May 2006

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Ode to Obesity

May 31, 2006 in Current Events | Permalink

Reports of the increased obesity in the United States and its adverse effects on health outcomes are common. The AARP finds that 3 out of 10 American adults are obese (“Obesity in OECD countries“). MedPage Today reports that poor teenagers are more likely to be overweight than their non-poor peers (“…Teens from poorer families are overweight“). While I do not mean to diminish the health impact of obesity in the U.S., the fact that the poor are more ‘well-fed’–in terms of quantity but likely not quality–than the rich is remarkable. Throughout history, I can not remember a time when the poor were ‘fat’ and the rich were ‘skinny’.

It is easy to find other areas of the world where hunger and famine are commonplace among the poor. In 2003, the BBC reported on the famine in Ethiopia (“West risks new Ethiopia famine“). The Guardian tells of the Niger famine in the summer of 2005; just over a week ago the Houston Chronicle related testimony from North Korean refugees regarding the famine in their former nation; and today the Herald Sun of Melbourne reported of vast numbers going hungry in East Timor due to recent violence. 

So despite the negative health impacts of obesity, those who live in OECD nations must be thankful that our rich and poor are well-fed, even if they are too well-fed. In choosing between malnutrition and obesity, the Healthcare Economist would certainly vote for the latter.

Trials and transparency

May 30, 2006 in Current Events, Pharmaceuticals | Permalink

The UK Medicines and Healthcare products Regulatory Agency (MHRA) has released a scathing report criticizing the medical procedures Parexel used in testing the TGN1412 drug. In-Pharma Technologist.com (“Parexcel back in hot water…“) reports that six individuals suffered severe side effects such as organ failure swelling of body parts due to poor administration of the trials by Waltham, Mass.-based Parexel. In the US, Merck has received much negative press for withholding data from its trials of the Vioxx painkiller. After 11 children given Paxil attempted suicide compared to only one attempt with a placebo, GlaxoSmithKline had to re-label the drug to warm of an increased risk in child suicide rates (WebMD’s report).

Amid all of this negative press regarding pharmaceutical clinical trials, one organization may have a solution. The May 20th-26th Economist (“Trials and transparency“) reports that the World Health Organization (WHO) recently released its suggestion for universal rules of disclosure for pharmaceutical clinical trials. The article states:

“At the moment, the industry can choose from various voluntary initiatives encouraging disclosure and dozens of registries, but it is governed by few hard-and-fast rules.

With its new manifesto, the WHO hopes to change all that. It outlines 20 data requirements that must be disclosed for all trials. Provocatively, it insists that all such information must be disclosed before the first patient is registered for a trial—even for early-stage trials.”

One of the major complaints of researchers is that medical and academic journals only publish the results of successful trials even though much could be learned from the results of unsuccessful experiments. PHARMA claims that compelling drug companies to disclose early experiment results may reduce innovation for fear that competitors may steal their ideas. The Economist argues the following:

“The fears are overblown. Full disclosure early in trials might indeed make it harder for firms to protect clever new ideas. But pharmaceutical companies should still enjoy patent protection. In any case, they already routinely look for clues as to what their rivals are doing. The WHO argues that transparency could even improve the efficiency of the drug discovery process. The same firm that loses its lead on one drug might catch up or beat rivals on three others using information gained from a newly transparent process.”

The Healthcare Economist would argue that it is rare that more information harms society.  “The more information, the better.”  The WHO rules are sensible and would lead to more disinterested evaluation of pharmaceuticals in development; I agree with the Economist that innovation would not be significantly reduced.

Father of Microcredit

May 26, 2006 in Economics - General | Permalink

On NPR’s Marketplace, my favorite radio program, there is an interesting interview with Muhammed Yunus.  Mr. Yunus is the founder and director of the Grameen Bank in Bangladesh.  The bank describes itself as follows:

GB [Grameen Bank] provides credit to the poorest of the poor in rural Bangladesh, without any collateral. At GB, credit is a cost effective weapon to fight poverty and it serves as a catalyst in the over all development of socio-economic conditions of the poor who have been kept outside the banking orbit on the ground that they are poor and hence not bankable.

To listen to the interview, go to marketplace.org or follow this link.

Medical Service Bargain hunters?

