You are currently browsing the monthly archive for January 2008.
Want some more information on the presidential candidates views on healthcare reform? The Healthcare 08 website has an interesting “PoliGraph” showing where the candidates stand. Candidates are characterized according how government driven and how important health care issues are. The graphs include issues such as: overall health care reform, drug prices, the uninsured, and stem cell research.
The graphs are very well done and the information is very accessible.
Tags: Presidential Candidates
The latest special issue of Health Economics is very interesting. It looks at healthcare cost and quality metrics across nine European countries using clinical vignettes from the HealthBasket dataset. The nine countries included in the project were: Denmark, England, France, Germany, Hungary, Italy, The Netherlands, Poland, and Spain. The vignettes were used in order to collect standardized data across the diversity of medical care practiced in these nine countries. The ten vignettes were:
The authors found that “Hungary, Poland, and Spain were – as expected – below the nine-country average [in terms of medical cost]. However, after adjustment for episode-specific PPPs…costs of these three countries turned out to be average, or even among the highest for some vignettes…The prices that were charged varied greatly, not least because of variation in applied technologies. The hip replacement vignette, for example, was reimbursed at a (average) level of €8963 in Italy, compared with €1795 in Hungary… The AMI vignette showed some remarkable variations as well. In the Netherlands, the ‘price’ for an AMI treatment was €8722; whereas in neighbouring Germany, it was ‘only’ €3114.”
While the technology used had a large impact on cost, structural varaiables (e.g.: number of beds per hospital, staff per beds, beds in the relevant specialty, or staff in the relevant specialty) had little correlation with procedural costs.
Other articles in this special issue examine each one of the ten vignettes in more detail.
Reinhard Busse, Jonas Schreyögg, Peter C. Smith “ Variability in healthcare treatment costs amongst nine EU countries – results from the HealthBASKET project” Health Economics, Volume 17, Issue S1 (p S1-S8)
Tags: HealthBasket
An interesting article (“Sudden Death…“) at the Covert Rationing blog addresses the poor care given to cardiac patients in hospitals. Dr. Rich states that:
“…hospitalized patients who have cardiac arrest (sudden loss of cardiac function due to the onset of a heart arrhythmia known as ventricular fibrillation) are often not receiving defibrillation (an electrical shock delivered to the chest) within the recommended 2-minute window of opportunity. Further, patients whose defibrillation is delayed beyond the 2-minute window have a substantially reduced chance of surviving the cardiac arrest….An accompanying editorial (written by Dr. Leslie Saxon, an old friend of DrRich) points out that in public areas where Automatic External Defibrillators (AEDs) are available, such as casinos, the odds of surviving a cardiac arrest is over 50%. In contrast, the odds of surviving cardiac arrest in a hospital, according to this new study, is only 34%“
Why would this be the case? Casino’s may have a business interest in saving people’s lives in order to get some good publicity and more consumer loyalty by survivors. On the other hand, hospitals may actually save money by not treating cardiac patients appropriately since patients experiencing cardiac arrest are likely to be “individuals with chronic and expensive medical problems – most often they have coronary artery disease, diabetes, or heart failure – and (as DrRich has pointed out before) their sudden death today will save the system countless dollars tomorrow.”
Insurance companies do have a financial incentive not to treat cardiac arrest patients optimally. The question is whether or not these financial incentive impact the manner in which physicians practice medicine in the hospital. Dr. Rich gives some evidence that financial incentives may be playing a significant role in the quality of hospital care in the U.S. today.
Tags: Cardiac Arrest
Who has the best Economics blog of 2008? The Bayesian Heresy makes their selections. Topping the list is the UCSD professor Jim Hamilton’s Econbrowser blog. In 2006, the Bayesian Heresy named the Healthcare Economist as the #2 Specialized Economics blog.
Richard Posner and Gary Becker, two preeminent economists, discuss some of the presidential candidate’s plans for healthcare reform.
Posner laments that the U.S. spends 16% of GDP on healthcare, but only has 37th best healthcare system according to the World Health Organization. What is to be done? Most candidates promise to reduce costs and increase health insurance coverage. But expanding insurance coverage will likely increase cost.
