October 2007

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Cure for Cancer: Use an expensive placebo…not a cheap one!

October 22, 2007 in Experimental, Pharmaceuticals | 1 comment

Give a patient a pill and they will feel better. Give the same patient the exact same pill and tell them it was purchased at a wholesale discount, and these same people won’t feel as good.

At least that is what a study by Shiv, Carmon and Ariely (2005) found.

In three experiments, the authors show that consumers who pay a discounted price for a product (e.g., an energy drink thought to increase mental acuity) may derive less actual benefit from consuming this product (e.g., they are able to solve fewer puzzles) than consumers who purchase and consume the exact same product but pay its regular price. The studies consistently support the role of expectancies in mediating this placebo effect.

A question remains, are price and quality related? A study by Riesz (1979) looks for a correlation between price and quality as reported by Consumer Reports for packaged food products. “He concludes that the correlation was near zero, and in cases such as frozen foods, it was even negative.”

Thanks to ‘Undercover Economist‘ Tim Harford for link.

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Catastrophic Payments for Health Care in Asia

October 22, 2007 in HC Statistics | Permalink

An amazing collection of data has been performed by van Doorslaer et al. in their 2007 Health Economics paper “Catastrophic Payments for Health Care in Asia.” For 14 Asian countries, the authors categorize all charged services, free services, and income-related fee waivers. Further the paper examines the frequency and magnitude of out-of-pocket payments for medical care in each nation. Just three of these statistics are described below.

  OOP as % of total health expenditures % with OOP greater than 15% of HH expenditures % with OOP greater than 25% of HH expenditures
Bangladesh 64.8 9.87 4.49
China 60.4 7.01 2.80
Hong Kong 31.2 3.04 1.09
India 82.2 5.52 1.83
Indonesia 57.7 2.59 1.13
Korea, Rep. 49.9 6.11 2.56
Kygrz, Rep. 51.7 2.30 0.50
Malaysia 40.2 0.98 0.36
Nepal 75.0 3.09 1.18
Philippines 44.9 2.68 1.14
Sri Lanka 49.6 1.54 0.47
Taiwan 30.2 2.79 0.87
Thailand 32.7 1.92 0.80
Vietnam 80.5 8.57 2.89
       

Quotations of the day

October 21, 2007 in Miscellaneous | Permalink

“Un libro abierto es un cerebro que habla; cerrado, un amigo que espera; olvidado, un alma que perdona; destruido, un corazón que llora.”

Proverbio Hindú

 

Nada de lo que el hombre ha sido, es, o será, lo ha sido, lo es ni lo será de una vez para siempre, sino que ha llegado a serlo un buen día y otro buen día dejará de serlo.

José Ortega y Gasset

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A Mathematician Reads the Newspaper

October 19, 2007 in Books | Permalink

I recently finished reading an interesting book titled A Mathematician Reads the Newspaper by John Allen Paulos. Published in 1995, the book employs simplified mathematical and statistical techniques in order to ascertain the validity of many statements published in the press. There are also numerous examples from the arena of health care reporting. For instance:

“A related equivocation arises when one is discussing diseases, accidents, or other misfortunes and their consequences. If one wishes to emphasize the severity of a problem, one will usually talk about the number of people afflicted nationally. If one wants to downplay the problem, one will probably speak about the incidence rate. Hence, if 1 out of 100,000 people suffers from some malady, there will be 2,500 cases nationwide. The latter figure seems more alarming and will be stressed by maximizers. Dramatizing the situations of a few of these 2,500 people by publishing or televising interviews of their families and friends will further underscore the problem. Minimizers, on the other hand, might invoke the image of a crowded baseball stadium during a World Series game and then point out that only one person in two such stadiums suffers from the misfortune in question.” [p. 79-80].

In another chapter, the Mr. Paulos advises one to be skeptical of medical claims made in both the news and advertising sections of the paper.

“A survey shows that this medication works more quickly. Than what does it work more quickly? Why is quick action important? Is it quick, but relatively ineffective? This nutrient is essential to good health. Are we suffering from a lack of it? Are there other sources of it? Can we have too much of it?”

The book is structured as a series of newspaper article length chapters. While most professional economists, mathematicians, or statisticians will not find this book a revelation, it still is an interesting read–making a case for the importance of the newspaper despite its many flaws. For those without a serious mathematical background, this book will hone your analytical senses and hopefully demonstrate how mathematicians is interesting and relevant to current events.

