April 2008

Should employers provide health insurance to their employees? There are many reasons why they should. One is that employees are attracted to firms that offer health insurance, especially since their are tax and cost advantages to group health insurance purchased through an employer. Another reason is that if a worker becomes sick, that reduces productivity. But how much does it cost a firm when either 1) a worker is absent from work (absenteeism) or 2) the worker shows up for work but their productivity is impaired (presenteeism)?

A paper by Pauly et al. (2008) attempts to quantify these costs. Unlike most studies, they use manager estimates of lost productivity. While workers may have better information regarding how much productivity is lost during an illness, workers may have an incentive to answer strategically and further, managers will be the ones ultimately deciding how much health care preventing employee illness is truly worth.

The authors hypothesize that jobs with the following three characteristics will be more affected when a worker becomes ill:

• jobs with high values of team production,
• jobs with high requirements for timely output, and
• jobs with high difficulties of substitution for absent or impaired workers.

A firm of course, can invest in protection measures in the case of illness. For instance, it could cross-train workers, it could accumulate inventory to smooth out periods of down time, or might pay workers to work harder if an employee is missing. Nevertheless, the authors estimate the costs of absenteeism as follows:

The authors assume that the cost of being absent must be at least the employees wage if the labor market is competitive. We see that the cost of an illness is significantly higher than the wage. Also, jobs that were found to involve more teamwork, had times sensitive products, and for which workers were not substitutable had larger absentee multipliers.

For workers who are sick, but come to work, here is the cost to the firm as a percentage of the employees wage.

One problem with this analysis is that it assumes that this is a one-time illness. If these are long term illnesses, it may be more cost effective for the firm to fire the employee because their sickness is either 1) driving up insurance premiums or 2) causing them to miss too much work. Offering a generous health insurance benefit may help to prevent illness, but may also attract sicker people to the firm. Thus, despite the article’s demonstration that the cost of employees missing work is significantly higher than their wage and that there are large costs when workers come to work when they are sick, it still does not mean that employers will want to offer generous health plans.

• MV Pauly, S Nicholson, D Polsky, ML Berger, C Sharda (2008). “Valuing Reductions in On-the-job Illness: ‘Presenteeism’ from Managerial and Economic Perspectives.” Health Economics, vol. 17(4): 469-485.

ABC News reports that immunization rates are falling.  Who’s fault is this?

“Traditionally, the government has measured immunization noncompliance by tallying up only missed doses of a vaccine. In this new research, the CDC recalculated immunization compliance to include vaccine lapses in addition to missed doses. Based on these new criteria, the CDC found that immunization compliance was actually 9 percentage points lower than previous estimates, dropping the compliance rate from 81 percent to 72 percent.”

When we measure compliance as missed vaccines, given that the child goes to the doctor, then we would believe that most of the fault of decreasing immunization rates is the doctors fault.  On the other hand, if we measure immunization rates as whether the child is “up to date” with their vaccines, then it could also be the fault of the parents who may not be bringing their child in for necessary check-ups.

Further, with an increasing number of vaccines required, it may be difficult for physicians to give all these vaccines.  Kids will only tolerate so many shots at a doctors visit before they start crying uncontrollably.  Elizabeth Luman of the National Center for Immunization and Respiratory Diseases says “It’s a complicated schedule … and there are also a lot of vaccines and figuring out when to time them can be a bit complicated.”

Vaccine shortages may also be to blame.  Dr. David Freedman, professor of medicine and epidemiology at the University of Alabama at Birmingham, says that “In many cases when there is a shortage, physicians can’t get any, stop giving it and are not rapidly informed when it is available again. In some cases shortages or nonavailability can last a year or more.”

Some doctors propose that an immunization registry, one that would store all an individuals immunization records, could be a solution.  This way, doctors and patients would be able to know which vaccines they have received and which ones they need to get.

The Scientific American magazine has an interesting article (”Science 2.0“) about the web, open-access, blogging and research. Should researchers post their results online? Should scientists blog about their methodology?

Pros

It seems like academic research is the perfect forum for social networking and blogging. The sharing of ideas is a key means towards scientific invention/innovation. Posting raw data is a great way for other researchers to verify results, or utilize the same data for different purposes. One cancer researcher noted:

• “To me, opening up my lab notebook means giving people a window into what I’m doing every day,” Hooker says. “That’s an immense leap forward in clarity. In a paper, I can see what you’ve done. But I don’t know how many things you tried that didn’t work. It’s those little details that become clear with an open [online] notebook but are obscured by every other communication mechanism we have. It makes science more efficient.”

The site OpenWetWare let’s laboratories share their daily experiences online. Further, researchers who are traveling can access their lab notebooks from anywhere in the world with OpenWetWare.

Further, social networking can allow easier collaboration between colleagues working in different parts of the country or different parts of the world.

It seems like researchers would be some of the first people to utilize Web 2.0, but…

Cons

• “It’s so antithetical to the way scientists are trained,” Duke University geneticist Huntington F. Willard said at the January 2007 North Carolina Science Blogging Conference, one of the first big gatherings devoted to this topic. The whole point of blogging is getting ideas out there quickly, even at the risk of being wrong or incomplete. “But to a scientist, that’s a tough jump to make,” Willard says. “When we publish things, by and large, we’ve gone through a very long process of drafting a paper and getting it peer-reviewed. Every word is carefully chosen, because it’s going to stay there for all time. No one wants to read, ‘Contrary to the result of Willard and his colleagues….’”

Beside the fact that writing about unfinished results is not the way scientists are usually trained, most individuals worry about having their ideas stolen. Having your idea “stolen” by another individual means you will not get the recognition you deserve for coming up with an idea, and your career path can be adversely affected. Doling out credit for work accomplished is an important component of the “old school” journal system.

Other worries include the fact that when junior faculty post critical comments of the work of senior faculty, they may fear some sort of reprisal. This has lead some individuals to use pseudonyms.

Summing up

There are some serious drawback to Science 2.0, but as Timo Hannay, head of Web publishing at the Nature Publishing Group, states, “Our real mission isn’t to publish journals but to facilitate scientific communication.”

Throughout its history, Medicaid provided health insurance for the nation’s poor. It did this by reimbursing providers on a fee-for-service basis. In the 1990s, however, California and other states decided to let private insurance companies bid for the right to provide services for Medicaid patients. These HMOs would receive a fixed per patient per month payment and the private insurer would be responsible for providing health care to Medicaid enrollees.

HMOs may be more efficient than the government since 1) they have an incentive to keep enrollees healthy to save cost, 2) they can negotiate lower input prices, and 3) competition may lead to higher quality, lower priced medical care. On the other hand, keeping the government run fee-for-service program may have been more efficient if 1) the government’s size and negotiating power could decrease input costs, 2) there may be increasing returns to scale, 3) the HMOs may include significant markups in their bids, and 4) HMOs may offer medical services which do not appeal to unhealthy enrollees (i.e., adverse selection).