Posner derides some of the other reform ideas:
“Some of the proposals for reducing aggregate costs are either fluff, like reining in jury awards in medical malpractice cases (those awards are a tiny fraction of total health costs, and already are being reined in by judges and by tort-reform measures adopted by state legislatures), or measures that the market is in process of implementing, such as the digitization of medical records. Other economizing proposals have hidden negative implications for quality–such as placing price controls on prescription drugs, reducing the protection that the patent laws provide against competition by generic (nonpatented) substitutes, and permitting the reimportation of drugs from countries that have price controls on drugs.”
What is the solution?
“The way to economize on expenditures on health care, though it is utterly infeasible politically, would be to eliminate the tax subsidies for health insurance and health care and institute a means test for Medicare, and at the same time to limit medical services. Then both the demand for and the supply of those services would be reduced, and the percentage of GNP that goes for health care would drop. But the principal result might be to reallocate consumption spending to goods and services that most people value less at the margin than they do health care. Moreover, there is an economic argument for some level of tax subsidies for health insurance premiums or health care. Medical care increases human capital, and is thus an investment, and investment expenditures need not be (probably should not be) taxed as long as the revenues generated by them are.”
In Becker’s post, he supports four main health care reform ideas:
Tags: Presidential Candidates
Two years ago, the Healthcare Economist blog was born (first blog post). While readership was slow at first, over the last 6 months of 2007 this blog averaged over 12,000 unique readers per month.
I want to thank these loyal readers for your support, commentary and timely criticisms. I aim to bring more quality information and commentary to the world of health economics in subsequent years.
Thank you again for all of your support.
Best wishes,
-Jason Shafrin
Tags: Anniversary
According to the Wall Street Journal (“Flat Tax Fred“), Presidential-candidate Fred Thompson has recently proposed instituting a flat tax in the United States “…with two tax rates of 10% and 25%.” One country has already beat Thompson to the punch: Russia.
In 2001, Russia enacted a flat tax rate of 13%. The reform has been popular and has since been adopted by countries such as Serbia, Ukraine, Georgia, Romania, Slovakia and Macedonia. But is the flat tax a good thing?
This is the question which Gorodnichenko, Martinez-Vazquex and Sabirianova Peter try to answer in their NBER working paper titled “Myth and Reality of Flat Tax Reform: Micro Estimates of Tax Evasion Response and Welfare Effects in Russia.” It has generally been found that tax collections drastically increased after the introduction of the flat tax. This trend, however, may not be due to the flat tax specifically. Increased GDP from 2001 until the present certainly accounts for much of the increase in collections. Also, an increase in voluntary tax contributions or stricter enforcement may be the cause of the increase in tax collections.
The authors use data from the Russian Longitudinal Monitoring Survey and measure tax evasion as the difference between household consumption and reported household income. Of course, this is not a perfect measure, but as long as the quantity of the measurement error remains constant over time, this methodology will provide researchers with a good understanding of how tax evasion evolved after the institution of the flat tax.
The authors find the tax evasion is more prevalent among younger, unmarried, individuals with fewer years of job tenure. Individuals working at small companies were more likely to evade taxes, but surprisingly government workers tend to be among those who most frequently evade taxes. This is likely due to increased non-reported income from accepting bribes.
The authors use a difference in difference technique comparing changes in tax evasion from low and high tax brackets. The lower tax brackets were not significantly affected by the changing tax laws, but the higher tax brackets did see a substantial change in their marginal tax rates paid. The authors also employed a regression discontinuity framework. This methods compares income groups just below and just above discrete changes in marginal tax rates.
The authors found that the flat tax lead to a significant decrease in tax evasion. This is likely due to the fact that lower marginal tax rates decreases the incentive to avoid reporting income. Further, if there is a decrease in tax evasion, policy makers can lower the marginal tax rate further while still collecting the same amount of revenue.
Lower marginal tax rates should also lead to an increase in the labor supply. The authors, however, did not find this to be the case. The flat tax had minimal or no impact on worker productivity. This is likely due to the fact that the supply of labor is very inelastic on both the intensive and extensive margins.
