Who is covered by Medicaid

Kaiser Family Foundation has a great overview of who is covered by Medicaid, what type of care they need, how much it costs, and how it is financed.


When evaluating any Medicaid reform proposal it is key to get straight how a proposal effects these groups. In the North Carolina Medicaid reform discussions (that are apparently going nowhere fast), some have said they want to move all parts of the program into such arrangements quickly. Generally, I think the largest groups (children + adults constitute three fourths of the beneficiaries) could be moved quickly into managed care because most of their care is acute care (physician, hospital), while I think we need to move more slowly for the elderly and disabled. They are of course the most expensive groups, but that is because they tend to have both acute and long term care needs.

In any event, the most important thing to understand about any Medicaid reform proposal is how it would effect each of these groups.

Paying college players-cost of attendance

The Raleigh, N.C. News and Observer has a front pager today on the changes that are coming to college sports regarding paying players. There are so many issues, and so many questions, but a key one is understanding a key University concept, “the cost of attendance (COA).” Duke University’s COA for 2014 is shown below:


Historically, the NCAA has prevented University’s from covering the full COA via an athletic scholarship, but the ruling in the Ed O’Bannon case stated that this could not continue. An athletic scholarship covers Tuition and mandatory fees, as well as room and board, but not other expenses. However, personal expenses such as books are not covered by an athletic scholarship (under Duke’s need based financial aid system, it is possible an athlete could get aid for these expenses, depending upon family income).

The News and Observer article terms the covering of what above is called “books and personal expenses” as a stipend. Note the differences in the Triangle of the costs of “books and personal expenses.”

  • At Duke, $3,466
  • At N.C. State, $3,828 for both in and out of state students
  • At UNC, $4,382 for in state, and $6,118 for out of state

These differences reflect policy choices by the schools, not just for their athletic programs. Merit based scholarship programs such as the B.N Duke and A.B. Duke don’t cover the full cost of attendance, but Duke’s need based financial aid program does (potentially, depending upon income) cover the full cost of attendance. At Duke there is also sensitivity about how large the “full cost of attendance” figure is, so there may be extra incentive to keep the “books and expenses” figure as low as possible.*

Calculating the full cost of attendance figure at a University is a highly idiosyncratic process, and there are many competing incentives. A quick look at the spread in the “books and expenses” aspect of Duke, UNC and NC State’s demonstrates. At UNC and NC State, around 8 in 10 undergrads have to be from the State of North Carolina. UNC shows a different figure for out of state as compared to in state, while NC State does not. Duke has about as many undergrads in a given class from California as there are from North Carolina, so it is hard to imagine how this amount in the expenses component at Duke could be lower than the in state figure at UNC.

I am not saying there is anything nefarious going on, but it is also hard to see how these figures at these three schools located within 30 miles of one another represent an externally validated cost to students. The Ed O’Bannon ruling is bringing attention to the cost of attendance figure for athletes, but this figure is important for all students at a University’s as a whole, and is set amidst a sea of many competing influences. The process of setting these figures seems murky, especially to families trying to compare across University’s. Because of increased attention due to athletics, the bright lights are coming.

*Duke has robust need based financial aid; the diddy I have learned is that a year at Duke costs $90k, we charge $63k and collect $30k. Around half of the undergrads pay full freight, and the other half is sliding based on income.

Duke University travel/Ebola policy

Duke University announced its travel bans and Ebola policy this morning. I pass it on without any comment other than to say that it sounds reasonable to me.


TO:  Vice Presidents, Vice Provosts, Deans, Directors, Department Heads, and Managers
FROM:  Eric Ossmann, MD, Director, Duke Preparedness and Response Center
       Kyle J. Cavanaugh, Vice President, Administration
RE:  Ebola Travel Precautions for West Africa
As a safety precaution in the wake of the Ebola outbreak in West Africa, any member of the Duke community who has traveled to Guinea, Sierra Leone, Liberia or Nigeria  within the previous three weeks should contact Employee Occupational Health & Wellness or the Student Health Center to consult with medical staff prior to returning to campus.  
Also, any students, faculty or staff members who plan to travel to any of these countries for any reason should also contact Employee Occupational Health & Wellness or the Student Health Center to discuss safety precautions prior to travel. The medical staff will be available to discuss current conditions in these countries, medical protocol, symptoms and treatment options for the disease. They are also available to answer any questions that travelers may have. 
  • Employee Occupational Health & Wellness: 919-684 -3136, option 2.  After hours, call: 919-684-8115
  • Student Health Center: 919-681-9355
Currently, there are close to 2,000 suspected and confirmed cases of Ebola in West Africa. The disease is only transmitted through direct contact with the bodily fluids of an infected and ill person. While the risk of becoming infected in this country is very low, Duke has imposed full country travel restrictions for Guinea, Sierra Leone, and Liberia until further notice. While travel has not been restricted to Nigeria, the CDC is encouraging individuals to practice enhanced precautions if traveling to that country. 
Duke’s emergency management team continues to monitor the situation closely and will provide updates as new information becomes available. For more information about Ebola, including symptoms, transmission and treatment, visit the Center for Disease Control (CDC) website (http://www.cdc.gov/vhf/ebola/), which includes a section on travel

