You are currently browsing the monthly archive for August 2008.
NPR’s Morning Edition reports on what happened when health economist Philip Musgrove brought a dying man to an emergency room. The receptionist with whom Dr. Musgrove interacted would not treat a the man until his health insurance information was collected.
Tags: Emergency Room, Health Insurance
The latest edition of the Health Wonk Review is up at Workers Comp Insider. Here are some of my favorite posts from the HWR:
Tags: HWR
In the July/August 2008 edition of Health Affairs, health economist Mark Pauly discuss his opinions with respect to the evolution of health insurance in India and China. He notes that in both countries, rising incomes has lead to increased demand for medical care, especially in urban areas. Despite the increased demand for medical care, there has not been nearly as much an increase in health insurance coverage. Out-of-pocket payments as a portion of total health care spending are 80% in India and 60% in China.
This has lead to calls by many politicians to increase “access to care” by increasing health insurance coverage rates. Pauly, cautions that mandating generous health insurance coverage may not be ideal:
“The problem with insurance that ‘improves access’ to care is that such additional use of care will almost surely raise average spending on care and, therefore, the premium that an unsubsidized insurer would have to charge…using regulation to push access and equity that makes insurance seem like a bad buy to its middle-class customers will be undesirable.”
If legislating a more generous insurance benefit package will reduce demand for health insurance, one solution is to have the government provide health insurance for all its citizens. This will increase equity, but could lead to other undesirable outcomes such as rent-seeking behavior, and politically determined medical care decisions. Further, using taxes to fund the public health insurance system could increase “black market” activity. That is,
“Using taxes as a vehicle to make insurance compulsory runs the risk of driving measurable and taxable income underground for people who expect to pay more in taxes from public goods than they will get.”
Dr. Pauly reminds us, that there is no easy way to solve the health care needs facings the citizens of the world’s two largest countries: India and China.
Tags: China, Health Insurance, India
Today I appeared on the Al Jazeera English News station, broadcast all over the world (watch live). I was involved in a debate with a pediatrician from Washington, D.C. regarding the merits and demerits of a single-payer health care system.
Tags: Al Jazeera, Media Apperances
Income inequality has generally increased since the 1970s. Even for researchers who find that income inequality has Does this mean that happiness inequality has also increased? An NBER working paper by Betsey Stevenson and Justin Wolfers claims that this is not the case. Below is the a portion of the abstract.
While there has been no increase in aggregate happiness, inequality in happiness has fallen substantially since the 1970s. There have been large changes in the level of happiness across groups: Two-thirds of the black-white happiness gap has been eroded, and the gender happiness gap has disappeared entirely. Paralleling changes in the income distribution, differences in happiness by education have widened substantially…Juxtaposing these changes with large rises in income inequality suggests an important role for non-pecuniary factors in shaping the well-being distribution.
Tags: Happiness, Inequality
The International Herald Tribune reports that the U.S. Postal Service has posted a $1.1 billion dollar loss in the past quarter. What are the reasons for this huge loss? First, total mail volume is down 5.5% from last year, likely due to the economic slowdown and the gradual increase in internet communication over time. Also, as oil prices increase, the cost to ship letters and parcels has gone up as well. Further, there is the legendary Post Office service. Let me give you an example from my experience mailing a package on Friday.
Post Office Employee (POE): Next!
Healthcare Economist (HE): Hello. I would like to mail this package and buy a book of stamps.
POE: Is there anything hazardous or fragile in this package?
HE: Yes, it is fragile. There is a glass framed picture in the box.
The post office employee proceeds to stamp a “Fragile” on the package in bright red letters. I pick out a book of stamps and pay for the transaction. As I begin to turn to leave the post office, the employee picks up my “Fragile” package and flings it 5 feet into the air into a hole leading to an empty bin in back room…Kah-plunk! That is how fragile packages are treated at the USPS?!?!?!
Next time, I’ll use UPS.
Tags: Business, Post Office
Economists often state that uninsured individuals do not “want” health insurance. Joe Paduda claims that this is not the case; most uninsured do want health insurance. Mr. Paduda cites a Washington Post, Kaiser Family Foundation and Harvard University survey which shows that “when asked why they don’t participate in their employer’s program, 1% of survey respondents said it was because didn’t think they needed insurance.” Most people decide to not to purchase health insurance–not because they do not want it–because they can not afford it.
This is where economic terminology can create confusion and also clarify the situation. Let me give you an example of what “want” means to an economist.
I want an Audi R8. However, the cost of this car starts at $112,500. Thus, I prefer to drive a 2003 Toyota Matrix and have some money left over to buy food, pay for rent, etc. Although I do “want” the sports car, I want more to not owe a huge amount of debt and instead be able to afford for other goods that I desire.
Similarly, for economists, if an individual is uninsured, it must be the case that this is because they prefer this situation. This may seem like a tautology, but what it means is that an individual who is uninsured would rather be uninsured than pay $12,100 and be insured. The $12,100 that would have gone to health insurance, can be used for food, rent, etc. Further, if you are young and healthy, the probability that you will become sick is probably fairly small compared to the average insured individual and thus you will be paying more for insurance than the expected value of your medical costs.
