ECONOMIC REPORT OF THE PRESIDENT

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whelming majority of Marketplace enrollees and the sizeable majority of individuals in the individual market overall are protected against premium increases and have no reason to leave the market when premiums rise. That, in turn, stabilizes the overall individual market risk pool and helps keep premiums affordable for people who are not eligible for tax credits. The result is that any negative effects of higher premiums on enrollment and the risk pool will be greatly attenuated, arresting the feedback loop of falling enrollment and higher premiums that would cause the market to unravel. Consumers’ actual behavior under the ACA to date provides no support for the view that premium increases will trigger significant market unraveling. Panel A of Figure 4-iv examines the relationship between changes in the average benchmark premium in each state from 2014 to 2015 and the corresponding changes in enrollment in the state’s ACAcompliant individual market (including both on- and off-Marketplace enrollment). For there to be any risk of a death spiral, premium changes would need to have very large negative effects on enrollment, akin to the scenario illustrated by the orange dashed line. In fact, there was essentially no difference in enrollment growth across areas experiencing larger and smaller increases in the benchmark premium from to 2014 to 2015, as illustrated by the green dashed line. Similarly, Panel B of Figure 4-iv examines the relationship between the change in the benchmark premium in each state from 2014 to 2015 and the change in average claims costs in the ACA-compliant market in that state. For there to be any risk of a death spiral, increases in premiums would have to result in substantial increases in claims costs (as a result of healthy individuals leaving the market), akin to the relationship between premium and cost changes illustrated by the orange dashed line. In fact, consistent with the evidence from Panel A that premium increases did not meaningfully affect enrollment, there is no evidence that premium increases adversely affected the risk pool. If anything, larger premium increases appeared to be associated with slightly slower year-over-year growth in monthly claims costs, as illustrated by the green dashed line. Complete data on how enrollment and claims in the ACAcompliant individual market changed from 2015 to 2016 are not yet available. However, the county-level relationship between changes in benchmark premiums and changes in the number of people selecting Marketplace plans, depicted in Figure 4-v, reinforces the conclusion that the individual market is at no risk of unraveling. As above, for the individual market to be at risk of a death spiral, counties experiencing larger increases in the benchmark premium would have to see much smaller growth in plan selections, akin to the scenario illustrated by the Reforming the Health Care System | 219
Figure 4-iv Change in Benchmark Premium vs. Change in Individual Market Enrollment and Claims Costs, by State, 2014–2015 Panel A: Enrollment Percent Change in Enrollment, 2014–2015 140 120 100 Observed Relationship 80 60 40 20 Relationship Required for "Death Spiral" under Pessimistic Assumptions 0 -20 -10 0 10 20 30 Percent Change in Benchmark Premium, 2014–2015 Panel B: Monthly Claims Cost Percent Change in Monthly Claims Costs, 2014–2015 25 Relationship Required for 15 "Death Spiral" 5 -5 Observed Relationship -15 -25 -20 -10 0 10 20 30 Percent Change in Benchmark Premium, 2014–2015 Note: Sample is limited to States that used HealthCare.gov in all years due to availability of data on benchmark premiums. Changes in benchmark premiums are calculated on a population-weighted basis. Enrollment and monthly claims spending for the ACA-compliant market are measured using data submitted to CMS for the risk adjustment and reinsurance programs. Enrollment is measured as the number of member months of enrollment during the year. Monthly claims spending is measured as aggregate claims in the State’s individual market divided by the aggregate number of member months of enrollment. Observed relationships use a simple log-log fit. The “Relationship Required for ‘Death Spiral’” lines use the same intercept coefficient estimated for the “Observed Relationship” lines, but different slope coefficients. In Panel A, the “Relationship Required for ‘Death Spiral’” line reflects a slope coefficient of -2; for a demand elasticity of -2 to allow a death spiral, individuals who leave the market in response to higher premiums would need to have claims costs half as large as individuals who remain enrolled, a relatively extreme scenario. In Panel B, the “Relationship Required for ‘Death Spiral’” line depicts a slope coefficient of 1, which is sufficient to ensure that additional revenue from higher premiums is fully offset by higher claims costs. Source: Centers for Medicare and Medicaid Services; Department of Health and Human Services; Census Bureau; CEA calculations. orange dashed line. To the contrary, counties that saw larger increases in the benchmark premium from 2015 to 2016 actually seem to have seen slightly larger increases in Marketplace plan selections over that period. Notably, while average premium increases were lower in 2016 than 2017, some counties saw rate increases of 30 percent or more in 2016, and even these counties show no clear evidence of slower enrollment growth. 220 | Chapter 4
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ECONOMIC REPORT OF THE PRESIDENT To
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C O N T E N T S ECONOMIC REPORT OF
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economic report of the president To
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eforms in history. Banks have sharp
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the annual report of the council of
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C O N T E N T S CHAPTER 1: EIGHT YE
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. THE ECONOMIC RATIONALE FOR FEDERA
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2.4. Government Purchases as Share
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4.iii. Premium for the Benchmark Pl
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6.18. Systemic Risk (SRISK) 2005-20
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C H A P T E R 1 EIGHT YEARS OF RECO
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Figure 1-1 Actual and Consensus For
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Figure 1-3 Real Hourly Wage Growth