A paper by Mark Duggan in the Journal of Public Economics in 2004 aims to see if contracting out Medicaid health care provision to private HMOs decreased costs. Duggan uses the fact that California enacted a mandate that all AFDC Medicaid enrollees must switch to a private HMO. For other individuals, such as those on SSI and those who were disabled, deaf or blind, the switch to the HMO was voluntary. This mandate was enacted between January 1993 and December 1999 depending on the county. The author uses variation in the county enactment date to find the effect of Medicaid HMOs on cost.

Background

The manner in which California instituted the transitioned individuals into private managed care plans can be categorized into 3 groupings:

1. Geographic Managed Care. “the state government contracts with several commercial HMOs to coordinate care for Medicaid recipients. Plans initially applied by submitting a menu of prices at which they would be willing to insure each type of Medicaid recipient. The government then awarded contracts to the plans most likely to deliver high quality medical care at a low price, though the weight placed on quality and spending was not specified.”
2. County Organized Health System (COHS). “Under this model, the not-for-profit, community-based HMO was reimbursed a fixed amount per recipient-month that varied by eligibility category.” Individuals did not have any plan choice and the state did not allow bids from for-profit firms.
3. “Two plan” counties. In these counties, the Medicaid enrollees would be able to choose between one private, commercial plan and one not-for profit plan. “…the state solicited bids from private companies and awarded a contract to just one of the plans.”

The following chart gives the type and date of managed care mandate by county.

Methods

Duggan uses the following equations to estimate spending.

• ManCare_jkt = α₁ + γ₁Mandate_kt + μ₁X_jkt + θ_1j + λ_1t + t*ρ_1k + ε_1jkt
• Spending_jkt = α₂ + γ₂Mandate_kt + μ₂X_jkt + θ_2j + λ_2t + t*ρ_2k + ε_2jkt

Subscripts j, k, and t index individuals, counties, and years respectively. The variable Mandate is equal to the fraction of individual j’s Medicaid eligible months in which a mandate was in effect. ManCare is equal to the fraction of the j’s eligible months in which he is actually enrolled in an HMO. Spending is equal to the Medicaid spending for person j at time t.

Results

Duggan finds that the managed care mandate increased Medicaid spending. Medicaid spending increased by between 17% and 23% for counties in which the mandate came into effect. These results, however, were less pronounced where there was competitive bidding between insurance companies (i.e., the Geographic Managed Care and “Two plan” counties).

Also, despite the increased spending, the author finds no evidence of increased quality in terms of better infant birth outcomes.

• Duggan, Mark (2004) “Does contracting out increase the efficiency of government programs? Evidence from Medicaid HMOs” Journal of Public Economics, v 88(12): 2549-2572/

Canada has a single payer system but the provinces have the bulk of the responsibility of running the health care system for their own residents. In order to qualify for federal funding, each province must meet the following criteria.

1. Universality. Available to all provincial residents on uniform terms and conditions;
2. Comprehensiveness. Covering all medically necessary hospital and physician services;
3. Portability. Allowing residents to remain covered when moving from province to province;
4. Accessibility. Having no financial barriers to access such as deductibles or copayments; and
5. Public administration. Administered by a nonprofit authority accountable to the provincial government.

Nevertheless, the 2005 Canadian Supreme Court ruling striking down Quebec’s prohibition on private insurance contracting may foreshadow significant changes in Canada’s health care system. 

Percent Insured. ~100%

Funding. Funding is provided jointly by the federal and state governments. The federal government uses funds from general revenue to provide a block grant to each of the provinces. The block grant finances only about 16% of each province’s health care expenditures. The remainder is funded by provincial taxes: mostly personal and corporate income tax. Health care spending makes up between one-third to one-half of provincial social welfare spending. For the nation as a whole, health care costs only 9% of GDP.

Private Ins. “At one time, all provinces prohibited private insurance from covering any service or procedure provided under the government program. But in 2005, the Canadian Supreme Court struck down Quebec’s prohibition on private insurance contracting.” Private clinics are barred from offering medical services which are covered by the Canada Health Act, but many begun to offer services in the black market.

Physician Compensation. Physicians work in private practice and are paid on a fee-for-service basis. Since these fees are set by a centralized agency, wages are fairly low which has lead to a physician shortage. There are only 2.1 physicians per 1,000 people. This is far less than the OECD average of 3.0 physicians per 1,000. Hospitals are funded on a global budget basis. Capital expenditures are reviewed and approved on a case-by-case basis.

Physician Choice. Referrals are required for all specialist services except the ED.

Copayment/Deductibles. There are generally no copayments or deductibles for services. However, British Columbia, Alberta and Ontario charge insurance premiums (although health services cannot be denied because of inability to pay).

Technology. The U.S. has five times as many MRI machines per capita as Canada and three times as many CT scanners. However, because of Canada’s proximity to the U.S., many Canadians do have the option of coming to the U.S. for treatment.

Waiting Times. In a 2005 decision striking down part of Quebec’s universal care law, Canadian Supreme Court Chief Justice Beverly McLachlin wrote that it was undisputed that many Canadians waiting for treatment suffer chronic pain and that “patients die while on the waiting list.” For instance, the Fraser Institute finds that 800,000 Canadians are waiting for treatment at any given time. “According to [the Fraser] survey, treatment time from initial referral by a GP through consultation with a specialist, to final treatment, across all specialties and all procedures (emergency, nonurgent, and elective), averaged 17.7 weeks in 2005.”

If you are interested on more information about the Canadian health care system, see my October 2, 2007 post.

• Tanner, Michael D. (2008) “The Grass Is Not Always Greener: A Look at National Health Care Systems Around the World” Cato Policy Analysis no. 613.

The most significant difference between Germany’s health care system and that of other countries is its use of sickness funds. All Germans with incomes under €46,300 are required to enroll in one of the sickness funds. Those with higher incomes can either join a sickness fund themselves or opt out and instead buy private insurance.

The federal government decides the global budget and which procedures to include in the benefit package. The National Association of Sickness Funds and the National Association of Physicians also help to form which benefits are included in the sickness fund benefit package. The state government regulates physicians and sets physician reimbursement rates.

In 2006, Angela Merkel proposed reforming the health care system by creating a centralized health fund, shifting funding from payroll taxes to general revenues, trimming benefits, and increasing cost sharing. This plan was abandoned due to a lack of public support and political opposition.

