June 2008

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Are wet babies healthy babies?

June 12, 2008 in Health Care in Developing Nations | Permalink

Does rainfall improve health for children in developing countries? Sharon L. Maccini and Dean Yang (2008) hypothesize that higher rainfall will lead to higher incomes for rural household and higher incomes allows increased food purchases and more disposable income to be made available for health care purchases. The authors find that in Indonesia, “[w]omen with 20% higher rainfall (relative to normal local rainfall) in their year and location of birth are 3.8 percentage points less likely to self-report poor or very poor health, attain 0.57 centimeters greater height, complete 0.22 more grades of schooling, and live in households that score 0.12 standard deviations higher on an asset index.” Similar effects were not found for males however.

It seems to be the case that generating more income for poor households in developing countries is the best way to improve the health status of their female children.

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Congress Pushes Curbs on Doctor-Owned Hospitals

June 9, 2008 in Hospitals, Public Policy | Permalink

The N.Y. Times reports (“Concerned about costs…“) that Congress is trying to impose new restrictions on physician-owned, for-profit hospitals. The legislators fear that these hospitals 1) drive up costs and 2) provide poor quality.

Legislators worry that when physicians own the hospital, they may have more of an incentive to order more procedures to increase their profits. If this is true, I am not sure that physician owned hospitals are the problem, it may be the case that Medicare or insurance companies need to change how they compensate physicians in these hospitals.

The second case is also of dubious merit. It was shown in a previous post that ambulatory surgery centers and hospital outpatient departments have similar quality levels. It is true that ambulatory surgery centers generally have a healthier patient base, but treating healthier patients in a lower cost setting is not necessarily a bad thing. It is true that many of these physician-owned hospitals not equipped to handle complications requiring emergency care, but if the complications are lower, then the cost savings may be worth not having the emergency care equipment.

Of course, not all physician-owned hospitals will be subject to these new restrictions. Lobbyists have convinced politicians that facilities such as Aurora BayCare Medical Center in Green Bay, Wisconsin and Wenatchee Valley Medical Center in Wenatchee, Washington should be exempt from these restrictions.

Michael C. Burgess a Texas Republican and an obstetrician-gynecologist states that “This is a free country…If you want to invest in a hospital, if you are willing to put personal capital at risk, you should not be forbidden to do so just because you are a doctor.”

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Poverty and Health in Developing Countries

June 6, 2008 in Health Care in Developing Nations | Permalink

Abhijit Banerjee and Esther Duflo find that for rural households, the probability that the mother is alive is 36 percentage points higher if the family has a daily per capita expenditures (DPCE) of $6 to $10 versus a DCPE of $1 to $2.  Using a panel data set specification, the authors also find that adults over 50 living on less than $2 a day are at least three times as likely to die over the next five to seven years than those living on $6 to $10 a day.

Are people poor because they are sick or do they get sick because they are poor?  The direction of causality is unknown.

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Advice for Graduate Students

June 6, 2008 in Economics - General | Permalink

The Austrian Economists blog has a great post (“Hard Work Pays Off“) giving a bunch of advice for grad students. Below are some of my favorite quotations:

  • Don Lavoie — “Why are you doing this? Don’t ever forget your answer to that question.”
  • James Buchanan — “All work is work in progress. Don’t get it right, get it written.”
  • James Buchanan — “It takes varied reiterations to force alien concepts upon reluctant minds.”
  • Bob Tollison — “Never consider a criticism as lethal, but instead as an opportunity for another line on your CV.”
  • Kenneth Boulding — “At some point in your career you will be confronted with the following dilemma — should you read or should you write. I chose to write.”
  • Peter Boettke — “Look out the window rather than on the black board for your questions. Strive to find puzzles where it appears that history defies what logic dictates and then solve the puzzle by demonstrating with the tools of rational choice theory and institutional analysis the the defiance was only an illusion.”
  • Andrei Shleifer — “Why be boring?”

And most importantly…

  • James Buchanan — “The best dissertation is a done dissertation.”