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Figure 1-4 Real GDP per Capita: Eur
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Figure 1-6 Household Net Worth in t
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Figure 1-8 Global Trade Flows in th
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Subsequent revisions to fourth-quar
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Percent 6 Figure 1-9 Fiscal Expansi
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substantial costs to the Federal Go
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worked to promote innovation and in
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expansion, a period of low producti
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The 2017 Economic Report of the Pre
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Chapter 4: Reforming the Health Car
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to the ACA and other factors. The A
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than 98 percent of Americans should
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Figure 1-13 Borrowers in Income Dri
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success of the financial rescue and
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einforced U.S. leadership in the ru
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Partnership (OGP), a global partner
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Figure 1-16 Labor Productivity Grow
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Labor Force Participation Household
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number of steps to ensure that econ
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C H A P T E R 2 THE YEAR IN REVIEW
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Percent 11 Figure 2-1 Unemployment
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allowing for additional investments
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Percentage Point 0.6 0.4 Figure 2-3
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public, largely highway constructio
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The size of the Federal Reserve’s
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Figure 2-5 Private-Sector Payroll E
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fell 80 percent from September 2014
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Figure 2-8 Rates of Part-Time Work,
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Figure 2-v Prime-Age Male Labor For
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Output Real GDP grew 1.6 percent ov
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Figure 2-11 Compensation and Consum
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Table 2-i Optimal Weighting for Hou
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esults suggest that, to a first app
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Figure 2-viii Real GDP, Average and
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Figure 2-13 Consumer Sentiment and
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Figure 2-xi Household Debt Service,
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Ratio to Annual DPI 1.10 1.05 Figur
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Figure 2-17 National House Price In
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Index 220 Figure 2-19 Housing Affor
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Figure 2-21 Composition of Growth i
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Figure 2-23 Capital Services per Un
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Box 2-7: Explanations for the Recen
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Figure 2-xv Business Fixed Investme
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Figure 2-26 Foreign Real GDP and U.
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somewhat generalizable (Box 2-8), b
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prices weakened and the global econ
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inadequate demand has contributed t
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Figure 2-31 Nominal Wage Inflation
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Figure 2-33 Real Hourly Wage Growth
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Index 6 Figure 2-36 Financial Condi
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Percent 4.0 Figure 2-38 Nominal Lon
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Dollars per Barrel 80 Figure 2-40 B
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Figure 2-41 IMF World Real GDP Grow
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against the Mexican peso, the Chine
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United Kingdom It has been a turbul
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for example, Japan has grown almost
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Figure 2-45 Credit to Nonfinancial
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Meanwhile, core inflation (excludin
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kept rates low across a wide range
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Investments in surface transportati
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Table 2-2 Supply-Side Components of
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Conclusion The economy continued to
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not increased from 1973 to 2013, in
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developments; individual behavior;
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action affecting income inequality
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have occurred. In doing so, these p
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Percent 24 21 18 15 12 9 6 African
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without the policy response.5 These
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Box 3-2: Income Inequality and the
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unable to obtain insurance at any p
Page 173 and 174: Figure 3-7B Percent 50 Uninsured Ra
Page 175 and 176: and have not expanded Medicaid foun
Page 177 and 178: Box 3-3: Safety Net Policies as Ins
Page 179 and 180: Millions of People 18 Figure 3-8 Im
Page 181 and 182: Figure 3-9 Effective Tax Rates for
Page 183 and 184: Box 3-4: Additional Actions to Make
Page 185 and 186: $294 million in newly appropriated
Page 187 and 188: 15 10 5 0 -5 -10 -15 Figure 3-12 Pe
Page 189 and 190: Administration with those of previo
