February 2012

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Will the Welfare State Cause the Next Great Depression?

February 29, 2012 in Economics - General | 2 comments

According to Robert Samuelson’s article in the Wilson Quarterly, the answer is yes.

Just as the gold standard amplified and transmitted the effects of the Depression, so the modern welfare state is magnifying the effects of the recession. The United States, Europe, and Japan, together representing about half of the world economy, face similar pressures: aging societies, high government spending, and soaring debt levels. These pressures impose austerity on country after country—just as the gold standard did. The cumulative effect is to make it harder for the world to recover from what started as an ordinary, though severe, recession—just as happened under the gold standard…What has brought the welfare state to grief is not an excess of compassion, but an excess of debt.

Alex Tabarrok would certainly agree.

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Are Consumer-Driven Health Plans Reducing Medical Spending?

February 28, 2012 in Asymmetric Information, Health Insurance | No comments

Although the U.S. now spends about 18% of GDP on health care, rate of growth of healthcare spending fell every year between 2002 and 2009.  Why is this?  One reason is the economy.  A worse economy means that less people have health insurance coverage and thus the utilization of medical services decreases.  Another answer is that private health insurance plans have increased levels of cost sharing.  “In 2006 only 10% of workers had to pay at least $1,000 before their insurer picked up the rest of the bill. By 2010 that share had more than tripled.”

Another possibility is consumer-driven health plans.  These health plans not only have higher deductibles, but they provide their beneficiaries with information on the price of services across different providers.  Although federal and state laws not require hospitals to list standard prices each year, price information available to consumers is still fairly limited.

The Economist reports that this is changing.

“GE, for example, hired Thomson Reuters, an information firm, to show employees the cost of different services. Thomson Reuters analyses prices from prior purchases—by workers at GE and other firms—to show the cost of a given procedure at different hospitals and clinics.

Another company, Castlight Health of California, has made transparency its sole mission. Working with big firms, Castlight assembles data from past transactions so that employees can shop for doctors online and read reviews posted by patients. Castlight wants to do for health what Travelocity did for air travel, explains Giovanni Colella, the founder. Mr Colella’s co-founder is now the chief technology officer for Mr Obama’s health department.”

Some insurers are resistant to price transparency.  “If an insurer has a contract to pay one hospital $7,000 for a caesarean and a contract to pay another hospital $10,000 for the same service, and this information leaks, the first hospital will lobby for a higher price. “

Does expanding insurance coverage improve access to care?

February 27, 2012 in CHIP, Health Reform, Medicaid | 3 comments

Although Health Reform did little to reduce the cost of health care, it did make significant strides to expand access to care.  For low-income individuals, the increased access comes along two dimensions: expanded Medicaid eligibility and increased physician fees.  Specifically, Health Reform required to

  • Make all individuals with incomes below 138% of the Federal Poverty Line (FPL) eligible for Medicaid, and
  • Increase their Medicaid physician fee schedules, so that they are no lower than Medicare’s for evaluation and management services provided by primary care physicians.

Whereas the first provision is permanent, the second provision is to be in effect only for 2013 and 2014.

Which one will have a bigger effect? According to a paper by White (2012), paying doctors more improves access.

Read the rest of this entry »

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Fighting Obesity by Popping Pills?

February 26, 2012 in Current Events, Pharmaceuticals | No comments

Drug-makers have had little success gaining FDA-approval for diet pills.  According to The Economist:

“It has been 13 years since the FDA approved a prescription diet pill. That drug, Roche’s Xenical, has notorious gastrointestinal side-effects. The FDA rejected Vivus’s Qnexa in 2010 over concerns for the safety of pregnant women and the quickening of patients’ heart rates.”

This may soon change…or maybe not:

“A committee advising America’s Food and Drug Administration (FDA) recommended that it approve Vivus’s diet drug, Qnexa. However, the pill’s long-awaited final approval may not come until April, if at all. The announcement mostly served as a reminder of what a struggle it is to turn fat into gold.”

Diet and exercise are the key to losing weight.  Pills can make you lose weight, but with what side-effects?  Remember that cigarettes are a well-known appetite suppressant, but you don’t see doctors prescribing obese individuals a pack of Marlboros.

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Friday Links

February 24, 2012 in Current Events | No comments

Some interesting reading as you head into the weekend…

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Medicare Reforms Linking Reimbursement Rates with Hospital Performance

February 23, 2012 in Health Reform, Hospitals, Medicare, P4P | No comments

Health reform not only changes the health care market for the demand side (e.g., patients, insurers), but also for the supply side (e.g., hospitals, physicians).  In the Medicare setting, a number of initiatives have aimed to pay providers who provide high-quality or low-cost care more money, and pay providers who provide low-quality or high-cost care less money.  CSC provides a nice overview of some of these initiatives.