Avik Roy’s health reform proposal

Avik Roy released a health reform proposal today, published by the Manhattan Institute (full pdf). I am not going to go all post-modern literary critic on this (only deconstruct), in part because a lot of it lines up nicely with things I have been writing about/calling for over the past few years. For example, I called for replacing the individual mandate and federalizing the dual eligibles and buying low income persons into exchanges in December of 2010! (these are “cousins” of what Avik proposes). My more fully fleshed out “next step health reform” version came in my book in 2011. Again, it is not hard to imagine a deal between what Avik and I wrote.

Perhaps most importantly is the tone, that acknowledges that policy deals are available. However, politics have been standing in the way. 

As Avik puts it:

One of the fundamental flaws in the conservative approach to health care policy is that few—if any—Republican leaders have articulated a vision of what a market-oriented health care system would look like. Hence, Republican proposals on health reform have often been tactical and political—in opposition to whatever Democrats were pitching—instead of strategic and serious.

The biggest question facing Avik’s proposal is not in policy terms or what supporters of the ACA will think, but whether any elected Republicans will be willing and able to shift gears and begin trying to move health reform ahead instead of simply looking for what helps in the next election. My hope (and cautious expectation) is that the answer is yes, after the 2014 election.

Two things I especially want to encourage in reform discussions that overlap with what Avik has proposed and that I have previously proposed as part of a North Carolina-specific reform/waiver approach within the ACA (p. 6-7):

  • Imagine a Medicaid waiver in which the cost of the dual eligible beneficiaries (those covered by Medicare and Medicaid) are federalized to reduce the perverse incentives inherent with two payers of care; state cost savings could be used to expand insurance coverage

  • Pilot a premium support approach to the setting of premiums for Medicare advantage plans in North Carolina, two to three years after we begin a State-run insurance exchange with the Medicaid waiver/BHP expansion I suggest

There is lots of health policy to be banged out in those two points that I have suggested, but the need for LTC reform is a crucial issue that I have written much about. About the current political stalemate in which exchanges are the panacea in the Medicare program, and the worst thing ever in the ACA–and vice versa, is silly.  

I will have more detailed comments later, but I commend Avik for offering this plan, and think there is a plenty to like in the proposal itself, as we look for the next step in health reform.

The correct counter factual is key in cost of smoking

This is the second post looking at the FDAs recent rulemaking around Graphic Warning Labels (GWLs) for cigarettes and applying new regulations to other types of tobacco. The first post is here.

This post addresses confusion about the counter factual used in our book The Price of Smoking (MIT Press, 2004) to identify the life cycle cost of cigarettes, expressed in a NPV of $40/pack in 2000$. Frank Chaloupka and other leading researchers have written a useful critique of the FDA report, that leans heavily on our cost of smoking work. However, Chaloupka et al. have one thing wrong. On page 8  they say:

The FDA’s analysis appropriately accounts for the fact that smokers differ from never‐smokers
in many ways, including income levels, insurance status, race and ethnicity, and participation in
other risky behaviors.  This implies that these differences need to be accounted for when
estimating the health care costs of smoking, something commonly done by estimating costs for
the counterfactual ‘non‐smoking smoker’, with the difference in costs between the smoker and
the non‐smoking smoker reflecting the excess costs caused by smoking.  However, FDA’s
approach, following that used by Sloan and colleagues (2004), compared costs for smokers to
costs for current non‐smoking smokers, comprised of never smokers and former smokers,
rather than comparing costs for smokers to hypothetical never‐smoking smokers.  Given that
the difference in expenditures for current smokers and current non‐smokers will be smaller
than that for current smokers and never smokers, this approach will lead to an underestimate
of the benefits resulting from reductions in smoking in response to FDA regulatory actions (emphasis added)

This is incorrect. We used a non-smoking smoker, statistical counter factual to identify the cost of smoking net of other factors (Ch2excerptMITPressSmokingBook.8.11.14). The previous link is a fairly lengthy excerpt of the second chapter of the book describing the conceptual, life cycle approach we used that is based on the non smoking smoker counter factual. In Chapter 1 (p. 20), we announce our intentions to estimate the cost of smoking using a statistical construct of the “non smoking smoker”:

In estimating smoking-attributable mortality, it is essential to compare mortality experience of actual smokers with what they would have experienced if they did not smoke. We term the latter “nonsmoking smokers.” Such persons are as close to smokers as our data allow us to make them.

