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You are currently browsing the archive for the Current Events category.
Russell Hutchinson presents the 100th edition of the Cavalcade of Risk.
Here are some other links of interest
Today, we’ll start today off with some humor:
And then move on to more serious issues:
“We are not cutting Medicare benefits. We are trying to eliminate waste.”
“Our country’s too big, too complicated, too decentralized for Washington, a few of us here, just to write a few rules about remaking seventeen percent of the economy all at once.”
“We can’t afford this. That is the ultimate problem here.”
How did Obama’s Healthcare Summit go? It was basically a pile of bad ideas. Senator Harkin gave the best explanation of what’s truly needed, but I’ll save that for last.
Examples of BAD IDEAS include
Starting over. John McCain asked to “Go back to the beginning” and Republican Senator Lamar Alexander said ”If we can start over, we can write a healthcare bill.” The whole start over rhetoric is dumb. If you don’t like the current proposals, say what you don’t like about them. If you have suggestions on how to do it better, say them. Suggesting a “do over” is not helpful. Even if you think health care in the U.S. is perfect and prefer the status quo, you should stand up and say that rather than asking for a clean slate.
Health Reform will lower the deficit. Expanding federal entitlement programs will NOT lower the deficit. In the short-run, additional tax revenue and cuts to other programs may decrease the deficit in the very short run, but adding or expanding big government programs never lowers the deficit.
Reforming medical malpractice. I have documented that the medical malpractice system does not work well (see here and here). However, malpractice costs are a small share of the overall health care dollars. If physicians prescribe too many tests and treatments because they wish to avoid being sued, than tort reform could decrease costs more drastically. However, this issue is more of a partisan one where Republicans can pander to their physician supporters and Democrats can pander to their attorney supporters.
End Waste and Abuse. This is a laudable goal, but determining what is waste and abuse is difficult. If you get an MRI for an injury, you may not need the MRI, but it will provide the doctor with some helpful information. This is certainly not fraud, but it may be waste. Having Medicare administrators who are far from the hospital floor determine what is wasteful is not as easy as political rhetoric makes it sound. Further, although there is much waste in the Medicare system, there is much waste when doctors are paid by private insurers as well. Every President promises to reduce Medicare fraud and waste, but few succeed.
“We actually create more diabetes through the food stamp program and the school lunch program.” - Senator Coburn. Do poor people buy more unhealthy food? Yes. Is it because of these programs? No. The poor have less money and fast food is cheap. Fresh fruits and vegetables are expensive. Increasing redistribution would allow the poor to eat healthier, but if Senator Coburn wants to mandate that poor people eat healthy, I think that is going too far. People on food stamps aren’t all of a sudden start shopping at Whole Foods. The food police are not the solution to health reform.
Here’s where the GOOD IDEAS were:
Incremental Reform doesn’t work. Senator Wyden said, “The evidence says incremental reform not only does less, it costs more.”
The most sensible comments came from Senator Harkin. In order to reduce health insurance premiums and Medicare expenses, we need cost control (i.e., rationing). We need to limit the medical care we make available to ourselves. Every person should not be able to receive every medical treatment they think will improve their lives. Determining which treatments to exclude form Medicare or private insurance is full of tough decisions, but they must be made, otherwise health insurance premiums will gobble up more and more of our wages.
Of course, no senator could support rationing care, but that is what Senator Harkin is essence supporting. Here is a quotation:
“Well, quite frankly, if we want insurance reforms you can only do that if everybody is in the pool. You can only get everybody in the pool if you make it affordable for middle class families and others. You can only make it affordable for middle class families and others if you have cost controls.”
The full transcript of the summit can be found in three parts (1, 2, 3). NPR also has some good analysis here.
A concerning development in Italy:
The decree mandates vetting of [online] video content to ensure it isn’t considered pornographic or harmful to national security. Violators face fines of up to more than $200,000. It would create an administrative authority that will decide what can go online and what can’t.
Media freedom advocates call it the “sheriff” of the Internet.
Alessandro Gilioli, a journalist and blogger for the magazine L’Espresso, says the decree will lead to censorship by means of red tape. “The way Italian government strangles the Web is through bureaucracy, not like in China — through bureaucracy, permissions, bureaucratic obstructions.”
Does Prime Minister Silvio Berlusconi really care about protecting Italians against pornographic material? Mr. Berlusconi’s sex scandal last summer shows that the man is no puritan. More likely, the Prime Minister is using the new regulations as anti-competitive measures to protect his television interests against the growing market for online entertainment. Shame on you Mr. Berlusconi.
These set of links focus less on Healthcare and are instead more for my Economist readers.
Yesterday I game my evaluation of President Obama’s State of the Union Address. Today, I analyze the Republican Response.
All Americans agree, we need a health care system that is affordable, accessible, and high quality. Cheap and high quality, who wouldn’t agree with that proposition? Figuring out how to get there is the problem.
But most Americans do not want to turn over the best medical care system in the world to the federal government. Republicans in Congress have offered legislation to reform healthcare, without shifting Medicaid costs to the states, without cutting Medicare, and without raising your taxes. Republicans don’t want to turn over your medical care to the federal government, except in the cases of Medicare and Medicaid. The Republican message is philosophically incoherent: we don’t like big government healthcare programs except for one really big, really underfunded healthcare program called Medicare. This sounds like Bill Clinton in 1994, “I’m not going to let the government mess with your Medicare.”
We will do that by implementing common sense reforms, like letting families and businesses buy health insurance policies across state lines, and ending frivolous lawsuits against doctors and hospitals that drive up the cost of your healthcare. These policies will do little to significantly change the healthcare system. The reason Republicans propose allowing people to buy policies across state lines is to allow individuals to buy less regulated insurance products from other states. If this happens, healthy individuals will buy less expensive products from less regulated states and only sicker individuals will be left to purchase health insurance in the more regulated states. This will drive premiums up significantly for the sickest people, but decrease premiums for healthy individuals. This phenomenon is known as adverse selection. In addition, malpractice reform can help cut costs. There is evidence that the current malpractice system doesn’t work well. However, malpractice costs are a tiny fraction of overall healthcare costs. Limiting the malpractice liability of physicians could decrease cost by incentivizing physicians to decrease the use of defensive medicine. If these caps are implemented, however, patients who are severely injured through a physician’s negligent behavior will not be able to receive the full compensation they are due.
This foreign terror suspect was given the same legal rights as a U.S. citizen, and immediately stopped providing critical intelligence. As Senator-elect Scott Brown says, we should be spending taxpayer dollars to defeat terrorists, not to protect them. As a nation that believes in the civil rights of all individuals, it is important to give even accused terrorists the right to due process.
Below are healthcare-related excerpts from President’s Obama’s State of the Union Address with my comments afterward.
Now let’s be clear – I did not choose to tackle this issue to get some legislative victory under my belt. And by now it should be fairly obvious that I didn’t take on health care because it was good politics. True. Support for Obama’s health reform policies are hitting all-time lows.
The approach we’ve taken would protect every American from the worst practices of the insurance industry. Here, Obama may be referring to the fact that he wants to prohibit insurers from denying insurance coverage based on pre-existing conditions. In many cases this is a good thing. It is hard for people who have diseases to get insurance coverage, and when they don’t get coverage, they may forego necessary care. However, when insurance companies don’t deny coverage to individuals with pre-existing conditions, each person has an incentive NOT to buy health insurance until they come down with a serious disease. This way, you’ll save money on health insurance and when you decide to buy health insurance when you’re sick, it’ll cost the same as it does for healthy people.
It would give small businesses and uninsured Americans a chance to choose an affordable health care plan in a competitive market. The subsidies individuals would get to purchase nongroup insurance would help people purchase insurance for individuals who work for a business that does not offer a group plan. However, the small businesses generally oppose health reform.
It would require every insurance plan to cover preventive care. Most already do.
And by the way, I want to acknowledge our First Lady, Michelle Obama, who this year is creating a national movement to tackle the epidemic of childhood obesity and make our kids healthier. Although losing weight will generally improve your health, calling obesity an epidemic is a bit of a hyperbole.
