You are currently browsing the monthly archive for June 2007.
The latest edition of the Cavalcade of Risk is up at Julie Ferguson’s Workers Comp Insider.
Particularly interesting are the comments by Robert Laszewski and Michael Cannon concerning a WSJ article which claims that Health Savings Accounts are faltering.
The concept of pay-for-performance has been discussed repeatedly in this blog. But what about the other P4P: pay-for-participation?
In the pay for participation model, payers compensate physicians to add infrastructure or partake in data collection. For instance, a health plan may pay providers to implement an electronic medical records system. Providers may also compensate physicians to set up data collection systems where performance can be measured. One difference between pay for performance and pay for participation is that P4Performance measures are generally distributed to the public whereas P4Participation metrics are kept confidential between the payers and providers. While the lack of openness reduces the information the public has about quality, it also diminishes a hospital’s or physician’s incentive to game the system.
As an example of pay for participation, an article by Birkmeyer and Birkmeyer (NEJM 2006), looks at the case of Blue Cross -Blue Shield of Michigan (BCBSM). The BCBSM program targets cardiac surgery, bariatric surgery and other general and vascular surgery. “[H]ospitals are compensated for data collection and participation in improvement activities in the form of supplements to reimbursements according to the diagnosis-related group for surgical care.” Since the data collected are not publicly report, physicians have less of an incentive to ‘juke the stats.’ For instance, when P4P performance measures are publicly available, surgeons may decide to forgo surgery on the sickest patients in order to decrease their surgery mortality rate, even though it is just these types of patients who likely could benefit most from surgery. With their flaws not open to public scrutiny, physicians may be more open to admit errors or work with the payer to improve the quality of care.
The authors do note that pay for participation is difficult to implement and requires large amounts of organization and coordination. While the payers do cover the cost of implementing the data collection, neither hospitals nor surgeons “[profit] financially from the pay-for-participation program,” which may limit provider enthusiasm for P4Participation efforts.
The Healthcare Economist blog was ranked as one of the top 100 health blogs according to Healthcare100.com [#51]. Some of my other favorite blogs which are also ranked in the top 100 (as of 18 June 2007) are:
According to a recent Christian Health Association poll, healthcare ranks at the top of most Americans’ priority lists. Excluding Iraq, 29% of individuals believed that “providing affordable health care” was the most important issue facing America. This was followed by “Ensuring homeland security” [22%]; “Reducing government spending and taxes” [19%], “Improving public education” [13%], and “Creating jobs” [9%].
According to the Wall Street Journal (“Gates Grant Targets Health Gauges“), the Bill and Melinda Gates Foundation has donated $105 million to the University of Washington to establish an institute to measure the impact of public-health programs. The new institute which will be created will focus on quantitative measures of health and will be headed by Christopher Murray.
The institute’s missions will include collecting and analyzing data on health trends, such as the prevalence of major diseases and the availability of health services, as well as conducting independent evaluations of the effectiveness of health programs…
Institute officials pointed to the dearth of available statistics in global health, contrasting that to business, which runs on clear results. “It would seem strange that we would need an institute like this,” Dr. Murray said. But in public health, “we’re so far behind the norm in other sectors.”
Jason’s Furman’s blog post on The Economist‘s Free Exchange blog not only has a clever title, but makes a clear argument against an estate tax and in favor of a inheritance tax. Philosophically, this amounts to taxing those who inherit wealth (Paris), but not those who general the wealth (Britney). He cites a paper by Lily Batchelder which states “inheritances should also be included in the heirâs income⦠because they are just as much income for the heir as are wages or lottery winnings.â? The reason for an estate or an inheritance tax is to decrease income inequality. Furman writes “the correlation between tax rates under [Ms. Batchelder's] proposed inheritance tax and the current estate tax are 0.23 â suggesting the current system is not doing a very good job of applying higher tax rates to people with greater ability to pay.” Finally, if bequests are accidental–which is unlikely–then the tax will create no economic distortions.
What is the optimal asset allocation? Of course the answer to this question depends on where you are in life and your tolerance for risk. A retired person who is 70 years old likely should have a higher percentage of their assets invested in money market funds and bonds than a 35 year old with most of their career ahead of them.
For those with a relatively long time horizon, I recommend investing heavily in equity and bond index funds. Why index funds? Eugene Fama, one of the intellectual father’s of the efficient market hypothesis, said “I take the market efficiency hypothesis to be the simple statement that security prices fully reflect all available information.” From Wikipedia:
The [efficient market] hypothesis implies that fund managers and stock analysts are constantly looking for securities that may out-perform the market; and that this competition is so effective that any new information about the fortune of a company will rapidly be incorporated into stock prices. It is postulated therefore that it is very difficult to tell ahead of time which stocks will out-perform the market. By creating an index fund that mirrors the whole market the inefficiencies of stock selection are avoided.
