February 2009

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Turkish Hospitals

February 27, 2009 in Hospitals, International Health Care Systems | No comments

In Turkey, the number of private hospitals has expanded from 250 in 2006 to 375 in 2008. Healthcare Europa reports that Turkish private hospitals previously charged whatever prices they pleased.  The government health insurance plan would pay the basic rate to the private hospitals, and the patient would be responsible for any difference between the government and the private sector rate.  This is known as “topping off.”

With the recent economic swoon, “the  government limited top-ups to a 30% ceiling in July 2008 -that spelt disaster for the private sector.  Lavish A-group hospitals, offering equivalence to top US and European hospitals, were typically adding 150% plus, more modest B-group hospitals 100% and C group hospitals – described as the same as a public sector hospital - were adding 20-50%.”

With declining demand and price controls, hospitals were seeing red.  However, “Filix Cevirme, General Coordinator at the Association of Private Hospitals (OHSAD), says the government is expected to up the ceiling to 70% after regional elections in March.”

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Medicare: Primary Docs to get more money, Specialists less

February 26, 2009 in Medicaid/Medicare, Physician Compensation, Public Policy | 1 comment

Joe Paduda of Managed Care Matters has a two great posts on Medicare’s new payment structure.  

The first post reports how exactly Medicare is changing its reimbursement for medical services.  ”It looks like reimbursement for cognitive services – the 99xxx codes for readers expert in CPT-4s…office visits and similar services for others – will be increased while payments for surgeries, imaging, and other ‘procedures’ will be reduced.”

The question remains, will these changes stick?  For years, policy experts have advised CMS to increase primary care compensation and decrease specialist compensation.  However, specialists are a smaller, more cohesive group.  This facilitates the formation of compelling lobbies for specialists.  Mr. Paduda accurately predicts that these Medicare reimbursement changes will create a “loud, violent, and ugly” political backlash from specialists.

In the second post, Mr. Paduda reveals some insight as to how Medicare reimbursement changes will affect Medical care contracting in the short- and long-term.

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Bailout: A Stimulus Plan for Lobbyists

February 26, 2009 in Current Events, Economics - General | No comments

The economic stimulus plan is looking to spend money on “shovel ready” infrastructure projects.  Even though stimulus bill funds have not yet been spent, fiscal policy has already generated increased economic activity in one sector: lobbying.

NPR’s Marketplace reports that Washington lobbyists earned a record-breaking $3.2 billion last year. Sheila Krumholz, Executive Director for the Center for Responsive Politics, states:

“There was this unique opportunity that government was handing out money and anytime that happens, companies will spend what they must to get in line to get a piece of the pie.“

Obama’s Address to Congress

February 25, 2009 in Current Events, Public Policy | No comments

While President Obama’s speech to Congress had many components, I’m going to focus on those related to health care.  I will also comment on the Republican response.

OBAMA ADDRESS

I applaud the President for specifically addressing the need for health care reform.

“…we can no longer afford to put health care reform on hold. We can’t afford to do it.”

Of course, Obama applauded his the health care changes made already (i.e., expanding SCHIP eligibility, and extending COBRA benefits).

The President mentioned the high cost of health care.  Health insurance premiums put a burden on small businesses.  Small businesses have smaller pooling groups and thus have higher average premiums than for large firms.  Further, if one employee gets has a catastrophic illness, this will have a large impact on health insurance costs for small businesses, but not for large.  Obama also mentions that many people file for bankruptcy due to large medical bills.

So what is Obama going to do about it?  Does he claim he can cure cancer?  Actually, yes.

“Our recovery plan will invest in electronic health records and new technology that will reduce errors, bring down costs, ensure privacy, and save lives.  It will launch a new effort to conquer a disease that has touched the life of nearly every American, including me, by seeking a cure for cancer in our time…and it makes the largest investment ever in preventive care, because that’s one of the best ways to keep our people healthy and our costs under control.”

