Risk Adjustment for Health Insurance: Theory and Implications

This paper explores the potential for welfare-improving public risk adjustment in health insurance markets characterized by adverse selection. The optimal risk adjustment system is derived in a theoretical model under a range of assumptions regarding government information and market equilibrium. Special attention is focused on the interaction between risk adjustment and the private transfers that can occur in markets characterized by adverse selection. Risk adjustment has the potential to improve both equity and efficiency; however, it can also have the effect of crowding out private transfers.     

Estimating Optimal Dynamic Regimes: Correcting Bias under the Null

Abstract.  A dynamic regime provides a sequence of treatments that are tailored to patient-specific characteristics and outcomes. In 2004, James Robins proposed g –estimation using structural nested mean models (SNMMs) for making inference about the optimal dynamic regime in a multi-interval trial. The method provides clear advantages over traditional parametric approaches. Robins' g –estimation method always yields consistent estimators, but these can be asymptotically biased under a given SNMM for certain longitudinal distributions of the treatments and covariates, termed exceptional laws. In fact, under the null hypothesis of no treatment effect, every distribution constitutes an exceptional law under SNMMs which allow for interaction of current treatment with past treatments or covariates. This paper provides an explanation of exceptional laws and describes a new approach to g –estimation which we call Zeroing Instead of Plugging In (ZIPI). ZIPI provides nearly identical estimators to recursive g -estimators at non-exceptional laws while providing substantial reduction in the bias at an exceptional law when decision rule parameters are not shared across intervals.     

SOME REAL EVIDENCE ON THE REAL BILLS DOCTRINE VERSUS THE QUANTITY THEORY

Researchers interested in testing between the Real Bills doctrine and the Quantity Theory approach to inflation in the face of rapid, deficit-financing money growth are confronted by an observation equivalence problem. This paper identifies a data set which resolves the dilemma and tests the two inflation models. The results provide clear evidence supporting the Real Bills doctrine, that the value of assets backing money determines its value, over the Quantity Theory.     

THE LEGISLATIVE HISTORY OF THE SHERMAN ACT RE-EXAMINED

According to Robert Bork's influential analysis, the Sherman Act was expressly instituted by the 51st Congress to advance consumer welfare, but has often been misinterpreted by federal courts handing down anticonsumer decisions. This paper suggests that the political coalition backing the 1890 antitrust statute sought multiple social ends and did not faithfully seek to impose economic efficiency. The key evidence includes historical economic trends, congressional debate, the legislative agenda of Senator John Sherman, and the political conflict generated by the most contentious (and most electorally important) issue of the 51st Congress: the highly protectionist McKinley Tariff Act.     

MEDIAN VOTERS OR BUDGET MAXIMIZERS: EVIDENCE FROM SCHOOL EXPENDITURE REFERENDA

Some readers may have found these results of greater interest were we able to confirm the directional hypotheses of the certainty setter model in addition to finding that spending is "related" to the reversion – the much weaker prediction of the uncertainty model. Yet the failure of the certainty
When base elections were optional, their infrequent occurrence might be expected under either a median voter or a setter model. For those districts that did hold base elections, the observations appear consistent with a setter model, but are either inexplicable by or inconsistent with a median voter model. Finally, both (a) the relationship between the number of budget elections and the presence of base elections, and (b) the outcome of mandatory base elections in 1978 provide a set of observations that are challenging to either model.
A similar challenge was posed by our investigation of budget elections when we called attention to the inadequacy of static, full information models. Rather than resolving the question of the simple setter model against the simple median voter model, our results indicate that both may be inappropriate and that endeavors dealing with complexities omitted here are warranted.