It seems that the flat tax is not only attractive according to economic theory, but may also work well in reality–at least in terms of reducing tax evasion.
Tags: Flat Tax
Which country’s citizens believe that their medical system needs a complete overhaul? According to a a study published in Health Affairs (“…Adults’ Health Care Experiences In Seven Countries, 2007“), one third of Americans believe that we need to “rebuild completely” our health care system.
| Minor Changes Needed | Fundamental Changes Needed | Rebuild Completely | HC Spending per capita | HC Spending / GDP | EMR | |
| Australia | 24% | 55% | 18% | $3,128 | 9.5% | 79% |
| Canada | 26% | 60% | 12% | $3,326 | 9.8% | 23% |
| Germany | 20% | 51% | 27% | $3,287 | 10.7% | 42% |
| Netherlands | 42% | 49% | 9% | $3,094 | 9.2% | 98% |
| N. Zealand | 26% | 56% | 17% | $2,343 | 9.0% | 92% |
| UK | 26% | 57% | 15% | $2,724 | 8.3% | 89% |
| US | 16% | 48% | 34% | $6,697 | 16.0% | 28% |
……………………………
Despite the fact that the U.S. has the highest healthcare spending per capita and the highest spending as a percentage of GDP, it seems that Americans are not happy with the quality of care they receive. One reason, is that Americans are paying more for their health care. We pay more as a society, but probably more importantly for these ratings, Americans pay more out-of-pocket when they do fall ill. “One-fifth of U.S. adults reported serious problems paying medical bills in the past year—more than double the rates in the next highest countries.”
The U.S. does have the shortest waiting time for elective surgery, but the U.S. does offer the sick very many same-day physician appointments. Only Canada (22%) fared worse than the U.S. (30%) in terms of the number of sick patients who could get a same-day appointment.
The Health Affairs article also concludes that the U.S. health care system is very fragmented. This is problematic for many reasons. First, it is very difficult to implement electronic medical records (EMR) in a fragmented system. As the chart above shows, only Canada has a smaller EMR penetration rate. Also, a fragmented system means that additional resources must be used to coordinate care between primary care providers, specialists, hospitals and other forms of care.
Nevertheless, fragmented care is not all bad. The computer industry is highly fragmented yet consumers do not generally complain about the quality of computers. Similarly, a fragmented health care system can allow certain providers to experiment with new medical treatments and new health management techniques. For instance, Dr. Jay Parkinson is serving younger patients with 24 hour access to email and instant messenger and of course in person consultation if needed (See “Physician House Calls“). This innovative form of care would not have been possible in a more centralized system.
Without a doubt, the American health care system could be improved. The manner in which this is accomplished will be one of the most important questions faced by our generation.
The latest edition of the Cavalcade of Risk has been posted at Julie Ferguson’s Worker’s Comp Insider.
Tags: CoR
How do we measure the financial burden of elderly obesity? At first this seems like an easy question to answer. Find the average medical spending of the obese elderly and compare that to the spending of an elderly individual of healthy weight.
Yet causation is difficult to show.
True, it is possible that the obese may be more likely to get sick and thus incur higher costs, but it is also possible that sick people can gain weight–since it is difficult to exercise when sick–which can cause more obesity. Thus, the original sickness and not the obesity may be the true cause of the additional medical expenses.
A 2007 Health Services Research paper by Yang and Hall try to examine this question. They use panel data from the Medicare Current Beneficiary Survey (MCBS). The authors use a maximum likelihood estimation strategy, modeling current BMI as a function of last year’s BMI and Acute Medical Events. Acute Medical Events are also a function of BMI in a separate estimating equation. Health care expenditure is a function of BMI, BMI-squared, functional status, chronic and acute disease and demographics.
To identify this system of questions, the authors uses the following exogenous variables: average food prices, density of fast food restaurants and air quality. Using these instruments, the authors find that “elderly men who were overweight or obese at age 65 had 6–13 percent more lifetime health care expenditures than the same age cohort within normal weight range at age 65. Elderly women who were overweight or obese at age 65 spent 11–17 percent more than those in a normal weight range.”
Tags: Elderly, Obesity, Overweight
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