May 25, 2006 in Health Insurance | Permalink

According to the Kaiser Family Foundation’s (KFF) 2005 Employer Health Benefits Survey, the estimated number of firms who will offer high deductible health plans has increased to 20% in 2005.  This is up from 5% in 2003 and 10% in 2004.  Despite this increase, only 3.9% of workers–about 2.4 million in total–are covered either by a High Deductible Plan combined with a Health Reimbursement Arrangement (HDHP/HRA) or a Health Savings Account (HSA).

The move towards consumer driven health care is upon us.  Services such as HealthGrades have begun to give quality ratings to hospitals as well physicians and nursing homes.  The HealthGrades offers basic 1-5 star ratings for free, but more detailed reports are available if you wish to pay for them.  (I have not elected to purchase these reports and cannot ascertain their quality.  The information for the Distinguished Hospital awards comes from inpatient mortality and complication rates from the CMS’s MedPAR data.) 

Further, The New York Daily News recently wrote an article (“Cutting Medical Care Costs“) on the trend towards consumer bargain hunting.  For instance:

Private insurers like Aetna have started programs in parts of the country (Cincinnati is an early example) where they’ll publish online the exact prices they’ve negotiated with doctors in the area for hundreds of medical procedures and tests.

Also, the story gives the following anecdote about patient Lew Randall:

Lew Randall, 64, from Freeland, Wash., recently suffered a shoulder injury. His doctor originally told him an MRI, at $1,200, would be in order to assess the damage.

When the doctor heard Randall would be paying the bill himself, he recommended a $300 barium X-ray instead?

“Is it just as good?” Randall asked.

“If it were my shoulder, that’s what I’d have,” the doctor replied.

“So why recommend the MRI?” Randall continued.

“It’s newer technology,” the doctor shrugged. “That’s what patients want.”

Lew Randall, however, is a director at the libertarian Cato Institute so his story may not be representative. 

HWR #7

May 24, 2006 in Miscellaneous | Permalink

Health Wonk Review #7 is available at InsureBlog.

Naked Economist peeps at healthcare

May 24, 2006 in Economics - General | Permalink

Charles Wheelen is a respected journalist, author and lecturer. He is currently a lecturer in public policy at the University of Chicago, but he is most famous for his best selling book “Naked Economics: Undressing the Dismal Science.” In his blog, he cites the top ten reasons why health care costs are increasing. While the ten are broad generalizations and do not offer solutions to fix the healthcare system, they do represent the economics field’s conventional wisdom on the subject. Highlighting a few of the ten:

  • Medical care is a luxury good: As the average income in a country increases, the percent of GDP dedicated to medical care will also increase.
  • We don’t pay for what we consume: Since most medical costs are paid for by either private or public (read government) insurance, patients have no incentives to shop on price.
  • Baumol’s disease: See my post on this phenomenon.
  • Demographics: As the baby boomers continue to age, total spending on healthcare will increase.
  • The uninsured: Those without insurance go to the emergency room when the have problems, which is usually a significantly more expensive option seeing a physician promptly in an outpatient facility.

Google Health

May 23, 2006 in Healthcare IT | Permalink

Fard Johnmar of the Healthcare Vox blog has written a post regarding the introduction of Google Co-op.  Google Co-op allows users to perform detailed searches regarding medical issues.  You can search by symptom, condition, medical test, etc.  Johnmar states that:

What’s interesting about this service is that Google is not taking responsibility for vetting healthcare content.  Instead it is relying on the “wisdom of crowdsâ€? to aggregate and rank high-quality healthcare information.  Google is asking those interested and knowledgable about healthcare (patients, consumers, pharmaceutical companies, etc.) to submit Web sites that they feel are reputable (after signing up to the service).

Another competitor in this arena is Healia.

One issue of economic interest is that of the quality of the website.  What if you search for information regarding kidney dialysis and you come across a site with incorrect descriptions?  This is the problem of asymmetric information where the product where uncertainty exists is information itself!  Economists solve this conundrum by realizing that this is a problem only in the short run.  In the long run, patients will realize which sites give reliable information and these site will be the only ones which are valued.

For instance let us look at Jessica Otte’s comment on the Healthcare Vox website:

“I’m not impressed. A search for ‘kidney stones’ brings up http://www.rogerbaxter.com/KidneyStone/index.html as site number 2. I cannot find any references cited or any evidence that the creator is a urologist or medical researcher. It may be accurate information, but honestly, is this the most reliable way to learn about kidney stones?

Google thinks it is ‘reliable’ because the site has over 3 million hits? The same author/domain also hosts “the Japanese beetle website.” There are ads for Amazon books all over the site. None of my textbooks or sites like pubmed, mdconsult, or statref have that added feature. Maybe I’m missing something!â€?

