtrend, as he dropped 2% (from 28.3 to 26.3) versus the average drop of 1.7% per cycle for Republicans. The GOP seems to turn their base voters out steadily, but this base forms a shrinking percentage of the electorate as the US becomes more diverse.
  • Democratic vote share has been more volatile, reaching a peak in 2008 and bleeding down after. But Clinton didn’t need to match Obama’s 2008 or 2012 performance to win – matching John Kerry or even Al Gore would have been sufficient! John Kerry’s performance, at 30% of eligible voters, would have crushed Trump, while even Al Gore’s 27.4% would have provided the small margin needed in the Midwest to win the election. In a low turnout election, Clinton bled off roughly 4% points of vote share, while Trump bled off only 2% points, leading to his narrow electoral college win.
  • Neither 3rd party votes [3] nor Trump’s numbers explain Clinton’s collapse – Clinton and the Democratic party have only themselves to blame for frittering away more than 100% of Obama’s net gains! Democrats tend to win when they increase overall turnout, and the data show clearly that turnout collapsed in the 2016 election.
  • Had Hillary Clinton managed to turn out any of the urban vote in the Midwest, or gotten millennials excited, she’d have been fine. She did neither, and in absolute terms had the worst performance for a Democrat since her husband, ironically (who won handily in 1996 in a low turnout election).

In short, I blame Democrats and the Clinton team in particular for this loss far more than I credit Donald Trump. According to the data, he likely performed just below a more typical GOP candidate, while Clinton greatly under-performed the last four Democratic campaigns.

Silver Linings For Democrats:

  • Arizona is rapidly trending blue – more rapidly than expected. Obama lost Arizona by around 213,000 votes in 2012, while Clinton lost by only 85,000 votes in 2016. This aligns with a 2014 study on demographic change, putting it right on track to lean blue in 2020.
  • Winning just Arizona’s and Florida’s (whose demographics are also shifting) 40 electoral votes replaces all the rust-belt states Clinton lost, creating a 272 electoral vote win.
  • Who voted in 2008 that didn’t turn out in 2016? Young people and minorities. Democrats win when turnout is high. Turnout is high when the most progressive parts of the Democratic base are excited. Therefore, Democrats’ direction should be clear – there is no one left in the center, and it’s time to move forward with the progessive wing of the party.
  • Had Democrats won in 2016, winning again (four in a row) would have proven even more impossible given the tick-tock nature of the Presidency in the US. Since FDR, one party has won three straight presidential contests only once, in 1988 – and none have won four straight.

[1] Votes are still being counted, and the final tally will likely show Clinton’s vote share edge close to 27%, still below Al Gore’s 2000 performance.

[2] Per the chart above, McCain lost 2.4% points from Bush 2004, and Romney lost another 0.8% points from McCain. Trump lost roughly 2% points from Romney – leading to an average decline rate of just over 1.7% per election cycle. Mr. Trump lost more than this amount, leading to the conclusion that he might have under-performed relative to an “average” GOP candidate.

[3] Above, we see that in 2016 voter turnout was around 55.4%, with 52.8% captured by the two mainstream parties. If all 2.6% lost to third parties came from Clinton voters (and it almost certainly dd not), that still implies that she under-performed Obama 2012 and Kerry 2004 by around a percentage point – and this assumption is far too generous to Clinton.