Health Wonk Review

October 18, 2007 in Carnivals | 17 comments

This week’s edition of the Health Wonk Review is overflowing with useful information. Can there be too much of a good thing, you ask? Well for those of you who don’t have the time to read every article in this week’s HWR edition, I’ve narrowed the posts into a few, easy-to-use categories.

  • BEST POSTS OF THE WEEK
  • Politics: S-CHIP, the Candidates and Conservative Health Scientists
  • From Aspen to San Francisco to México
  • Health Insurance and WTC Safety
  • Microsoft’s Health Vault
  • Money’s Influence on Physicians: Comments on physician profit motive, the NIH, and managed care.
  • Health care Effectiveness: Preventive Care, Midwives and Comparing American and European Health
  • Who are you?

Enjoy…

BEST POSTS OF THE WEEK

Is P4P is really just a CMS (Medicare/Medicaid) scheme to save money, wrapped in the flag of quality? 79% of physicians believe so. This and other interesting commentary on P4P can be found at Wachter’s World blog by Bob Wachter.

The gold standard for Health Economics is the RAND experiment. But what if the conclusions from RAND were wrong? This is the question posed by John McDonough of A Healthy Blog. McDonough reviews an October 2007 article by John Nyman, stating that differential attrition rates between those assigned to the free plan and those assigned to the cost-sharing plan may be a cause for concern.

Politics: SCHIP, the Candidates and Conservative Health Scientists

Jon Swift: SCHIP will “turn more of our kids into little welfare princes and princesses.â€?

Michael Cannon of the Cato@Liberty Blog on SCHIP: “Expansion of access to care through insurance coverage, which is the focus of national health care policy related to children, will not, by itself, eliminate the deficits in the quality of care.â€?

Rob Cunningham of Health Affairs: while “children, on average, receive recommended treatment in only 46.5 percent of their ambulatory care encounters,â€?… “the current SCHIP reauthorization process offers the opportunity to make amends on this frontâ€?

Lisa Emrich at Brass and Ivory gives her thoughts on government (taxpayer-funded) programs from a patient’s perspective.

Jimmy Atkinson of NOEDb reviews how the 2008 presidential candidates propose to reform the health care system.

Joe Paduda of Managed Care Matters says the Kaiser Family Foundation’s Health08 site compares all the Presidential candidates’ health care platform planks.

Robert Laszewski of Health Care Policy and Marketplace Review takes an in depth look at Hilary Clinton’s health plan proposal.

Health Access California looks at the Govern-ator’s latest revisions to his health proposal.

Although academics tend to be more liberal than the population in general, Greg Laden at the Evolution blog says that “Health Scientistsâ€? preferred Bush to Kerry in 2004.

From Aspen to San Francisco to México
Alvaro Fernandez presents 10 Highlights from the 2007 Aspen Health Forum posted at Brain Fitness Blog.

The Health 2.0 conference recently took place in San Francisco. Brian Keppler of The Health Care Blog gives his take on Health 2.0, a concept of Web-based platforms that allow users to reformulate data for their own purposes.

Need cheap medical care? In San Diego, many residents go to Tijuana for lower priced pharmaceuticals and physicians visits. David Williams of the Health Business Blog recently released a white paper analyzing the future of medical tourism in the U.S.

Health Insurance and the WTC Saftey

Bill Halper of InsureBlog may be developing a split personality. One the one hand, he sympathizes with the difficultly people have trying to purchase health insurance after a serious medical problem arose. On the other hand, “a substantial percentage…had made a conscience (and retrospectively stupid) decision to gamble [by not purchasing some insurance] and they lost that bet.â€?

It seems that there is an “appalling lack of any attention to safety in the mammoth WTC cleanup,â€? according to Julie Ferguson at Worker’s Comp Insider

Microsoft’s Health Vault

David Harlow of the Health Care Law Blog is skeptical of Microsoft’s HealthVault. It may just be “a band-aid for a problem that needs a more fundamental solution.â€?

Vince Kuraitis of e-CareManagement blog gives us “Four Misconceptions” about Microsoft’s Health Vault.

Money’s Influence on Physicians: Comments on physician profit motive, the NIH, and managed care.

Zagreus Ammon of the Physician Executive believes “The profit motive in medicine, while causing significant unanticipated problems (costs, insurance etc.), has been able to deliver some significant improvements in survival, lifespan and quality of life.â€? In particular, he examines declining cancer death rates.