Our approach…would reduce costs and premiums for millions of families and businesses. And according to the Congressional Budget Office – the independent organization that both parties have cited as the official scorekeeper for Congress – our approach would bring down the deficit by as much as $1 trillion over the next two decades. Cost will decrease for some people. Those who are newly eligible for Medicaid will see lower health insurance premiums. Those who receive subsidies to buy health insurance will see lower premiums. However, the taxpayer will have to cover this cost. Thus, there will be winners and losers if health reform passes. The Medicare cost cuts the Obama is proposing are small in comparison with the fast rate of growth of overall Medicare spending. Further, political pressure will make it difficult to actually enact these cuts. Although Obama may claim the health reform will decrease federal spending, insurance companies believe health reform will increase health care costs. I’ve already stated my belief that the cost-cutting measures in the health reform bills are meager.
As temperatures cool, I want everyone to take another look at the plan we’ve proposed. There’s a reason why many doctors, nurses, and health care experts who know our system best consider this approach a vast improvement over the status quo. Providers should support health reform. In general it expands the number of people with insurance (i.e., it expands their potential market). Further, because there is little cost cutting, doctors and nurses should see an increase in profits. Doctors and nurses may also believe that health reform is good for their patients, but without a doubt it will benefit the provider’s pocketbook.
Do not walk away from reform. Not now. Not when we are so close. Let us find a way to come together and finish the job for the American people. In other words: “Please pass health reform. Pretty please!”
Starting in 2011, we are prepared to freeze government spending for three years. Spending related to our national security, Medicare, Medicaid, and Social Security will not be affected. But all other discretionary government programs will. A spending freeze sounds like a great idea to reduce the debt. However national security (21%), Medicare & Medicaid (23%), Social Security (21%), other mandatory spending (10%) and interest on the debt (8%) make up most of the federal budget. This leaves only 17% of the budget which is not under a spending freeze. That is like saying, “Yeah, I’ll keep living in this house I can’t afford and driving this car I can’t afford, but when I go to Taco Bell I’ll get the regular taco instead of the taco supreme.” That is not the way to financial security. Additionally, some of the discretionary programs will be cut but others will receive increased funding. Obama even campaigned against spending freezes in the election.
More importantly, the cost of Medicare, Medicaid, and Social Security will continue to skyrocket. That’s why I’ve called for a bipartisan, Fiscal Commission, modeled on a proposal by Republican Judd Gregg and Democrat Kent Conrad. Read: “I know it’s not a good idea politically to cut Medicare, Medicaid or Social Security. So instead I’ll call for a commission to write a report that gets ignored a year from now.”
We are helping developing countries to feed themselves, and continuing the fight against HIV/AIDS. Feeding the poor and helping those with AIDS are important goals. They are also goals that few people would oppose politically.
Conclusion: Overall, Obama has proposed nothing new on health reform, but has just asked nicely for Congress to pass it. He has imposed a spending freeze on 17% of federal budget while letting entitlements continue to gobble up more and more of worker’s incomes through taxes. There is no solution to the impending budget shortfalls for Medicare and Social Security. To sum up, on the health care front it’s more of the same.
Links for a Rainy day in the Bay (Area):
With the recent devastation in Haiti, many celebrities have advocated donating money to the non-profit Partners in Health. What is this organization? Is it the best place to donate your money?
Almost 4 years ago, the Healthcare Economist endorsed PIH as a great place to donate your money in my post “Are you ready to be inspired?“ The post discusses the book Mountains beyond Mountains, a book detailing the life and efforts of PIH founder Dr. Paul Farmer. It may seem like giving money to PIH is becoming a fad, but it truly an amazing organization that deserves your resources. Further, Charity Navigator gave PIH a four star rating (its highest) for being an efficiently run NGO.
To donate, click here.
Megan McArdle broke a story that Jon Gruber, a famous MIT health economist, was paid $300,000 by the Obama Administration for “special studies and analysis” of the health care bills. Did this sway his opinion on the evaluation on endorsing various legislative bills?
I would say no. Dr. Gruber is a well respected health economist who has long supported health reform efforts. He was one the principal advisers for the design of the Massachusetts’ health reform. What I’m trying to say, is that Dr. Gruber likely already had a bias towards health reform and the $300,000 likely did not affect the analysis he would have done if he had not been paid.
I would hope that money would not affect Dr. Gruber’s econometric research whatsoever. What it could influence is his decision to endorse specific bills. Any bill has pros and cons which hopefully Dr. Gruber would uncover unbiasedly in his evaluation. Taken as a whole, however, the money may have helped convince Dr. Gruber to give a more positive tone to the overall bill in interview.
The fact that Dr. Gruber was paid to do research should not appall anyone; a researcher has to earn a living somehow. McArdle’s discovery should not be any sort of a scandal, but it should make the public realize that no academic researchers is ever perfectly unbiased.
Dr. Richard Fogoros of the Covert Rationing blog has a series of posts listing the most overblown stories of the decade. The stories are listed below with my commentary.
The Senate passed a healthcare reform bill 60 (all democrats) to 39 (all republicans). To summarize it’s contents:
“The bill would require most Americans to have health insurance, would add 15 million people to the Medicaid rolls and would subsidize private coverage for low- and middle-income people, at a cost to the government of $871 billion over 10 years, according to the Congressional Budget Office.”
This does not mean that health reform has passed. The Senate and House must both agree to pass the bill, something that has not yet happened.
Key items in the bill are provisions for guaranteed issue and community rating. This means that “ insurers could not deny coverage because of a person’s medical condition; could not charge higher premiums because of a person’s sex or health status; and could not rescind coverage when a person becomes sick or disabled.”
While the Senate reform bill does a good job of extending insurance coverage to many Americans, it will not decrease the cost of health insurance. In fact, the guaranteed issue and community rating provisions mean that the cost of health insurance will likely increase.
The N.Y. Times reports that Democrats in the Senate are nearing the 60 votes needed to pass a health reform bill. To do this, Democrats have made a number of concessions. These include: abandoning a public option, prohibiting abortion coverage, and of course, long-term-care insurance to people with severe disabilities, new services for pregnant teenagers, financial breaks to nonprofit insurance companies, and of course extra Medicaid money to Nebraska.
How will the government pay for these additions? There are new sources of revenue. This include taxes on high income individuals, taxes on profitable health insurance companies, and taxes on tanning salons. The tax on tanning salon replaces a proposed tax on cosmetic surgery.
People in favor and against a single payer system should be disturbed by these developments. Single payer advocates likely are disturbed that there is no public options and that there are so many giveaways to special interest groups. Those against a single payer option will be upset that at the seeming inevitability that government involvement in health care will increase.
Your lowly Healthcare Economist is also perturbed. A single payer system could work efficiently, lower cost and expand coverage. Despite lots of ideological rhetoric, having a government bureaucrat reviewing your claims for reimbursement would not be much different than having a health insurance bureaucrat doing the same. As I predicted, however, getting to the single payer system will inevitably involve handouts to interest groups. Even if a single payer or government regulated health insurance system was ideal at the outset, lobbying would likely corrupt the system.
The major problem with the current system is that if you lose your job (possibly because you are sick), then you also lose your health insurance. The proposals on the table have the benefit of expanding health insurance to more individuals. However, these same proposals offer little to decrease–or even slow the growth–of the cost of health insurance. Proposals to tax tanning salons isn’t the type of real reform that is needed.
The first American Nobel laureate in economics died on Sunday at age 94. The N.Y. Times has an obituary. Here are other economists’ comments.
In 1998, Medicare enacted the sustainable growth rate (SGR) which would slowly bring down Medicare physician compensation. However, each year, it gets reversed by Congress. Now, instead of a gradual decline, the implementation of SGR would result in a 21.2% pay cut for Medicare docs.
Before the Thanksgiving holiday, however, Congress once again reversed the SGR. Megan McArdle gives some solid reasons of why the reform of the SGR should be included in any health reform bill.
Some links to tide your over to Turkey Day.
A Health Reform Bill passed in the House despite declining support among the American people. The Kaiser Family Foundation has a nice summary of what is included in the bill. Today, I will review who wins and who loses from different aspects of the bill.
Individual Mandate.
Employer funding requirements.
Expand Medicaid to all individuals with incomes below 150% of the Federal Poverty line (FPL).
