March 2010

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Modeling the spread of H1N1 in the Internet age

March 31, 2010 in Contagious Disease | No comments

CNN reports that H1N1 is still a problem, particularly in the Southeastern U.S.  Traditionally, epidmiologists model the spread of a contagious disease based on two factors: the transmission rate between people and the frequency of contact between individuals.  A study by  Yoo, Kasajima and Bhattacharya (2010) incorporates a third factor that will affect the spread of a disease:

We modify this standard model to incorporate avoidance response—that is, the idea that the frequency of contact among individuals will itself depend on the prevalence of the disease in the population. Unlike the standard [susceptible-infected-recovered] SIR-model, in our model the attack rate changes over time as disease prevalence changes. We assume attack rate to be the product of three factors: a constant baseline attack rate that represents a “biological” transmission rate; a baseline contact frequency which differs among subgroups; and avoidance response parameters which are influenced by the prevalence rate of the disease.

The avoidance response parameters measure the degree to which individuals decide to forego contact with other people. I am curious how the advent of the internet has affected avoidance response.

The internet helps to disseminate information faster.  Thus more people will be aware of a contagious disease and can change their behavior to avoid others.  On the other hand, one potential downside is that people may become desensitized to pandemic information if one is able to access more information on pandemics worldwide.

On the positive side, the internet allows decreases the marginal cost of staying at home.  Office workers can work online from home with little problem; students may be able to “attend” classes through online meetings through Skype or other software.  You can shop, watch video, and of course read blogs to pass the time.

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The Cost of Health Insurance Mandates

March 30, 2010 in Health Insurance | 1 comment

Health insurance mandates increase health insurance cost.  By compelling insurance companies to cover certain medical treatments, cost inevitably rise.  Of course the people who receive these treatments benefit while those who do not must pay additional premiums.  A recent paper by the Pacific Research Institute summarizes the findings of various studies of the impact of mandates on health insurance premiums.

  • CBO (2000): 4 to 9 percent of premiums, all mandates aggregated
  • Graham (2008): 5 to 23 percent of premiums, all mandates aggregated
  • Bunce and Wieske (2009): 20 to 50 percent of premiums, all mandates aggregated
  • New (2006): 15 percent of premiums, all mandates aggregated
  • Congdon et al. (2006): 0.3 to 0.7 percent of premiums, per mandate above 20
  • Wisconsin OCI (2002): 1 to 3 percent of premiums, five specific mandates aggregated
  • GAO (2003): 3 to 5 percent of premiums, all mandates aggregated
  • Krohm and Grossman (1990): 0.2 percent of claims, specific mandated benefits
  • Maryland HCC (2006): 2 percent of premiums, all mandates aggregated
  • Maryland HCC (2008): 0.01 to 1 percent of premiums per each of five specific mandates

Of course, the actual mandate will affect the increase in premiums. For instance, a mandate to cover one specific vaccine likely would provide only a small increase in premiums, especially since many insurance policies would already cover this treatment. On the other hand, a mandate to cover all forms of cancer treatment for all types of cancer likely would drive up premiums significantly.  What one can conclude from the above studies is that mandates do increase cost.  The degree to which health insurance premiums increase, however, is not a settled matter.

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Links

March 29, 2010 in Current Events | No comments

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An evaluation of MedPAC’s hospital wage index revisions

March 26, 2010 in Hospitals, Medicaid/Medicare | No comments

Some press on a report I worked on at Acumen, LLC.

“The hospital wage index used to adjust Medicare inpatient prospective payment system (IPPS) payments to reflect the geographic differences in labor costs has created payment problems through its use of metropolitan statistical areas (MSAs) and “rest of state” areas to define hospital labor markets. However, the “blending and smoothing” approach developed by the Medicare Payment Advisory Commission (MedPAC) isn’t the best corrective mechanism. Instead, better labor market definitions are the solution, according to a new report from Burlingame, Calif.-based Acumen LLC that was commissioned by the Centers for Medicare and Medicaid Services (CMS).

Under the wage index, geographically distant hospitals that have different labor costs often receive the same wage index value because they are located within the same broad MSA or county, or neighboring hospitals that have the same labor costs receive much different wage index values because they happen to be located in different MSAs. These problems have driven as many as one-third of IPPS hospitals to seek a reclassification or an exception that increases the hospital’s wage index value, and “the overlay of the existing patchwork of reclassifications and adjustments on the wage index has created a very complicated and convoluted system,” says Acumen.”

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Proposed Reforms to Medicare’s Hospital Wage Index

March 25, 2010 in Labor Economics, Medicaid/Medicare | 2 comments

A hospital in New York City faces higher labor costs than a hospital in Billings, Montana. To take into account these cost differences, Medicare adjusts hospital payments to reflect these cost differences using a hospital wage index. As currently constructed, however, many hospitals petition to be included in labor markets where they would receive a more generous wage index value.

A number of reforms to the CMS hospital wage index have been proposed. In a recent Acumen report to which I contributed, we evaluate whether some reforms proposed by MedPAC would improve the wage index’s accuracy. Below is an excerpt from the executive summary. The full report is available here.

