You are currently browsing the monthly archive for December 2007.
The USA Today reports on your government in action (“Subsidies…“):
Flying round-trip from Lewistown, Mont., to Billings — also a two-hour-drive — costs $88 as well on Big Sky. The government cost: $1,343 per passenger. Just two people a day took the Lewistown-to-Billings flights on average in 2006, according to the DOT.
According to the N.Y. Times (“…Benefit Cut at 65 in Retiree Plans“) in 2001it is estimated that one-third of large employers and fewer than one-tenth of small employers offered health benefits to retirees. These numbers may trend towards zero in the near future after an Equal Employment Opportunity Commission (EEOC) ruling.
NPR’s Marketplace reports (“Employers let off one health-care hook“) the EEOC has ruled “that companies can cut their retirees’ health-care benefits once they turn 65.” This will lead to more government provided health care. Is this a good thing?
Businesses will certainly benefit from not having to be in the business of planning for the health insurance of seniors.  According to the N.Y. Times, Dianna B. Johnston, a lawyer for the commission, said many employers and labor unions had told it that âif they had to provide identical benefits for retirees under 65 and over 65, they would just drop retiree health benefits altogether for both groups.â?
Further, a paper by Gopi Shah Goda, John B. Shoven, Sita Nataraj Slavov (reviewed on 10 Oct 07) claims that having Medicare as a Secondary Payer (MSP) creates an implicit tax for elderly workers. The authors find that the tax is 15-20 percent at age 65 and increases to 45-70 percent by age 80. While the authors claims are based on how MSP effects seniors’ incentives to work, it does not comment on whether or not implicit contracts guaranteeing retirees right to private insurance should be abolished or not.
In essence, this ruling is a transfer from retirees to businesses. Retirees who believed they would receive private health insurance from their employer now must rely on Medicare or pay for private insurance in the individual market. Businesses benefit from being able to eliminate costs from insuring retirees.
This raises the larger question of who should be paying for health insurance. The government could do it, but this may lead to a monopolistic system with little choice and a potential for corruption. Individuals could buy their own insurance, but without a mechanism to pool risk, sick individuals will have to pay significantly higher premiums than healthy individuals. Insurance is supposed to insulate individuals from income shocks due to changes in their health status and an individual market will not be able to accomplish this goal. A natural risk pooling institution is the employer, but employers do not want to be in the business of planning their employees (large) health insurance choices. Who should pay for health care is at the crux of the health care debate and needs to be resolved before policy reforms are implemented.
The N.Y. Times has an interesting piece (“…Low-Cost, High Return Marketing“) on small business bloggers. It concludes that consultants are the mostly likely bloggers. Aliza Sherman Risdahl, author of The Everything Blogging Book, comments that âThey [consultants] are experts in their fields and are in the business of telling people what to do.â? A member of the health blogging community, consultant David Harlow of HealthBlawg, is even profiled.
Only a few blog make enough money from advertising to be worthwhile in a purely dollars and sense terms. Nevertheless, the small business blog writers use the sites to network with others, build their reputation, and (hopefully) eventually get hired.
Tags: Blogging
On Monday, the California Assembly passed a bill that mandates health insurance for all California’s citizens. The government will provide subsidies households with incomes below 250 percent of the federal poverty level. Those earning between 250 percent and 400 percent of the federal poverty level [FPL] would be able to deduct premium costs that exceed 5.5 percent of their incomes. Health insurance will still be privately run, but the government will pay a larger portion of the premiums.
One odd twist of the legislation is that “some Californians would be granted exemptions if their income is too low to afford premiums but too high to qualify for heavy government subsidies.” Which type of people would fall into this group? The poorest poor have Medicaid. People between with income between 0-250% of the FPL are receiving large subsidies from the government.
One of the major arguments in favor of universal health care is that it creates a more equal society, giving the poor a helping hand. Yet if the working poor are exempted from buying health insurance, why is California spending all this money for health insurance when the working poor don’t have insurance.
Of course, providing these subsidies will be expensive. According to the L.A. Times, California is “about to enter a ‘fiscal state of emergency’ because of a $14-billion budget shortfall.” Who is going to pay for the subsidies?
