March 2009

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Free Academic Articles Online: A Good Idea?

March 16, 2009 in Economics - General | No comments

The Wilson Quarterly looks at whether or not putting academic journals online is a good idea.  Although getting access to academic articles is easier than ever, scholars are concentrating their reading on a less diverse range of articles.

“As journals go online, researchers actually see less of their contents.  For every additional year of archives a journal makes electronically available at no charge, the number of distinct articles cited in other journals falls by 14 percent on average.”  On the other hand, “articles that are available for free are read much more frequently than those requiring a subscription.”

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Patents vs. Markets

March 16, 2009 in Pharmaceuticals, Public Policy | No comments

Markets win.

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In Support of Corporate Medicine

March 15, 2009 in Supply of Medical Services | 1 comment

Arnold Kling and Michael Cannon believe that the idea of the physician as a lone independent craftsment is out-of-date.  The authors contend that healthcare quality would improve and costs would drop if physicians adopted a more corporate environment.  Larger organizations, such as the Mayo Clinic, Kaiser Permanente and Veterans Affairs all benefit from economies of scale and a team-based medical approach.  Nevertheless, physicians generally are loath to accept this organizational structure, because they do not want their own authority and decision-making abilities undermined by a larger corporate structure.  Below are some excerpts from their article “Does the Doctor Need a Boss?”

  • “Medicare’s payment system generally does not reward coordination. Instead, Medicare and other fee-for-service payers tend to favor technologically intensive specialist services over those of general practitioners who might be best suited to play the role of project manager. The mismatch between payment systems and patients’ needs can be seen in the fact that the supply of gerontologists is not increasing, in spite of the obvious demographic basis for greater demand and the value gerontologists can add as project managers for those who are least able to coordinate their own care.”
  • “…the markets for legal and accounting services are dominated by corporate providers that can hire, coordinate, and monitor the services of those specialists. In medicine, transaction costs include the costs of soliciting input, sharing information, and coordinating treatment among multiple clinicians, often across space and time. Thus it is not unreasonable to think that delivering health care effectively, particularly for complex patients, could require a corporate model of organization.”
  • “In a corporate setting, a doctor would not have a business or administrative function. The doctor would not worry about what is billable and what is not. Instead, the doctor’s job would be to serve patients according to corporate standards. The doctor would be paid a salary, with increases, bonuses, and other incentives that take into account direct observation of the doctor as well as patient satisfaction and peer evaluations.”
  • “There is nothing magical about a corporation as an organization. Corporate bureaucracies are inherently inflexible, imperfect, and unimaginative. Competitive market pressures force corporations to overcome those limitations and are therefore essential to improving medical care. If corporations risk losing customers when they fail to keep pace with market standards for excellence, they will find a way to improve—or go out of business.”

Citation

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Correlation and Causation

March 13, 2009 in Miscellaneous | No comments

This comic may cause you to laugh.

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The Intensive and Extensive Margins of Teenage Sex

March 12, 2009 in Contagious Disease, Public Policy | No comments

HIV is a huge health issue around the world and especially in sub-Saharan Africa.  Many American NGOs have promoted abstinence programs as a way to prevent the spread of HIV/AIDS.  However, most evidence finds that this approach has been ineffective.

An NBER working paper by Dupas (2009) adds more support that abstinence programs do not work.  In the paper, the author used a

“…randomized fi…eld experiment involving 328 primary schools to compare the effects of providing abstinence-only versus detailed HIV risk information on teenage sexual behavior. Half of the schools, randomly selected, received teacher training on the national HIV/AIDS curriculum, which focuses on abstinence until marriage, but does not discuss risk reduction strategies (such as condom use or selection of safer partners). In 71 schools, randomly selected after stratifying by teacher training status, an information campaign provided teenagers with information on the prevalence of HIV disaggregated by age and gender group (the relative risks information campaign).”

The authors finds that the abstinence program had no effect on pregnancy rates.  However, the “risk reduction” educational program decreased the probability a girl had started childbearing within a year by 28%.  The decreased pregnancy rates were not, however, due to less frequent sexual activity.  Instead, teenage girls switched their sexual partners from older partners to teenage boys in their age cohort.

This leads to the finding that teenage girls are having the same amount of sex, teenage boys are having more sex, but pregnancies are decreasing.  Why is this?

The author explains that when teenage girls have sex with teenage boys, “…teenage girls report higher rates of condom use, presumably in order to avoid pregnancy with resource-constrained teenagers.”  It is also possible that teenage girls can more easily convince boys of their same age to wear a condom whereas it may be more difficult to convince older men to use a condom.

Thus, we see that these “relative risk” educational programs do not decrease sexual activity on the extensive margin (teenage girls are having the same amount of sex), but do decrease risky behaviors on the intensive margin (more condom use when teenage girls have sex with people of their same age).

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Cavalcade of Risk

March 11, 2009 in Carnivals, Current Events | 5 comments

SURGEON GENERAL’S WARNING: Reading this edition of the Cavalcade of Risk puts you at risk of certain side effects such as:

If you are willing to risk these serious side effects, please read on.

