Today I appeared on the Al Jazeera English News station, broadcast all over the world (watch live). I was involved in a debate with a pediatrician from Washington, D.C. regarding the merits and demerits of a single-payer health care system.
Income inequality has generally increased since the 1970s. Even for researchers who find that income inequality has Does this mean that happiness inequality has also increased? An NBER working paper by Betsey Stevenson and Justin Wolfers claims that this is not the case. Below is the a portion of the abstract.
While there has been no increase in aggregate happiness, inequality in happiness has fallen substantially since the 1970s. There have been large changes in the level of happiness across groups: Two-thirds of the black-white happiness gap has been eroded, and the gender happiness gap has disappeared entirely. Paralleling changes in the income distribution, differences in happiness by education have widened substantially…Juxtaposing these changes with large rises in income inequality suggests an important role for non-pecuniary factors in shaping the well-being distribution.
- Betsey Stevenson, Justin Wolfers (2008) “Happiness Inequality in the United States” NBER Working Paper No. 14220.
- Richard V. Burkhauser, Shuaizhang Feng, Stephen P. Jenkins, Jeff Larrimore (2008) “Estimating Trends in US Income Inequality Using the Current Population Survey: The Importance of Controlling for Censoring” NBER WP #14247.
The International Herald Tribune reports that the U.S. Postal Service has posted a $1.1 billion dollar loss in the past quarter. What are the reasons for this huge loss? First, total mail volume is down 5.5% from last year, likely due to the economic slowdown and the gradual increase in internet communication over time. Also, as oil prices increase, the cost to ship letters and parcels has gone up as well. Further, there is the legendary Post Office service. Let me give you an example from my experience mailing a package on Friday.
Post Office Employee (POE): Next!
Healthcare Economist (HE): Hello. I would like to mail this package and buy a book of stamps.
POE: Is there anything hazardous or fragile in this package?
HE: Yes, it is fragile. There is a glass framed picture in the box.
The post office employee proceeds to stamp a “Fragile” on the package in bright red letters. I pick out a book of stamps and pay for the transaction. As I begin to turn to leave the post office, the employee picks up my “Fragile” package and flings it 5 feet into the air into a hole leading to an empty bin in back room…Kah-plunk! That is how fragile packages are treated at the USPS?!?!?!
Next time, I’ll use UPS.
Economists often state that uninsured individuals do not “want” health insurance. Joe Paduda claims that this is not the case; most uninsured do want health insurance. Mr. Paduda cites a Washington Post, Kaiser Family Foundation and Harvard University survey which shows that “when asked why they don’t participate in their employer’s program, 1% of survey respondents said it was because didn’t think they needed insurance.” Most people decide to not to purchase health insurance–not because they do not want it–because they can not afford it.
This is where economic terminology can create confusion and also clarify the situation. Let me give you an example of what “want” means to an economist.
I want an Audi R8. However, the cost of this car starts at $112,500. Thus, I prefer to drive a 2003 Toyota Matrix and have some money left over to buy food, pay for rent, etc. Although I do “want” the sports car, I want more to not owe a huge amount of debt and instead be able to afford for other goods that I desire.
Similarly, for economists, if an individual is uninsured, it must be the case that this is because they prefer this situation. This may seem like a tautology, but what it means is that an individual who is uninsured would rather be uninsured than pay $12,100 and be insured. The $12,100 that would have gone to health insurance, can be used for food, rent, etc. Further, if you are young and healthy, the probability that you will become sick is probably fairly small compared to the average insured individual and thus you will be paying more for insurance than the expected value of your medical costs.
Those who argue that all individuals should have health insurance can argue this based on equity goals. However, in order to make health insurance more attractive, one must either 1) lower the price of health insurance, or 2) increase the after-tax incomes of low income workers. The first can be done with more flexible insurance arrangements, offering more basic health insurance coverage, improving the efficiency of the health care sector and by man other means. The second means to increasing insurance can be accomplished by either increased economic growth or a more redistributive tax policy.
Nevertheless, nothing in this world is free (especially health care). Everyone would want health insurance if it were free; but because it is so expensive, other wants come to be more important than health insurance and thus individuals become uninsured.
Barack Obama and John McCain both believe that they know how to improve the American health care system. A policy brief by Michael Tanner has nice summary of the two candidates policies. I will review some of this paper today.