Do I think the California plan is a step in the right direction? Maybe one step forward and one step back. Providing means-tested subsidies to help the poor afford health insurance is a step in the right direction for those who prefer a more egalitarian society. Further, although the state is financing much of the insurance premiums, it is leaving insurance to the private market. However, in the presence of a private insurance market, I believe that a minimum standard of health insurance should be established by either the government or decided on by insurance groups. This is not because I think regulation is good in general, but because 1) the insurance contract customers sign is incomprehensible and customers do not know the benefits they are receiving and 2) insurance companies often deny claims that they should pay. Setting a minimum standard with regulation could help to clear up some of this ambiguity while allowing insurance companies to offer more generous, more expensive plans if they choose.
What I do not approve of in the California plan is that health insurance is mandated. Poor families may better be able to use cash to buy food and pay for rent rather than health insurance subsidies. Healthy individuals are forced to buy a product they don’t need. Further, do not be fooled by the Governator’s statements that ‘this plan will pay for itself’; this piece of legislation will be very expensive and increase the utilization of medical care in the U.S.
Here are some news stories covering the issue:
And here is the actual text of the bill.
Tags: California, Universal health care
Merrill Goozner has a very interesting 4 part series on the pharmaceutical industry. Goozner talks of the inordinate amount of spending on pharmaceutical R&D yet notices a decrease in truly beneficial medicines. Pharmaceutical firms focus on trying to produce mass-market, blockbuster drugs for markets such as acid indigestion, headaches, and depression, but many of these drugs have little incremental benefit over existing medicines. For instance, Goozner notes that “Despite its lack of additional efficacy compared to the OTC medications that could be obtained at a fraction of its price, Nexium was the second best-selling drug in the world in 2006 with $6.7 billion in sales and a 16.9 percent annual growth rate.”
Goozner claims that stricter FDA regulations lead to more drug innovations. “If anything, history shows that the tougher the rules, the greater likelihood that industry will pursue innovative therapies. The number of new drugs and biologics approved by the agency fell consistently over the past 15 years, a period when the legal and regulatory environment was becoming substantially more hospitable to winning approval of new technologies.” I do not agree with this. It could be the case that high regulatory periods happened to be the ones where the most innovation took place by coincidence. Further, it could be that drugs were developed in the ‘easy’ regulatory period but because of the lag in development, they may have only been approved during the strict regulatory era.
Goozner also wisely notes the problems of developing drugs for the developing world: no money, no drugs.
“Where there is no money, there is no market, and hence does not attract investment by the global pharmaceutical industry. Malaria, leishmaniasis, Chagas disease, hookworm, drug-resistant tuberculosis, diarrheal diseases – the list of infectious diseases devastating the developing world is long, and the science to develop cutting edge therapeutics for treating them is at the pharmaceutical industry’s fingertips. But its resources are rarely deployed in that direction because there is no potential financial payoff.”
The full series is available in 4 parts (I, II, III, and IV).
The Sunday New York Times had an interesting article (“Disparately seeking a kidney“) on kidney transplantation. The author, a kidney recipient, suggests the following:
“Altruism is a beautiful virtue, but it has fallen painfully short of its goal. We must be bold and experiment with offering prospective donors other incentives for giving, not necessarily payment but material reward of some kind — perhaps something as simple as offering donors lifelong Medicare coverage. Or maybe Congress should grant waivers so that states can implement their own creative ways of giving something to donors: tax credits, tuition vouchers or a contribution to a giver’s retirement account.
In short, we should reward individuals who relinquish an organ to save a life because doing so would encourage others to do the same. Yes, splendid people like Virginia [the author's kidney donor] will always be moved to rescue in the face of suffering, and I did get my kidney. But unless we stop thinking of transplantable kidneys solely as gifts, we will never have enough of them.”
I have touched on this subject last month in my post on “Organ Sales.”
The latest edition of the Cavalcade of Risk has been posted at American Consumer News.
Tags: CoR
Implementing electronic medical records (EMR) have been elevated to a top priority by healthcare policymakers. Using EMR, medical providers may be able to improve quality and better detect adverse events.
One way to improve quality with EMR is chart abstraction. After a physician-patient encounter, the doctor can review the medical chart to see if he or she prescribed the correct treatments or advice to the patient. This quality improvement methodology is certainly feasible without EMR, but is made much easier and inexpensive when patient records are held electronically. A paper by Luck et al. (2000) claims that chart abstraction may not capture all quality measures. In fact, chart abstraction typically underestimates the quality of care provided. This is likely due to the fact that physicians do not write down every minute detail of the visit and thus quality may be underestimated. Another issue is recording bias. “Busier practitioners may do more than they write down or good recorders may not be careful history takers (or physical examiners).” Plus, one must realize that a patients medical record serves multiple purposes. It is not only a medical document, but a legal record and a source of billing information. These facts may compromise the integrity of the EMR (e.g.: DRG creep).