Percent Insured. 99.6% (There are about 300,00 uninsured individuals)

Funding. Sickness funds are financed through a payroll tax which averages 15% (but varies depending on the fund chosen). The tax is split between the employer and employee. In 2006, Germany ran a €7 billion deficit and the government has proposed a 1% increase in the payroll tax.

Private Ins. Approximated 9% of Germans have supplemental insurance. The private, supplemental insurance covers items not paid for in the sickness fund benefit package. As mentioned above, only middle- and upper-class individuals can opt-out of the sickness funds. Of those eligible to opt out, only about 1/4 of individuals do decide to opt out.

Physician Compensation. Physician reimbursement is set through negotiation with the sickness funds. Most of the negotiating power, however, lies with the sickness funds. Thus, the purchasing power of German physician’s wages is about 20% of that of physicians in the U.S. In 2005, there were physician strikes over low wage compensation. Further, physicians have to deal with significant reimbursement caps and budget restrictions. According to Tanner, physicians only attempt to provide the minimum care necessary.

Copayment/Deductibles. Until recently, there have been almost no copays or deductibles. Recently, Germans have begun paying €10 copays for prescription drugs, doctors visits, and hospital stays.

Technology. The U.S. has four times as many MRI units per capita and twice as many CT scanners per capita. Tanner claims that the existence of a small private insurance market helps to supplement technology spending. For instance, CT scanners at one point were almost non-existent in the public sector, but competition with private insurance companies meant that the public system had to add more CT scanners.

Waiting Times. It is a matter of some debate whether or not there are long waits for medical care in Germany. A WHO report says that “Waiting lists and explicit rationing decisions are virtually unknown.” On the other hand, another study finds that care is frequently rationed. For instance, the elderly and those with terminal illnesses are often denied care. Since hospitals are run through a global budget, this can reduce their incentive to treat those with serious, expensive-to-treat medical conditions.

Benefits covered. There is an extensive benefit package which even includes sick pay (70% to 90% of pay) for up to 78 weeks.

• Tanner, Michael D. (2008) “The Grass Is Not Always Greener: A Look at National Health Care Systems Around the World” Cato Policy Analysis no. 613.

I have already written about Switzerland in previous posts (see Swiss Healthcare Sytem: Part I, and Part II). Still of all the countries with universal health care, Switzerland’s is the most market-oriented and merits discussion. Switzerland’s health care spending as a percentage of GDP is second only behind the U.S. (11.6% of GDP for Switzerland, 15.3% for the U.S. according to Frontline), yet the government pays for very little of this funding. The Swiss system is similar to the “managed competition” health care plan proposed by the Clintons in the early 1990s.

Percent Insured. 99.5%. Does this mean a mandated system system would lead to universal coverage in the U.S?  This is unlikely.  In Switzerland, a mandate for auto insurance has nearly 100% compliance, but in the U.S. the auto insurance mandate’s compliance rate is only around 83%.

Funding.  Insurance is purchased by individuals.  Individuals generally must pay the full cost of premiums, but the government helps to finance insurance purchases for the poor.  “These subsidies are designed to prevent any individual from having to pay more than 10 percent of income on insurance,” and one third of Swiss citizens receive this type of subsidy.    Thus, the Swiss government only pays for 24.9% of health care costs (compared with 44.7% in the U.S.).

Private Insurance.  All insurance is private insurance.  However, insurance companies are mandated to offer the same “basic benefits package.”  Some physicians operate outside the negotiated schedules and individuals are beginning to purchase supplemental insurance to cover the cost of these higher cost physicians.  Some estimates claim that 40% of Swiss citizens have purchased supplemental insurance.

Physician Compensation.  Physician compensation is negotiated between the insurance companies and doctors on a canton by canton basis.  Balance-billing is not allowed.  Switzerland has strong regulation with respect to nonphysician health care professionals (e.g., nurses, PAs, NPs,) and thus patients are often compelled to use expensive physicians even when this may not be medically necessary.

Physician Choice.  According to a WHO study, Switzerland ranks second only to the U.S. in terms of the ability of patients to choose their provider.

Copayment/Deductibles.  Premiums are community rated and only adjusted for sex and age.  Employers do not pay for workers insurance and thus many Swiss have opted for less expensive plans with higher deductibles.  This has lead to the Swiss paying for 31.5% through out of pocket expenses.

Waiting Times.  According to a WHO study, Switzerland ranks second only to the U.S. in terms of timely care.

Benefits Covered.  All insurers cover the “basic benefits package” so most competition between insurers is based on price and service.  A politically defined benefit package is susceptible to influence from special interest groups.  Thus, Uwe Reinhardt notes that “over time, the growth in compulsory benefits has absorbed an increasing fraction of the consumers’ payment, thus compromising the consumer-driven aspects of the Swiss system.”

• Tanner, Michael D. (2008) “The Grass Is Not Always Greener: A Look at National Health Care Systems Around the World” Cato Policy Analysis no. 613.

The latest edition of the Cavalcade of Risk is up at Workers Comp Insider.

Great Britain represents all that is good and bad with centralized, single-payer health care systems. Health care spending is fairly low (7.5% of GDP) and very equitable. Long wait lists for treatment, however are endemic and rationing pervades the system. Patients have little choice of provider and little access to specialists.

Percent Insured. ~100%

Funding. Great Britain has a single payer system funded by general revenues. With any centralized system, avoiding deficits is difficult. In 2006, Great Britain had a £700 million deficit despite the fact that health care spending increased by £43 billion over five years.

Private Insurance. 10% of Britons have private health insurance. Private health insurance replicates the coverage provided by the NHS, but gives patients access to higher quality care, and reduced waiting times.

Physician Compensation. Unlike in the case of other single payer systems such as Norway, most physicians and nurses are mostly government employees. In 2004, the NHS negotiated lower salaries for doctors in exchange for reduced work hours. Few physicians are available at night or on weekends. Because of low compensation, there is a significant shortage of specialists.

Physician Choice. Patients have very little physician choice. However, under the experimental London Patient Choice Project, patients waiting more than six months for treatment will be offered a choice of four different treatment providers.

Copayment/Deductibles. There are no deductibles and almost no copayments except for small copayments for prescription drugs, as well as for optical and dental care.

Waiting Times. Waiting lists are a huge problem in Great Britain. Some examples: 750,000 are on waiting lists for hospital admission; 40% of cancer patients are never able to see an oncologist; there is explicit rationing for services such as kidney dialysis, open heart surgery and care for the terminally ill. Further, minimum waiting times have been instituted to reduce costs. “A top-flight hospital like Suffolk Est PCT was ordered to impose a minimum waiting time of at least 122 days before patients could be treated or the hospital would lose a portion of its funding.”