Obama’s general health care policy
Obama goal is to expand government provided health care and create a form of “managed competition” originally developed by Alain Einthoven. Obama supports expanding SCHIP and Medicaid eligibility. Although Obama does not support a health insurance mandate for adults, he does support a mandate for children and young adults (any one 25 or under). Obama’s goal to increase health care access, he would support a “pay-or-play” mandate. All but the smallest employers would be required to provide health insurance; those who didn’t would be compelled to pay into a national fund covering these uninsured workers. The mandate would likely require a minimum benefits package. Overall, Obama is pushing towards more government provided health care and more regulation.
McCain’s general health care policy
Compared to Obama, McCain is generally against more government participation and regulation. Instead of moving the U.S. to larger risk pools (e.g., government insurance, employer insurance) that are more severely regulated, McCain want to move the U.S. towards more individually provided health insurance. McCain’s main policy initiative is a $2,500 health insurance refundable tax credit for individuals ($5000 for families). The goal is to make health insurance more affordable, but make individuals incur the full cost of “better” health insurance at the margin. McCain is also considering risk-rating these vouchers so that individuals with severe health problems will receive a larger voucher. McCain would also allow individuals to buy health insurance from any state.
Side-by-side comparison
| Obama | McCain | |
| Community Rating | Yes | No |
| Guaranteed Issue | Yes | No |
| Drug Reimportation | Yes | Yes |
| Expand SCHIP/Medicaid | Yes | No |
| Pay-or-play mandate | Yes | No |
| Government direct negotiations with drug companies? | Yes | No |
| End tax-exempt status of employer health insurance benefits? | No, but capped | Either eliminate or cap |
| Health Insurance Vouchers | No | Yes |
| Purchase out-of-state health insurance? | No | Yes |
| Allow non-traditional organizations to buy insurance (e.g., churches, professional organizations)? | No | Yes |
Commentary
So whose health insurance plan is better? If you are in favor of more government involvement in health care, you should support Obama. In the Audacity of Hope, Obama states that “the market alone cannot solve our health care woes–in part because the market has proven incapable of creating large enough insurance pools to keep costs to individuals affordable, in part because health care is not like other products or services (when your child gets sick, you don’t go shopping for the best bargain).” While Obama’s proposals will decrease insurance choice, increase regulation, and increase public funding of healthcare, Obama’s proposals are likely more progressive than McCains and will create larger risk pools. Obama’s plan is likely much more expensive. Further, an employer mandate may lead to higher unemployment levels (see Baicker and Levy paper).
If you are in favor of less government involvement, McCain is your man. McCain rejects “coercion and the use of state power to mandate care, coverage or costs.” The voucher system is similar to the one proposed by Victor Fuchs, and fairly similar to the Swiss managed competition system. A shift to individual–rather than employer-provided–health insurance accompanied by a decrease in regulation should: 1) reduce health insurance costs, 2) increase employment relative to Obama’s plan, 3) give insurance companies the incentive to create innovative products, 4) give workers more choice of their health insurance plan, and 5) be more fiscally sound for the government.
On the other hand, McCain’s plan will be more regressive and can adversely affect the ability of individuals with pre-existing conditions to buy health insurance (unless risk rating the voucher payment occurs). The McCain plan can only be successful if risk pooling can occur on the individual level. This is happening in Switzerland, but in Switzerland there is a standard benefit package which makes shopping for insurance coverage easier.
Additional Comment
Both candidates have proposals with respect to improving how medical care is delivered. Increased preventive care, EMR, and P4P are all popular measures. However, the NEJM states “Our findings suggest that the broad generalizations made by many presidential candidates can be misleading. These statements convey the message that substantial resources can be saved through prevention. Although some preventive measures do save money, the vast majority reviewed in the health economics literature do not.” The ability of any President to directly affect the quality of medical care provided to the patient is likely small. P4P initiatives are good in theory, but since most of medical care involves unmeasurable outcomes, or outcomes which depend on multiple causal factors (e.g., the quality of medical care, baseline patient health, patient behaviors), it is very difficult to implement them on a large scale.
Merrill Goozner of GoozNews has an interesting interview with Richard Ebright, a chemistry professor at Rutgers University. The two discuss the Bruce Ivins, anthrax, and bioterrorism. A few poignant excerpts.
- Ebright: “We’ve spent $57 billion in biodefense since 2001. The annual budget for NIH is only $30 billion. The spending has been disproportionate to the level of threat.”
- Ebright: “There are now 14,000 individuals authorized to handle bioweapons materials.”
Goozner also gets some answers about who benefited from the anthrax attacks of 2001.
- Ebright: “The administration has milked this for all it is worth by allowing the misperception to remain that this was an external attack, possibly from Iraq…The vaccine industry, particularly BioPort and its successors, have exploited this misperception.”