A paper by Bates et al. (JAMIA 2003) claims that chart review or chart abstraction is overall a good technique, but may be too expensive for routine use and may fail to detect may adverse events. The Bates paper reviews a number of studies looking at electronic tools such as “event monitoring” and “natural language processing” which can help to detect problems before they occur.
EMR are only useful if physicians actually use them. A study by Miller and Sim (Health Affairs 2004) find that “the path to quality improvement and financial benefits lies in getting the greatest number of physicians to use the EMR (and not paper) for as many of their daily activities as possible. The key obstacle in this path to quality is the extra time it takes physicians to learn to use the EMR effectively for their daily tasks.” EMRs are only useful if all relevant data are included in the EMR. If most information is documented, but a physician records a patient’s allergies in the paper, but not electronic chart, there could be serious adverse medical affects. The Miller and Sim paper also proposes some solutions of how to best implement EMR.
Another unforeseen side-effect of using EMR that physicians will spend more time typing and gazing at a computer screen and less time interacting with the patient. A study by Margalit et al. (2006) finds that in Israel, “physicians spent close to one-quarter of visit time gazing at the computer screen.” The computer may enhance record keeping, but it also may diminish dialogue.
Finally, whenever EMR are implemented, they must be integrated in to the current systems in use. The new EMR must be integrated with the technology currently in use and well as the social system in place. One must also take into account the technical and physical infrastructure in place. For instance, Harrison, Koppel and Bar-Lev (JAMIA 2007) document that implementing computerized physician order entry at one children’s hospital “reduced beside nurse-physician interaction about critically ill infants. Nurses had fewer opportunities to provide feedback that sometimes led to beneficial medication changes.
Tags: EMR
Development economists have long sought the answers as to why new innovations do or do not get implemented in developing countries. Giliches (1957) found that hybrid corn adoption has an S-shaped function over time. Other studies have found that an individual’s social network is the primary determinant of technology adoption. If your friends try out a new technology and it works, you will be more likely to hear about this advance if you have a large social network. Other economists blame credit constraints for the slow adoption of many farming technologies. A large up-front cost of some fertilizer or new seeds may be prohibitive, even if there is a high payback rate in terms of crop yield. Finally, it is possible that the “new and improved” technology may not be better. A pesticide developed in the West may work on American or European pests but may prove impotent against different other farm threats in other countries.
A paper by Elaine Liu, however, argues that there is another driving force which may explain technology adoption: risk preferences. To test this, Liu surveys Bt cotton adoption of farmers in the Henan, Shandong, Hebei and Anhui provinces in China. Bt cotton is slightly more expensive that regular cotton seeds, but farmers who use these new seeds spray 82% less pesticides than with the original seeds.
To test for risk aversion, Liu employs a Holt and Laury (2002) methodology but uses prospect theory to fit parameters of the individual’s utility functions. This allows individuals to be loss averse and also to use nonlinear probability weighting.
After controlling for various covariates, Liu finds the following results.
Although Liu does not mention this, prudence may play a factor in these technology adoption decisions. Taking a sure loss from the higher price of Bt cotton may not outweigh the gain from decreasing the probability of crop loss.
By 2006, the adoption of Bt cotton was nearly 100% and it seems that Chinese farmers are reaping the rewards of this new technology. Once the farmers understood better the benefits of the new seed, risk decreased and farmers were more likely to adopt the new Bt cotton technology.
Tags: Bt cotton, Development, Prudence
A very interesting article in the L.A. Times (“Defining government’s role in healthcare“) points out the following:
Though many Americans may not realize it, government is already the dominant player in healthcare, with federal and state expenditures accounting for 47% of the projected $2.3 trillion the nation will spend this year. Indeed, many private insurers follow the lead of the biggest government program, Medicare, in setting coverage policies.
Even if nothing changes, government will pick up more than half the nation’s healthcare tab by 2017. Universal coverage proposals from the leading Democratic presidential candidates would advance that tipping point to 2011, according to a recent analysis by the consulting firm PricewaterhouseCoopers …
“If we are going to get to broad-based reform, it’s not going to be the model of government paying for most of it,” said health economist Mark McClellan, who served as Bush’s Medicare administrator. “Rather, it’s coverage that would provide help from the government but expect real contributions from individuals, with partial subsidies at higher income levels.”
Thanks to Michael Cannon for the link.
Tags: Government Spending
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