Page 191 and 192: as a share of potential GDP by Pres
Page 193 and 194: Figure 3-17 Changes in the Distribu
Page 195 and 196: 30 25 20 15 10 5 0 Single Source: C
Page 197 and 198: ate on capital gains and dividends
Page 200 and 201: C H A P T E R 4 REFORMING THE HEALT
Page 202 and 203: eneficiaries have received cumulati
Page 204 and 205: form of lower premium costs and ind
Page 206 and 207: Percent 25 20 Creation of Medicare
Page 208 and 209: Figure 4-3 Health Insurance Coverag
Page 210 and 211: 90 80 70 60 50 40 30 20 10 0 25 55
Page 212 and 213: Percent Uninsured 25 CHIP Created 2
Page 214 and 215: Legislative actions subsequent to C
Page 216 and 217: Percent Uninsured 40 35 Figure 4-7
Page 218 and 219: ecause of the ACA’s provision all
Page 220 and 221: Box 4-2: Dynamics in the Individual
Page 222 and 223: projected during the debate over th
Page 226 and 227: Figure 4-v Change in Benchmark Prem
Page 228 and 229: 20 Figure 4-10 Share of Workers in
Page 230 and 231: percent during the decade preceding
Page 232 and 233: Panel A: Share with a Personal Doct
Page 234 and 235: Box 4-3: Interpreting Results from
Page 236 and 237: Fortunately, the OHIE is not the on
Page 238 and 239: Figure 4-14 Uncompensated Care as a
Page 240 and 241: Figure 4-15 Uninsured Rate by Popul
Page 242 and 243: Figure 4-17 Monthly Gain in Private
Page 244 and 245: Change in Working-Age Employment to
Page 246 and 247: this cross-sectional relationship b
Page 248 and 249: ecent discussions of macroeconomic
Page 250 and 251: Figure 4-23 Life Expectancy at Birt
Page 252 and 253: Figure 4-24 Mortality Rate vs. Medi
Page 254 and 255: more to cover Medicare patients tha
Page 256 and 257: example, through CMMI, the Administ
Page 258 and 259: orient payment around the entirety
Page 260 and 261: Percent of Payments 60 Figure 4-26
Page 262 and 263: covered under ACO contracts at the
Page 264 and 265: Additional Steps to Reform the Heal
Page 266 and 267: legislation that overrides the reco
Page 268 and 269: Figure 4-28 Health Care Price Infla
Page 270 and 271: Figure 4-30 Trends in Real Prices f
Page 272 and 273: average growth rate of real per enr
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Figure 4-34 Growth in Real Costs fo
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made a large, readily quantifiable
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in states experiencing weaker and s
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distribution, holding fixed both sp
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individuals among individuals 65 an
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Figure 4-40 Average Real Deductible
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Figure 4-41 Real Per-Enrollee Presc
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educe the growth rate of Medicare s
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improvements will strengthen ACOs
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-5 0 -2 Figure 4-42 Cumulative Perc
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Woolhandler 2015). These analysts a
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productivity on the job. These bene
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Figure 4-46 Premiums and Cost Shari
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(KFF 2016). Another fifth of tradit
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2030 2028 2026 2024 2022 2020 2018
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C H A P T E R 5 INVESTING IN HIGHER
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Gainful Employment regulations. To
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Thousands of 2015 Dollars 900 800 7
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externalities, credit constraints,
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Figure 5-4 Earnings by Age and Educ
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Figure 5-5 Variation in Earnings by
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Box 5-1: Anti-Poverty Efforts and E
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careers. Some of the effects of the
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eligibility cutoff likewise finds s
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Box 5-2: Federal Investments in K-1
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Evaluations of early local Promise
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America’s College Promise Playboo
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Dollars 45,000 40,000 35,000 30,000
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pre-payment penalty. Second, by tyi
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equirements, pushed efforts associa
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Figure 5-16 Size of Outstanding Loa
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Figure 5-17 Average Monthly Payment
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Figure 5-18 Distribution of Key Out
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Figure 5-20 Earnings by Family Inco
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to student needs and improve test s
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Box 5-5: Making Sure Students Enter
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prior, the early FAFSA reform helps
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Figure 5-ii Number of Institutions
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Figure 5-23 Gainful Employment Earn
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Additionally, Pell Grants can be be
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C H A P T E R 6 STRENGTHENING THE F
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with no easy way to get the funds f
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public has limited information, run
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value added of the sector has gradu
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managers. Thus, after fees, savers
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Too Many Resources in Finance? Beyo
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of the firm after the purchase affe
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Percent 100 Figure 6-2 Mortgage Ori
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Figure 6-4 Case-Shiller Home Price
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Figure 6-7 Global OTC Derivative Ma
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consumer and investor protections.