Let’s look at Obama’s 3 suggestions:

  • EMR:  Electronic medical records (EMR) are of course a good thing.  The question is one of implementation.  If the government establishes one standard for electronic medical records, this will create a unified platform that can be used by all health care providers.   Sharing information across providers is essential.  However, there are privacy issues to be managed whenever a database is centralized.  Further, mandating one EMR standard will hinder the ability of innovators to improve the quality of the EMR.
  • Preventive Care.  Preventive care is generally a good thing, but I do not believe this is an important health reform issue.  First, preventive care will not reduce costs significantly and may even increase costs.  The Congressional Budget Office states that any gains from reducing obesity would be concentrated in the short and intermediate period “because some of the savings will be offset by increased longevity and the cost of disease that are most prevalent during old age.”  Secondly, if individuals are not getting preventive care and it is not saving money, then this does not seem to be a public policy issue.  An exception may be vaccines; however, since poor patients who can not pay for vaccines can get subsidized or free vaccines, the problem is one of education, not of health insurance.
  • Cure Cancer.  This idea will enrage the pro-cancer lobby.

Although President Obama realizes that “we must also address the growing cost in Medicare and Social Security,” he does not address how this will be done.

REPUBLICAN RESPONSE

Gov. Bobby Jindal’s comments related to health reform were the following:

“To strengthen our economy, we also need to address the crisis in health care. Republicans believe in a simple principle: No American should have to worry about losing their health care coverage, period. We stand for universal access to affordable health care coverage.

What we oppose is universal government-run health care. Health care decisions should be made by doctors and patients, not by government bureaucrats…if we put aside partisan politics and work together, we can make our system of private medicine affordable and accessible for every one of our citizens.”

Gov. Jindal theme was this: the government will help pay for your health insurance premiums, but does not support a single payer plan.  Although Gov. Jindal was vague, the Republican worldview might support a voucher system.  In a voucher system, individuals receive subsidies to buy private health insurance based on their income and illness level.  I believe that Republicans would oppose the creation of a public health insurance plan that could compete with private insurers (see 24 Feb 2009 post).

SUMMARY

Like most speeches, the Obama Address and Republican Response were long on rhetoric and short on details.  As all policy wonks know:

“Le bon Dieu est dans le détail” (God is in the details)

Gustave Flaubert

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Procrastination

February 25, 2009 in Miscellaneous | No comments

Ph.D. students have one goal: finish your dissertation.  While this may seem like an easy task, it is one that is difficult and takes many years to complete.  A dissertation in economics is made up of 3 chapters (usually  3 separate papers).  Why does it take some grad students 7 years, 8 years or more to complete their dissertation.

An Economist article may shed some light on why people procrastinate.  The authors find that people are most likely to procrastinate when they have abstract tasks to accomplish (e.g., finish dissertation) compared to when they have concrete tasks (e.g., turn in problem set 3).  

This may be one reason why organizational tools work.  David Allen’s Getting Things Done forces individuals to break down their abstract task (e.g., finish dissertation) into concrete, short term tasks (e.g., find valid data set to analyze research question, clean data, decide on regression specification).

As someone who will complete their dissertation in the standard 5 years, I believe that breaking down abstract goals into smaller, more concrete tasks has certainly helped me finish the dissertation.

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California raises state sales tax 1%

February 24, 2009 in Current Events, Taxes | No comments

Two weeks ago I did a piece looking at the cost of living in different states.  One major dimension of the cost of living is state sales and incomes taxes.  With the recent economic downturn, it looks like I’ll have to update my numbers.

California currently has the highest sales tax of any state (7.25%).  Due to the current budget crisis, it will increase the sales tax by 1 percentage point to 8.25%.  This means that in my current home of San Diego, the sales tax will rise to 8.75%.  In my future home of San Francisco the sales tax will be 9.5%.

Ouch!

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Should a Government Health Plan compete with Private Health Plans?

February 24, 2009 in Health Insurance, Public Policy | 6 comments

“If you do not have insurance you can choose to enroll in the new public plan, which will offer benefits similar to what every federal employee and member of Congress gets. Or you can choose private plan options…” Barack Obama.com

Should the government develop a health plan that would compete with private health plans?  Thomas Rice thinks this is a good idea.  In his Health Economics editorial, Rice believes that the government’s market power and lower administrative expenses will lead to lower health insurance costs.  He claims that “Government should have a strong role in providing coverage to those who are currently uninsured or who have meager coverage, and a government-sponsored option that competes against the current array of private insurers is an excellent way to start.”

