Discussion of Health Benefits (Part 2)

Here are the remarks of Professor Jerry Green of the Department of Economics and HBS, at the November 4, 2014 FAS meeting:

President Faust, Provost Garber, Dean Smith, Colleagues

Jerry Green, Economics Department

My work is in microeconomic theory. Among other things, I study risk, insurance, and incentives. I study behavior, rational and irrational, and its implications for policy.

I will confine my remarks to explanatory note #2, which addresses the new co-insurance payments – 10% of the cost of many tests and procedures, up to an out-of-pocket maximum.

Co-insurance imposes a significant new financial risk. It is all the more harmful because the people bearing the expense are those who require a significant medical service.

I believe that a much better idea would be to eliminate co-insurance entirely, raising premiums instead, so as to keep constant the average employee’s contribution toward medical insurance.  By design, in expectation, Harvard’s expenses would not change as a result.

Co-insurance has been studied extensively by health economists. Each implementation of co-insurance is different and much depends on the details in a plan’s designs. Because Harvard’s new co-insurance provision applies only to hospitalization, surgery and advanced diagnostic testing, its effect on the utilization of medical services is hard to predict. I will argue, however, that whatever one believes about utilization in the future, the results of the new Harvard plans will be both financially and medically undesirable.

If there is no change in utilization, then co-insurance will not reduce Harvard’s aggregate health benefits expenditure.  Yet the uncertain magnitude of the co-insurance requirement puts patients and their families under financial pressure at exactly the wrong time.

If co-insurance does decrease utilization, which seems to be one goal of this policy, I believe that matters will be even worse.  By deferring or avoiding medical care or diagnostic tests some employees, or their family members, will later experience serious illnesses or complications.  Viewed from any perspective longer than the single year in which the initial decision to forego care was made, medical expenses will be higher, not lower. Thus, if utilization does decrease, we will have both inferior outcomes and higher costs.  Co-insurance is a lose-lose proposition.

My colleague, David Cutler, in his masterful book “Your Money or Your Life” has documented that the keys to improving health outcomes in any population are: regular follow ups, adhering to “doctor’s orders”, timely diagnostic tests, early interventions, and active management of chronic conditions.  These are precisely the actions that might be postponed or avoided by an employee facing the prospect of co-insurance payments.

Everything that we have learned in recent years, in economics and the other social sciences, tells us that people do not choose wisely, even in very important matters.  Start with wishful thinking, add an ounce of procrastination, stir in the anxieties due to illness, and you have a recipe for poor medical decision making by the patient. Add a dash of co-insurance, pour over financial stringency, and this potent cocktail will become dangerous, perhaps lethal.

A few years ago, as everyone will recall, our retirement plans were simplified and investment choices were restricted. The rationale for these changes was beautifully explained on the floor of this meeting by my colleague David Laibson. Citing the same body of academic research I have mentioned above, Professor Laibson confirmed that people – even highly educated and intelligent people -- are not good judges of their own situations. We all are subject to irrationality: over-valuing the present relative to the future, inertia, cognitive biases, and especially over-optimism.

If that is true in the financial realm it is doubly true in medicine. Medical decisions are more complicated, more uncertain, and more emotional. They are frequently made in times of stress, making us even more likely to err.

Harvard acted wisely when it recognized the adverse effects of human psychology on retirement planning. It should now act wisely again. The administration should recognize that co-insurance creates unfair, unnecessary, random transfers of wealth, falling on exactly the wrong subset of our population.  It will not reduce the long term cost of medical care, and will result in some avoidable, perhaps tragic, outcomes.

November 4, 2014
FAS Faculty Meeting

A Good Night for Young Harvard Alums Running for Congress

All four young alums I highlighted in a previous blog post got elected! Power of my blog. (And a tip of the hat to Harvard alum Charlie Baker too, -- he will be replacing Harvard alum Deval Patrick as Governor of Massachusetts ….)

The Discussions at the Harvard Faculty Meeting

At the faculty meeting yesterday, November 4, a major item of discussion was the changes in Harvard's health benefits. The Crimson reports on it here, with a significant sidebar here. I have offered this blog as a place where the faculty speakers, all of them eloquent, can post their comments for others to read. Reproduced below are the remarks of Professor Mary Lewis, who introduced the resolution, asking Harvard to reconsider the changes.

Also, the Crimson reports here on the question I asked, reproduced above, about the nonconsensual study of class attendance.

Thank you, Madam President.