Benefits Covered. The NHS system offers comprehensive coverage. Because of rationing, care might not be as easy to get as advertised. Terminally ill patients may be denied treatment. David Cameron has proposed that the NHS refuse treatment to smokers or the obese (see 7 Sept 2007 post).

• Tanner, Michael D. (2008) “The Grass Is Not Always Greener: A Look at National Health Care Systems Around the World” Cato Policy Analysis no. 613.

Greece has an employer-based health insurance system in which all Greek employers enroll their employees in one of the “social insurance funds.” Due to strict regulation by the Greek Ministry of Social Health and Cohesion, Greece in essence has a single payer system. For instance, the Ministry controls employee contribution rates, insurance benefit packages, and the types of doctors a social insurance fund can employee. Also, employers can not choose among competing sickness funds as they can in Germany, they must choose an their industry-specific social insurance fund.

The National Health Service (NHS) also operates its own health care services. For instance the NHS operates hospitals and employs some physicians. One can see the NHS as a backup for the social insurance funds, but in some rural areas, the NHS is the principal provider of care.

Percent Insured. Similar to the U.S., only 83% of Greeks have health insurance covering primary care. Most Greeks (97%) do have health insurance for hospital care.

Funding. In Tanner’s opinion, “the Greek health care system is funded through payroll taxes, general tax revenue and bribery.” (see below)

Private Insurance. About 8% of Greeks have private health insurance but this number has been growing rapidly in recent years.

Physician Compensation. About half of physicians are employed directly by the social insurance fund. The other half are in private practice, but are contracted on a fee-for-service basis by the insurance funds. Unlike in France, no balance billing is allowed. Despite this fact, many physicians demand under the table payments in exchange for treatment. Further, physicians often “actively attempt to persuade patients to move from a doctor’s sickness fund contract to the doctor’s private practice. Patients who switch pay out of pocket but receive faster and better care.”

Physician Choice. Greeks must have a referral from a GP in order to receive care at a public or NHS hospital.

Copayment/Deductibles. In theory, there are no deductible or copayments. In reality, the need to make informal payments to providers means that most patients incur significant out of pocket expenses. In fact, one estimate claimed that informal out-of-pocket payments make up 42% of healthcare expenditures.

Technology/Quality. Hospital administrators are appointed not based on merit, but instead based on their political affiliation. Because of this, many hospitals suffer from poor quality. Pay for doctors and nurses is fairly low and thus there are severe staffing shortages. In NHS hospitals, “it has been estimated that less than half of authorized medical positions are actually filled.” The U.S. has twice as many MRI units per capita and 20% more CT units per capita.

Waiting Times. Wait times for medical care are very long in Greece. This is likely due to the provider shortages caused by low reimbursement rates. The wait for treatment at both public and NHS hospitals can be very long. There is a six month wait for some surgeries and the wait for appointments with specialists can be as long as 150 days. Simple blood tests often take a month.

Corruption and Inequality. There is significant corruption and inequality in the Greek system. For instance, some funds, known as “noble funds” have more extensive benefits and lower worker contributions. The reason for this is that strong worker unions are able to use their political clout to get a better deal for their workers at the expense of workers in other industries. Also, most doctors demand under the table payments in order to see patients or if patients want higher quality care. Further, many doctors receive kickbacks for referrals to private hospitals and diagnostic centers.

We can see that the centralized system of Greece is breaking down. Individuals are demanding higher quality care, but due to government rationing, significant corruption is occurring.

• Tanner, Michael D. (2008) “The Grass Is Not Always Greener: A Look at National Health Care Systems Around the World” Cato Policy Analysis no. 613.

Portugal is similar to Norway in that it is a very centralized health care system. Despite the fact that Portugal ranks highly according to the WHO, there is widespread discontent with the Portuguese system.

Most individuals in Portugal are insured by the state-run, single-payer National Health System. However, 25% of the population is insured through an occupation based insurance scheme. These occupation based schemes include most government, military and telecommunication workers. “These plans were originally intended to be incorporated into the NHS, but their powerful constituencies have prevented that from occurring.”

Funding. Financing of the health care system is generated from general tax revenues. Health care spending accounts for 13% of government revenues. The National Health System (NHS) has an annual global budget, but it is often exceeded by a significant amount. Individuals in the occupation-based insurance schemes pay a premium of about 1% of their salary.

Private Insurance. About 10% of the population has private insurance. Private insurance pays for hospital stays and specialist care. Because there is no guaranteed renewability, premiums are often significantly raised or customers are dropped when they have very high claims amounts.

Physician Compensation. About half of primary care doctors are government employees and the other half work in private practice. Most specialists elect to go into private practice and are paid on a contractual basis by NHS.

Physician Choice. Patients must choose doctors from a list and can only change GPs with a written application. GPs act as gatekeepers. Referrals from the patient’s GP is needed to access specialist care.

Copayment/Deductibles. For most services, there is no or little copayments. For diagnostic tests, hospital admissions, specialists visits and prescription drugs, however, copayments can run up to 40% or more.

Technology. Portugal is seriously lacking in medical technology. The U.S. has 7 times more MRI units per person than Portugal and 20% more CT scanners.

Waiting Times. Waiting times are very long in Portugal. Further, there are often long waits for specialist visits. The European Observatory on Health Systems says the Portugal is heading towards “de facto rationing.” Because of this, many Portuguese either go to Spain for treatment or head to the emergency department. In fact, “at least 25 percent of emergency room patients do not need immediate treatment.”

Benefits Covered. On paper, all benefits are covered, but in reality, many benefits–such as dental care and rehabilitation–are rarely provided.

• Tanner, Michael D. (2008) “The Grass Is Not Always Greener: A Look at National Health Care Systems Around the World” Cato Policy Analysis no. 613.

Simon Caulkin, management editor of The Guardian, has a great article titled “The rule is simple: be careful what you measure.”  The article discusses the fact that measuring performance leads to better performance on the dimensions measured, but can often lead to significantly worse performance on the unmeasured dimensions.  For instance,

What happens when bad measures drive out good is strikingly described in an article in the current Economic Journal. Investigating the effects of competition in the NHS, Carol Propper and her colleagues made an extraordinary discovery. Under competition, hospitals improved their patient waiting times. At the same time, the death-rate following emergency heart-attack admissions substantially increased. Why? As targets, waiting times were and are measured (and what gets measured gets managed, right?). Emergency heart-attack deaths were not tracked and therefore not managed. Even though no one would argue that the trade-off - shorter waiting times but more deaths - was anything but a travesty of NHS purpose, that’s what the choice of measure produced.

Hat tip to DB’s Medical Rants for this one.

The Retired Doc’s Thoughts has an interesting post as well.

All Norwegians are insured by the National Insurance Scheme. This is a universal, tax-funded, single-payer health system. Compared to France, Italy, Spain and Japan, Norway has the most centralized system.