In “The rise and fall of the NIH,â€? ScienceZoo believes that the NIH’s decision to increase funding for Complementary and Alternative Medicine (CAM) at the expense of basic research will decrease the number of revolutionary discoveries made in the U.S.

Roy Poses of Health Care Renewal explains why physicians have not been able to resist threats to their core values from ever more dominant health care organizations.

Health care Effectiveness: Preventive Care, Midwives and Comparing American and European Health

Daniel Goldberg of the Medical Humanities Blog laments that “tiny percentages of both care and research dollars going to preventive medicine and public health even while there is little dispute that such measures are far more likely to have a significant impact on population health than what we allocate the lion’s share of resources to (acute care and development of new technologies and biologics)â€?

My own post on Healthcare Economist examines whether or not Midwives provide higher quality care during pregnancy than physicians.

Ian Welsh of The Agonist analyzes why older Europeans are healthier than older Americans.

Who are you?

Author “Dr. J. C.â€? of Brain Blogger blog anonymously for fears of malpractice lawsuits and to protect his patients confidentiality.

Prescription Drug Coverage and Elderly Medicare Spending

October 17, 2007 in Medicaid/Medicare, Pharmaceuticals | Permalink

In 2006, the federal government first began expanding Medicare coverage to include prescription drugs using the Medicare Part D program. According to one report, Part D will cost taxpayers $47 billion in 2007.

Yet it is possible that Medicare Part D could actually save taxpayers money. If prescription drugs and other medical care are substitutes, then increasing funding for lower cost pharmaceuticals could actually save taxpayers money on the more expensive hospital stays (covered by Medicare Part A) and physician visits (covered by Medicare Part B). For instance, it is possible that regularly taking beta blockers may reduce the chance that one needs an expensive heart surgery.

On the other hand, if pharmaceuticals and other medical care are compliments, than increasing Part D funding, could increase the total spending in Medicare Parts A and B. For instance, individuals taking prescriptions drugs may need to go to the doctor more often–covered by Part B–in order to have their pharmaceutical usage monitored.

So how does Medicare Part D affect other Medicare spending?

This is the question Baoping Shang and Dana Goldman investigate in their NBER Working paper “Prescription Drug Coverage and Elderly Medicare Spending.”

Data and Methods

Shang and Goldman use data from the 1992-2000 Medicare Current Beneficiary Survey (MCBS) and compares Medicare spending differentials between individuals who have a Medigap policy with drug coverage and individuals who have a Medigap policy without drug coverage.

Since Medicare spending–like most health care spending–is right skewed with a large mass at zero expenses. The authors use a two-part regression structure. In the first regression, the the authors use a probit regression to determine the probability an individual had any health care spending. In the second regression, Shang and Goldman utilize an OLS (an later an IV) structure to find the impact of Medigap drug coverage on total spending, conditional on the fact that the individual had some spending. Mathematically, the two regressions look as follows:

  1. p* = β0 + β1*d +β2(d*Income) + ε
  2. ln(Y|Y>0) = γ0 + γ1*d +γ2(d*Income) + ν

p* is the probability of any spending, d is a dummy variable if the individual has drug benefits, and Y is total Medicare spending.
This econometric structure could lead to incorrect inferences if selection bias were present. In fact, “[c]ompared to those with prescription drug benefits, Medicare beneficiaries without drug benefits tend to be older, less educated, less likely to be in an urban area, and poorer. They are sicker in term of both self-reported overall health and histories of chronic diseases.”
In an attempt to eliminate selection bias, Shang and Goldman employ state reforms in the health insurance markets as instrumental variables. These reforms include the following:

  • “Guaranteed issue requires health plans to offer coverage to all individuals, regardless of their health status or claims experience.
  • Rate rating includes rating bands, very tight rating bands, and community rating. Rating bands restrict health plans’ use of experience, health status, or duration of coverage in setting premium rates for individuals. Very tight rating bands allow very limited adjustment for experience, health status, and duration. Community rating prohibits health plans’ use of experience, health status, or duration of coverage in setting premium rates for individual coverage.”

For their instrument, Shang and Goldman look at states with 1) both guaranteed issue and rate rating, 2) states with only rate rating, and 3) states with neither. Since MCBS is a panel, the authors employ a discrete factor model to control for three different levels of unobserved heterogeneity directly and allows some correlation of these fixed effect terms with the error terms.

