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NBA Coaches and Spoiled Children

April 28, 2012 in Books, Economics - General | No comments

In honor of the start of the NBA playoffs…

“After personal fouls, points scored per minute have the largest impact on minutes per game.  The result directly contradicts the rhetoric from coaches.  Again, coaches tell players to focus on something besides scoring.  Players, though, can see that the most effective way to get more playing time is to score more points.  In essence, coaches are like the parents of a spoiled child.  Although the coach may tell the player he will be sitting if he doesn’t look past scoring, the player knows this is an empty threat. If the player just shows the coach he can score, he will be rewarded with more playing time.  In turn, additional playing time will inflate scoring totals, which will increase a player’s future salary.”

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What is an ISBN?

April 13, 2012 in Books, Data | 2 comments

You may have seen on Amazon or near the UPC of your book an ISBN.  What is an ISBN?  Can it be any number?  Why does the Healthcare Economist care?

Answers are provided below.

What is an ISBN?

According to Wikipedia:

“The International Standard Book Number (ISBN) is a unique numeric commercial book identifier based upon the 9-digit Standard Book Numbering (SBN) code created by Gordon Foster, Emeritus Professor of Statistics at Trinity College, Dublin, for the booksellers and stationers W. H. Smith and others in 1966.

The 10-digit ISBN format was developed by the International Organization for Standardization (ISO) and was published in 1970 as international standard ISO 2108.[4] (However, the 9-digit SBN code was used in the United Kingdom until 1974.) Currently, the ISO’s TC 46/SC 9 is responsible for the ISBN. The ISO on-line facility only refers back to 1978.”

Since 1 January 2007, ISBNs have contained 13 digits

Can it be any number?

The answer is no. Here is why the ISBN is interesting, you can identify certain invalid ISBN yourself! How can you do this? The answer is that the ISBN system uses an check digit error detection function. A check digit is a form of redundancy check used for error detection, the decimal equivalent of a binary checksum. It consists of a single digit computed from the other digits in the message.

“The final character of a ten digit International Standard Book Number is a check digit computed so that multiplying each digit by its position in the number (counting from the right) and taking the sum of these products modulo 11 is 0. The digit the farthest to the right (which is multiplied by 1) is the check digit, chosen to make the sum correct. It may need to have the value 10, which is represented as the letter X.”

Take the book the Social Transformation of American Medicine by Paul Starr for instance.  Its ISBN is 0465079350. The sum of products is 0×10 + 4×9 + 6×8 + 5×7 + 0×6 + 7×5 + 9×4 + 3×3 + 5×2 + 0×1 = 209 ≡ 0 mod 11 (because 209/11 is exactly 19 with a remainder of 0). Thus, this ISBN is valid.

I have created a spreadsheet that you can use to check if the ISBN is valid and also see in more detail how the math works. All you need to do is enter the ISBN in the yellow box. There are additional tabs that gives examples of sample valid and invalid ISBN-10 numbers.

Why does the Healthcare Economist care?

Two reasons: i) I like books and ii) validity checks any time you use data, whether its data on books or healthcare records.

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Physician Influence on Federal Health Spending, 1950s

April 9, 2012 in Books, Licensure, Physician Compensation, Supply of Medical Services | No comments

The 1950s was a time of unprecedented technological advances in the science of medical care.  In 1955, epidemiologists at the University of Michigan developed a polio vaccine.  These advances lead the federal government to increase funding for research.  Between 1955 and 1960, Congress increased the budget of the National Institutes of Health (NIH) from $81 million to $400 million.  Physicians did not support increased funding for all aspects of medical care, particularly those what would increase competition.

“More money for research met no objections from the AMA.  However, the story of aid to medical education was different, and it is worth recalling the contrast.  In 1949 Congress was close to approving a five-year program of grants and scholarships for medical schools to increase the nation’s supply of physicians.  A bill had passed the Senate and was reported out of House committee when it hit a small snag.  Yet it seemed likely to pass the next year.  The House of Delegates of the AMA approved the measure in December 1949.  However, two months later, concerned about setting dangerous precedents, the AMA board reversed its position, and the bill died in Congress.  Despite wide support from other groups, aid to medical education was blocked throughout the 1950s.”

Although physicians did not support more funds for medical education, medical schools grew tremendously during this period.