I am not opposed to having a public health insurance plan competing with the private health insurance plans.  However, there are some issues that need to be dealt with:

  • Budget Constraints.  Although the government may be able to charge lower health care premiums than private health insurers could, why is this the case?  If this is because  public health insurance is more efficient due to economies of scale, than this is great.  If they charge lower premiums however because they do not have a firm budget constraint, then this is a problem.  If public health insurers can unfairly compete by running a deficit every year, then this will not only drive private health insurers out of business, it will also saddle future generations with a large tax burden.
  • Public School Problem.  Individuals who want to send their children to private school face a stark disincentive to do so. If they sent their children to public school, the only cost is the taxes they must pay.  If they want to send their children to private school, they must not only pay the taxes for the public school, but most also pay private school tuition.  Similarly, if a public health insurance plan is made available, individuals should not get this for free.  If there is a subsidy for public health insurance (e.g., based on income or health risk) then private health insurers should also be able to receive this subsidy.  This will create a more level playing field.  
  • Risk Adjustment.  How will the public health insurance plan price premiums?  If the public plan is community rated, but the private plans are rated on an individual basis, all the sickest individuals will gravitate to the public plan. This will drive up medical costs for the government insurer.
  • History.  Rice notes that “the Federal Employee Health Benefits Program…provides access to private health insurance plans to over eight million federal employees and dependents. Although the program has provided good coverage at a reasonable cost, historically it has been plagued by the same issues as other consortia of private insurance: difficulties in controlling costs, and selection bias.”

As I mentioned, I am not opposed to having a government-run health insurance plan.  However, we must realize that this in and of itself is not a cure-all for the health care problems facing the U.S.

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The shortsightedness of the “Buy American” clause

February 23, 2009 in Current Events, Economics - General | No comments

Many politicians are proposing that a “Buy American” clause be included in the stimulus package.  This is bad idea.  Protecting American jobs from foreign may seem like a good idea to save jobs.  However, if  ”Buy American” bill is passed other countries will institute their own protectionist provisions.  In fact, Brazil may challenge the “Buy America” provision at the WTO.

The Washington Post reports, “Nations including China and many in Europe are preparing to spend billions of dollars of taxpayer money on stimulus projects. American companies are angling for a piece of those pies, and retaliatory measures against U.S. companies, executives argue, could significantly complicate those efforts.”

The Wilson Quarterly reviews a paper  by Erik Lindberg (2008) which seeks to answer the following question: why today is Hamburg an economic powerhouse of over 2 million whereas the smaller city of Lübeck only plays a much less significant role in the German economy .  In the 15th century, Hamburg and Lübeck were both prosperous German port cities of a similar size.  ”Lübeck connected to the Baltic Sea via the Trave River and Hamburg to the North Sea via the Elbe.  Their divergent fates illustrate the perils of extreme protectionism…In the face of increasing Baltic Sea competition from upstart traders from London and Amsterdam, Lübeck chose to protect its powerful landowners and leading merchant guild …Hamburg, by contrast, encourage trade with Dutch, Flemish, and English merchanges, and even a score of Portuguese Jews were invited to movie in.”

History reveals the perils of protectionism.  Further, even if the “Buy American” clause is intended to be temporary, political interest groups will have an incentive to lobby to make this protectionist philosophy stick in the long term.

Let us call on our politicians to reject the “Buy American” clause in order turn American cities and towns into Hamburgs, and not Lübecks.

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Economy’s Impact on the University of California

February 20, 2009 in Economics - General | 2 comments

Due to the poor economy and state budget deficit , the University of California will face a $450 million shortfall.

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Limitations of the “Science” of Economics

February 20, 2009 in Economics - General | No comments

From Nobel Prize winner Friedrich A. Hayek’s “Pretence of Knowledge” Speech.

“Unlike the position that exists in the physical sciences, in economics and other disciplines that deal with essentially complex phenomena, the aspects of the events to be accounted for about which we can get quantitative data are necessarily limited and may not include the important ones. While in the physical sciences it is generally assumed, probably with good reason, that any important factor which determines the observed events will itself be directly observable and measurable, in the study of such complex phenomena as the market, which depend on the actions of many individuals, all the circumstances which will determine the outcome of a process, for reasons which I shall explain later, will hardly ever be fully known or measurable. And while in the physical sciences the investigator will be able to measure what, on the basis of a prima facie theory, he thinks important, in the social sciences often that is treated as important which happens to be accessible to measurement.“

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