August 2009

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Finding the Canadian, British, and German health care systems right here in the U.S.

August 24, 2009 in International Health Care Systems | 1 comment

What is the health care system like in other countries? Is the medical care in Canada superior to that of the U.S., or do they lack technology and have long waiting lines? Is Germany’s employer-provided health insurance better than ours?

On NPR’s Fresh Air, author T.R. Reid explains that you don’t need travel anywhere to experience how health care works in other nations. We have the Canadian, British, German, and Third World health care systems right here in the U.S.

  • Canada. Medicare is just like the Canadian medical system. In fact, Lyndon B. Johnson borrowed the term Medicare from the Canadians. Just like in Canada, American Medicare is a single payer system, where the providers (i.e., physicians) are not directly employed by the government.
  • United Kingdom. The Veterans Affairs (VA) health care system is similar to the health care system in the UK. The VA is a single payer system where providers are employed directly by the VA, just like in Britain.
  • Germany. Just like for most Americans, in Germany, individuals receive health insurance through their employer. The Prussian Otto von Bismark, in fact, developed this system of social insurance. German “sickness funds” are very similar to the employer-provided health insurance under which most employed Americans are covered.
  • Third World. In most third world countries, you only receive medical care if you can pay for it yourself. This is how life is for the 47 million uninsured Americans.

Mr. Reid also has an interesting article in the Washington Post, debunking some of the myths concerning other countries health care systems.

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Calculating zero inflation when drug costs rose from $100 to $36,000

August 23, 2009 in Pharmaceuticals | No comments

A paper by  Claudio Lucarelli and Sean Nicholson  (2009) examines the skyrocketing cost of colorectal cancer treatment.  In 1993, the price of treating these patients with chemotherapy was only $100.  By 2005, this price had skyrocketed to $36,000.  Is this what is wrong with our health care system?

The authors claim that the answer is no.  Although prices increased, so did quality.  Thus, the price per unit of quality has stayed fairly constant over time.  In the author’s words:

“Using discrete choice methods to estimate demand, we construct a price index for colorectal cancer drugs for each quarter between 1993 and 2005 that takes into consideration the quality (i.e., the efficacy and side effects in randomized clinical trials) of each drug on the market and the value that oncologists place on drug quality.  A naive price index, which makes no adjustments for the changing attributes of drugs on the market, greatly overstates the true price increase.  By contrast, a hedonic price index and two quality-adjusted price indices show that prices have actually remained fairly constant over this 13-year period, with slight increases or decreases depending on a model’s assumptions.”

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Are San Franciscans more adventurous Food Eaters?

August 21, 2009 in Miscellaneous | 3 comments

Are San Francisco residents more adventurous food eaters than people in say North Dakota? The probability that Bay Area residents have sampled Thai, Vietnamese, Indian, Mexican, Salvadoran, or Ethiopian food is much higher than the person living in North Dakota. But what does adventurous really mean?

  • San Franciscans may be just as adventurous as people in small towns. San Franciscans may be very similar in this respect to people from North Dakota in that they eat the food available at their local restaurants. Since the restaurants in the Bay area come from diverse cultures, SF residents may seem more adventurous even if they are only sampling what is locally available. Of course, a restaurant will go out of business if there is no demand for the food prepared, so there must be some demand.
  • Demand may be initially generated by immigrants. Since the Bay Area has so many immigrants, it is natural that is has many more types of food than North Dakota.
  • Just as in North Dakota, San Franciscans may just eat food similar to their peers. Because the Bay Area has so many immigrants, it is much more likely that your peer is foreign-born in San Francisco than in the Bay Area. Or it is more likely that your peers have been exposed to a wide variety of cuisines. Thus, it may be the “cultural norm” to eat a variety of foods.
  • Young people may be more adventurous the old people. If more young people live in cities, this may help to determine how adventurous a town is.
  • Living in San Francisco is not determined exogenously. Individuals who like to try new foods may migrate to the Bay Area.

So to determine which city is more adventurous, San Francisco or Bismarck, North Dakota I propose the following test. Take a sample of residents of each city and see which are willing to try monkey brains. The city with highest proportion who try it, is the most adventurous.

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HWR is posted

August 20, 2009 in Carnivals | No comments

The latest edition of the Health Wonk Review is up at David Williams’ Health Business Blog.

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Health Reform: What is being proposed?

August 20, 2009 in Uncategorized | 1 comment

Are you in favor of reform of the health care system or not? This question is difficult to answer because few people know what reforms are actually being proposed. Do not worry, the Healthcare Economist is here to help.

Currently, there are four major plans on the table:

  • Senate Finance Committee Policy Options.  The plan has an individual mandate, creates a Health Insurance Exchange for individuals and small businesses to purchase insurance, gives subsidies to individuals/families with income between 100% and 400% of the federal poverty line (FPL), expands Medicaid and SCHIP, allows a temporary buy-in for pre-Medicare population.
  • Senate HELP Committee Affordable Health Choice Act.  The plan has an individual mandate, creates state-based American Health Benefit Gateways for individuals and small businesses, subsidies available for individuals/families with incomes up to 400% of FPL, employer “pay or play” mandate with exceptions for small employers, expands Medicaid to all individuals with incomes up to 150% FPL.
  • House Tri-Committee America’s Affordable Health Choice Act of 2009 (H.R. 3200).  The plan has an individual mandate, creastes a health insurance exchange for individuals and small employers, has cost sharing credits for families up to 400% of FPL, “pay or play” mandate, expands Medicaid to 133% FPL.
  • President Obama Principles for Health Reform.  Mr. Obama has a set of general guidelines to follow which include: reducing long term health care costs, protecting families from healthcare-related bankruptcies, guaranteed choice of doctor, investment in prevention, the ability to maintain coverage when you lose your job, end barriers to coverage for those with pre-existing conditions.