“The infusion of money into research and training programs created new opportunities in–and for–medical schools.  During the 1940s, the average income of medical schools tripled form $500,000 to $1.5 million a year; by 1958-59 the average schools income was up to $3.7 million and ten year later to $15 million.”  Medical schools became sprawling, complex organizations that now saw their missions as three-fold: research, education, and patient care (usually in that order).”

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Quotation of the Day: On Wickedness

February 10, 2012 in Books | No comments

‘I’ll let you know as soon as I can, Danglars. I shall try to speak to Monsieur de Villefort and intercede with him on the prisoner’s behalf. I know that he is a rabid Royalist; but, dammit, though he’s a Royalist and a crown prosecutor, he is also a man and not, I believe, a wicked one.’

‘No,’ said Danglars. ‘Though I have heard it said that he is ambitious, which is much the same.’

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Celebrity Product Endorsement in the 1800s

February 3, 2012 in Books, Quotation | No comments

“The first customers bough pairs of telephones for communication point to point: between a factory and its business office, for example.  Queen Victory installed one at Windsor Castle and one at Buckingham Palace (fabricated in ivory; a gift from the savvy [Alexander Graham] Bell.”

Bring Market Prices to Medicare

December 16, 2011 in Books, Health Insurance, Managed Care, Medicare, Medicare Advantage | 5 comments

Medicare is a government-run insurance program.  Can policy changes be made to add competition to Medicare, maintain quality and reduce cost?  A book titled Bring Market Prices to Medicare argues that it can through a competitive bidding process. This book makes a number of sensible arguments which I review today.

The main proposal of the book is a competitive bidding process for all Medicare plans. Currently, there is a form of competitive bidding only for Medicare Advantage (MA) managed care plans. The authors also argues for competitive bidding for fee-for-service (FFS) Medicare (i.e., Parts A and B).  There is already a competitive bidding process for Medicare’s prescription drug program (Part D) which has worked well.

One of the main advantages of Medicare FFS is that beneficiaries do not need a referral for any services and are not limited to certain provider networks. However, Medicare beneficiaries do not pay for these added benefits. In addition, even if HMOs are more efficient than Medicare FFS, Medicare FFS beneficiaries still pay the same Part B premiums.

The authors want beneficiaries to face the true price differentials between the lowest cost plans and less efficient plans., regardless if the plan is Medicare FFS or an MA plan. Thus, beneficiaries would be responsible for any premium differences due to choosing a more expensive plan.

Currently, MA plans receive a variant of the average bid in their service area. The authors propose that Medicare would only pay for the lowest cost plan. This proposal would in essence be a transfer from plans and beneficiaries (who would have to pay the cost differential between the plan they choose and the lowest cost plan) to the government. Given the fiscal hole the federal government is facing, this is a good idea.

Authors also propose to eliminate the 25% tax on premiums. According to MedPAC, “Plans that bid below the benchmark also receive payment from Medicare in the form of a “rebate.” The law defines the rebate as 75 percent of the difference between the plan’s actual bid (not standardized) and its case mix-adjusted benchmark. The plan must then return the rebate to its enrollees in the form of supplemental benefits or lower premiums” The rebate structure gives plans a disincentive from lowering their bids since they only recover a share of the cost decreases.

Another issue focuses on regional adjustments. Living in New York is expensive and health care is more expensive in New York than in rural Mississippi. However, should Medicare subsidize New Yorkers because their health care is more expensive. The authors argue no, but poor individuals in high cost areas will be adversely affected by this policy choice.

A major issue is controlling quality. Plans could create low cost plans by providing low-quality care or failing to provide mandated services. Thus, CMS will need to regulate the plans. Plans with quality levels below a specific level would be barred from enrolling individuals or the government could force beneficiaries to pay additional premiums to enroll in these low quality plans. Public reporting of plan quality is also needed.

Strategic bidding is also a problem. Plans could collude to raise the bid price. However, by having Medicare FFS as an option will cap the amount colluding firms could increase prices. Further, a small firm could bid a very low amount and set the market. Medicare could set the benchmark at the lowest cost plan which meets a minimum size requirement.

Source:

Another Review of the Book:

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The History of Medicine: A Very Short Introduction

September 30, 2011 in Books, Contagious Disease, Medical Studies | 1 comment

I recently finished reading a great book by William Bynum called The History of Medicine: A Very Short Introduction. The book does just what it says: provides a great introduction to the history of medicine.  It is concise and interesting throughout.  The contents are divided into six chapters:

  • Medicine at the bedside
  • Medicine in the library
  • Medicine in the hospital
  • Medicine in the community
  • Medicine in the laboratory
  • Medicine in the modern world.