Require CHIP enrollees with incomes above 150% FPL to obtain coverage through the Health Insurance Exchange.
Subsidies to individuals with incomes below 400% of the FPL to to obtain coverage through the Health Insurance Exchange.
Reinsurance program for individuals aged 55-64.
Tax of 5.4% on individuals with modified adjusted gross income exceeding $500,000 ($1m for families).
The Public Option and the Health Insurance Exchange.
Savings from Medicare and Medicaid
Here’s some fun reading to take you into the weekend:
The lobbying group America’s Health Insurance Plans (AHIP) is touting a study by PriceWaterhouseCoopers showing that health reform would increase premiums significantly. The findings claim that insurance premiums would rise between “26 percent between 2009 and 2013 under the current system and by 40 percent during this same period” if these four health reform provisions are implemented. The White House disagrees with the analysis and says that the PWC report is cherry-picking these four provisions. Let’s see who is right.
Below are the reforms PWC analyzes:
Obama’s blog responds with the following:
Overall, I am tending to side with the insurance companies on this one. I can’t verify whether their exact numbers or methods are correct, but many Obama’s reforms will increase cost overall. Consumers will be more insulated from these cost increases, however, because the government (i.e., taxpayers) will subsidize premiums and expand Medicaid. The major achievement of Obama’s reform proposals is that he will expand insurance coverage to many more Americans. The major drawback, as I have pointed out in the past, is that Obama’s reform do little to cut costs.
Many of the healthcare reform bills under consideration include an individual mandate. If you don’t purchase health insurance you pay a fee. For the Senate Finance Committee and Senate Health Committee, this penalty would be up to $750. The House Version would assess the fee as 2.5 percent of adjusted gross income over a certain level ($18,700 for a couple). However, in all cases, individuals with religious objections would be exempt from these penalties from not purchasing insurance.
Will Obama’s healthcare reform efforts produce a religious revival? It’s doubtful, but the number of people who claim to have religious objections to avoid compliance with the individual mandate will rise.
Today, Elinor Ostrom of Indiana University and Oliver E. Williamson of the University of California, Berkeley won the Nobel prize in Economics. Dr. Ostrom won “for her analysis of economic governance, especially the commons” and Dr. Williamson “for his analysis of economic governance, especially the boundaries of the firm.”
According to the N.Y. Times:
The prize committee, in making the awards, seemed to be influenced by the credit crisis and the severe recession that in the minds of many mainstream economists has highlighted the shortcomings of a unregulated marketplace, in which “economic actors,”left to their own devices, will act in their own self-interests and in doing so, will enhance everyone’s well-being. The committee, in effect, said that theory was too simplistic and ignored the unstated relationships and behaviors that develop among companies that are competitors but find ways to resolve common problems. “Both scholars have greatly enhanced our understanding of non-market institutions” other than government, the committee said.
“Basically there is a common understanding that develops even among competitors when they are dealing with each other,” Mr. Shiller said, adding “when people make business contact, even competitors, they can’t anticipate everything, so an element of trust comes in.”
More details on the Nobel laureates, see the NobelPrize.org.
Tyler Cowen gives a nice example of Dr. Williamson’s work in practice:
“Let’s say you privatize a water system in Africa and write a 30-year contract with a private French company to run the thing. As the contract nears its end, and if renewal is not obvious, the company has an incentive to “asset strip,” or at the very least not maintain the value of the pipes. Alternatively, the government might signal, in advance, that it has every intention of renewing the contract. The company then has the incentive to lower quality to consumers, since it expects renewal a and faces weaker competitive constraints.”
Marketplace has an interview with Dr. Williamson who reveals one of the most important benefits of a Nobel prize: a free university parking space.
The Nobel Prize in Medicine went to Elizabeth Blackburn from the University of California, San Francisco, Jack Szostak from Harvard Medical School and Carol Greider from Johns Hopkins University. The nobel prize was awarded “for work on the existence and nature of telomerase, an enzyme that helps prevent the fraying of chromosomes and is core to new work on ageing and cancer.” More details on the prize and a biography of each of the winners can be found here.
Yesterday, the winners of the prestigious MacArthur ‘Genius’ Fellowships were unveiled. Twenty winners received $500,000 of funding over 5 years with no strings attached. Some of the winers include:
Many people have asked me, what do you think about the Baucus health reform plan? Taking the bird’s eye view, the Baucus plan does a very good job at expanding insurance coverage. Eligibility limits for public plans (i.e., Medicaid and SCHIP) are more generous. Lower middle class and middle class individuals qualify for health insurance subsidies to purchase private insurance. The Health Insurance Exchange should diminish the fear of losing one’s insurance when you switch jobs. Overall, Baucus has built on existing health infrastructure to expand health access.
By building on existing infrastructure, what he will do is basically expand the same health care system–that everyone is now complaining about–to more people. There is little sincere effort to reform Medicare. Although a white paper claims that he would cut physician compensation in Medicare, Baucus unsurprisingly decided to raise Medicare physician payment rates. Pledges to reduce ‘waste and fraud’ are uttered by every President and Congressman in recent history but this is difficult to accomplish. What about the promise to “reward Medicare providers who deliver care more efficiently and penalize those who don’t.” This is good in theory, but difficult in practice. Can we adequately risk adjust to make up for the fact that some physicians have sicker populations? Will physicians have an incentive to not treat the sickest patients in order to improve their bonuses from Medicare?
Other points
I am not in favor of an individual mandate. Most people want insurance and will buy it if they can afford it. Will the government really fine lower middle class individuals for not buying health insurance? What if they are using their limited income towards shelter, food, or their children’s education?
The “free rider” problem is a serious problem and has been addressed nicely here.
The Health Insurance Exchange is an interesting idea. On the one hand, standardizing health plans makes comparison shopping between insurers easier. However, the standardization may hurt innovation in the health insurance industry. Further, how will these standard evolve as new technologies are invented? I would guess that these ’standardized’ plans will be slower to cover newer technologies.
Taxing ‘cadillac’ insurance plans does not make sense to me. Let us say that two people earn $50,000 per year. One person decides to buy a fancy flat screen TV while the other buys a small TV and saves the rest. Should we tax the person who likes TV more than the a non-TV loving person? Similarly, some people will prefer to spend more money on comprehensive health insurance. Others might forego a cadiallac plan and instead buy exercise equipment, organic food, cars or any other item. A progressive tax to fund health insurance for poorer individuals makes sense. Taxing those who want comprehensive health insurance does not. In fact, Baucus is reconsidering the excise tax on high-end insurance plans.
Monday Links:
Disclaimer: The director of the Holocaust Education Resource Center is (my mom!) Mrs. Bonnie Shafrin.
What is Max Baucus proposing in his inital health reform bill? Most of the principles are based on the Senate Finance Committee 2009 white paper. Below
Ezra Klein also has a nice review of parts of the Baucus bill: Exchanges, Insurance Regulation, Affordability, Individual Mandate, Co-ops, Taxing Insurers. Time magazine also has a FAQ on the Baucus bill.
Some links for you to enjoy over the weekend.
The NEJM recently reported on physician views about the public option and the possible expansion of Medicare. It turns out, most physicians favor the status quo of a mix of public and private financing.
Why would doctors support a public plan? It could be ideological. They may simply believe that more government health insurance would make society more equitable. Or they may believe that they can receive more money from government reimbursement than hard-bargaining private companies. Or it could be that dealing billing rules from multiple private insurance companies is much worse than dealing with billing issues from Medicare.
In 2009, President Barack Obama addressed the nation calling for healthcare reform. In 1974, President Richard Nixon also addressed the nation calling for healthcare reform. Let us analyze Nixon’s speech and compare it to Obama’s.
Today, I will review the Republican Response to President Obama’s health care reform speech. To sum up, Republicans propse:
Below are some highlights from the speech [with my comments in brackets].
“Good evening. I’m Dr. Charles Boustany…” [read: Because I'm a doctor, you can trust me...right? Here's a profile on Boustany.]
it’s time to start over on a common-sense, bipartisan plan focused on lowering the cost of health care while improving quality. [Who doesn't want high quality at lower cost? The difficulty is to actually implement a plan that will accomplish this.]