“The Medicare statute requires that per-discharge payments to hospitals in the inpatient prospective payment system (IPPS) reflect geographic differences in the cost of labor. As a result, Medicare’s IPPS payments are adjusted by a hospital wage index that seeks to reflect the average price of labor facing each hospital. To construct the index, Medicare clusters hospitals into metropolitan statistical areas (MSAs) and residual areas (“balance-of-state” or “rest of state”). These geographical areas approximate hospital labor markets, and average wages are calculated for each using wage data from an annual survey of IPPS hospitals’ labor costs. However, accurately representing a hospital labor market is not a simple task, and inaccurately specifying a hospital labor market can create two problems.

Read the rest of this entry »

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World TB Day 2010

March 24, 2010 in Contagious Disease | No comments

Today, March 24th, is World Tuberculosis Day.  According to UN Secretary General Ban-Ki Moon, there were 9.4 million new TB cases in 2008 and 1.8 million deaths.  The CDC website has more information on what can be done to stop the spread of TB.

There is lots of coverage of the TB Day activities from around the world including news articles on: Ethiopia, Ghana, Lesotho, Palestine, Pakistan, Singapore, Sri Lanka, U.S.

The Financial Times believes that the private sector must play a role in order to defeat TB: “Governments and their international partners must recognise that health is an investment. The only successful exit strategy in the struggle against the TB, HIV and TB/HIV pandemics is to include them as part of broader development and poverty reduction strategies, and to strengthen health systems to respond more effectively to the needs of the most vulnerable populations. The private sector has a key role in making this happen,”"

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Cavalace of Risk #101

March 24, 2010 in Carnivals | No comments

The latest edition of the Cavalcade of Risk is up at OzRisk.net.

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Barack Obama signs healthcare bill into law

March 23, 2010 in Current Events | No comments

Here’s the full transcript of the signing ceremony.  NPR describes some of the reactions across the U.S.  Below, I have put together some links describing the international coverage of the signing.

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Do Hospitals “Cost Shift” to the Privately Insured when Medicare Reduces Prices?

March 23, 2010 in Health Insurance, Hospitals, Medicaid/Medicare | 7 comments

Many health policy experts believe that when Medicare or Medicaid decrease prices, hospitals will increase the prices they charge to the privately insured.

Does this make sense?  Ginsburg (2003) summarizes the debate:

Most executives in hospitals, physician organizations, health plans, and businesses have long been convinced that reductions in rates paid to Medicare and Medicaid lead directly to higher payment rates charged to private payers. But most economists who have published on the topic express strong skepticism about the possibility that cost shifting can and does occur.  Not only do they point to empirical analyses that fail to obtain results supporting the existence of cost shifting, they also argue that cost shifting is conceptually impossible. The crux of their argument is the question of why providers with the ability to increase revenue through increases in prices to private payers would not have already exhausted such capacity prior to reductions in payment rates.

Ginsburg argues that cost shifting can occur.  Many hospitals are non-profits whose goal is not profit maximization.  Instead, they may try to maximize the quantity of patient care subject to a constraint of fiscal solvency.  The board of directors for many hospitals is made up of community leaders and physicians rather than managers, which further dilutes the profit motive.  When Medicare or Medicaid reduces reimbursement rates, non-profits may increases prices charged to private insurance companies to insure that they will break even.  Additionally, for-profit hospitals may also be able to raise the rates they charge private insurers only after a Medicare or Medicaid fee cut because they must compete with non-profit hospitals on price.

Although Ginsburg offers a compelling argument that cost shifting could occur, he does not provide empirical evidence that it does occur in reality.

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HOUSE PASSES HEALTH CARE BILL

March 21, 2010 in Current Events, Health Insurance | 3 comments

Today, Sunday, March 21, 2010, the House passed the health care bill.  This is a historic day…whether for good or for bad depends on your point of view.

Some of my previous posts on health reform can be found here, here, here, here and many other places.  My basic opinion was that health reform is good in that it greatly increases coverage in the U.S.  What it doesn’t do, however, is control cost.  If further steps are not taken in the future, health insurance will take up a larger and larger share out of your paycheck either through increased employer premiums and/or increased taxes.

Other opinions:

  • The Economist: Although very expensive, they support reform because it expands coverage.
  • N.Y. Times: Reform is a boon to insurers and drug companies.
  • Paul Krugman: Proposals to guarantee health insurance are often controversial before they go into effect, but always popular once enacted.
  • Megan McArdle: Health Reform is terrifying and the tyranny of the majority.
  • FoxNews: Health Reform is the biggest abuse of power Washington has ever seen.
  • Health Affairs blog: On abortion and health reform.
  • Mathhew Iglesias: Some things are more important than short term politics.
  • Kaiser Health News: A consumer guide to health reform.
  • The Fiscal Times: Will health reform’s cost savings ever come to fruition?
  • Ezra Klein: Putting the bill’s cost into perspective.

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