There are a series of assumptions and choices we made that are conservative in terms of identifying the cost of smoking, and therefore in the FDAs work, estimating some of the benefits of stopping are also likely conservative. I will get into some of those issues in later posts.



*The Price of Smoking. Frank A. Sloan, Jan Ostermann, Gabriel Picone, Christopher Conover, and Donald H. Taylor, Jr. MIT Press, 2004.  Note: several has asked me why the book is not titled “The Cost of Smoking”….that is what the manuscript was titled and the MIT Press marketing people wanted (and obviosly got) the titled changed.

Ruling against the NCAA

A federal judge ruled against the NCAA in the so-called Ed O’Bannon case, opening the way for players to share in licensing revenue (the use of their image and likeness on TV, etc) above the cost of attending college (what can be covered by a scholarship). The most consequential points:

In a 99-page opinion, U.S. District Judge Claudia Wilken issued an injunction that will prevent the NCAA “from enforcing any rules or bylaws that would prohibit its member schools and conferences from offering their FBS football or Division I basketball recruits a limited share of the revenues generated from the use of their names, images and likenesses in addition to a full grant-in-aid.” Wilken said the injunction will not prevent the NCAA from implementing rules capping the amount of money that may be paid to college athletes while they are enrolled in school, but the NCAA will not be allowed to set the cap below the cost of attendance. (my emphasis)


The injunction will also prohibit the NCAA from “enforcing any rules to prevent its member schools and conferences from offering to deposit a limited share of licensing revenue in trust for their FBS football and Division I basketball recruits, payable when they leave school or their eligibility expires,” Wilken wrote. Her injunction will allow the NCAA to set a cap on the trust fund at less than $5,000 in 2014 dollars for every year an athlete remains academically eligible to compete. The money would be payable to athletes upon expiration of their athletic eligibility or graduation, whichever comes first. She ruled schools could offer lower amounts of compensation if they want, but they can’t “unlawfully conspire with each other in setting these amounts.”

Basically, universities can now offer the full cost of attendance plus $5,000/year to be received upon graduation to play Division 1 basketball or FBS football (other sports aren’t included; they don’t generate much money,and are in fact, money losers). The ruling explicitly denies players from being able to individually negotiate the sale of their likeness, for example through endorsement deals while in college.

Some thoughts on this:

  • This is a fairly friendly adverse ruling, because the NCAA is allowed lots of discretion and the money still all flows through universities and conferences (no direct player endorsements). However, the purely amateur model of college sports is now officially dead.
  • The principle of athletes sharing in more of the money they help generate (beyond a scholarship) is correct, I think, and roughly in line with proposals I have made in the past.  However, a more economically appropriate “fix” would be to set a base stipend amount that the vast majority of players would get, and allow for an explicit market mechanism to determine the amount that “stars” receive. A modest stipend could be delivered while the students played; the stars could get the big bucks when they left college.
  • This decision, along with this past weeks NCAA announcement allowing the 5 FBS football conferences to make their own rules about cost of attendance coverage for athletes signal that there will be some big changes (The NW football union debate is another signal). What strikes me about where Universities like Duke stand now is how much policy making there is to undertake, especially with the decision explicitly saying Universities can set the share of licensing money below $5,000/year/player, they simply cannot collude in doing so. Overlaid on that is the ACC (and other 4 FBS football conferences) trying to determine their rules on what scholarships cover. Will there be an ACC decision about a cost of attendance calculation for football and basketball that must be complied with? Or will it be left up to members to work under a set of to be developed guidelines? And will collusion (I think that is what the ACC members agreeing to a ‘must follow’ cost of attendance decision would be) be ok, but collusion in setting the share of licensing revenue is explicitly not allowed in the judges ruling? Lots of policy making to be done.
  • It is a particularly interesting time for Duke. 5 or 6 years ago, we would likely be looking for a Georgetown solution (play Div 1 basketball, but drop to a lower level in football). But Duke just went to the ACC Championship game in football, and probabilistically speaking have to be approaching a ‘regression to the mean’ phase in basketball within the next 5-7 years. Duke is so far in that I think we will have to match the maximum package allowable, especially in basketball in the short term. Overcoming that inertia and choosing a different approach would be very difficult.
  • I am a member of the Executive Committee of the Academic Council at Duke, the primary faculty governance body at the University, so we will inevitably have to weigh in. This will of course be chaotic. The professors break down into three groups: (1) those who embrace Duke’s big time sports; (2) those who hate the attention and money given to big time sports and who want to de-escalate; (3) those who are clueless about it and don’t pay attention (on basketball national championship game day in April, 2010 I had coffee with a faculty friend who said “isn’t there some sort of match tonight?” Um…). I think that big time sports are inextricably a part of Duke’s identity and there is really no going back. We will have to learn the new rules and compete within them. I will go so far as to say that Duke’s recruitment of undergraduate students ‘niche’ are very smart students who say they want a ‘balanced’ college experience, that includes big time sports. I believe that if we dropped to D3 sports, our student body would become less competitive. This telling of Duke’s story will be bitterly opposed by other faculty. However, you cannot ‘split the difference between the two views’  as Duke either has to try and compete at the highest level of football and basketball, or not.
  • Finally, I assume that Duke makes every effort to fully comply with the rules, and  further assume that this will always be the case. The question is what are the rules, and how will people react as the reality of the new regime becomes clear.