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Figure 6-iv Top 5 Banks as Share of
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cult to replace with services from
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Are U.S. Banks Too Big? The questio
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The three federal banking agencies
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Risk Taking The Dodd-Frank Act took
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Box 6-3: The Performance of Communi
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Figure 6-ix Return on Assets of Ban
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egulators can take a more holistic
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Figure 6-13 Repo and Reverse Repo,
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Figure 6-15 Private Funds Reporting
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Days 60 Figure 6-16 Weighted-Averag
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Figure 6-18 Systemic Risk (SRISK),
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In the absence of another financial
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lower funding costs in 2007-09, “
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through the Dodd-Frank Act and othe
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Prior to the financial crisis, one
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asis.24 One of the advantages of ce
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findings from the NRSRO examination
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Prior to the crisis, enforcement of
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Box 6-5: Addressing the Problem of
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Table 6-i Sources of Investment Adv
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financial system and the systems of
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Box 6-6: The JOBS Act While it was
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Figure 6-23 S&P 500, 2003-2016 Inde
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Figure 6-27 Mortgage Delinquency an
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It created the FSOC to consider ris
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energy efficient and lower greenhou
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of domestic actions to reduce green
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people and vegetation (U.S. Global
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investment are much higher than the
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Delaying Action on Climate Change I
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uses and land management activities
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Carbon Pollution Standards for Powe
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a projected range of $16 billion to
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these resulted in insignificant cha
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Figure 7-4 Corporate Average Fuel E
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diesel fuel and jet fuel. The Vehic
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Box 7-3: Building Resilience to Cur
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sources in the oil and gas sector,
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emissions and total greenhouse gas
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Figure 7-7 Energy Intensity of Real
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Figure 7-10 U.S. Petroleum Consumpt
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Figure 7-12 Energy Intensity Transp
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Figure 7-14c Energy Intensity Comme
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Figure 7-16 U.S. Energy Consumption
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2008 to 7 percent in 2015. Figure 7
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Index, 2008 =0 0.1 0.0 -0.1 Figure
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Figure 7-23 Decomposition of Emissi
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three determinants of emissions? If
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Percent 100 80 Figure 7-26 Sectoral
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characteristics, and management tre
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oil and gas sector) were subsequent
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while creating new jobs and raising
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such as using similar methodologies
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Box 7-4: Supporting Increased Penet
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sector, the fee would incentivize p
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to be used to decompose emissions i
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Reinvestment Act.” NBER Working P
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D’Amico, Stefania, et al. 2012.
Page 495 and 496:
______. 2016. “Chapter 3: Develop
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Chetty, Raj, et al. 2014. “Where
Page 499 and 500:
NBER Working Paper 22170. Cambridge
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American Hospital Association and H
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Cantor, Joel C., et al. 2012. “Ea
Page 505 and 506:
______. 2012a. “Direct Spending a
Page 507 and 508:
Dranove, David, Craig Garthwaite, a
Page 509 and 510:
Wars: Global Solutions for Developi
Page 511 and 512:
Huang, Jidong, and Frank J. Chaloup
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McWilliams, J. Michael. 2016. “Ch
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Pinkovskiy, Maxim. 2014. “The Imp
Page 517 and 518:
______. 2016. “Certification of M
Page 519 and 520:
Arcidiacono, Peter, V. Joseph Hotz,
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Bulman, George, and Caroline Hoxby.
Page 523 and 524:
______. 2015a. “Economic Costs of
Page 525 and 526:
Dobbie, Will, and Roland G. Fryer J
Page 527 and 528:
Committee on Health, Education, Lab
Page 529 and 530:
Jepsen, Christopher, Kenneth Troske
Page 531 and 532:
Marcotte, Dave E., et al. 2005. “
Page 533 and 534:
Reynolds, Arthur J., et al. 2011.
Page 535 and 536:
Chapter 6 Acharya, Viral. V., Deniz
Page 537 and 538:
Fama, Eugene F., and Kenneth R. Fre
Page 539 and 540:
Wheelock, David C., and Paul W. Wil
Page 541 and 542:
______. 2016a. “The Economics of
Page 543 and 544:
______. 2016c. Short Term Energy Ou
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Interagency Working Group on the So
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Office of Management and Budget (OM
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A P P E N D I X A REPORT TO THE PRE
Page 553 and 554:
Council Members and Their Dates of
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Report to the President on the Acti
Page 558 and 559:
consulting with a wide variety of o
Page 560 and 561:
In October, the Council released a
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Research Economists David Boddy . .
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A P P E N D I X B STATISTICAL TABLE
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GOVERNMENT FINANCE, INTEREST RATES,
Page 569 and 570:
Year or quarter Table B-1. Percent
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Table B-2. Gross domestic product,
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Table B-3. Quantity and price index
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Table B-5. Real exports and imports
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Year Total Table B-7. Real farm inc
Page 579 and 580:
Table B-9. Median money income (in
Page 581 and 582:
Labor Market Indicators Table B-11.
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Year or month Table B-12. Civilian
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Table B-14. Employees on nonagricul
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Year or month Table B-15. Hours and
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Government Finance, Interest Rates,
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Table B-19. Federal receipts and ou
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Table B-21. Federal and State and l
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Table B-23. U.S. Treasury securitie
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Year and month Bills (at auction) 1
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Year and month Table B-26. Money st
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