Replacing your family’s current health care with government-run health care is not the answer. In fact, it will make health care much more expensive. [Generally, the government has not done a good job of containing costs. On the other hand, neither has private health insurance. ]
And it cuts Medicare by $500 billion, while doing virtually nothing to make the program better for our seniors. The president had a chance, tonight, to take the government-run health care off the table. Unfortunately, he didn’t do it. [Obama says, "I will protect Medicare," with exception of cuts where waste and fraud occur. The Republicans claim Obama will decrease Medicare funding significantly. I am not sure which is the truth. However, these two sentences make the Republican stance confusing. They say don't cut Medicare, but "take government-run health care off the table." Medicare is government-run health care! If Republicans were truly against government health care, they would oppose Medicare and try to replace it with vouchers or some other system. ]
One, all individuals should have access to coverage regardless of pre-existing conditions. [This is one area where Obama and the Republicans agree.]
Two, individuals, small businesses and other groups should be able to join together to get health insurance at lower prices, the same way large businesses and labor unions do. [I don't see much of a proposal here. Currently, small businesses and individuals can group together to buy insurance. However, these pools often don't work well because the sickest individuals and small businesses with sick employees are the ones who most want to join these groups. This is known as the problem of adverse selection. If premiums rise in these pools as healthier individuals drop out, this results in a death spiral. Republicans do not seem to be advocating a health insurance exchange as Obama proposed, only not to make it illegal for individuals and small business to group together--which they can do already.]
Three, we can provide assistance to those who still cannot access a doctor. [According to a recent Republican proposal, this would entail making health insurance tax-deductible even if it is purchased through a nongroup plan and creating refundable tax credits for low- and modest-income Americans. ]
And four, insurers should be able to offer incentives for wellness care and prevention. [This is not a real proposal; insurers currently are able to offer incentives for wellness care and prevention.]
We need to establish tough liability reform standards, encourage speedy resolution of claims, and deter junk lawsuits that drive up the cost of care. [As I mentioned in my previous post, the claims won in malpractice suits are not the cause of high health care costs; many patients are seriously injured by medical errors and deserve compensation. However, the defensive medicine many doctors practice to avoid lawsuits, does lead to unnecessary tests and drives up costs]
Let’s also talk about letting families and businesses buy insurance across state lines. [This sounds like a good idea. Individuals should be able to purchase whatever type of health insurance they please. However, this basically would mean that the federal government, and not states, would be the regulator of health insurance. This may increase industry-wide consolidation, but may increase competition in areas with a single dominant insurer. Still, if distant insurance companies do not have contracts with local doctors, this legislation will have little impact on the quality of care.]
Today, President Obama made a speech calling for healthcare reform. To sum up, Obama is proposing:
Below are some highlights from the speech [with my comments in brackets].
So tonight, I return to speak to all of you about an issue that is central to that future – and that is the issue of health care. [It's about time.]
Everyone understands the extraordinary hardships that are placed on the uninsured, who live every day just one accident or illness away from bankruptcy… These are middle-class Americans. [This is true. The poorest Americans--excluding illegal immigrants--receive health care coverage from Medicaid and thus are need not worry about health care coverage. The quality of Medicaid coverage is always up for debate, however. The middle-class, the self-employed, those who work for small firms are the ones least likely to have insurance.]
Many other Americans who are willing and able to pay are still denied insurance due to previous illnesses or conditions that insurance companies decide are too risky or expensive to cover. [This is one of the major problems with the current health insurance system. There is insurance for acute illnesses (e.g., a broken arm, a car accident), but those with chronic conditions face higher insurance premiums or may be dropped completely. What is needed may be health status insurance.]
We are the only advanced democracy on Earth – the only wealthy nation – that allows such hardships for millions of its people. [One must keep in mind that although health insurance is important, it is only a means to an end. That end is better health. Reducing illness rates through public health initiatives, clean water, better sewage disposal, better eating habits, and exercise may be more beneficial to improving health than simply expanding health insurance. Further, would giving all Americans low quality health insurance be better or worse than having some individuals with high quality insurance and others with none? Nevertheless, it is true that the U.S. has the highest rate of uninsurance in the developed world.]
More and more Americans worry that if you move, lose your job, or change your job, you’ll lose your health insurance too. [This is the problem of job lock and job stretch]
We spend one-and-a-half times more per person on health care than any other country, but we aren’t any healthier for it. [The U.S. spends 15.3% of GDP on health care. Here are medical spending rates for other nations.]
…those of us with health insurance are also paying a hidden and growing tax for those without it – about $1000 per year that pays for somebody else’s emergency room and charitable care. [This is true, but insured individuals overuse the emergency room more than the uninsured.]
Finally, our health care system is placing an unsustainable burden on taxpayers. When health care costs grow at the rate they have, it puts greater pressure on programs like Medicare and Medicaid. [Medicare's trust fund will run out of money in 2017. ] …Put simply, our health care problem is our deficit problem. Nothing else even comes close. [True.]
I believe it makes more sense to build on what works and fix what doesn’t, rather than try to build an entirely new system from scratch. [That's what the U.K. did when they developed their single-payer NHS.]
First, if you are among the hundreds of millions of Americans who already have health insurance through your job, Medicare, Medicaid, or the VA, nothing in this plan will require you or your employer to change the coverage or the doctor you have. [Although one should build on the existing health insurance infrastructure, the Obama plan does little to improve the existing government health insurance options. Since 16% of Americans already rely on the government for health insurance, reforming these programs is imperative.]
…it will be against the law for insurance companies to deny you coverage because of a pre-existing condition. As soon as I sign this bill, it will be against the law for insurance companies to drop your coverage when you get sick or water it down when you need it most. [Disallowing insurance companies to drop individuals with pre-existing conditions will do either one of two things. If insurance companies can raise prices, individuals with pre-existing conditions will simply face extremely high premiums. If insurance companies are not allowed to raise premiums, the premiums for healthier enrollees will have to cover this additional cost. Further, insurance companies may still have an incentive to provide poor treatment. For instance, the insurance company with the best AIDS clinic may get expensive AIDS patients. Thus, insurance companies may have a disincentive to provide high quality treatment to the sick. Additional commentary is available here. Risk-adjustment subsidies as practiced in Switzerland is one option to solve this problem. ]
And insurance companies will be required to cover, with no extra charge, routine checkups and preventive care, like mammograms and colonoscopies [Most already do.]
…creating a new insurance exchange – a marketplace where individuals and small businesses will be able to shop for health insurance at competitive prices. [I am not exactly sure how insurance exchange would work. Would insurance companies give on flat premium for all individuals? Would premiums be based on age? Gender? Smoking habits? Pre-existing conditions?]
For those individuals and small businesses who still cannot afford the lower-priced insurance available in the exchange, we will provide tax credits, the size of which will be based on your need. [This is what John McCain advocated. However, instead of vouchers for all, tax subsidies will be available to middle class Americans without employer provided health insurance. A voucher system, where all individuals would receive an amount to use towards insurance based on income has been popular among many economists.]
That’s why under my plan, individuals will be required to carry basic health insurance. [An individual mandate. See my previous comments here, here and here.]
My guiding principle is, and always has been, that consumers do better when there is choice and competition. Unfortunately, in 34 states, 75% of the insurance market is controlled by five or fewer companies. In Alabama, almost 90% is controlled by just one company. [Even in the private market for health insurance, there is little competition.]
…making a not-for-profit public option available in the insurance exchange [see my comments here. In general, those who support a public option point to the European and Canadian systems and cite how much more efficient these systems are than the U.S. Those who oppose a public option point to the European and Canadian systems and cite how much more inefficient these systems are than the U.S. A public option could improve health care quality if it is well-run and is fiscally sustainable over the long run (e.g., Veterans Affairs). However, if it provides poor quality of care (e.g., Medicaid) and is fiscally unsustainable (e.g., Medicare), than the public option will not improve the American health care system.
