You are currently browsing the monthly archive for December 2009.
Tags: Links
“…the broad generalizations by many presidential candidates can be misleading. These statements convey the message that substantial resources can be saved through prevention. Although some prevention measures do save money, the vast majority reviewed in the health economics literature do not.”
Tags: Prevention
On Tuesday, President Obama unveiled a plan to use repaid TARP monies to fund a job creation program. The question is, can the government actually create jobs?
Initially, one would say yes. If the government hires more workers, this is job creation. If the government hires more contractors, this is job creation. If the government gives subsidies to businesses to increase employment, this is job creation. Isn’t it?
One must first wonder where the government is getting the money to pay for the job creation programs. Let us assume that it is from taxpayers. In this case, the government is taking money from individuals to ‘create jobs.’ However, by increasing taxes, consumers have less money to spend on goods and services. When consumers buy less stuff, firms will cut jobs. The net effect likely will be a wash. The government ‘creates’ jobs by paying money itself and destroys jobs by raising taxes.
What if the government funds the job creation with debt? If the debt is only purchased by Americans, we have the same problem. Consumers purchase government debt rather than buying products. Again the net effect is likely a wash.
Now let us think expand our thinking. Assume we live in a global economy where foreigners buy our bonds. In this case, the government may be able to create jobs somewhat in the short run . Foreigners will have less money to buy American exports if they buy our bonds, but likely only a fraction of foreigners income is spent on American goods. Thus, the extra money the government receives from foreigners can create American jobs in the short run. Subsequent generations, however, will have to pay back the loans from foreigners in the form of higher taxes. Thus, increased job creation now comes at the expense of decreased job creation in the future.
Let us also think about business cycles in the creation of jobs. The U.S. just went through a bad economic downturn. Individuals and firms were saving more and buying/investing less. Thus, firms had a smaller market to which they could sell goods. If the government taxes (or borrows) from individuals and firms, and decides to spend all this money on ‘job creation,’ employment could actually increase. Currently, the marginal propensity to spend will likely be higher for the government than for consumers or firms. However, increased marginal propensity to consume implies a decreased marginal propensity to save. With lower savings rates, there are fewer funds available to investors to invent new ideas, invest in new technologies and provide the foundation for long-run technical growth. Interest rates will rise. Currently, the Federal Reserve has held down interest rates by printing more money, but this will likely cause inflation in the near- to medium-term.
As any economist knows, there is no free lunch. The government may be able to create jobs in the short run to counteract dips in the business cycle, but these debts must be repaid in the long-run. Thus, in the long-run the government does not create jobs. Innovative individuals and firms create jobs. Further, this post has not even discussed the problem that the government will likely misallocate funds and may hire the wrong type of workers for long term economic growth.
If the government really could create jobs in the long-run, then the government might be able to maximize job growth by spending ad infinitum.
Tags: Debt, Government Spending, Job Creation, Taxes
California’s Medicaid program, known as Medi-Cal, is the largest in the nation. The California Health Care Foundation offers some interesting facts about the program in this report. For instance:
In just two years, Medi-Cal’s share of the state’s General Fund spending increased from 17% to 19%. If not for provisions in the federal stimulus bill that provide California with an estimated $10-$11 billion in additional federal Medicaid matching funds, state lawmakers likely would have made much deeper cuts to Medi-Cal.
Key facts include:
“The weak relationship between aggregate spending and health outcomes is in stark contrast to evidence showing pronounced medical benefits for use of specific medical devices, procedures, or pharmaceuticals. For example, advances in the treatment of heart attacks reduced the one-year mortality rate for these patients by 5 percentage points between 1984 and 1991 (Cutler et al., 1998). The use of anti-retroviral drugs among HIV/AIDS patients is associated with approximately a 70 percent drop in mortality…”
A paper by Evans and Garthwaite aim to see if the marginal benefit of additional time in the hospital for newborns improves the baby’s health. A traditional OLS regression will likely show that a shorter postpartum hospital stay is correlated with better health. However, this is because doctors release healthier babies from the hospital sooner than they do for sick babies; shorter postpartum hospital stays do not cause an improvement in health.