Results

A simple two part model finds that the “prescription drug benefits increase drug spending by $157, reduces Medicare Part A spending by $135, and increases Medicare Part B spending by $31″–a net $104 reduction in Medicare spending. The more complicated structural model using structurally estimating unobserved heterogeneity parameters finds that the drug benefit increases drug spending by $170 (or 22%). However, “prescription drug benefits decrease Medicare Part A spending by $350 or 13%; and prescription drug benefits decrease Medicare Part B spending by $74 or 4% although the estimates are statistically insignificant.”

Healthcare Economist comment

Even for those who oppose government provided health insurance, few would argue with the statement that given Medicare’s existence, it is important to be sure it operates in the most efficient way possible. This paper demonstrates that Medicare Part D may be cost saving. Leaving out prescription drug benefits may lead patients to choose expensive surgeries–which are free to them since they are covered by Medicare –over taking prescription drugs–which are costly without Medicare Part D. The authors sum up their findings in a compelling manner: “…it appears that Medicare beneficiaries may have been overinsured with respect to medical services, and underinsured with respect to prescription drugs.”

Shang, Baoping; Goldman, Dana; (2007) “Prescription Drug Coverage and Elderly Medicare Spending” NBER WP #13358.

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Midwifery-Promoting Public Policies and Health Outcomes

October 16, 2007 in Nonphysician Clinicians | Permalink

Many health care policy researchers believe that non-physician clinicians, such as physician assistants, nurse practitioners and midwives can help to reduce cost while maintaining quality. Midwifery has gained in popularity over recent years. Groups such as the American Public Health Association, Public Citizen and the National Organization for Women all support increased access to midwifery care.

The question remains whether or not midwife care during pregnancy is inferior, equivalent, or superior to physician care. Amalia R. Miller attempts to answer this question in her 2006 B.E. Press paper.

Differences between midwives and physicians

  • Skills: Physicians receive an MD while midwife training is comparable to a nursing background. Only physicians can preform surgery such as a cesarean delivery.
  • Financial Incentives: Physicians have a financial incentive to recommend cesareans since they will reap the financial rewards of preforming the surgery. Since midwives do not receive any compensation from surgery, they may be more likely to look out for the best interest of the patient.
  • Attitude toward childbirth: The midwifery model of care views birth as a natural process and gives the mother more input towards shaping the birth experience. The physician’s medial approach “…highlights the risks of childbirth, viewing the event as inherently medical, even pathological, requiring hospital admission and technological intervention.”

Quality

One problem with measuring the quality of care received by those who use midwives is that of selection bias. For instance, healthy women may be more likely to use a midwife. Pregnant women with serious complications will be more likely to use physicians. Thus, a researcher may erroneously conclude that pregnant women treated by physicians are more likely to have cesareans, when a more appropriate conclusion would be that physicians treat a less healthy patient base and thus preform more cesareans.

The best study preformed to date is a Chambliss et al. (1992) paper. The authors conducted “[a] randomized blinded clinical trial was conducted in which 492 low-risk patients were assigned to either physician or midwifery management.” Unlike most non-randomized trials, the authors found a small positive relationship between midwifery and cesarean rates.

Methods

The Miller (2006) paper looks at how midwifery affects cesarean rates. They use 1989-1999 Natality Detail Files as well as the 1989-1999 March Current Population Surveys (CPS) as her data source. The author considers a simple OLS regression using cesarean rates as the dependent variable and the use of midwifery–along with other covariates–as the independent variables. The problem of selection bias remains.

Thus, the authors use the enactment of Any Willing Provider laws as a proxy for state-wide midwifery usage. These laws “prohibit discrimination against a class of providers.” While Any Willing Provider laws are not directly related to midwives, the authors also use specific state midwifery reimbursement laws to proxy for midwifery usage. The claim made by Ms. Miller is that these laws are exogenously enacted; this creates a natural experiment and allows a difference-in-difference regression.

Results

Ms. Miller finds that midwifery reimbursement laws, unsurprisingly, do increase midwifery usage by pregnant women but more general Any Willing Provider laws do not alter midwifery usage rates. The authors continues to state that “…The main finding of the Chambliss et al. (1992) study is confirmed: there is no evidence that the expansion of midwifery led to a reduction in cesarean section rates. Hence, the results from the small randomized trial appear to generalize to the population at large, while the non-random trials likely suffered from selection bias due to inadequate controls for patient health and preferences. ”

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2007 Nobel Prize in Economics

October 15, 2007 in Economics - General | Permalink

The winners of the 2007 Nobel Prize in Economics are: Leonid Hurwicz, Eric S. Maskin, and Roger B. Myerson.  The trio won the prize for their work on Mechanism Design.  See the Nobel Prize press release as well as the Scientific Background paper detailing exactly what is mechanism design.