The BBC recently reported that a Durham University professor David Hunter is claiming that obesity is such a problem that its “…threat to our future health is just as significant as the current security threat.” What is Dr. Hunter’s solution?
He said that bigger warning labels, changes in the taxation of “unhealthy” foods, and even the use of compulsory regulations to force manufacturers to cut levels of salt, sugar and fat in their foods could be employed.
I am not sure where you weigh in (pun intended) on this debate, but I think that this is pure hyperbole. Obesity is a health problem, but is one where rational individuals are able to trade-off buying inexpensive, tasty, high calorie meals against the health risks of due to increased obesity. Further, the benefits of eating high calorie, low cost meals are never mentioned. As the cost per calorie decreases, individuals in society are able to afford to purchase more goods (e.g., education, housing).
On the other hand, individuals who experience a terrorist attack are not able to choose their own fate.
If the price of health insurance was risk adjusted so that obese individuals–who are more at risk for diseases such as diabetes–would pay more for health insurance, this would give individuals an incentive to lose weight. In theory this makes sense, but sometimes individuals gain weight when they are sick (since they cannot exercise) and thus risk adjusting health insurance premiums for obesity may be problematic. Nevertheless, claiming that obesity is a bigger problem then terrorism is going too far.
I recently received an email about Mendeley, software program for managing and sharing research papers. I have not used this, but am certainly interested in programs that help organize your research. Has anyone used this program? Any thoughts?
My favorite team, the Milwaukee Brewers, is in town and I have gone to the first two games of the series (both wins). Unlike the recent dreadful history, this year the Brewers have the 2nd best record in the National League and are in the lead for the NL Wild Card. In honor of the Brewers visit to San Diego, today I will write a brief post of how statistics and baseball have intertwined.
Introduction
Baseball is a game where players a generally judged on a statistical basis. How many homeruns does a player hit? What is his batting average? What is the pitcher’s earned run average (ERA)?
The book Moneyball showed how the Oakland A’s were able to use advanced statistical analysis to put together a winning team despite having much lower financial resources compared to teams such as the Yankees, Red Sox and Cubs. While most fans are familiar with statistics such as ERA and on-base percentage (OBP), other, lesser-known statistics may help to reveal how good a player really is.
Lesser-known baseball statistics (from Hardball Times)
- BABIP - Batting Average on Balls in Play. This is a measure of the number of batted balls that safely fall in for a hit (not including home runs). The exact formula we use is (H-HR)/(AB-K-HR+SF). If a pitcher has a low BABIP , this indicates that they are have been “lucky” since most of the balls that have been hit have been caught and their actual ERA may be lower then their talent would suggest. If they have high BABIP, this generally means the pitcher is “unlucky” since most of the balls in play have been hits, so their ERA may inflated compared to their actual talent level.
- FIP - Fielding Independent Pitching. a measure of all those things for which a pitcher is specifically responsible. The formula is (HR*13+(BB+HBP-IBB)*3-K*2)/IP, plus a league-specific factor (usually around 3.2) to round out the number to an equivalent ERA number. FIP helps you understand how well a pitcher pitched, regardless of how well his fielders fielded.
- GPA - Gross Production Average. This is a variation of OPS, but more accurate and easier to interpret. The exact formula is (OBP*1.8+SLG)/4, adjusted for ballpark factor. The scale of GPA is similar to BA: .200 is lousy, .265 is around average and .300 is a star
- K/9; BB/9; K/BB. These statistics are strikeouts/9 innings, walks/9 innings, and the ratio of strikeouts to walks. Since strikeouts and walks are wholely under the control of the pitcher, these statistics measure how good the pitcher’s stuff is (based on strikeouts) compared to how good his control is (based on the walks statistics).
- OPS - On Base plus Slugging Percentage. A crude but quick measure of a batter’s true contribution to his team’s offense. On base percentage measure how often the player is able to reach base safely and slugging percentage takes into account the players power numbers (doubles, triples, HRs).
- Pythagorean Record. A formula for converting a team’s Run Differential into a projected Won/Loss record. The formula is RS2/(RS2+RA2). Teams’ actual won/loss records tend to mirror their Pythagorean records, and variances can usually be attributed to luck. The Brewers record is currently 70-51, but their Pythagorean Record is 66-55, indicating that they have been somewhat lucky this year.
- WHIP - Walks and Hits Per Inning Pitched. A variant of OBP for pitchers. This is a popular stat in rotisserie baseball circles.
Statistically Oriented Baseball Blogs and Websites
The latest edition of the Cavalcade of Risk is up at Joe Paduda’s always excellent Managed Care Matters.