I move that:  “that for 2015 the President and Fellows be asked to replace the currently proposed health care benefit plan with an appropriately adjusted version of the 2014 health benefit package, maintaining the 2014 plan design.”

Richard Thomas seconded the motion.

President Faust, Provost Garber, Deans Smith, Khurana, and Meng, Members of the Faculty

It is wonderful to see so many people here and so many colleagues who have taken time from their sabbaticals to return for a discussion as important as this one.  Your presence here is a reminder that Harvard University is, as President Faust just said a few minutes ago, a community of ideas and ideals;  we are not just a business; we come together when it is ethically vital to do so; we don’t just clock-in hours.  Indeed, the conferral of honorary degrees upon new faculty and newly tenured faculty is a time-honored ritual of coming together as a community of scholars. It was in recognition of the communitarian spirit of Harvard University,  that I submitted the motion that is before you.

At the October FAS meeting, I asked President Faust how and when the recently announced health benefits policy could be reversed.  In the wake of posing that question, I have been contacted by scores of faculty and staff from several different schools thanking me and sharing their anxieties about the impact this policy may have on them.  It is this outpouring of concern that prompted me, in consultation with a number of colleagues from whom you will hear in a moment, to submit the motion that is before you.  The hour is late, and we have a long list of faculty who wish to speak including Jerry Green, from economics and HBS; Marc Kirschner, from Systems biology at HMS, joining us today in his capacity as University Professor; Alison Johnson and Lisa McGirr, from History; Mark Kisin, from Mathematics; Charles Langmuir from Geochemistry; Richard Thomas from Classics and Christopher Winship from Sociology.  I am sure many of you also want a chance to speak. So I will try to be as brief as possible.

Tomorrow is the first day of open enrollment and if you have not yet examined your benefits enrollment guide in detail, I suggest that you do so.  When you do, you will notice that your premiums are going down, in my case by exactly $10/month.  More critically, your out-of-pocket expenses – the newly instituted deductibles and coinsurance – are going up, by as much as $1500 per individual and $4500 per family per year.  If you make less than $95K per year, these caps are adjusted somewhat.  But either way, in all but the healthiest years, you are likely to experience a pay cut of some sort, and one that is determined solely by your medical luck.

Why did the university make this change?  Many reasons have been offered, none of which is very compelling.  We’ve been told that the university’s health benefit costs are rising relative to salaries; in fact, the University’s health benefit costs as a proportion of total expenditure over the last six years have been quite flat.  Indeed, nationwide, the medical rate of inflation has gone down for the past five years and only recently has it shown a very slight uptick.  The administration warns us that health care costs might rise more in the future, so we should plan ahead.   Of course, they might also fall; does the University plan to refund us some of our out of pocket expenses in that eventuality?  In all seriousness, though, it is quite possible that costs will not rise dramatically; and yet the university is locking in this change now.

We’ve also been given a lot of misleading information about the impact of the Affordable Care Act.  Given the hour, this is too complicated to go into in at this moment but I’m happy to discuss this with any of you later.  Finally, the provost has suggested that if this reform had not been enacted, we would have experienced an increase of 3.6% in our premiums.  3.6% of my premium would have been $15 more per month for me; and about $37 more per month for Harvard, if the same contribution ratios had been maintained.  Since insurance is about managing risk, I would have willingly spent more per month in premiums in exchange for some peace of mind.

We don’t actually know if increasing premiums without adding deductibles or coinsurance was considered by the University benefits committee because the entire process has been shrouded in mystery.  My purpose in mentioning this is not to discount the hard work the UBC members put in, but to ask why the committee did not build in consultation with the people who would be most affected, why it is so hard to discover anything about what the committee was asked to do, how much money will be saved, and what the alternatives were.  In short, we still don’t really know how we got to this plan.  It is also clear that it has been implemented in a most precipitous way. When I checked earlier this afternoon, the detailed plan guides available on the University benefits website were for last year’s plans, not the proposed plan.  We’re frequently told that reforms such as Harvard’s are designed to allow us to become better health-care consumers.  I don’t know about you, but when I make momentous decisions about my healthcare, I like to be an informed consumer.
Harvard can and should do better.

Harvard could do better by ensuring that caring for one’s health is less stressful and uncertain, so we can focus on what we’re here to do: produce new knowledge and teach the brightest minds in the world.  The beauty of the old system was that you knew what to expect so you could focus on healing or having a baby.  You knew that whatever tests, procedures or surgeries your doctor ordered would be covered.  In 2015, by contrast, all but the most routine tests will trigger deductible and co-insurance payments, the cost of which you sometimes will not know until the test or procedure is complete.