The Economist’s View website provides a number of links to newspaper articles and blog posts regarding the 2007 Economics Nobel prize.  “Mechanism Design for Grandma” on the Marginal Revolution site gives a simple explanation of Mechanism Design Theory.

As an Applied Microeconomist who is generally skeptically of the practical importance of much of economic theory, I find Tyler Cowen’s post on the Marginal Revolution website particularly interesting:

No doubt mechanism design, and the general problem of inducing truth-telling, will be with us forever.  But how practical are these general results?  Or have the theorists simply provided us with cautionary notes and left the real applications to the context-specific world of practice?  Did these guys get at the real reasons why we don’t organize the entire economy as a second-price auction?

Part of me thinks: “Hey, let’s say Natasha wants Yana to tell her the truth about when she will clean her room.  This stuff isn’t useful!”

Another part of me thinks: “It is most important to get theory right.  These guys are brilliant.  Only the philistines demand that all scientific contributions have immediate applications.”

Some of you might argue: “These guys have already had a big impact on real world auctions and incentive schemes.”  In terms of the induced improvement in human welfare, I find that a difficult case to make.  The important progress has come from recognizing much simpler truths about incentives.

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Procrastination

October 13, 2007 in Miscellaneous | Permalink

Here’s an entertaining cartoon posted on Cristina Favreau’s Savvy Entrepreneur website.

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Overtreated

October 12, 2007 in Books | 5 comments

“In its 1999 report To Err is Human, the Institute of Medicine report estimated that as many as ninety-eight thousand Americans are killed each year by medical error. Another ninety thousand to four hundred thousand patients are harmed or killed by the incorrect use of a drug–they received the wrong drug, or the wrong dose of the right drug, or two drug that interacted in the wrong way.”

“…preventable hospital error [is] the eight leading cause of death annually, ahead of motor vehicle accidents (43,458), breast cancer (42,297) and AIDS (16,516).”

Most health policy articles and books look at how to get more medical care to those who need it. How can we lower the cost of medical care? How can patients receive higher quality treatment? How can we decrease the number of uninsured? Shannon Brownlee’s book Overtreated looks at the medical care from a different perspective. She claims that Americans are too anxious to receive medical care and that the excessive amounts of medical treatment are actually hurting the average health levels of the American population.

Her well-written book uses a mix of anecdotes and statistics to document how unnecessary medical care is not only increasing health care costs, but also harming patient health. Examples where physicians do not take into account a drug or medical procedure’s side effects abound. Orabilex causes potentially fatal kidney damage. Spinal fusion surgery is frequently preformed but likely benefits only a small percentage of back-pain sufferers. Drugs such as Prozac and Ritalin are certainly over-prescribed. Diabetes patients receive recommended care only 24% of the time (McGlynn et al. NEJM 2003).

Why does this overtreatment occur? Brownlee, gives 5 main reasons.

  1. Defensive Medicine. Doctors fear malpractice suits and would prefer to preform more tests and give more treatment in order to avoid being sued.
  2. “Do something” mentality. Patients want the doctor to ‘do something’ even if the best medicine would be non-treatment and rest. Patients often believe that every disease can be cured with enough treatment.
  3. Lack of evidence. Doctors are pressed for time and can not read through the copious amounts of journal articles available (although people working for the Cochrane Collaboration, InfoPOEMs, and UpToDate are trying to change this). Thus, doctors may be misinformed. Further, different studies often provide contradictory suggestions as to what the physician should do.
  4. Lack of training to interpret evidence. Even when doctors are diligent about reading journal articles, they often misinterpret the results and do not critically review the paper to be sure the researchers methodology is sound.
  5. Money. When physicians are paid on a fee-for-service basis, they have a financial incentive to provide more medical care.

The book is non-technical and the first 9 chapters document the way in which and the reasons why Americans get so much medical care. Chapter 10 offers some solutions to these health care problems. These solutions are similar to the ones expounded in Ms. Brownlee’s article in the October 2007 edition of the Washington Monthly (see my comments here).

  • Brownlee S, (2007) Overtreated. Bloomsbury, New York, 1st ed.

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