...private companies can't fairly compete with the government. And they'd be right if taxpayers were subsidizing this public insurance option. But they won't be. [This is likely true in the short run. The government could fairly price health insurance and compete with private insurance. However, if the public option become most attractive for the sickest, poorest individuals, the average cost to cover beneficiaries will rise relative to the costs of private insurance companies. Then the government will be faced with a choice: either price health insurance more in line with individual or group risk (i.e,. raise premiums) or use tax dollars to subsidize care. If they did the former, the public plan would be little different than a private insurer. If they do the latter, the public plan would receive a subsidy. ]
First, I will not sign a plan that adds one dime to our deficits – either now or in the future [read: I will increase taxes. That is the only way to pay for the small business/individual subsidies proposed]
Second, we’ve estimated that most of this plan can be paid for by finding savings within the existing health care system [Every politician mentions this, but few can achieve it. We'll see how well Obama does, but I am skeptical.]
…unwarranted subsidies in Medicare that go to insurance companies. [read: payments for Medicare Advantage will decrease.]
I don’t believe malpractice reform is a silver bullet, but I have talked to enough doctors to know that defensive medicine may be contributing to unnecessary costs. [I am not sure what the exact proposal is...damage caps? The claims won in malpractice suits are not the cause of high health care costs; many patients are seriously injured by medical errors and deserve compensation. However, the defensive medicine many doctors practice to avoid lawsuits, does lead to unnecessary tests and drives up costs]
Add it all up, and the plan I’m proposing will cost around $900 billion over ten years – less than we have spent on the Iraq and Afghanistan wars [read: this plan is really expensive but, hey, it costs less than than two wars put together.]
“What we face,” [Ted Kennedy] wrote, “is above all a moral issue; at stake are not just the details of policy, but fundamental principles of social justice and the character of our country.” [read: Ted Kennedy supported my plan if you don't like it you're trampling on his grave.]
I understand that the politically safe move would be to kick the can further down the road – to defer reform one more year, or one more election, or one more term. [This is 100% true. Obama the politician should just do nothing and let Medicare run out of money and let the next politician deal with the crisis. Obama the statesman has decided use his office to enact these reforms. Whether or not you agree with Obama's plan, it is admirable for him to go out on a limb to attempt to solve our some of our health care problems. He does, however, "defer reform" for Medicare, since no significant changes to benefit packages or funding was proposed.]
The N.Y. Times reports that President Obama will not insist that a public option be part of any health reform package. You can watch the full speech tonight at 8pm ET live online here. Or for those of you (like me) who prefer the written word, you can always read the speech transcripts available later tonight. Here’s a list of what to look for in Obama’s speech.
The Economist reports on Obama and the online media. Market Sentinel report shows the 94 most influential online sites and whether or not they favor Obama’s proposal. [Note: The Healthcare Economist is one of these top 94 sites].
Is Obamacare going down in flames? Is Sarah Palin’s “Death Panel” comment the culprit? Is the government going to start killing its own citizens?
In Sarah Palin’s Facebook post, she explains her concerns by quoting from section 1223 of HR 3200:
Section 1233 authorizes advanced care planning consultations for senior citizens on Medicare every five years, and more often “if there is a significant change in the health condition of the individual … or upon admission to a skilled nursing facility, a long-term care facility… or a hospice program.” [3] During those consultations, practitioners must explain “the continuum of end-of-life services and supports available, including palliative care and hospice,” and the government benefits available to pay for such services.
How does one interpret this Section? Some extremists have claimed that this section will encourage or require euthanasia among sick patients. If you support ObamaCare, you likely think of these consultations will proceed as follows: a benevolent nurse will advice patients of their health care outcomes and may recommend care best suited for the patient. If you do not support ObamaCare, then you may still believe that these nurses are good hearted, but pressure from their superiors to cut cost may cause these consultations to become distorted. Practitioners may push for more hospice care and less invasive medical treatment–not because it is in the patients best interest–simply to save costs.
The truth is, no one knows exactly how these consultations will play out in reality. Some pracitioners may feel pressured to recommend less invasive care to save money and some may not. However, believing that this type of rationing does not occur in the private sector is incorrect. Let us look at another Sarah Palin statement:
“The America I know and love is not one in which my parents or my baby with Down Syndrome will have to stand in front of Obama’s ‘death panel’ so his bureaucrats can decide, based on a subjective judgment of their ‘level of productivity in society,’ whether they are worthy of health care. Such a system is downright evil.”
Palin fears that government rationing will deny care to certain groups. But as Robert Reich understands, health care is already rationed. In the private sector, different insurance companies cover different treatments. When an insurance company decides not to cover some type of end-of-live medical treatment, these private sector administrators can be considered just as much of a death panel as in Obama’s public sector plan.
We need politicians to now to offer real solutions to the health care problems in America. Pandering to American’s fears by using terms such as “death panel” and “rationing” will likely help the Republicans win votes, but it will not improve health care. If Republicans were truly opposed to any government-run healthcare, then their hyperbole could be seen a ploy to end government-run healthcare. However, very few politicians (even Republicans) endorse ending Medicare. Even the supposed anti-government George W. Bush enlarged Medicare by added prescription drug coverage (Part D). Thus, I see lots of criticism, but few proposals for improvement.
Arnold Kling makes a provocative case for real reform: end Medicare and institute vouchers. Kling proposes that insurance be deregulated and Medicare ended. Won’t individuals with pre-existing conditions pay more for health insurance? Yes. However, in order to make this proposal fair, Kling would make the voucers conditional. The amount of the vouchers would be “based on need. Need would depend on income and pre-existing conditions.” With more people paying for their own health care and the government leveling the playing field, a fairer, more efficient system would emerge. For more on vouchers, see my post on vouchers in the U.S., as well as vouchers in Chile.
Under oath, Ken Lewis testified that “he believed Messrs. Paulson and Bernanke were instructing him to keep silent about deepening financial difficulties at Merrill, the struggling brokerage giant.”
According to Lynn Turner, former chief accountant at the SEC, “If these allegations are proven true, both Bernanke and Paulson should be prosecuted by the SEC to the fullest extent of the law.”
Economists coercing business leaders to hide vital economic information…Say it ain’t so, Ben!
Nevada is contemplating ’slapping’ a $5 tax on sex acts in brothels.
SURGEON GENERAL’S WARNING: Reading this edition of the Cavalcade of Risk puts you at risk of certain side effects such as:
If you are willing to risk these serious side effects, please read on.
RISK PREFERENCES SURVEY
The Healthcare Economist asks you to take a risk…and participate in a survey on risk preferences. By completing the survey, you will help advance the science of economics and be eligible to win a $25 gift card from Amazon. For more information, click here.
HEALTH
Joe Paduda of Managed Care Matters presents How bad is the United Kingdom’s National Health Service?
The Lancet says that privatization in post communist societies during the 1990s caused an increase in mortality.
John Earle of VoxEU disagrees, providing evidence that privatization did not increase mortality rates.
Will the removal of a “moral exemption” clause lead to hospitals closing their doors? InsureBlog’s Henry Stern reports that at least some providers are likely to shutter if forced to perform abortions, but wonders if the risk is really all that great.
The Disease Management Care Blog is shocked SHOCKED that the initial salvo of health care reform in the White House Summit promised everything to everybody. The DMCB, however, found that General Mills’ employee health insurance plan is a model to emulate.
The Health Business Blog believes the government should consider playing a direct role in venture financing of medical device companies, and let entrepreneurs direct those investment decisions.
Health reform need not reinvent the wheel, claims The Colorado Health Insurance Insider. Louise advocates for expanding the current public health insurance programs (such as Medicaid and SCHIP) rather than creating a new public health insurance schemes from scratch.
Bargaineering reviews some of the different health insurance plan types: from HMOs to PPOs.
Two drinks a day is good for you…now it’s bad for you…A Western Heart weighs in.
OTHER INSURANCE MARKETS
From the “if it seems too good to be true” department, Jon Coppelman of Workers’ Comp Insider discusses a California workers’ comp avoidance scheme based on the idea of turning employees into stock-owning corporate officers. The plan may backfire, however, since failing to have workers’ comp coverage is a criminal offense.
Will car insurance companies offer discounts to individuals who install tracking devices in their cars? American Consumer News investigates the phenomenon of Pay as you go Car Insurance.
Russell Hutchinson of Chatswood Consulting questions whether recent commentary on New Zealand’s Accident Compensation insurer is consistent with an insurance-based view of it’s role – or a social policy-based view.