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The Moral of the Story

June 5, 2008 in Current Events | Permalink

What’s a doctor to do when a child comes in with the symptoms of vomiting, infected ears and being “clingy and cranky”?  Dr. Perri Klass assumed that this was an ear infection, but discussion with the patient’s mother revealed that the child had fallen on his head just a day earlier. Should the doctor order an expensive CT scan when the probability that brain damage occured is very low, or should the doctor send the patient home with instructions of how to care for an ear infection and risk having the child die if brain damage is left undected.  This moving story is in the May 29, 2008 edition of the New England Journal of Medicine.

Hat tip to The Sentinel Effect.

Mandatory Seat Belt laws

June 5, 2008 in Public Policy | Permalink

A recent paper in the May 2008 edition of the Journal of Health Economics by Carpentera and Stehr finds that mandatory seat belt laws save lives.

“…we find consistent evidence that state mandatory seatbelt laws – particularly those permitting primary enforcement – significantly increased seatbelt use among high school age youths by 45–80%, primarily at the extensive margin. Unlike previous research for adults, however, we find evidence against the selective recruitment hypothesis: seatbelt laws had consistently larger effects on those most likely to be involved in traffic accidents (drinkers, alcohol-involved drivers). We also find that mandatory seatbelt laws significantly reduced traffic fatalities and serious injuries resulting from fatal crashes by 8 and 9%, respectively. Our results suggest that if all states had primary enforcement seatbelt laws then regular youth seatbelt use would be nearly universal and youth fatalities would fall by about 120 per year.”

So should we implement mandatory seat belt laws? From the evidence in their paper, Carpentera and Stehr believe so. However, is this issue truly so clear cut?

One question is whether or not mandatory seat belt laws really caused increased seat belt use. Did the seat belt laws cause increased seat belt use or did increased seat belt use lead to the increased popularity and passage of a law?

This paper is important in that it quantifies the benefits of the mandatory seat belt laws, but does not quantify the costs. What is the cost of enforcement in terms of 1) time law enforcement must dedicate to seat belt policing instead of “real” police work? and 2) the cost to the justice system and work absences due to the adjudication or appeals process for seat belt violation, and 3) the violation of a person’s individual freedom to choose to not wear a seatbelt. In this case, there is no externality to not wearing a seat belt; the person harmed from not wearing a seat belt is that person themselves. A libertarian would be strictly against a mandatory seat belt law. Nevertheless, a compelling argument can be made that minors do not use an optimal decision-making process when deciding whether or not to wear a seat belt.

Do I support a mandatory seat belt law? No.

I believe that parents should help to convince their child to use seat belts and that it is possible that schools should educate children on the benefits of using a seat belt. However, using police resources to fine individuals who do not wear seat belts seems to be a waste of resources. If mandatory seat belt laws are not enforced, then this would free up police resources, but also would weaken the impact of mandatory seat belt laws.

Seat belt save lives. But I think parents and schools–not the government–are the best institutions to spread this message.

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Cavalcade of Risk – Second Anniversary Edition

June 4, 2008 in Uncategorized | Permalink

The Second Anniversary edition of the Cavalcade of Risk has been posted at the always informative InsureBlog.

Two especially interesting posts from Cato-at-Liberty and Colorado Health Insurance Insider discuss the individual–compared to the group–health insurance market.

Does Free Health Insurance increase the poor’s access to medical care?

June 4, 2008 in Health Insurance, International Health Care Systems, Public Policy | Permalink

As mentioned in previous posts, most health insurance in the France public health care system involves significant copayments. While this helps to reduce the moral hazard problem, it may prevent poor individuals from utilizing the care they need. In 2000, France introduced free complementary health insurance plan which covers most out-of-pocket payments for the poorest 10% of French residents. Did this policy change increase utilization?

This is the question analyzed by Grignon, Perronnin and Lavis (2008). The authors note that three groups are effected by this change. This first is the very poor who already paid very few copays due to the existing means tested program (Aide Médicale Générale). The second group of individuals who were eligible for the complementary insurance program previously had commercial insurance, which in France is often used to finance the copayments of the national health insurance system. For the first two groups, we would expect little change in medical utilization. The third group, however, had no commercial or means tested complementary insurance and thus becoming eligible for the new French program likely will have a significant impact on access to care.