Percent Insured. 100%. All Norwegian citizens and residents are covered.

Funding. The National Insurance Scheme is funded by general tax revenues. There is no earmarked tax for health care. The Norwegian tax burden is 45% of GDP. The government sets a global budget limiting overall health expenditures and capital investment.

Private Insurance. Norwegians can opt out of the the government system and pay out-of-pocket. Many pay out-of-pocket and travel to a foreign country for medical care when waiting lists are long.

Physician Compensation. Hospital and nonhospital physicians generally are paid on a salaried basis. Some specialists can receive an annual grant and fee-for-service payments. Reimbursement rates, however, are set by the government and, unlike in France, the physician can not charge higher rates than the centrally-set reimbursement rate.

Physician Choice. Patients choose general practitioners (GPs) from a government list. These GPs then act as gatekeepers for specialist services. Patients can only switch GPs twice per year and only if there is no waiting list for the requested GP.

Copayment/Deductibles. There are no copayments for hospitals stays or drugs. There are small copayments for outpatient treatment.

Waiting Times. There are significant waiting times for many procedures. Many Norwegians often go abroad for medical treatments. The average weight for a hip replacement is more than 4 months. “Approximately 23 percent of all patients referred for hospital admission have to wait longer than three months for admission.” Also, care can be denied if it is not deemed to be cost-effective.

Benefits. Very generous. The program also provides sick pay. “As Michael Moore has noted, the Norwegian system will even pay for ’spa treatments’ in some cases.”

• Tanner, Michael D. (2008) “The Grass Is Not Always Greener: A Look at National Health Care Systems Around the World” Cato Policy Analysis no. 613.

The latest edition of the Health Wonk Review has been posted on Maggie Mahar’s Health Beat website.

Japan has universal health insurance based around a mandatory, employment-based insurance. “The Employee Health Insurance Program requires all companies with 700 of more employees to provide workers with health insurance among some 1,800 ’society-managed’ plans. Nearly 85% of these plans cover a single company…Most of the rest of the [health insurance plans] are industry-based.” Small business workers join a government-run small business national insurance plan. The self employed and retirees are covered by the Citizens Insurance Program administered by municipal governments.

Japan has very generous health insurance benefits, significant provider choice, and high quality medical technology, but costs are not as high in the U.S. One reason for this is a significant level of cost sharing. The average Japanese household spends $2300 per year on out-of-pocket health care expenses (this figure excludes the payroll taxes used to finance health insurance premiums). Other reasons for lower health care costs is a healthy life-style, a lower incidence of disease and a general Japanese cultural aversion towards invasive procedures.

Another reason for lower costs is that the Japanese government sets a reimbursement fee schedule for all physician services. This has resulted in “assembly line medicine” where “two-thirds of patients spend less than 10 minutes with their doctor; 18 percent spend less than 3 minutes.”

Funding. The health insurance plans are funded by an 8.5% (for large business) or an 8.2% (for small-businesses) payroll tax . The small business national health insurance program is also supplemented by government funds. The payroll taxes are split almost evenly between the employer and the employee. Sometimes these funds are not sufficient to cover costs. In 2003, more than half of the insurance plans at large firms lost money and many companies are now joining industry-based plans. Those who are self-employed or retired must pay a self-employment tax. The Roken is financed by contributions from the Employee Health Insurance Program, the small-business national health insurance, and the Citizens Insurance Program. The elderly do not contribute to this plan.

Private Insurance. Very few Japanese use private, supplemental insurance. Private supplemental insurance pays for less than 1% of health care costs.

Physician Compensation. Hospital physicians are salaried employees but nonhospital physicians are paid on a fee-for-service basis. Hospitals and clinics are privately owned but the government sets the fee schedule, just as it does for private physicians. The fee-setting system, however, is very corrupt since there are over 3000 procedures whose price needs to be set. For instance, “[i]n 2004, a group of dentists was indicted for bribing the fee-setting board.”

Physician Choice. There are no restrictions on physician or hospital choice and no referral requirements.

Copayment/Deductibles. Copayments are 10% to 30%, but generally closer to 30%. Copayments are capped at $677 per month for the average family.

Technology. Japan has high levels of technology. Patients have just as much access to MRI and CT units as in the U.S. Further, because the government imposes a fee schedule, competition is based solely on technology (there is no price competition).

Waiting Times. Waiting times are a significant problem at the best hospitals. Since the best hospitals can not charge higher prices there will be a queue. Many hospitals have been known to accept “under the table” payment to see patients quicker. Thus, the market may be working, whether or not policy makers want it to do so.

Benefits covered. Very generous.

• Tanner, Michael D. (2008) “The Grass Is Not Always Greener: A Look at National Health Care Systems Around the World” Cato Policy Analysis no. 613.

The Spanish have one of the most centralized health care systems in the world. Patients have no choice of provider and there is almost no cost sharing. Like most centralized systems without cost-sharing, there are significant waiting times for procedures. This has resulted in a 2 tiered system where 12% of the population receives higher quality care by purchasing private insurance.

Spain ranks #7 on the WHO health care rankings and the Spanish the second-most satisfied with the quality of their health care in Europe (behind France).

Percent Insured. 98.7%

Funding. The Spanish health care system has decentralized control run by each of the regions (comunidades autónomas). Thus results in wide variations in health care spending and quality across each for the regions. The central government gives block grants to each region based on its population and demographics. These funds are raised from general revenues.

Private Insurnace. About 12% of the population has private health insurance (about 25% of people living in Madrid or Barcelona have private health insurance). Like in other countries, we see evidence of a two-tiered system. Private insurance payments account for 21% of total heat care expenditures. Further, a fair number of Spaniards pay out-of-pocket for care outside the national healthy system.

Physician Compensation. Most physicians are quasi-civil servants and are paid a salary based on seniority and credentials. The fact that doctors are paid a salary reduces their incentive to under- or over-treat, but the fact that there is no merit pay may decrease physician effort levels. Lower pay has resulted that Spain has fewer physicians and nurses per capital than most OECD countries.

Physician Choice. Spanisards can no choose their physician. They are assigned a primary care doctor who must refer the patient in the case that specialist services are needed. Patients are not allowed to change doctors unless they have private insurance. According to Tanner, “This has sparked an interesting phenomenon whereby sick Spaniards move in order to change physicians or find networks with shorter waiting lists.”

Copayment/Deductibles. There are few copayments except for prescription drugs.

Technology. Spain has about one third as many MRI and CT units as the U.S.

Waiting Times. Waiting lists are a significant barrier to care in Spain. The average wait to see a specialist in Spain is 65 days. Waiting times for procedures are also long, up to 62 days for a prostectomy and 123 days for a hip replacement.