Those who argue that all individuals should have health insurance can argue this based on equity goals. However, in order to make health insurance more attractive, one must either 1) lower the price of health insurance, or 2) increase the after-tax incomes of low income workers. The first can be done with more flexible insurance arrangements, offering more basic health insurance coverage, improving the efficiency of the health care sector and by man other means. The second means to increasing insurance can be accomplished by either increased economic growth or a more redistributive tax policy.
Nevertheless, nothing in this world is free (especially health care). Everyone would want health insurance if it were free; but because it is so expensive, other wants come to be more important than health insurance and thus individuals become uninsured.
Tags: Health Insurance, Wants
Barack Obama and John McCain both believe that they know how to improve the American health care system. A policy brief by Michael Tanner has nice summary of the two candidates policies. I will review some of this paper today.
Obama’s general health care policy
Obama goal is to expand government provided health care and create a form of “managed competition” originally developed by Alain Einthoven. Obama supports expanding SCHIP and Medicaid eligibility. Although Obama does not support a health insurance mandate for adults, he does support a mandate for children and young adults (any one 25 or under). Obama’s goal to increase health care access, he would support a “pay-or-play” mandate. All but the smallest employers would be required to provide health insurance; those who didn’t would be compelled to pay into a national fund covering these uninsured workers. The mandate would likely require a minimum benefits package. Overall, Obama is pushing towards more government provided health care and more regulation.
McCain’s general health care policy
Compared to Obama, McCain is generally against more government participation and regulation. Instead of moving the U.S. to larger risk pools (e.g., government insurance, employer insurance) that are more severely regulated, McCain want to move the U.S. towards more individually provided health insurance. McCain’s main policy initiative is a $2,500 health insurance refundable tax credit for individuals ($5000 for families). The goal is to make health insurance more affordable, but make individuals incur the full cost of “better” health insurance at the margin. McCain is also considering risk-rating these vouchers so that individuals with severe health problems will receive a larger voucher. McCain would also allow individuals to buy health insurance from any state.
Side-by-side comparison
| Obama | McCain | |
| Community Rating | Yes | No |
| Guaranteed Issue | Yes | No |
| Drug Reimportation | Yes | Yes |
| Expand SCHIP/Medicaid | Yes | No |
| Pay-or-play mandate | Yes | No |
| Government direct negotiations with drug companies? | Yes | No |
| End tax-exempt status of employer health insurance benefits? | No, but capped | Either eliminate or cap |
| Health Insurance Vouchers | No | Yes |
| Purchase out-of-state health insurance? | No | Yes |
| Allow non-traditional organizations to buy insurance (e.g., churches, professional organizations)? | No | Yes |
Commentary
So whose health insurance plan is better? If you are in favor of more government involvement in health care, you should support Obama. In the Audacity of Hope, Obama states that “the market alone cannot solve our health care woes–in part because the market has proven incapable of creating large enough insurance pools to keep costs to individuals affordable, in part because health care is not like other products or services (when your child gets sick, you don’t go shopping for the best bargain).” While Obama’s proposals will decrease insurance choice, increase regulation, and increase public funding of healthcare, Obama’s proposals are likely more progressive than McCains and will create larger risk pools. Obama’s plan is likely much more expensive. Further, an employer mandate may lead to higher unemployment levels (see Baicker and Levy paper).
If you are in favor of less government involvement, McCain is your man. McCain rejects “coercion and the use of state power to mandate care, coverage or costs.” The voucher system is similar to the one proposed by Victor Fuchs, and fairly similar to the Swiss managed competition system. A shift to individual–rather than employer-provided–health insurance accompanied by a decrease in regulation should: 1) reduce health insurance costs, 2) increase employment relative to Obama’s plan, 3) give insurance companies the incentive to create innovative products, 4) give workers more choice of their health insurance plan, and 5) be more fiscally sound for the government.
On the other hand, McCain’s plan will be more regressive and can adversely affect the ability of individuals with pre-existing conditions to buy health insurance (unless risk rating the voucher payment occurs). The McCain plan can only be successful if risk pooling can occur on the individual level. This is happening in Switzerland, but in Switzerland there is a standard benefit package which makes shopping for insurance coverage easier.
Additional Comment
Both candidates have proposals with respect to improving how medical care is delivered. Increased preventive care, EMR, and P4P are all popular measures. However, the NEJM states “Our findings suggest that the broad generalizations made by many presidential candidates can be misleading. These statements convey the message that substantial resources can be saved through prevention. Although some preventive measures do save money, the vast majority reviewed in the health economics literature do not.” The ability of any President to directly affect the quality of medical care provided to the patient is likely small. P4P initiatives are good in theory, but since most of medical care involves unmeasurable outcomes, or outcomes which depend on multiple causal factors (e.g., the quality of medical care, baseline patient health, patient behaviors), it is very difficult to implement them on a large scale.
Tags: McCain, Obama, Politics, Presidential Candidates
Merrill Goozner of GoozNews has an interesting interview with Richard Ebright, a chemistry professor at Rutgers University. The two discuss the Bruce Ivins, anthrax, and bioterrorism. A few poignant excerpts.
Goozner also gets some answers about who benefited from the anthrax attacks of 2001.
Tags: antrhax, Terrorism, Vaccinations
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