RISK PREFERENCES SURVEY

The Healthcare Economist asks you to take a risk…and participate in a survey on risk preferences.  By completing the survey, you will help advance the science of economics and be eligible to win a $25 gift card from Amazon.  For more information, click here.  

HEALTH

Joe Paduda of Managed Care Matters presents How bad is the United Kingdom’s National Health Service? 

The Lancet says that privatization in post communist societies during the 1990s caused an increase in mortality. 

John Earle of VoxEU disagrees, providing evidence that privatization did not increase mortality rates.

Will the removal of a “moral exemption” clause lead to hospitals closing their doors?  InsureBlog‘s Henry Stern reports that at least some providers are likely to shutter if forced to perform abortions, but wonders if the risk is really all that great.

The Disease Management Care Blog is shocked SHOCKED that the initial salvo of health care reform in the White House Summit promised everything to everybody. The DMCB, however, found that General Mills’ employee health insurance plan is a model to emulate.

The Health Business Blog believes the government should consider playing a direct role in venture financing of medical device companies, and let entrepreneurs direct those investment decisions.

Health reform need not reinvent the wheel, claims The Colorado Health Insurance Insider.  Louise advocates for expanding the current public health insurance programs (such as Medicaid and SCHIP) rather than creating a new public health insurance schemes from scratch.

Bargaineering reviews some of the different health insurance plan types: from HMOs to PPOs.

Two drinks a day is good for you…now it’s bad for you…A Western Heart weighs in.

OTHER INSURANCE MARKETS

From the “if it seems too good to be true” department, Jon Coppelman of Workers’ Comp Insider discusses a California workers’ comp avoidance scheme based on the idea of turning employees into stock-owning corporate officers.  The plan may backfire, however, since failing to have workers’ comp coverage is a criminal offense.

Will car insurance companies offer discounts to individuals who install tracking devices in their cars?  American Consumer News investigates the phenomenon of Pay as you go Car Insurance. 

Russell Hutchinson of Chatswood Consulting questions whether recent commentary on New Zealand’s Accident Compensation insurer is consistent with an insurance-based view of it’s role – or a social policy-based view.

ECONOMY

The Personal Financier compares and contrasts the current U.S. economic downturn with the Japanese banking crisis of the 1990s.

The Political and Financial Markets Commentator reviews the annual report of the Oracle of Omaha, Warren Buffet.

Wisdom from Wenchypoo’s Mental Wastebasket notes that because of tumbling car prices, if your car is stolen or totaled, you may not get enough from your insurance company to pay off your lease or loan.  On the other hand, Wenchypoo claims that housing prices are still overvalued.

At the Death and Taxes blog, Don the libertarian Democrat reports on a recent IBM Risk Governance Forum. While there, he picked up on an important risk dynamic which could indicate even further market woes.

On the Gnarl Side doesn’t believe we can manage risk.  Instead, we should focus on risk accommodation.

Chilean blogger Alejandro Rogers Bozzolo explains the because of “moral hazard,” bailing out big banks can lead to riskier behavior in the future.

Is the Swedish government’s bailout of Nordbanken in 1993 a good model for the U.S. to follow?  One Mint weighs in.

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$1.1 billion for Comparative Effectiveness Research

March 10, 2009 in Current Events, Public Policy | No comments

Regarding my post on Monday, Obama’s stimulus package–a.k.a. the American Recovery and Reinvestment Act (ARRA)–includes 1.1 billion dollars for clinical comparative effectiveness research.

According to the American Academy of Family Physicians (AAFP), ARRA “allocates $1.1 billion for comparative clinical effectiveness research, including $300 million for the Agency for Healthcare Research and Quality and $400 million each for HHS and NIH to conduct this research.”

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Mandatory Nurse Staffing Ratios and Hospital Quality

March 10, 2009 in Hospitals, Nurses, Quality, Supply of Medical Services | No comments

At the turn of the century, California passed laws mandating minimum nurse-to-patient ratios.  These laws went into effect in 2004.   Initially, the nurse patient ratio was 1:6, but those ratios were decreased to 1:5 in 2005.  Do minimum nurse staffing laws increase the quality of medical care or do they simply increase costs and drive up nurse employment?

A paper by the California HealthCare Foundation attempts to answer this question.  The authors use data from the  Office of Statewide Health Planning (OSHPD) and the California Employment Development Department (EDD) to measure hours of work for registered nurses, licensed vocational nurses, aides and orderlies.  AHRQ data is employed to identify hospital-specific quality measures which could be affected by changes in nurse staffing patterns.  