Benefits not covered. Rehabilitation and convalescence are not covered. Those with terminal illnesses are generally the responsibility of the patient’s relatives.

While France may have the highest rated health care system in the world, Italy is second according to the WHO. The Italian health care system is a decentralized version of the British NHS. Despite the high rankings by the WHO, Italians are dissatisfied with the quality of their care. Italians believe more patient choice will improve quality, but “given the general dysfunction of the Italian political system, and the entrenched opposition of special interest groups, substantial reform is not likely anytime soon.”

Cost: Health care spending rose by 68% between 1995 and 2003.

Funding. Funding is based on a regressive payroll tax. The tax starts at 10.6% of income for the first €20,660 and drops to 4.6% of income between €20,51 and €77,480. The rest of the funding comes from federal and regional general taxation (i.e.: income and value-added taxes). The regions are responsible for health care provision. The Ministry of Health funds these regions according to a formula based on weighted capitation and past spending. Then the regions allocate these funds to Local Health Authorities (LHA).

Private Insurance. Private health insurance in Italy is uncommon, but is occasionally offered by employers. It is not possible to opt out of the National Health Insurance system and insurance premiums are not tax deductible. Many Italians do pay for private health care. It is estimated that about 35% of Italians use at least some private health services, but the public sector certainly dominates the private in terms if its relative importance.

Physician Compensation. Physicians are paid via capitation. Hopsitals are paid via DRGs.

Physician Choice. Italians have limited choice of their physician but more than in the UK or in Spain. They must register with a general practitioner (GP) in their LHA. For any specialist services, patients must get a referral from their GP.

Copayment/Deductibles. Inpatient and primary care are free. For tests, diagnostic procedures and prescription drugs, copayments are as high as 30%. However, 40% of the population (e.g.: the elderly, pregnant women, kids) are exempt from these copayments.

Technology. There is a shortage of medical technology in Italy. The U.S. has twice as may MRI units per million than Italy and 25% more CT scanners.

Waiting Times. Waiting times are fairly long for diagnostic tests. The average wait for a mammogram is 70 days, for endoscopy 74 days. Tanner notes that: “Ironically, the best-equipped hospitals in northern Italy have even longer waiting lists since they draw patients from the poorer southern regions as well.”

• Tanner, Michael D. (2008) “The Grass Is Not Always Greener: A Look at National Health Care Systems Around the World” Cato Policy Analysis no. 613.

Consumers are starting to pay a larger share for high priced drugs.  According to the N.Y. Times (”Co-payments“), insurance companies “…are charging patients a percentage of the cost of certain high-priced drugs, usually 20 to 33 percent, which can amount to thousands of dollars a month.”  Medicare’s drug plans have introduced new fee schedules where patients pay larger copayments for Tier 4 and Tier 5 drugs.  Private insurers now followed Medicare’s lead.

Should consumers bear a larger burden of their health care costs?  On the one hand, moving towards more out-of-pocket costs will reduce premiums.  Further, higher co-payments will reduce moral hazard (i.e., the use of unnecessary medical care simply because insurance pays for it).  Also, this moves us closer toward insurance as a policy to insure people against catastrophic risk and not as a mechanism to pay for all medical care.

Still, health economist James Robinson from UC-Berkeley states that “It is very unfortunate social policy.  The more the sick person pays, the less the healthy person pays.”

France is often seen by liberals as the ideal system. It has universal health care, with few waiting lists. France has the highest level of satisfaction with their health care among all European countries. How can this be? What is their secret?

France provides a basic, universal health insurances through large occupation-based funds. The General National Health Inusrance Scheme covers 83% of French workers, while other occupational specific (e.g.: for agricultural workers, for the self employed, for miners, etc.) cover the remainder. About 99% of individuals are covered by this universal health insurance system.

However, France utilizes more market-based ideas than most people realized. Copayment rates for most services are 10%-40%. About 92% of French residents have complementary private health insurance.

In essence, the French system avoids widespread rationing because, unlike true single-payer systems, it employs market forces. Even the OECD says that the “proportion of the population with private health insurance” and the degree of cost sharing are key determinants of how severe waiting lists will be.

Insured. About 99% of French residents are covered by the national health insurance scheme.

Cost. France is the third most expensive health care system (~11% of GDP). While the system has generally been well funded, in 2005 the health care system ran a €11.6 billion deficit and in 2006 the health care system had a €10.3 billion deficit. No centrally planned health insurance system will be immune from occasional (or even frequent) deficits.

Funding. Most of the funding is from a 13.55% payroll tax (employers pay 12.8%, individuals pay 0.75%). There is a 5.25% general social contribution tax on income as well. Thus, there is an approximately a 18.8% on employees for health insurance. There are also dedicated taxes which are assessed on tobacco, alcohol, and pharmaceutical company revenues.

Private Insurance. “More than 92% of French residents have complementary private insurance.” This insurance pays for additional fees in order to access higher quality providers. Private health insurances makes up 12.7% of French health care spending. These complementary private insurance funds are very loosely regulated (less than in the U.S.) and the only stringent requirement is guaranteed renewability. Private insurance benefits are not equally distributed so there is, in essence, a two-tier system.

Physician Compensation. French doctors are paid by the national health insurance system based on a centrally planned fee schedule, but doctors can charge whatever price they want. The fees are based on an up front treatment lump sum, which is similar to DRGs in the U.S. The patient–or their private insurance–must make up the difference between the fee charged by the doctor and the amount paid for by the universal health care system. The average French doctor earns only €40,000, although medical school is free for them and the French legal system is fairly tort-averse.

Physician Choice. The French have a fair amount of choice in which doctors they choose. However, recently the French have moved towards a more “managed care” practice style where patients have a “preferred doctors” who acts as a gatekeeper for specialists.

Copayment/Deductibles. 10% to 40% copayments.

Technology. The government does not reimburse new technologies very generously and because of global budgets and fee restrictions, there is little incentive to make capital investments in medical technology.

Waiting Times. France has generally avoided waiting lists, likely due to the fairly high coinsurance charges. Recent trends towards Increased restrictions, reduced reimbursement rates, and rationing has increased wait times however.

Tanner’s summary. “To sum up: the French health care system clearly works better than most national health care systems. Despite some problems, France has generally avoided the rationing inherent in other systems. However, the program is threatened by increasing costs and may be forced to resort to rationing in the future.”

• Tanner, Michael D. (2008) “The Grass Is Not Always Greener: A Look at National Health Care Systems Around the World” Cato Policy Analysis no. 613.