Results

The authors do not find a strong positive effect of being eligible for the the free complementary insurance plan, but this is likely because 87% of the sample was previously eligible for means tested benefits. There was some evidence that the utilization of specialist care did increase for the population eligible for the free complementary insurance program. Individuals who enrolled voluntarily into the free plan had significantly higher probability of using all types of care.

The authors summarize their findings concerning the increased utilization of those previously not covered as follows:

“This impact of the free plan on health-care utilization of those previously not covered has three causes: (1) a true price elasticity of demand for health care among the poor: faced with a lower (indeed zero) price, individuals use more care, mostly specialist visits and drugs than when faced with a variety of co-payments averaging 23%; (2) pent-up demand: the change in utilization among those previously not covered reflects the slope of their demand as well as the stock of past unmet needs and can therefore overestimate the longer-run elasticity of demand; and (3) enrolment bias: those who voluntarily enroll may be those who expect to use health care more. “

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Custom-made vs. ready-to-wear treatments

June 3, 2008 in Physician Compensation, Supply of Medical Services | Permalink

When you are sick and need a doctor, you need hope that you are given the best care possible. Most people assume that doctors will tailor their treatments to the individual patient needs. However, a paper by Frank and Zeckhauser (JHE 2007) explain that this may not be the case. The authors claim that there are four costs which may preclude physicians customizing treatments to individual patients.

  • Communication costs: Whenever a physician prescribes a treatment outside of standard protocol, they will have to explain why they are doing this to the patient and this takes time. With patients armed with more information from direct-to-consumer advertising and the internet, communication costs have increased over time.
  • Cognition costs: The authors claim that using brain power (cognition) has costs and there may be increasing marginal costs of cognition use. Thus, physicians may use heuristics to simplify the decision-making process.
  • Coordination costs: As more and more physicians specialize, communication between physicians is increasingly important. Using standardized, less customized medical treatments makes communication between physicians regarding patient treatment much easier.
  • Capability costs: Some doctors are trained to perform certain techniques. If a superior technique is developed, the physician may still decide to use the “old” technique since they have mastered the “old” technique and do not know how to preform the new, superior technique.

It is likely that customization of treatment varies significantly by treatment. For instance, in my “Operating on Commission” paper I find significant differences in surgery rates based on how physicians are compensated by insurance companies. Since this is a significant medical and financial decision by the doctor, one would expect there to be more customization than in other areas, since the benefits to surgery are so large relative to the costs outlined above.

The authors ennumerate how customization will vary accross patients as follows:

  1. little is known about a patient and their responsiveness to various treatments
  2. treatment is expected to be short-lived
  3. there is little difference in the impact of different treatments on patients

On the other hand, Grand and Zeckhauser look at whether or not there is “norm-following behavior” in the length of office visits and physician prescribing behavior. They use data from the 2004 NAMCS and the Quality Improvement in Depression study. They find that physicians do customize treatment more for chronically ill patients than for patients with acute illnesses. Physicians do tend to spend more time in office visits with new patients, but the time spent with the patients does not vary by illness type or severity. Thus, the administrative and communication costs that new patients impose and not medical necessity seem to be dictating how the length of a visit varies. These results are similar to the ones found in Glied and Zivin (2002).

Thus, the authors conclude that some customization of prescribing practices and prescribing behavior does occur, but this behavior is not based on clinical factors.

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Michael Grossman wins the Victor Fuchs Lifetime Contribution Award

June 2, 2008 in Economics - General | Permalink

The American Society of Health Economists (ASHE) has honored Michael Grossman as the winner of the Victor Fuchs Lifetime Contribution Award.  Much of Dr. Grossman’s research deals with child and adolescent health, as well as drug and alcohol use.  An interview with Dr. Grossman is available in the ASHE spring newsletter.

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