ECONOMY
The Personal Financier compares and contrasts the current U.S. economic downturn with the Japanese banking crisis of the 1990s.
The Political and Financial Markets Commentator reviews the annual report of the Oracle of Omaha, Warren Buffet.
Wisdom from Wenchypoo’s Mental Wastebasket notes that because of tumbling car prices, if your car is stolen or totaled, you may not get enough from your insurance company to pay off your lease or loan. On the other hand, Wenchypoo claims that housing prices are still overvalued.
At the Death and Taxes blog, Don the libertarian Democrat reports on a recent IBM Risk Governance Forum. While there, he picked up on an important risk dynamic which could indicate even further market woes.
On the Gnarl Side doesn’t believe we can manage risk. Instead, we should focus on risk accommodation.
Chilean blogger Alejandro Rogers Bozzolo explains the because of “moral hazard,” bailing out big banks can lead to riskier behavior in the future.
Is the Swedish government’s bailout of Nordbanken in 1993 a good model for the U.S. to follow? One Mint weighs in.
Regarding my post on Monday, Obama’s stimulus package–a.k.a. the American Recovery and Reinvestment Act (ARRA)–includes 1.1 billion dollars for clinical comparative effectiveness research.
According to the American Academy of Family Physicians (AAFP), ARRA “allocates $1.1 billion for comparative clinical effectiveness research, including $300 million for the Agency for Healthcare Research and Quality and $400 million each for HHS and NIH to conduct this research.”
The Kaiser Family Foundation that says 59% of people think health reform would make the country better off and only 12% thought health reform would make the country worse off. This seems like overwhelming support. However, how only 38% of people thought health reform would make themselves and their family better off compared to 11% who think health reform would make them and their families worse off. Forty-five percent of respondents thought that health reform would make no difference in their family’s overall welfare.
Will voters support “what is best for the country” or what is “best for themselves and their family”? I would guess that most people would vote selfishly despite their health reform preference for the country as a whole.
Nevertheless, “a poll conducted by Time/CNN/Yankelovich in September 1993 — just before the Clinton health plan was formally introduced — found the public much more conflicted than today, with 20% saying they thought the plan would make them and their family better off, 21% saying they would be worse off, and 57% believing they would be unaffected.”
Looks like health reform is gaining public support slowly but surely.
The economic stimulus plan is looking to spend money on “shovel ready” infrastructure projects. Even though stimulus bill funds have not yet been spent, fiscal policy has already generated increased economic activity in one sector: lobbying.
NPR’s Marketplace reports that Washington lobbyists earned a record-breaking $3.2 billion last year. Sheila Krumholz, Executive Director for the Center for Responsive Politics, states:
“There was this unique opportunity that government was handing out money and anytime that happens, companies will spend what they must to get in line to get a piece of the pie.“
While President Obama’s speech to Congress had many components, I’m going to focus on those related to health care. I will also comment on the Republican response.
OBAMA ADDRESS
I applaud the President for specifically addressing the need for health care reform.
“…we can no longer afford to put health care reform on hold. We can’t afford to do it.”
Of course, Obama applauded his the health care changes made already (i.e., expanding SCHIP eligibility, and extending COBRA benefits).
The President mentioned the high cost of health care. Health insurance premiums put a burden on small businesses. Small businesses have smaller pooling groups and thus have higher average premiums than for large firms. Further, if one employee gets has a catastrophic illness, this will have a large impact on health insurance costs for small businesses, but not for large. Obama also mentions that many people file for bankruptcy due to large medical bills.
So what is Obama going to do about it? Does he claim he can cure cancer? Actually, yes.
“Our recovery plan will invest in electronic health records and new technology that will reduce errors, bring down costs, ensure privacy, and save lives. It will launch a new effort to conquer a disease that has touched the life of nearly every American, including me, by seeking a cure for cancer in our time…and it makes the largest investment ever in preventive care, because that’s one of the best ways to keep our people healthy and our costs under control.”
Let’s look at Obama’s 3 suggestions:
Although President Obama realizes that “we must also address the growing cost in Medicare and Social Security,” he does not address how this will be done.
REPUBLICAN RESPONSE
Gov. Bobby Jindal’s comments related to health reform were the following:
“To strengthen our economy, we also need to address the crisis in health care. Republicans believe in a simple principle: No American should have to worry about losing their health care coverage, period. We stand for universal access to affordable health care coverage.
What we oppose is universal government-run health care. Health care decisions should be made by doctors and patients, not by government bureaucrats…if we put aside partisan politics and work together, we can make our system of private medicine affordable and accessible for every one of our citizens.”
Gov. Jindal theme was this: the government will help pay for your health insurance premiums, but does not support a single payer plan. Although Gov. Jindal was vague, the Republican worldview might support a voucher system. In a voucher system, individuals receive subsidies to buy private health insurance based on their income and illness level. I believe that Republicans would oppose the creation of a public health insurance plan that could compete with private insurers (see 24 Feb 2009 post).
SUMMARY
Like most speeches, the Obama Address and Republican Response were long on rhetoric and short on details. As all policy wonks know:
“Le bon Dieu est dans le détail” (God is in the details)
Two weeks ago I did a piece looking at the cost of living in different states. One major dimension of the cost of living is state sales and incomes taxes. With the recent economic downturn, it looks like I’ll have to update my numbers.
California currently has the highest sales tax of any state (7.25%). Due to the current budget crisis, it will increase the sales tax by 1 percentage point to 8.25%. This means that in my current home of San Diego, the sales tax will rise to 8.75%. In my future home of San Francisco the sales tax will be 9.5%.
Ouch!
Many politicians are proposing that a “Buy American” clause be included in the stimulus package. This is bad idea. Protecting American jobs from foreign may seem like a good idea to save jobs. However, if ”Buy American” bill is passed other countries will institute their own protectionist provisions. In fact, Brazil may challenge the “Buy America” provision at the WTO.
The Washington Post reports, “Nations including China and many in Europe are preparing to spend billions of dollars of taxpayer money on stimulus projects. American companies are angling for a piece of those pies, and retaliatory measures against U.S. companies, executives argue, could significantly complicate those efforts.”
The Wilson Quarterly reviews a paper by Erik Lindberg (2008) which seeks to answer the following question: why today is Hamburg an economic powerhouse of over 2 million whereas the smaller city of Lübeck only plays a much less significant role in the German economy . In the 15th century, Hamburg and Lübeck were both prosperous German port cities of a similar size. ”Lübeck connected to the Baltic Sea via the Trave River and Hamburg to the North Sea via the Elbe. Their divergent fates illustrate the perils of extreme protectionism…In the face of increasing Baltic Sea competition from upstart traders from London and Amsterdam, Lübeck chose to protect its powerful landowners and leading merchant guild …Hamburg, by contrast, encourage trade with Dutch, Flemish, and English merchanges, and even a score of Portuguese Jews were invited to movie in.”
History reveals the perils of protectionism. Further, even if the “Buy American” clause is intended to be temporary, political interest groups will have an incentive to lobby to make this protectionist philosophy stick in the long term.
Let us call on our politicians to reject the “Buy American” clause in order turn American cities and towns into Hamburgs, and not Lübecks.
One health risk factor often overlooked in this blog is going to war. Veterans from the wars in Iraq and Afghanistan frequently return home with traumatic brain injury from roadside bombs, post-traumatic stress disorder (PTSD), and other injuries.
Marketplace chronicles the problems veterans experience trying to collect military benefits after returning to civilian life. The article reports that it can be difficult for Veterans to claim indemnity benefits.
Soldiers given a military disability rating below 30 percent get a one-time severance payment instead of life-long medical benefits for the whole family. Kerry Baker — with the Disabled American Veterans — says the army cherry-picks lesser injuries when applying its disability standards. In military-speak, disabilities are referred to as “unfitting conditions.” That’s any injury that prevents soldiers from performing their duties.
Further, getting medical care at the VA is difficult during wartime. The VA has a “backlog for disability claims is in the hundreds of thousands.”
The human and financial cost from war does not end at the close of combat. These issues will linger on for years to come.
Today, G.M. and Chrysler must submit a government-mandated recovery plan to Congress. The N.Y. Times reports that G.M is trying get the United Auto Workers to agree to cutback in its employee and retiree health care benefits. ”[G.M.] has to address how a company that lost more than $20 billion last year can afford $5 billion a year in medical bills.” Five billion dollars in medical costs seems like a lot, but how much is it really?