Recently I came across an article by Michael Tanner of the Cato Institute title “The Grass is Not Always Greener: A Look at National Health Care Systems Around the World.” I figured that the article would be a highly biased piece of writing which would show that the U.S. healthcare system is great and the universal health care systems of Western Europe are horrible.

While the article does tend to highlight some of the drawbacks of centralized, planned medical care, the article has a well-researched, thorough review of the health care systems of many countries.

For the next week or so, I will be summarizing the health care systems in some of these countries. How do these health care systems operate? Which countries have the “best” health care systems? What are the pros and cons of each system? I hope you find these summaries enlightening.

The link to all the summaries can be found here. The countries who’s health care systems I will discuss are:

• France,
• Italy,
• Spain,
• Japan,
• Norway,
• Portugal,
• Greece,
• Great Britain,
• Switzerland,
• Germany,
• Canada.

The PBS program Frontline has focusing its show on the topic “Sick Around the World.”  The show airs on Tuesday, April 15 and may be of interest to Healthcare Economist readers.  From the Frontline publicist:

“To examine the question of universal health care coverage, FRONTLINE teams up with T.R. Reid, a veteran foreign correspondent for The Washington Post, to find out how five other capitalist democracies–United Kingdom, Japan, Germany, Taiwan and Switzerland–deliver health care and what the United States might learn from their successes and their failures. ”

After the broadcast, the program will also be available at the Frontline website.

The average person believes that they are above average in almost all respects. This phenomenon is often called the Lake Wobegon effect after Garrison Keillor’s fictitious town in which all people are above average.

A paper by Dunning, Heath and Suls (2004) gives some great examples of Lake Wobegon in action.

“Motorcyclists believe they are less likely to cause an accident than is the typical biker (Rutter, Quine, & Albery, 1998). Business leaders believe their company is more likely to succeed than is the average firm in their industry (Cooper, Woo, & Dunkelberg, 1988; Larwood & Whittaker, 1977). People think they are less susceptible to the flu than their contemporaries, and as a result avoid getting flu shots (Larwood, 1978). Of college professors, 94% say they do above-average work (Cross, 1977). People signing up to bungee jump believe they are more likely to avoid injury than the average bungee jumper, although their friends and family do not share this impression (Middleton, Harris, & Surman, 1996). Ironically, people even state that they are more likely than their peers to provide accurate self-assessments that are uncontaminated by bias (Friedrich, 1996; Pronin, Lin, & Ross, 2002).”

…Surgical trainees place too much confidence in their diagnoses after looking at X-ray evidence (Oksam, Kingma, & Klasen, 2000). After looking over a client’s case materials, clinical psychologists overestimate the chance that their predictions will prove accurate (Oskamp, 1965).

Despite the prevalence of overconfident self-assessment, I suffer from no such problem. That is of course because I am an above-average blogger.

For all my economist peers who are sick and tired of monetary policy, financial option valuations, and esoteric econometric specifications, it may be time for a change. The American Association of Wine Economists (AAWE) is holding their second annual conference August 14-16 in Portland, Oregon. The AAWE also publishes the Journal of Wine Economics.

I am sure the members of the AAWE do not mind conducting “research” as to which wines are the highest quality.

Who says economics is the dismal science?

“When regulators or policy makers succeed in improving the quality of care provided by some doctors, do patients even notice and/or care?” This is the question which Kenneth L. Leonard attempts to answer. Davies and Ware (1988) do state that patient satisfaction is correlated with average quality levels. One problem with most studies is that quality improvements take place over a long period of time. It is possible that as quality improves, patient expectations also increase and thus overall reported patient satisfaction may be unaffected.

How does a researcher get an exogenous change in quality? Leonard uses the Hawthorne Effect. The Hawthorne effect states that quality will improve whenever there is a change in environment. In this study, doctors are observed by researchers. The study finds that objective measures of quality improve immediately after researchers arrive, but the quality improvement slowly decays over time until after about 10 observations, the doctor returns to their original quality level.

So, do patients actually notice this quality improvement? Leonard find that:

“Patient do, in fact, recognize and value quality care. A 1% increase in protocol adherence (from an average adherence of about 53%) is associated with about a 0.40% increase in the probability that a patient will declare the consultation to have been “very good” (from an average level of about 12%).”

• KL Leonard (2008) “Is patient satisfaction sensitive to changes in the quality of care? An exploitation of the Hawthorne effect” Journal of Health Economics, 27(2): 444-459.
• A. Davies and J.J. Ware (1988). “Involving consumers in quality of care assessment, Health Affairs” 7, pp. 33–48.

The latest edition of the Cavalcade of Risk is up at Early Retirement Extreme.

Paul Levy, the president and CEO of Beth Israel Deaconess Medical Center in Boston made about $1 million dollars in 2005. Of this, $650,000 was base salary, $195,000 was made up of incentive bonus, and the balance was composed of compensation for health insurance, life insurance, and retirement.

How do I know these figures? Paul Levy told me. Well, he didn’t tell me directly, but he did post these figures on his Running a Hospital blog. Levy writes:

So, if you were on my board, how would you set an appropriate salary? You might look at the competition, and as the Globe notes, the salaries for most of the Boston-area hospital CEOs center around the same level. Would you look at salaries of people in for-profit companies, and, if so, how do you measure comparable size and complexity? Would you look at salaries of other types of non-profits, like universities and museums?

Does it matter that the average tenure of a hospital CEO is under six years? If that is roughly the tenure of a major league baseball player, should CEO salaries be in the same ballpark? Sorry, I couldn’t resist!

The New York Times recently posted an interactive page on executive pay. So the question remains, readers, how would you set Paul Levy’s salary?

An Annals of Internal Medicine survey sheds some light on physicians opinions regarding universal health care. Overall 59% of physicians support national health insurance and 32% oppose it. Support for national health insurance increased 10 percentage points since 2002 (49%). Unsurprisingly, surgical subspecialties, anesthesiologists, and radiologists, were the only specialities where more than half of respondents did not support universal health care.

Any economist would not be surprised by these findings. Primary care is not highly compensated now and universal health care would likely not alter this. Further, primary care would likely simplify the world of primary care: there would either be one insurance company (as in the case of government provided care), or it would likely be clearer which treatments would be covered. Further, since there would be no uninsured, the primary care doctors would not have to provide any uncompensated care.

For specialists, however, it is likely that national health insurance will reduce compensation for physicians. Some procedures may not be covered, or will be reimbursed at lower rates. More referral restrictions and likely rationing of care would lead to lower profits for specialists.

Even physicians are divided about whether or not national health insurance is a good idea.

GoozNews has more information on the article.

The N.Y. Times reports (”…24/7 Stress…“) that blogging may be hazardous to your health.