If the university had announced that it was instituting a pay cut for all faculty and exempt staff with chronic illness in their families, plus those who contracted illness, got pregnant or sustained an accident, it would have sounded absurd, but it would have been more honest.  Moreover, this pay cut will be timed to come at precisely the moment when you are sick, stressed, or facing the challenges of being a new parent.   To be fair, the university cites various protections for “lower income” employees that will be put into place.  Yet, if you are in the two “lower” income brackets, you will have to pay up to the same caps as the best paid employees at Harvard, save your receipts, and then have the difference reimbursed after you’ve already paid the hospital.  Why should people as vital to Harvard’s mission as post-docs or non-union staff front the university money while potentially defaulting on their own bills as a result?

Is Harvard a business that transfers costs to its employees, reducing its expenses by shifting the burden to people coping with serious illness?  Or is Harvard a community where we equitably share the risks that we all face as human beings and where health care is a human right?
If Harvard were just a business, it would not offer such generous financial aid to middle class students and their families.  Indeed, Harvard always has been more than a business.  Let us keep it that way.
It is too late to offer rationalizations for this plan; that could have happened months ago through a process that included a broader spectrum of faculty and staff in the decision-making process; since that did not happen, we ask for a moratorium.

President Faust, you have a list of faculty members who have indicated in advance a desire to speak in favor of this motion.  With your consent, we would like to hear directly from them now, beginning, if you please, with Jerry Green from economics.

- Mary Lewis, Professor of History
- November 4, 2014 Faculty Meeting

Harvard Still Doesn't Get Electronic Privacy

I asked the following question at today's FAS meeting. Hopefully the news media present will report the reply, as I cannot comment on it until the person who gave it authorizes some reporting on it. I will just say that I found the response unsatisfactory. The incident is just as bizarre as it sounds, and I don't know much more about it that I can disclose.

Madam President, I learned recently from two of my faculty colleagues that students in their courses had been surreptitiously photographed throughout the past spring term using cameras trained on the seats in the lecture hall. This was done under the cloak of research on class attendance. A senior university official called in these professors and explained that by means of this electronic monitoring, images of all the students in attendance had been captured at each class. These faculty colleagues, neither of them tenured, first learned that their classes had been under surveillance when this senior Central Administration official called them in, without informing the Computer Science area dean, and asked them to comment on the attendance data. And contrary to a basic principle of research involving human subjects, the students who were subjects of this study still, I believe, have not been informed that their images were captured and analyzed.  

This study raises many important and troubling questions. Questions about the oversight relations between faculty, deans, and department heads in the FAS, and the plethora of provosts we now have. Questions about who controls the classrooms in which we teach—this study seems to me at odds with a vote of this Faculty that describes the classroom as “a special forum” where the teacher determines the agenda. But I will focus on just the most obvious and urgent action item.  

This university took great efforts under your leadership and Professor Barron’s to get a grip on issues of electronic privacy. Yet some basic principles seem not to have sunk in everywhere. Just because technology can be used to answer a question doesn’t mean that it should be. And if you watch people electronically and don’t tell them ahead of time, you should tell them afterwards. 

We would all benefit, I think, from more peer feedback on our teaching. But none of us, students or faculty, want to be treated like inmates of some academic Panopticon, never knowing for sure whether we are being or have been under scrutiny while we were going about our daily business of teaching and learning.  Can we have your assurance that all the students and faculty who were subjects of this nonconsensual study will be informed that they were under photographic surveillance? 

Detail on the Law Professors' Objections to Harvard's Sexual Harassment Policy

Janet Halley, Royall Professor at Harvard Law School and one of the 28 who signed the letter cited in my previous blog post, has written a detailed memo on the issues. Here is the preface:

Today colleges and universities around the country enjoy a moment of special opportunity: a chance to change slipshod, dismissive and actively malign handling of sexual harassment claims, and to offer genuine remedies for victims. But it is also a moment of danger: because one such remedy involves discipline for wrongdoers, the rules must define misconduct to include the conduct we want to sanction and deter (and not socially valuable or unharmful behavior), and to process complaints in a way that is fair to all parties. The new University Policy and Procedures realize these dangers: they provide an overly broad definition of sexual harassment, far beyond anything that federal courts recognize; they trench directly on academic freedom and freedom of speech; they threaten stigmatized minorities with unjustifiable findings of responsibility; they will rush low-income students who cannot afford counsel to unfair judgment; and they are defective on every known scale of equal procedural treatment of the parties and due process.

