Working Papers: A SUMMARY OF RECENT PAPERS THAT MAY BE OF INTEREST TO REGULATION'S READERS.

• Author: Van Doren, Peter

Health Care

* "What Do Health Insurance Deductibles Do to Health Care Spending Growth and Its Efficiency?" by Claudio Lucarelli, Molly Frean, Aliza Gordon, et al. SSRN Working Paper no. 3985356, December 2021.

The rationale for high deductible health care insurance accompanied by individual health savings accounts is the simple principle taught to all undergraduates in Economics 101: when consumers have their own money at stake, they are more careful with their spending. But health care seems to be different. Managed care and higher patient cost-sharing have all been shown to lower the level of spending as they are phased in, but after an initial implementation period, spending growth resumes its former rate.

Across the member countries of the Organisation for Economic Co-operation and Development, the rates of growth of health care expenditures since 1960 are remarkably similar despite large differences in industrial organization. From 1960 to 1998, the OECD median real per-capita health expenditure growth rate was 4.5% per year while the U.S. rate was 4.4%. From 2005 to 2019, the OECD real per-capita health expenditure growth rate averaged 2.2%; the U.S. rate was 2.1%, Switzerland 2.2%, Canada 2.1%, and the United Kingdom 2.1%. The conclusion I draw from the similarity in growth rates across developed countries, whose health care systems range from single-payer government systems, to largely private, and everything in between, is that policy differences matter less than all the political chatter about health care would suggest.

This paper asks whether high-deductible health care insurance plans with higher levels of cost-sharing generate a permanent reduction in the rate of growth of spending. The data come from claims from 2015 to 2018 from a large national insurance company and compare the spending of populations that have remained in high- or low-deductible health insurance plans for at least four years. Those enrolled in high-deductible plans do not experience a lower rate of spending growth for medical claims but do experience a lower spending growth rate for prescription drugs. The reduction in spending was for less cost-effective drugs (cost per quality-adjusted life year [QALY] above $50,000); there was no reduction in the growth rate for highly cost-effective drugs (cost per QALY below $50,000). The findings were robust to controls for the non-random nature of those who enroll in high- and low-deductible health plans (so-called selection effects).

Minimum Wage Effects on Low Wages

* "How Important Are Minimum Wage Increases in Increasing the Wages of Minimum Wage Workers?" by Jeffrey Clemens and Michael R. Strain. NBER Working Paper no. 29824, March 2022.

Minimum wage policy discussions suggest that the decision by states to increase the minimum is the important determinant of wage increase for low-wage workers. In this paper, the authors use Current Population Survey data from 2010 to 2019 in which the same respondents are asked about their wages 12 months apart. For those who were employed at both times, wage growth can be calculated.

Of those workers with wages within 50C of the minimum during the first interview, more than 70% of those employed 12 months later had a higher wage. For those who received an increase, their wages rose an average of $2.05 an hour. Thus, a large majority of low-wage workers cannot be described plausibly as "career minimum wage workers."

The paper compares the wages of those in states that increased the minimum wage to the wages of those in states that did not. The effect of state minimum wage increases is real but small. Around 71% of minimum wage workers in states that did not increase their minimum wage at any point in the 2013-2018 period got a raise in any given year, compared to around 79% of minimum wage workers in states that did increase their minimum wage. In other words, minimum wage increases account for about 8% of the wage increases realized by minimum wage workers across the full sample period.

Consumer Credit Cards

* "Credit Cards and the...