Paul Merriman’s Fund Advice website is an excellent resource for those who are interested in investing in index funds (that’s a tongue twister). His article on the “Ultimate Buy and Hold Strategy” is particularly enlightening. Mr. Merriman also gives some model portfolios for various fund groups. I prefer the Vanguard funds due to their relative low expense ratios. While the Fund Advice website recommends 40% bonds, I believe that this is pretty conservative for young investors (disclaimer, I am 27 years old). Thus, a 20% bond allocation should be sufficient. As I noted before, you should put some cash put into a money market fund for emergencies and to plan for large expenditures which you expect to occur in the next year or two. The amount of money to put in the money market depends on your own personal situation. Also, I abstract from any mention of home purchasing as an investment, even though for many people a large portion of their savings is tied up in the equity of their house.
My model portfolio is show below. All funds are from the Vanguard group, but you can create a similar portfolio with funds from other mutual fund groups.
| Name of Fund | Symbol | Allocation |
| 500 Index | (VFINX) | 11.0% |
| Value Index | (VIVAX) | 11.0% |
| Small Cap Index | (NAESX) | 11.0% |
| Small Cap Value Index | (VISVX) | 11.0% |
| Developed Markets Index | (VDMIX) | 14.4% |
| International Value | (VTRIX) | 14.4% |
| Emerging Market Index | (VEIEX) | 7.2% |
| Intermediate Term Bond Index | (VBIIX) | 10.0% |
| Short Term Bond Index | (VBISX) | 10.0% |
| 100% | ||
In this allocation, we have 20% bonds and 80% stocks. Half of the bonds are in short term and the other portion is in intermediate term bonds. For the equity portion of the portfolio, 55% is invested domestically and 45% is invested internationally.
You can see that the portfolio is more heavily weighted towards small-cap and value funds since over the long term these funds have outperformed the simple S&P index. While the small cap funds are more volatile than the S&P, the value funds will be less volatile and more likely to lose less value when the market is declining (thus giving you a slight hedge).
The Fund Advice website notes:
From 1927 through 2006, an index of large U.S. growth stocks produced an annualized return of 9.3 percent; large U.S. value stocks, by contrast, had a comparable return of 11.5 percent. Among small-cap stocks over the same period, growth stocks returned 9.3 percent, and value stocks returned 14.5 percent.
A disclaimer: I am not a financial adviser, but this is basically how I invest my own savings.
New rankings are available detailing the quality of care received in different states. The Agency for Healthcare Quality and Research (AHQR) gives some State Snapshots based on National Healthcare Quality Report. My home state of Wisconsin is ranked #1 according to the Milwaukee Journal Sentinel (“State is No. 1…“). The Commonwealth Fund also has a report ranking each state. The Commonwealth Fund Rankings are as follows:
How seriously should these rankings be taken? In my opinion, not seriously at all.
Let us say that each American individual living in country X would have a health level of x. If an individual would move to another state j, then their health level would be (x + aj). Ideally, states would by ranking by ordering them from the ones with the highest level of aj to the lowest. Empirically, however, we only view (x + aj). Thus, some states may have poorer, less educated, non-English speaking residents who would have worse health regardless of which state they are in. Thus, scoring well on the dimension “Cancer deaths per 100,000 population per year,” which is measured by the AHQR’s quality report , does not tell the reader whether treatment is of a high quality or if the state’s population is just healthier to begin with.
Let us look at the state GDP levels according to the Bureau of Economic Analysis’ (“Regional Economic Accounts“):
We see that 4 of the states with the worst health rankings also placed in the bottom quintile in terms of state GDP. Only Maine ranks in the top 10 in the health rankings and has a low GDP. None of the richest states rank in the bottom 10 Commonwealth Fund health care rankings. Finding a correlation between wealth and health is not surprising, but the exact relationship between the two is difficult to pin down.
In order to try to counter this selection bias based on the initial health levels of residents living in each state, most rankings include process measures in addition to actual health outcomes.
For instance, looking at individuals who have acute myocardial infarctions, if a high percentage of these individuals receive beta blockers within 24 hours of hospital admission or are prescribed aspirin at discharge, then a state will rank highly on these dimensions. While many of these process measures seem to be a good reflection of medical care quality, they may also reflect the characteristics underlying population, as well. For instance, ranking states based on the percentage of women age 40 and over who report they had a mammogram within the past 2 years (as does the AHQR), may indicate good health care policies by providers and health plans, or may indicate that the state’s population is more concerned with preventative care than residents of another state.
Also, states with high levels of health insurance usually gain extra points in the ranking, but it has not been conclusively shown that high levels of health insurance increase health levels.
So what can we use these reports for? While the overall rankings are not too instructive, policy makers can look at specific dimension to help improve care. For instance, why does New Mexico rank below average for “Receipt of recommended care for acute heart failure among Medicare patients?” Policy Makers could try to improve care by increasing the percentage of “Heart failure patients with left ventricular systolic dysfunction prescribed ACE inhibitor/angiotensin receptor blocker at discharge.” Most of the quality rankings, however, only take into account simple procedures, likely are not an accurate representation of a state’s medical care quality.
The latest edition of the Health Wonk Review is up at David Williams’ Health Business Blog.
“Energy and persistence conquer all things.”
- Benjamin Franklin
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