 

This memo is written in the spirit of improving Harvard‘s approach to sexual harassment discipline. It is premised on my firm belief that we can provide a full and robust response to complaints while also guarding vigilantly against ratifying frivolous claims, damaging academic freedom, harming stigmatized minorities, depriving accused students of the support they need, and violating the due process and equality rights of the parties to these disputes.

A crucial meta-argument is not about the policy per se but about the process by which it came into being and the presumption that "we had to do it, the feds were holding a gun to our head." Professor Halley writes,

This memo is thus addressed to an unclear situation. University officials have acceded to mandates from federal regulators that, in my view and the view of many others, were adopted without proper procedures and lack any grounding in the statutes that the regulators are charged with enforcing. As I attempt to show in Parts I and II of this memorandum, many of these mandates, and hence many of the resulting provisions of the University Policy and Procedures, offend basic principles of fairness – what you could call constitutional values. But it is often said that the University and its sub-entities are without choice in installing and implementing these policies. This claim presents our community choices of a different kind, ones that may have Big C Constitutional implications.

In responding to government pressure in the current crisis, institutions of higher education – Harvard included – bear responsibility for far more than sheer compliance with federal regulators inventing ever-new requirements in the name of sexual harassment enforcement. They bear responsibility for victim protection and redress, justice for all parties, due process for the accused as well as complainants. They must protect not only women but also other vulnerable minorities. They must advance, not undermine, the cause of free speech and academic freedom; must preserve respect for the autonomy and privacy of adults in their relationships; and must think not only in punitive but also in public health terms about harmful cultural practices among our students. All of this can be done without giving up the current opportunity to make protection and redress for victims of sexual harassment far better than it has been in the past.

Thanks to Professor Halley for inviting me to link to her memo.

So here is a crucial question. To resist, must a university wait until the feds have charged it with some specific malfeasance as a result of a Title IX complaint -- which if true, would be a very unattractive proposition, risking huge amounts of federal funding under circumstances when there would be enormous public sympathy for the complaint against it? Or could it pro-actively protest on principle, and, without any presenting complaint against it, seek to have statutes, regulations, and executive dicta overturned because it thought it was being unlawfully or even unconstitutionally required to comply with them?

I am trying to get a clear answer to that question.

In the meantime, it is interesting to note that much of the meta-argument of certain FAS faculty about the adoption of the new health benefit policies is exactly the same: The policy was adopted too quickly and without adequate consultation, not merely with the rank and file of faculty and students but with members of the faculty who would bring nationally recognized expertise to the deliberations. (NB: Professor Mary Lewis, who will on Tuesday formally move that the FAS ask that the new policies be suspended, is not related to me.)

The Title IX Mess

I have refrained from commenting on Harvard's Sexual and Gender-Based Harassment Policy because I figured the University was just doing what it had to do. If the federal government announces that universities have to do X or risk loss of their federal funding, they should, almost always, do X. The rare cases of resistance have had mixed results. Years ago, Brown University resisted a Title IX complaint having to do with what exactly it meant to offer equal athletic opportunities to men and women -- and lost. On the other hand, MIT resisted the antitrust consent degree the other members of the "Overlap Group" signed -- and won. In this case it seemed to me likely to be very risky to resist. At some point prudent fiduciaries have to instruct the executive to settle up with the feds and save their litigation to resist incursions that are closer to the core of the institutional mission.

That said, I have thought, since the policy was announced, that it was a disaster to any sense of justice in the American tradition. What has happened here (I wrote about this in EWAS) is that frustration has mounted over the low conviction rate in charges of sexual assault, typically peer sexual assault between drunken undergraduates with no witnesses other than the principals. Rape being a serious felony, Harvard and most other institutions have long observed something like the standard in the criminal justice system, that a pretty high level of certainty should be required before someone is declared a rapist. Universities have never been required to do that, since they are not sending anyone to prison, but it has always seemed the right thing to do given the social consequences of labeling someone a rapist.