According to the Kaiser Family Foundation, Medicare expenses in the following states were less than $5 billion in 2005:
Wow. I couldn’t believe this either when I compared the numbers. The N.Y. Times article continues stating “ [G.M.'s] future obligations for retiree health care are estimated at $47 billion, and by next year it is required by its contract to contribute more than $10 billion to the trust set up in 2007.”
This is certainly a tough situation. G.M., Ford and Chrysler are on the hook for billions of current employee and retiree medical expenses. On the other hand, retired Big 3 autoworkers who put in 30-40 years of service with the promise of life-time healthcare may now be left with limited or no medical coverage.
Like everyone in this economic recession, belt tightening is needed by all parties involved.
It’s a truism that people are complicated, multifaceted, contradictory, surprising, but it takes the advent of war or other momentous events to be able to see it. It is the most fascinating and the most dreadful of spectacles…the most dreadful because it’s so real; you can never pride yourself on truly knowing the sea unless you’ve seen it both calm and in a storm. Only the person who has observed men and women at times like this…can be said to know them. And to know themselves.
a checklist?
According to The Independent (‘Right patient? right limb?‘), “Surgeons in England and Wales will be ordered today to carry out a safety checklist before every operation they perform, after a study showed it cut surgical deaths and complications by a third….Surgeons and nurses run through a series of basic safety checks before each operation, similar to those made by pilots before take-off. The checks include asking: Is this the right patient? Is this the right limb? Has the patient had the right drugs?”
Atul Gawande states why he believes these checklists are so important.
“When I talk to clinicians, they say: ‘we already do this stuff.’ The answer is: we are good at doing it most of the time, but we are not good at doing it all the time. We found some members of the team felt they were such low agents, they only felt responsible for their corner. Being allowed to say who they were [one item on the checklist] and hear the surgeon say what he expected made them feel part of the team. When you are not given a voice you turn your brain off.”
This techniques may also be implemented on the other side of the Atlantic. On CNN, I recently saw an interview with an executive at MachOne Leadership. This firm translates aviation Crew Resource Management (CRM) techniques, tools, and skills for the healthcare field. Aviation techniques may be useful in the surgical setting because both are complex, high-stress environments, lead by type-A personalities who don’t like to compromise.
The Cato Institute’s Michael Cannon moderates an interesting policy forum on “Does America’s Health Care Sector Produce More Health?” A podcast of the forum is available here.
Is a single payer system better than an unregulated health care system? If they U.S. scores worse on health care metrics, does that mean that unregulated health care systems are inherently inferior? Not necessarily. The U.S. is not a truly unregulated health care system. In fact, it could be the case that health care quality as a function of regulation could be related as follows:
The U.S. is somewhat regulated, but less regulated than health care systems in most European countries. Thus, it could be the case that moving the U.S. towards a single payer system or moving towards a completely deregulated system could both improve health care quality in America.
The Mayo Clinic is renowned as one of the best health care facilities in the world. Yet it also spends millions of dollars to make its buildings look like this. Why do hospitals spend so much money on making their buildings look beautiful instead of directing those funds towards clinical care?
An NBER working paper by Goldman and Romley (2008) finds that patient demand is based much more on hospital amenities than on their clinical quality.
“From the patient perspective, hospital quality…embodies amenities as well as clinical quality. We also find that a one-standard-deviation increase in amenities raises a hospital’s demand by 38.4% on average, whereas demand is substantially less responsive to clinical quality as measured by pneumonia mortality. These findings imply that hospitals may have an incentive to compete in amenities, with potentially important implications for welfare.”
Tomorrow morning, I’m off to San Francisco for the Allied Social Science Associations (ASSA) meetings. I have 20 job interviews in 4 days. Wish me luck.
How would you like to run a major city? With the economic economic slowdown, would you raise taxes? If so, on what? If you would cut spending, what programs would you cut?
The City of Los Angeles has a survey that let’s you decide allocate the taxpayers dollars. More information can be found at the L.A. Times.
At the turn of the century, the football (soccer) club Real Madrid began collecting some of the most famous players in the world. Termed los Galácticos by the media, the team included a stockpile all-world players such as Figo, Zidane, Ronaldo, Beckham, Michael Owen, Roberto Carlos, and Raúl.
It seems Presdient-Elect Obama is trying to form his own team of Galácticos. Obama has assembled an economic team with impressive resumes: Lawrence Summers (Harvard Ph.D., former Harvard president), Peter Orzag (London School of Economics, Ph.D.), Christina Romer (M.I.T, Ph.D.), Paul Volcker (Harvard, LSE, former Fed Reserve President).
Does this ensure success? Not necessarily. David Halberstam’s book, The Best and the Brightest, reveals that President Kennedy’s team of extremely intelligent, well-educated individuals still managed to make poor decisions during the Vietnam War.
On the other hand, Obama is also following President Lincoln’s “Team of Rivals” model. Lincoln choose William H. Seward, Salmon P. Chase, and Edward Bates for cabinet positions even though each of them opposed his nominations. Similarly, Obama has choosen Democratic rival Hilary Clinton as secretary of State, and has allowed Bush-appointee Robert Gates to continue as Secretary of Defense.
Will Obama’s choices for cabinet positions lead help lead the United States on the path to peace on prosperity? Hopefully, they will at least do better than los Galácticos.
The Washington Post reports that the number of children who have been vaccinated in developing countries has been greatly exaggerated. Political pressure to increase vaccination rates as well as financial incentives from NGOs rewarded increased vaccinations has driven these reporting errors.
My favorite Economist issue is out: The Economist picks for the books of the year. Below, is a list of my favorite books that I’ve read in the last 12 months.
In short: yes. A study by Rising, Bacchetti, Bero (2008) compares mandatory trial submissions to the FDA with information on trials which appear in academic journals. The authors find that “Discrepancies between the trial information reviewed by the FDA and information found in published trials tended to lead to more favorable presentations of the NDA drugs in the publications. Thus, the information that is readily available in the scientific literature to health care professionals is incomplete and potentially biased.”
Why is health care so expensive? How does insurance work?
Health insurance giant Humana has some answers available on YouTube. These brief, two minute videos give a nice introduction to some important health care and health insurance concepts. The videos so clear and easy to understand anyone could understand it.
Health experts will of course note that these videos greatly simplify the problems of providing medical care and leave out a lot of important nuances. Still, as an introduction to important health care concepts, these videos do a fairly good job.
With the economy in a downturn, many firms have been hard hit. Industries that sell luxury goods have been especially hard hit. One example of a luxury good sector taking a beating is the elective surgery market. The New York Times reports that dermatologists, facial surgeons and plastic surgeons have all seen a significant drop in demand.
Yet these physicians are not passive participants in the market. In a move that Marginal Revolution’s Markets in Everything would appreciate, physicians are slashing prices.
“In light of drastic consumer cutbacks on spending, some dermatologists, facial surgeons and plastic surgeons are promoting the kinds of markdowns, coupons or two-fers you might expect to find in supermarket circulars — complete with restrictions like ‘offer not good with any other promotion.’
…surgeons list promotions like $500 off a single operation or $1,000 off a combination of body or facial surgeries.“
Barack Obama has been elected President of the United States. Whether you are for or against Obama, this is a historic day. It is the first time an African-American has been elected president. Coverage of the election is below:
Well its election day here in the U.S. As an engaged citizen, I encourage you to vote. As an economist, I know that your vote will not matter. Anthony Downs looks at the irrationality of voting and claims that the probability that your vote will matter, that it will itself determine the outcome, is in essence zero.
So should you vote? Cafe Hayek states that even though voting may be irrational, it is likely the right thing to do: “Kant’s categorical imperative says basically that you should act assuming that others will act the same way.”
So who is going to be the next president of the United States of America? Marketplace has a segment dedicated to two sites that attempt to predict the outcome. The first, InTrade, is a prediction market that economists like because the people doing the predicting are actually betting their own money on their projections. The second site is fivethirtyeight.com. This site uses sophisticated statistical techniques to arrive at more accurate projections of the winner. As of 8:45am PCT, both sites had Barack Obama as the heavy favorite.