The Kaiser Family Foundation has a side-by-side comparison of each of the four proposals. Very helpful!

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Do we spend too much on immigrant health care?

August 20, 2009 in Economics - General | 2 comments

The Immigration Policy Center believes not.  Some evidence they give includes:

  • Ku (AJPH 2009) reports that “immigrants’ medical costs averaged about 14% to 20% less than those who were US born.”
  • Four out of five people in America who have no insurance are U.S. citizens.  
  • The UCLA Center for Health Policy Research found that in 2005 one out of every five uninsured Californias were undocumented.
  • Undocumented overuse of the emergency room may be a myth.  In 2006, 20% of U.S.-citizen adults and 22% of U.S.-citizen children had visited the emergency room within the past year.  In contrast, 13% of noncitizen adults and 12% of noncitizen children had used emergency room care.  

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Looming Threat: H1N1 Outbreak in the Fall

August 19, 2009 in Contagious Disease | 2 comments

The Washington Post reports that most Americans are not very concerned about swine flu.  Should they be worried?  Maps from the New England Journal of Medicine and RhizaLabs detail that swine flu is still a problem.

The CDC reports that “from April 15, 2009 to July 24, 2009, states reported a total of 43,771 confirmed and probable cases of novel influenza A (H1N1) infection. Of these cases reported, 5,011 people were hospitalized and 302 people died.”  However, the CDC does not seem too concerned either.  The CDC has decided to discontinue confirmed and probable case counts on July 24, 2009 (aggregate national reports of hospitalizations and deaths will continue ).

So it is logical for Americans to not be concerned about H1N1?  I believe that public health officials still need to take H1N1 very seriously.  It is very likely that a second H1N1 outbreak will occur this fall and winter during flu season.  During the traditional flu season, H1N1 monitoring must increase.

For the average American, however, I believe there is little reason to worry.  This is not because they will not get H1N1, but instead because there are only a few steps they can take to prevent it.  The CDC recommends: avoiding sick people, washing your hands frequently and covering your face with a tissue when you sneeze.  The first two steps will help prevent you from getting H1N1, but both are logical and most people should already be doing these.  The third step will not help prevent you from getting H1N1, but will prevent the spread of the disease to others if you have it.

The Healthcare Economist’s advice to you is wash your hands, avoid sick people and–until flu season begins–worry about something else other than H1N1.

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How does changing medical prices affect patient demand?

August 19, 2009 in Economics - General | 1 comment

Price elasticity estimates how consumer demand changes as prices change.  For instance, the price elasticity of medical service is defined as the percentage change in quantity of medical care demanded divided by the percentage change in price of the same commodity.  Most academics believe that the price elasticity for medical services is between 0 and -1.  This means that if prices increase by 10%, the demand for medical services decreases, but by less than 10%.  This means that medical goods are inelastic.

One can also measure the income elasticity for medical services.  Income elasticity measures the percentage change in the demand for medical services as income increases.  If the income elasticity is greater than 1, medical services are a luxury good.  This means that as people get richer, they want more of the good.  Estimates of income elasticity range from 0 to about 1.6; meaning that researchers do not know if medical services are elastic or inelastic with respect to income.

A paper by Borger et al. (2008) reviews of the findings of previous research regarding price and income elasticities of medical care.  Click on the following links for a listing of empirical estimates of price elasticities and income elasticities.

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Tuesday Links

August 18, 2009 in Economics - General | 1 comment

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Should Uncle Sam feed Seniors cheesesteaks or cantaloupe?

August 17, 2009 in Obesity | 1 comment

Obesity is  growing problem in the United States.  As more people become increasingly obese, mortality rates will increase (or at least decrease less slowly than would have otherwise been the case).  However, increased mortality may be a blessing for Uncle Sam.  As more elderly die earlier from obesity-related diseases, the government will be able to reduce its fiscal responsibility to pay for health care for these individuals.  In an earlier post, I cited a study that found that a rise in obesity can save governments money.

Another study by Michaud et al. (2009) has contradicted this finding.  While obese individuals will have shorter life expectancies, they do have higher health care costs in each year in which they live.  Taking into account a variety of trends that affect life expectancy–such as obesity and diabetes–Michaud and co-authors find that “Together, the reduction in smoking and the rise in obesity have increased net public-sector liabilities by $430bn, or approximately 4% of the current debt burden. Larger effects are observed for specific public programs: annual spending is 10% higher in the Medicaid program, and 7% higher for Medicare.”

It seems like it pays for Uncle Sam to feed grandma cantaloupe and not cheesesteaks.

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