To identify the causal affect of newborn initial hospital stay, the authors use an instrumental variables specification. The instruments are a series of federal and state laws passed in the late 1990s increased considerably postpartum stays for newborns. This lead to an increase in the length of postpartum hospital stays that is unrelated to the baby’s health.
With the 2SLS, the authors find little average effect (LATE) of longer postpartum hospital stays on the probability of hospital readmission (a course measure of the baby’s health). However, the authors also look at the effect of the laws on high risk babies. This include babies born via C-section, or those with other significant risk factors. For these high risk babies, longer hospital stays did decrease the probability of hospital readmission.
Thus, while the average benefit of longer postpartum hospital stays may not be cost-effective for the average baby, it can be highly cost effective for high risk babies.
In a recent edition of Health Affairs, health economist Tsung-Mei Cheng interviews Taiwan’s Health Minister Ching-Chuan Yeh, M.D. They discuss Taiwan’s adoption of a national health insurance (NHI) system in 1995. Below are some highlights from the interview.
Source: Tsung-Mei Cheng (2009) “Lessons From Taiwan’s Universal National Health Insurance: A Conversation With Taiwan’s Health Minister Ching-Chuan Yeh” Health Affairs, 28(4): 1035-1044.
Tags: Taiwan
In The Healing of America, T.R. Reid discusses some ‘interesting’ urinalysis techniques practiced by Dr. Tenzin in Nepal.
“When they do urinalysis up at Khunde [a Western-style clinic in Nepal], all the do is stick a slip of paper into a sample,” he said. ”But that can’t be enough. I just don’t think it is possible to diagnose a medical problem and propose a course of treatment without tasting the urine. Certainly I wouldn’t begin a diagnosis of your shoulder until I had tasted your urine. It tells so much about a patient’s health status.”
Tags: Nepal, Urinalysis
Many economists feel that Health Savings Accounts (HSAs) are the direction in which health reform needs to head. HSAs combine high-deductible health plans with tax-deferred savings account. The theory behind HSAs is for the patient to pay for ‘basic’ health care to reduce the problem of moral hazard while letting insurance pay for catestrophic illnesses.
Kroncke and White (2009) wisely note that the devil is in the details. ”The most puzzling detail is how to draw an unambiguous legislative line between basic and catastrophic health care.” In the long-run, legislators will have an incentive to categorize more and more care as catastrophic to appeal to specific disease-related lobbying groups. The authors provide a list of important questions which need to be answered if HSAs are to gain a significant foothold in the health insurance marketplace.
Basic Insurance Questions
Catastrophic Insurance Questions
Source:
Tags: Health Insurance, HSAs
Much of my own research has focused on how physician financial incentives affect the quantity and quality of medical care. It should come as no surprise that I found a recent New York Times article on the topic stimulating. Dr. Sandjeep Jauhar examines how hospital and physician financial incentives affect the length of a patient’s hospital stay. An excerpt is below.
My hospital, like all acute-care facilities, receives a set payment per admission based on the patient’s diagnosis. So the longer a patient stays in the hospital, the more money the hospital stands to lose. Of course, the longer a patient stays, the greater the likelihood of hospital-acquired infections or harm from tests and procedures, which means timely discharge in most cases is good for hospitals and patients alike.
But doctors, paid separately by Medicare, have little motivation to discharge patients quickly. As long as their patients are in the hospital, they can bill and be paid for each visit they make.
I discussed this issue with an internist in private practice, who requested anonymity because of the sensitive nature of the subject. His patients, it seemed to me, were often staying longer in my hospital than necessary. “I understand why hospitals want to cut down length-of-stay,” he told me matter-of-factly. “But if I discharge a patient early, I don’t get paid. It’s O.K. if you have enough patients in the hospital, but if you don’t, you sometimes have to drag out the stay. I don’t like to do it, but sometimes you have to.”
Tags: Hospitals, Length of Stay, Medicare, Physician Compensation
A paper by Hofer et al. (JAMA 1999) looked at the reliability of physician report cards having to do with diabetes treatment. The authors looked at variability across physicians in the number of physician visits and hospitalizations among diabetic patients. They found:
Source:
Tags: P4P
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