Eric Crampton argues against the paternalistic view some economists have taken in a recent editorial in Health Economics. Here’s an excerpt:

“Of course, most economists would disagree vehemently [that taxing unhealthy behaviors is a good thing]. Raising taxes does tend to reduce consumption and, where consumption generates large negative externalities (costs borne by uninvolved parties) can even be efficient: Pigovean taxes (taxes proportionate to those external costs) can push us closer to socially-optimal outcomes. But, there is no inefficiency caused by people choosing to live lifestyles they view as preferable despite the health costs.

If I decide to enjoy a shorter life rather than eek out a miserable existence without wonderfully-marbled steaks, a beer or several, or even the occasional cigar, zero inefficiency is induced thereby.

…what evidence there is suggests that to the extent smoking induces a “fiscal externality,” the sign of the effect is wrong: smokers pay more in cigarette taxes than they ever cost the public purse. They die earlier of cheaper diseases and collect less in superannuation than do non-smokers. And, as a 10% increase in cigarette taxes correlates with a 2% increase in obesity, one wonders whether increased cigarette taxes consequently require further increases in taxes on fatty foods.

Crampton supports the idea of “De gustibus non est disputandum,” we should not criticize individuals’ preferences.

“‘Libertarian paternalism’, ‘optimal paternalism’ and ‘cautious paternalism’ have been promulgated by prominent economists.” A recent Health Economics editorial by Jody L. Sindelar contradicts the economist conventional wisdom that correcting externalities, providing information and protecting youths are the only role for the government in the health policy arena.

I agree with Sindelar that making general economic theory more flexible to the practicalities of the real world is important. For instance, she cites the effectiveness of the PROGRESA program in Mexico. The program has been so sucessful that it has been adopted in New York City. The authors also cite the fact that small conditional cash payments conditional on drug abstinence have also been effective in help those addicted to drugs quit their habit.

Nevertheless, we must be careful how much believe the government should manipulate our lives. Sindelar claims that smoking, alcohol and drug abuse, and overeating all are examples of irrational behavior. While these activities are harmful, many people do enjoy having a cigarette, getting intoxicated, or eating copious amounts of desserts and the decision to smoke, drink, overeat or use drugs is likely not irrational. I do not believe that these activities should be taxed or prohibited just because they are harmful to the individual. Only if they lead to harm in other individuals (i.e.: externalties, such as second hand smoke, drunk driving, etc.) would specific tax be merited.

In my view, I do not believe that all government action is bad. Yet, I believe that the burden of proof should be that government action is truly beneficial. In the criminal court, people are “innocent until proven guilty.” In the public policy arena, there should be no government action, unless the government action has been proven beyond a reasonable doubt to be effective.

• JL Sindelar (2008) “Paying for performance: the power of incentives over habits.” Health Economics, 17(4): 449-451.

David Whelan chronicles the rise (and possibly future fall) of Medicare Advantage programs in his article “Unfilled Prescription” in Forbes.

Earlier laws privatizing Medicare, starting with a pilot program in 1985, were written to give insurance companies only 95% of the money otherwise spent per Medicare member. The insurers were supposed to figure out how to make up the difference. It was a blunt way to save the Treasury money, but few companies stepped up…

The 2003 law hiked the payments to lure more insurers into the market. In some counties minimum payments to these plans reached as much as 128% of the amount Medicare traditionally spends per patient. Insurers rushed in, and costs soared. In the most remunerative counties, two times as many old people are enrolled in Medicare Advantage as the national average. As a result, taxpayers now pay an average of 12% more per private-plan beneficiary, not 5% less.

Whenever we talk about cost we also need to talk about quality.  Are people who opt for Medicare Advantage plans getting higher quality care than in traditional Medicare?  Are they able to see doctors in a more timely manner?  Is care more coordinated?  If this is the case, then the extra costs may be worth the money.

Nevertheless, an economist would guess that Medicare Advantage plans should be cheaper.  Even though the private plans have higher administration and advertising costs, they likely are more efficient than the government plans.  Further, one would anticipate that healthier seniors would choose the Medicare Advantage plans and sicker senior would be more likely to choose traditional Medicare.  This selection problem should make Medicare Advantage cheaper.

I agree that the federal government should not pay more money for private plans than it does for traditional Medicare.  It should reimburse the plans the same (or less if there is adverse selection) as it costs for the government to administer traditional Medicare and if firms want to increase the price, than seniors can pay the difference.  If seniors do not want to pay the difference, they can always opt for traditional Medicare.

Paul Polak’s book Out of Poverty could have just as easily been titled “How to get rich: a guide for small-time farmers in developing countries” or “Marketing to dollar-a-day earners.” Polak’s book states that donations –especially those run through the developing country government–will not end poverty. They have not so far. One reason is that most donations are used to give away goods for free. But this destroys the incentive of any small businessperson to try to sell affordable priced goods to the poorest of the poor.

Polak’s NGO, IDE, develops products for those in extreme poverty in developing nations. Polak stresses that any good targeted to poor rural farmers must be 1) cheap, 2) small scale and 3) expandable. Drip irrigation is one great way for poor farmers to conserve water and efficiently irrigate their crops. Further, drip irrigation will allow farmers to grow crops during their more lucrative off-seasons, when the price from the crops is higher. Unfortunately, most drip irrigation companies make large, capital intensive products targeting large farms. IDE has taught farmers to use less expensive versions of these drip irrigation technologies to increase their income. IDE has also helped to spread the treadle pump technology to many farmers.

Another NGO with a similar philosophy as IDE is the Scojo Foundation. Scojo gives small entrepreneurs the materials and training to start their own firm selling reading glasses to the poor. Not only do these small-time entreprenuers profit, but customers who’s vision improved also appreciate the market transaction.

Another seemingly obvious point Polak makes is that the cure for poverty is to find a way for the poor to make more money. Increasing the education or medical care the poor receive is not in and of itself a means out of poverty. Poor children get little education because their parents need them to work on their farms to survive, not because they do not understand the value of eduation. Polak claims that once farmers in developing countries increase their income, they do increase their spending on education for their children, and medical care for their entire families.

• Polak, Paul. (2008) Out of Poverty: What works when traditional approaches fail. Berrett-Koehler Publishers, Inc. San Francisco, 232 pages.

Wikio has their own ranking system of the top health blogs. The Healthcare Economist blog was ranked as #46 as of today.

The latest edition of the Health Wonk Review has been posted at The Health Care Blog by Brian Klepper.

Gruber (1994) shows that the costs of employer-provided health insurance benefits are passed on to employees through lower wages. But do employees with higher expected medical expenses have their wages reduced by a higher amount to reflect the additional medical costs to employers? This may not be the case if employers can not observe the health of employees when they hire them. On the other hand, for obese individuals, the fact that they are obese is easily observable. Papers such as