  • Performance Value-Based Purchasing (VBP) — Offers increased update to diagnosis-related group (DRG) payment rates to hospitals according to demonstration of performance or improvement in designated performance areas relative to performance standards and benchmarks.
  • Shared Savings Program — For groups of providers who form an Accountable Care Organization (ACO), potentially shares a portion of financial savings in caring for Medicare patients if performance standards are met, according to performance rated on a sliding scale against benchmarks.
  • Readmission Reduction Program (RRP) — Decreases annual adjustments to DRG payment rates for hospitals that are in the lowest performance quartile for excess readmissions of Medicare patients with selected discharge diagnoses.
  • HAC Payment Limitation — Decreases annual adjustments to DRG payment rates for hospitals that are in the lowest performance quartile for a designated set of Hospital-Acquired Conditions (HACs).
  • Bundled Payments for Care Improvement Initiative — One of several initiatives of the CMS Innovation Center to give doctors and hospitals new incentives to coordinate care, improve the quality of care and save money for Medicare. Bundle care for a package of services patients receive to treat a specific medical condition during a single hospital stay and/or recovery from that stay. Applicants pick conditions to target and one of four ways to define the extent of pre- and post-hospital care included in the bundled payment.

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Cavalcade of Risk is up

February 22, 2012 in Carnivals | No comments

The Insurance Regulatory Law Blog hosts the 151st Cavalcade of Risk.  Van Mayhall’s cross-word puzzle format is highly entertaining.  Can you solve the puzzle?

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Less Money for Preventive Care, More Money for Docs

February 22, 2012 in Medicaid/Medicare, Physician Compensation | No comments

Merrill Goozner reports that paying for the “doc fix” comes at the cost of preventive services.

Friday’s payroll tax cut extension bill included $18 billion to maintain Medicare physician salaries at current levels for the rest of this year. Unlike the payroll tax extension, Congress insisted on paying for the doc-fix with offsetting budget cuts.  They raised nearly a third of the money by cutting $5 billion from prevention programs initiated under the Affordable Care Act. The rest came from reduced payments to hospitals, nursing homes, and clinical labs, and reduced Medicaid payments to Louisiana.

Smoking cessation programs? Cut. Outreach to schools to get kids to eat more fruits and vegetables? Cut. More programs at local YMCAs to prevent diabetes? Cut.“The idea of paying for a ten-month fix in physician payments with a ten-year cut in prevention programs is the ultimate penny-wise, pound-foolish move,” said Richard Hamburg, deputy director of Trust for America’s Health, which lobbies for community prevention programs and more funding for state and local health departments.

Preventive care programs may improve the quality of life for some individuals, but according to the CBO expanded use of preventive care “leads to higher, not lower, medical spending overall.”  Thus, although cutting preventive care may seem to increase medical costs in the long-run, in practice the deal to cut preventive care services should save enough move to pay for this year’s doc fix.

 

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Everyone’s vote counts…unless it counts twice

February 21, 2012 in Current Events, Public Policy | No comments

The U.S. is supposed to have the most advanced voting system in the world.  The U.S. voter registeration practices, however, may be closer to the third world.  According to a Pew study, voter registration is rife with problems.

“About 2.7 million people have active registrations in multiple states, including about 2,000 people registered in four or more states, according to the Pew report. Elections officials said it is difficult to track when someone has moved to another state without canceling their previous registration.”

To fix this problems, eight states are attempting to centralize their voter registration. These states include Colorado, Delaware, Maryland, Nevada, Oregon, Utah, Virginia and Washington. Hopefully these initiatives are sucessful; otherwise the one person-one vote paradigm will be in jeopardy.

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American Declaration of Independence: Ideology or Economy?

February 20, 2012 in Economics - General | No comments

On this President’s Day, let’s revisit America’s founding document: the Declaration of Independence.  The Declaration of Independence includes broad ideological statements such as “We hold these truths to be self-evident, that all men are created equal,” and claims that the British have violated “certain unalienable rights.”

But were the real reasons for the American Revolution economic?  According to to Lynd and Waldstreicher, the answer is yes.  Wilson Quarterly reports:

“Scholars tend to view the ideological arguments for independence as building to a critical point and preoccupying the colonists thereafter. That’s inaccurate, Lynd and Waldstreicher write: From the mid-18th century right up to the signing of the Declaration, Americans objected to a myriad of British imperial policies principally on economic grounds. The antitax sentiment of the Boston Tea Party in 1773 is well known, but Americans also protested British attempts to requisition resources during the Seven Years’ War (1756–63), imperial currency manipulation that left the colonies strapped, and prohibitions on trade with the French West Indies, along with many other policies.”

The authors claim to make the strongest case for their course of action, these early Americans subsumed their economic frustrations within a broader argument for sovereignty based on the violation of rights.

In today’s Presidential races, we also see economic arguments couched in ideological terms.  Obama’s argument to raise taxes is delivered under a fairness argument.  President Obama says it’s the ‘height of unfairness‘ that the very wealthy can pay a lower percentage of their income in federal taxes than many in the middle class.

Tea Party candidates that argue for lower taxes do so using the language of “fiscal responsibility, constitutionally limited government, and free market economic policies.”

The take-away is that political rhetoric–both now and in colonial times–often is used to justify fundamentally economic arguments.

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