Is this a problem?  I would say not.  Jessica realized that this information did not look credible and most likely searched for a new site which had more reliable information.  One solution to this is certification where reliable medical organizations (such as the AMA) would certify that a website had accurate content.  While this would not preclude any other website from posting inaccurate information and may not improve the Google search results, websites carrying the certification ‘seal’ would be more highly valued.  A medical information website would pay for the certification because a reliable site will have more visits and thus higher ad revenue.  The certifying body would have an incentive only certify credible website, because otherwise, their certification ‘seal’ would soon become worthless to consumers.

Bottom line: anything that brings more information to patients is a good thing in my book.

Millions wasted on unnecessary test

May 22, 2006 in Health Insurance | Permalink

Forbes reported last week (“Millions…“) that millions of dollars are wasted each year due to unnecessary tests. Their findings are based on an article by Dr. Dan Merenstein and co-authors and is to appear in the June issue of the American Journal of Preventive Medicine.

What is the definition of an unnecessary test? The United States Preventive Services Task Force grades each test on a scale from A to D. For tests which receive ‘C’ grade, the panel has made no recommendation either for or against its use. For tests which receive a grade of a ‘D,’ the panel recommends against giving the test due to harmful side-effects or additional stress placed upon the patient.

The study examines three tests given a ‘D’ rating by the panel: EKG or electrocardiogram, urinalysis and chest X-ray. The authors looked at over four thousand routine exams for adults over age 21. Forbes reports:

At least one of the three “D” interventions was ordered 43 percent to 46 percent of the time, the researchers said.

Using extrapolation techniques, Merenstein and his colleagues determined that direct medical costs for the three “D” tests ranged from $47 million to $194 million. Adding in two other tests from the “C” category pushed the costs up by another $12 million to $63 million.

Merenstein concluded that:

“Doctors could do it [provide unnecessary tests] to appease patients or because the physicians themselves think they’re supposed to do them. And, if they owned a lab, some doctors did it for financial reasons,”

This is hardly surprising. In a fee-for-service environment, physicians have an incentive to over-treat. Since patients usually have insurance and thus do not feel the full cost of the service, they also have little incentive to restrict the physician from conducting tests. If patients did have to pay the full cost for the test, they would certainly be more hesitant to accept to pay for these unnecessary procedures.

Health insurance should not be a formed of forced savings where all services are covered. If society desires to reduce the cost of health insurance, choosing insurance plans which only cover serious medical problems–and not routine check-ups–is one of the more effective, free-market means.

The Dismal Science

May 21, 2006 in Economics - General | Permalink

Alex Tabarrok of the Marginal Revolution blog, has an interesting post regarding economics, long known as the dismal science.  First off, he has an entertaining excerpt from the Jon Stewart show:

Jon Stewart: Uh, the way you’ve explained the tax cuts doesn’t really seem fair.

John Hodgman: Fairness isn’t really the point.  They don’t call economics the dismal science because it’s fair.

JS:  Well, I suppose not.

JH: No, no, they call it that after Sir Eustice Dismal.  The 18th century English economist who proposed making smokestacks out of children.

JS: I uh, I actually never knew that.

JH: Yes, it was a very interesting proposal but ultimately flawed.  I mean if you make the smokestacks out of children who will you force to clean them?…

JH: Yes, it’s referred to as Dismal’s paradox.

In actuality, economics is known as the dismal science because of Thomas Malthus.  Tabarrok also cites the EconLog website which has a nice summary of “The secret history of the dismal science.”

Economist’s Morality

May 20, 2006 in Miscellaneous | Permalink

I just finished reading The Kite Runner by Khaled Hosseini, a very entertaining novel about the maturation of a boy who grew up in Afghanistan and later emigrated to the United States.  In the book, there is a wonderful passage where the protagonist’s father lectures him on morality.  His speech is one with which most libertarian-oriented economists would certainly agree.

“Now, no matter what the mullah teachers, there is only one sin,  only one.  And that is theft.  Every other sin is a variation of theft.  Do you understand that?”

“…When you kill a man, you steal a life,” Baba said.  “You steal his wife’s right to a husband, rob his children of a father.  When you tell a lie, you steal someone’s right to the truth.  When you cheat, you steal the right to fairness, do you see?”

“…If there’s a God out there, then I would hope he has more important things to attend to than my drinking scotch or eating pork.”

The book is a quick read, but one that also has the ability to touch your heart.

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