“… nurse staffing legislation resulted in higher use of registered nurses in most California hospitals. Implementation of the staffing regulations could not be tied to changes in hospital finances; rather, changes in Medicare and Medi-Cal payment rates and demands to address seismic building requirements had far greater effects on finances. Hospital administrators found that it was challenge to meet the staffing requirements, particularly in ensuring that staff were available at all times, including during breaks and meals. Finally, many of the health care leaders interviewed for the study expressed an expectation that the minimum staffing ratios would increase the quality of care due to increased interaction with patients; however, there was no evident change in patient length of stay or adverse patient safety events. None of these findings were affected by hospital ownership, financial position, or patient mix.”

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Are juries too stupid to judge technical drug safety cases?

March 9, 2009 in Public Policy | No comments

Yes,  Dr. Peter Schuck (Professor, Yale Law School):

  • “…juries in different states make different decisions on the same drug–hardly a recipe for the uniformity and predictability to which manufacturers should be entitled. A jury’s flaws are inherent in its design. In contrast, the FDA’s flaws–and they are many–can at least be remedied by Congress, to which it is highly accountable.“

No, Merrill Goozner (Journalist, GoozNews):

  • “The jury system may be an imperfect solution to this flawed regulatory system, but sometimes it is the only option…the FDA over many decades has been denied the resources it needs to do its job properly. In the past decade, it has been run by political appointees like former drug industry counsel Dan Troy, who nakedly used public office to advance the interests of his former clients. When regulation fails, the states’ civil justice system — including the right to a jury trial — remains a vital backstop.”

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Should the U.S. get NICE?

March 9, 2009 in Medicaid/Medicare, Public Policy | 6 comments

All health services researches know that comparative-effectiveness research is a vital link towards improving quality and decreasing cost.  Comparative effectiveness examines different medical treatments and evaluates which are the most cost effective.  The UK’s NICE (National Institute for Health and Clinical Excellence) publishes clinical appraisals regarding which treatments the NHS should cover.

Should the U.S. create a NICE-style government agency to conduct comparative effectiveness research?  Few researchers doubt that comparative effectiveness research is needed.  The question is whether it should be provided by the government.

Pro

Comparative effectiveness research is a public good.  Information is a non-rivalrous good (when I learn something that does not stop you from learning it).  Once the best treatment for each disease is established, it is difficult (but possible) to exclude individuals.  Because comparative effectiveness research is a public good the government would seem to have a large role to play.  Further, the government may be a more unbiased researcher than would be the case if private insurance companies conducted comparative effectiveness research.

Even if the government decided to continue funding a comparative effectiveness agency such as AHRQ, this does not preclude the private sector or academia from conducting their own research.

Con

Michael Cannon makes a strong argument against a centralized NICE-style government body.  Most convincingly, he states that  ”If a government agency produces unwelcome research, those groups will spend vast sums on lobbying campaigns and political contributions to discredit or defund the agency.”  If AHCPR’s history (now AHRQ) is any indication, it will be difficult for a government-funded body to publish controversial findings.  Health Affairs reports that when AHCPR found limited health benefits to back surgery, back surgeons “found sympathetic ears among House Republicans.” AHCPR’s funding was cut by 21% due to lobbying by back surgeons and medical device manufacturer Sofamor Danek.

If the government does not do a good job, could the private sector?  The answer is likely yes.  Cannon suggests that prepaid group plans (PGPs) such as Kaiser Permanente would be in the best position to conduct the comparative effectiveness analysis.  ”PGPs therefore boost the production of a nonexcludable good (comparative effectiveness information) by bundling it with an excludable good (reputation).”

Although expanding AHRQ’s role does not preclude private sector health plans from conducting their own research, spending on AHRQ will likely crowd-out private health plan comparative-effectiveness research.

Conclusion

Should there be an agency similar to NICE in the U.S. Michael Cannon makes a compelling argument that the answer is no, but he does this in a fantasy world where he forms American institutions from scratch.  Private sector insurance companies would be more likely to conduct comparative effectiveness research if:

  1. Medicare was eliminated.  Seniors could instead receive vouchers to purchase their own private health care.  When people shop for their own insurance and pay for the marginal insurance premium dollar out of their own pocket, this will increase demand for cost effectiveness research.
  2. Medical licensing (but not certification) standards were eliminated.  This way, insurance companies could take advantage of using more cost-effective labor such as nurse practitioners and physicians assistants.  ”According to professor of health policy Jonathan Weiner, nonphysician  clinicians comprise 14 percent of primary  care providers nationally, but 17 percent at Kaiser Permanente and 25 percent at Group Health.”

If these two changes were instituted, then I agree that a government-run comparative effectiveness organization would be unnecessary.  However, this is not the world we live in.   Medicare’s budget for 2009 was $420 billion.  In this world, I believe that there should be a government cost-effectiveness agency in order to monitor Medicare’s the cost-effectiveness of Medicare spending.   Further, government funding for medical research is needed whether or not Medicare exists.

Thus, I see two feasible options: (1) Eliminate Medicare, subsidize health insurance through vouchers, and leave the cost-effectiveness research to private health plans; and (2) Keep Medicare and expand funding of a government-run comparative-effectiveness body (such as AHRQ).

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