This chart explains the differences between the first five kinds of medicine.

There are many interesting nuggets of information from this book and picking out a few is difficult.  I’ll settle for two which discuss the unintended consequences of the invention of anesthesia and antibiotics:

“Giving surgeons more time to operate made conserving tissues easier, but the longer exposure of the open wounds to the air also increased the possibility of post-operative infection.  Consequently, anaesthesia enlarged the range of operations surgeons could perform, but not necessarily the changes of a patient’s surviving the ordeal.”

“The causative agents of malaria, tuberculosis, and HIV have all developed resistance to many of their conventional treatments, complicating these major world diseases.  The hospital has not ’caused’ this phenomenon; human agency has.  But drug-resistant pathogens are now so common that modern hospitals sometimes lose their desired epithet, as ‘houses of healing,’ and revert to that old one, ‘gateways to death.’”

Here is Amazon’s summary of the book:

Taking a thematic rather than strictly chronological approach, W.F. Bynum, explores the key turning points in the history of Western medicine-such as the first surgical procedures, the advent of hospitals, the introduction of anesthesia, X-Rays, vaccinations, and many other innovations, as well as the rise of experimental medicine. The book also explores Western medicine’s encounters with Chinese and Indian medicine, as well as nontraditional treatments such as homeopathy, chiropractic, and other alternative medicines.

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Smoking Prevention in China

August 30, 2011 in Books, Public Health | 1 comment

“All tobacco companies are state-owned, and the industry provides signifiant revenue; it also directly employs more than half a million people. From the government’s perspective, smoking is important to stability, both economic and social.  Some cigarettes are even subsidized–the cheapest brands cost as little as thirty cents a pack, because officials fear that farmers will become unhappy if they can’t afford to smoke.”

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Poor Need More Financial Services than Rich

April 6, 2011 in Books, Financial | No comments

Why would that be the case?  The answer is risk.  Poor people (especially in developing countries) have a larger share of their assets at risk due to theft, a family illness, or funeral.  Thus, cash flow management is vital for survival for the poor.  The Enlightened Economist discusses a book called Portfolios of the Poor where Daryl Collins and three co-authors examine how the poor in India, Bangladesh and South Africa manage their money. The data the authors use is unique: weekly diaries kept by researchers who tracked these individuals and families. They found the following:

“The first surprise is the extent to which poor people – living on or about the $2 a day threshold, or about 40% of the world’s population – use a wide variety of financial services, although many of them are informal. The reason is that such low incomes are typically extremely variable and so there is a more intense need than in the case of better-off people for financial management. Poor people have a greater demand for financial intermediation. Less surprising, perhaps, are the facts that poor people face much greater risks including the risk of theft or unanticipated life emergencies, and that their typical transaction is very small indeed…

The typical researchers’ focus on balance sheets will show that the kind of people who kept diaries for this research will see little change in their (tiny) level of assets from one year end to the next, but there will have been, relatively speaking, huge flows of cash in and out in between. Another insight is that a year is far too long a time horizon for financial decision making – and this includes assessing loan rates using APRs. Most of the time poor borrowers will want a loan for a very short period and may regard the (high) interest rate as a fee for a service.”

Thus usurious interest rates may not be so high in levels if paid back quickly.   In other words, the high interest rate translate into a small interest payment for short-term loans, and thus the interest may just cover lenders’ high transaction cost of making such a short term loan.

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Book Review: Macrowikinomics

December 10, 2010 in Books | 2 comments

The theory behind Wikipedia is that the wisdom of the masses is greater than that of a few ‘experts’.  Many people believe that Wikipedia has greatly enhanced the amount of knowledge available to the common man.  Others lament that the encyclopedia entries are not always screen and the quality of entries is highly variable.  Can online, mass collaboration lead to significant improvements in a variety of fields?  This is the propoistion advanced by the book Macrowikinomics by Don Tapscott and Anthony D. Williams.

Although I have not read the entire book, the section on healthcare offers innovative, although overly optimistic, ways to leverage online mass collaboration to improve healthcare quality.  Examples of healthcare websites where this type of mass collaboration takes place include:

Read the rest of this entry »

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