Of course that resulted in low conviction rates, which have long been a source of frustration for victims and their advocates--in universities just as it is in the "real world." What has happened is that, for fundamentally political reasons (with Joe Biden hugging sexual assault victims and all), the executive branch of the federal government has re-cast rape as a civil rights violation, and insisted that "equity" here means that the two parties have equal standing in colleges and universities receiving federal funds. Findings must be on a "preponderance of evidence" standard -- essentially a 51-49 standard, rather than a beyond-a-reasonable-doubt standard. If one party can appeal the finding of the college judiciary, the other side can too. And so on. More of the guilty will most certainly be convicted in this way -- and more of the innocent too. This isn't what we used to think "fairness" meant -- it used to mean giving an individual defendant a fair shake against the overwhelming power of the prosecutorial entity. If anyone needs a refresher, go look at what is happening in Hong Kong, where the city is fighting about which of the "two systems," democratic or authoritarian, will ultimately govern it.

A diverse group of Harvard Law School faculty protested Harvard's Title IX policy, arguing in essence that Harvard caved too easily to the feds. The new policy involves measures, they say, that "are overwhelmingly stacked against the accused, and are in no way required by Title IX law or regulation." That last phrase is important. What exactly Title IX, the law, requires is very murky -- see Why Colleges Are on the Hook for Sexual Assault - Students … for a good explanation of how scope of the law has expanded over the years far beyond anything the enacting legislators anticipated. What surprises me is the statement that the policy goes beyond anything that regulations require, and that Harvard "decided simply to defer to the demands of certain federal administrative officials." Is that right? We know that managing risk is among the highest priorities of Harvard's governing boards. Did they really instruct the university administration to placate a handful of federal bureaucrats?

The Law School letter is worth reading. But I want to point out an inherent contradiction in Harvard's policy that has not been highlighted to my knowledge: The contradiction between the obligation not to allow a "hostile environment," and the obligation to protect the right to free speech. Here are the relevant passages from Harvard's policy. On what's a "hostile environment":

Sexual harassment is unwelcome conduct of a sexual nature, including unwelcome sexual advances, requests for sexual favors, and other verbal, nonverbal, graphic, or physical conduct of a sexual nature, when: (1) … [quid pro quo]; or (2) such conduct is sufficiently severe, persistent, or pervasive that it interferes with or limits a person’s ability to participate in or benefit from the University’s education or work programs or activities (hostile environment).

… verbal, nonverbal, graphic, or physical conduct may create a hostile environment if the conduct is sufficiently persistent, pervasive, or severe so as to deny a person equal access to the University’s programs or activities. Whether the conduct creates a hostile environment may depend on a variety of factors, including: the degree to which the conduct affected one or more person’s education or employment; the type, frequency, and duration of the conduct; the relationship between the parties; the number of people involved; and the context in which the conduct occurred.

Clear as mud. On free speech:

 Nothing in this Policy shall be construed to abridge academic freedom and inquiry, principles of free speech, or the University’s educational mission.

Really?

I have no idea how to reconcile those two passages. In America, under the First Amendment, we tolerate all kinds of offensive and odious speech, because we fear that the inhibition of obnoxious speech by empowering the government to regulate it would not be worth the price in restricting free expression. Just as we require a high standard of proof for crimes because we judge that it is better for the government to have to act with one hand tied behind its back, and let some bad guys walk free, than to risk over-reach by a more unconstrained federal prosecution.

It may be that we have to do as Harvard's policy states, outlaw "hostile environments" even with the exquisitely vague definition of what they are. It may even be exactly the right thing for us to do. But how can we, with a straight face, state that outlawing hostile environments in no way entails a restriction on what people can say? The First Amendment allows all kinds of hostile speech, as long as it falls short of actual threat. The Harvard policy outlaws hostile environments, including hostile verbal environments. Let's be honest, or risk having the whole policy dismissed as a political statement. We're outlawing the whole band of speech between hostile and threatening, aren't we?

Meanwhile, from another decade and in another country, …

Brooks Newmark, AB'80, Conservative Member of Parliament for Braintree in the UK, has resigned his position as Minister for Civil Society, after sexting allegations emerged. Newmark was slated to be the president of the Harvard Alumni Association next year, but has resigned from the board. He has announced that he will not seek re-election as MP.

The journalism itself has complications in the UK, which has weaker protections for the press than the US does, because the journalist seems to have deceived Newmark into sexting after picking up a rumor; only later did a woman report that he had sexted her. So the journalist is under investigation by the Independent Press Standards Organisation (IPSO).

Ugh.

Updated 9:15pm October 20 to reflect new information that Newmark has resigned his position on the HAA board.