Should be an interesting year.

How much pleasure does smoking bring?

News of a controversial cost:benefit calculation contained in new federal tobacco regulations subjecting many tobacco products to cigarette-like regulations, and creating new graphic warning label (GWL) regulations for cigarettes. The question at hand is whether the cost:benefit analysis underpinning the regulations is correct.

Most attention has focused on estimates of the benefits (pleasure, etc.) that smokers derive from smoking that were used in the analysis, and which increase the cost of the regulation (lost benefit to smokers = bigger cost of regulation). Frank Chaloupka and several other leading researchers in the economics of smoking have written a useful critique of the economic analysis undertaken to evaluate this rule. They focus on the issue of “lost consumer surplus “–or the pleasure/other benefits that smokers derive from smoking as a cost of the GWL regulation. From page 3:

The most critical concern about FDA’s cost estimation is the agency’s reliance on lost consumer surplus as a cost of smokers’ quitting in response to the GWLs.  We describe in detail why the notion of consumer surplus, predicated on well‐informed rational behavior, does not apply in this instance in which the vast majority of smokers begin smoking, and become addicted, before the age of majority.

This is important because any rule that has an expected cost of over $100 Million (in 1995$) has to undergo a detailed cost:benefit analysis to demonstrate that the benefits of the regulation outweigh the costs. As the estimate of “lost consumer surplus” rises, the net benefit of the regulation decreases, making the case for its promulgation less clear. A book that I co-authored “The Price of Smoking” (5 part series on the book from June, 2011) with Duke colleagues figures heavily in the FDAs cost:benefit analysis, and our top line findings illustrate the stakes. We estimated the net present value of the societal cost of a pack of cigarettes in 2000$ to be $40/pack, allocated as follows:

  • $33 private cost: borne by the individual, primarily through a substantially shortened lifespan
  • $5.50 quasi-external cost: borne by the smokers’ family through increased health costs, slightly lower wages and other factors
  • $1.50 external cost: borne by society, and representing the net effect of things like taxes paid, Medicaid and Medicare payments, and Social Security received

Most of the cost of smoking is borne by smokers via shortened lifespan, so netting out the “lost consumer surplus” or pleasure from smoking greatly changes the calculus of assessing the costs and benefits of a regulation whose predicted impact is smoking cessation. Note that the disagreement about the magnitude of this “lost consumer surplus” is mostly one of theory application (I think). Two polar opposite interpretations of the economic and epidemiological literature are possible: smoking is simply another economic decision, and therefore the benefits of smoking must be similar to the costs expressed in terms of lost years of life. At the other end of the spectrum, the addictive nature of the product and juvenile initiation means smoking is irrational and therefore not given to a calculus based on the economic rationality of decisions. Surely the truth lays somewhere in between.

The most unusual aspect of the economic analysis undertaken by the FDA is to reduce, by around half, the benefits of smoking cessation to account for “lost consumer surplus” or foregone benefits of smoking, which greatly increases the cost of the regulation. While some allowance may seem reasonable, Chaloupka and colleagues argue persuasively (see p. 11-12) that we don’t have enough empirical evidence to determine the size of the impact, and most crucially that there is no reason to expect smokers to quit smoking in response to graphic warning labels if they had undertaken smoking in a fully rational manner. This is persuasive to me that reducing the benefits of cessation that are expected to result from the regulation by half is an over-estimate of this effect, resulting in an under-estimate of the net benefits of the regulation. It does not make clear what the correct estimate might be.

There are many other interesting issues raised by the FDA regulation and the Chaloupka et al response related to the economics of smoking that I will address in several posts over the next few weeks.


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