Everyone wants to be a knowledgeable voter. Yet your life is busy; you work, or are in school, or have kids. There is only one day left before the election. How do you choose your candidate?
For health related issues, I of course recommend reading a post from this blog. But what about other issues?
Fortunately, a few sites let you take a brief quiz which let you compare your views on certain issues with that of the candidates. Some of these sites include:
“Nothing is more permanent than a temporary program.”
The San Francisco Chronicle reports that Apple has donated $100,000 for the No on Prop 8 campaign. Proposition 8 is a California referendum that aims to pass the “Marriage Protection Act” which would outlaw gay marriage. Apple may gain some customers who approve of gay marriage, but most people won’t buy a computer just because Apple supports gay marriage. On the other hand, opponents of gay marriage may decide they would rather purchase a laptop from company that don’t overtly supports gay marriage. Claremont University Marketing Professor Peter Sealey claims that Apple’s decision could drive away customers who disapprove of same-sex marriage. From a marketing point of view, Apple seems to be making a big mistake.
So why would Apple give money to one side of such a controversial issue?
One reason may be that Apple is not trying to appeal to its customers, but its employees. Apple is based in Silicon Valley. Many of its employees are likely young, liberal, and favor gay rights. Thus, the support of gay marriage may be a ploy to appeal to the sentiments of Silicon Valley techies.
Or there is a third possibility. Apple may just be following the ideals of its workers, managers, and shareholders. ”Apple was among the first California companies to offer equal rights and benefits to our employees’ same-sex partners, and we strongly believe that a person’s fundamental rights – including the right to marry – should not be affected by their sexual orientation”
What are the tax implications of John McCain’s health care proposal? The key components are that health insurance will no longer be tax deductible but individuals will receive a $5000 credit of purchasing health insurance. Let’s work out some simple math to see how this will impact the life of a typical American.
Example with Max, Rob and Rich
Currently, the deductibility of employer provided health insurance is highly regressive. Let’s look at 3 individuals. One is middle class and his name is Max; the other two are rich and their names are Rob and Rich. Middle class Max has a 25% tax rate, while Rob and Rich pay a 40% income tax rate. Rob has the same $12,000 health insurance package as Max, but Rich has a more generous $16,000 plan. Let’s see how this affects their tax bills.
| Max | Rob | Rich | |
| Tax Rate | 25% | 40% | 40% |
| Health Ins. Cost | $12,000 | $12,000 | $16,000 |
| Health ins. tax liability |
$3,000 | $4,800 | $6,400 |
| Tax liability if ins. tax-deductible |
$0 | $0 | $0 |
| Net taxes w/ $5000 credit | -$2,000 | -$200 | $1,400 |
The tax system as it currently stands is very regressive. Max, Rich and Robert pay the same $0 taxes on their health care benefit regardless of their income and regardless of the size of their health insurance benefit. If health insurance was taxed, then middle class Max will pay less taxes on his health insurance than rich Rob and rich Rich because Max has a lower marginal tax rate. On the other hand, individuals with more generous health insurance packages get a larger tax benefit when health insurance benefits are tax deductible. Even though Rob and Rich are in the same tax bracket, Rich saves more money than Rob when health insurance is tax deductible, since Rich has a more generous health insurance plan. Tax deductibility encourages people to buy more generous health insurance packages at the expense of the taxpayer.
The McCain plan.
Will the McCain plan lead to higher net taxes? In my example, Max and Rob save money under the McCain plan. Only Rich owes more taxes since he is in a higher tax bracket and has a more generous health insurance plan. Of course, health insurance costs will increase over time, so McCain may want to index his health insurance credit to inflation.
Individuals are also worried that if they pay for health insurance themselves, this is a pure transfer of cost. If I support McCain, will my health insurance costs go up by $12,000? or $7000? In reality, if employers stop paying for health insurance and transfer the burden to employees, in a competitive market employers will increase wages to compensate for the loss of the health insurance benefit. Most economic research has found that the cost incidence of employer-provided health insurance appears almost 100% through lower employee wages.
We do have to worry that as individuals start to pay for individual health insurance plans, the problems of adverse selection may worsen. Further, non-group plans are more expensive to administer than group plans. Thus, the shift in the type of plans individuals select may affect the cost, but the direct tax effect of the McCain plan will lead to a reduction or small increase in tax liability from health insurance benefits.
Effect on Employers
Some individual believe that the McCain plan would increase taxes for business. This is incorrect. If health insurance businesses were taxed, individuals would pay the tax. For businesses, health insurance still counts as a labor cost and would reduce their profit and thus tax liability. If individuals would receive a $12,000 health insurance package from work, currently they do not owe any taxes on this benefit. If individuals were taxed on this benefit, then an individual in a 25% tax bracket would owe $3000 in additional taxes. If you are in the 40% tax bracket, you will owe $4800. This means on net, the McCain plan would decrease your taxes by $2000 for the 25% tax bracket and $200 in the 40% tax bracket.
Also, even if the employer paid for health insurance for a group, each individual would be taxed according to the average cost of the health insurance plan per worker (likely weighted by whether it was a family or single plan).
The Star Ledger reports that “uninsured patients are less likely to visit the emergency department for non-urgent care than insured patients.” The conclusion is based on an article in this month’s edition of JAMA written by Newton, Keirns, Cunningham, Hayward, and Stanley (2008).
The authors examined 127 articles which studied adult medical and surgical care of uninsured patients in emergency settings. They conclude the following:
“Available data support the statement that care in the ED is more expensive than office-based care when appropriate, but this is true for all ED users, insured and uninsured. Available data do not support assumptions that uninsured patients are a primary cause of ED overcrowding, present with less acute conditions than insured patients, or seek ED care primarily for convenience.”
Generally, uninsured patients only visit the emergency room if there is an emergency. Why? The emergency room is expensive and uninsured individuals cannot afford to use the emergency department for simple primary care issues. On the other hand, working individuals with insurance use the emergency room because physician hours are usually during their working day and sometimes the only place to get after-hours care is the emergency room.
The New York Times has an revealing article on Henry Cisneros. Mr. Cisneros was the U.S. Secretary of Housing and Urban Development (HUD) under President Clinton. In an attempt to expand home ownership rates, especially among low-income households, Mr. Cisneros loosened mortgage restrictions. ” Families no longer had to prove they had five years of stable income; three years sufficed…lenders were allowed to hire their own appraisers rather than rely on a government-selected panel.”
The article portrays the fallout from HUD reforms under Cisneros. Lago Vista is a Cisneros development in San Antonio and was supposed to be a beacon of hope for low income households. Now, “scores of homes have been foreclosed, including one in five over the last six years on the community’s longest street, Sunbend Falls, according to property records.”
Conflicts of Interest
Mr. Cisneros later capitalized on his experience at HUD. “[H]e joined the boards of a major builder, KB Home, and the largest mortgage lender in the nation, Countrywide Financial — two companies that rode the housing boom, drawing criticism along the way for abusive business practices.” Later, Mr. Cisneros became a developer himself and built up the now impoverished Lago Vista development.
Government intervention towards the noble goal of increased home-ownership rates for the poor, has had the unintended consequence of exacerbating the housing crisis.
What is AIG doing with the bailout money it has received from the federal government? The Wall Street Journal reports that AIG is “…using taxpayer money in its effort to soften new federal controls over the mortgage industry.”
Today I attended a seminar by Eli Berman on his paper, “Can Hearts and Minds Be Bought? The Economics of Counterinsurgency in Iraq.“ He noted that the U. S. Military often employs pediatricians to collect information. When, the military pays for a pediatrician to serve an Iraqi community., not only does this engender good will from the local Iraqi population, but soldiers mill around the pediatrician’s waiting room. After conversing with some of the parents, many Iraqis share intelligence about the identity or location of rebel insurgents. In rural areas, a similar technique works with veterinarians.
In Europe and North America, the influenza vaccination rate is about 20% to 40%. In China, this figure is only 2%. The pharmaceutical company Sanofi-Aventis smells opportunity.
China Business Daily reports that Sanofi-Aventi will invest €7 million to build a new vaccination prodction facility in Shenzhen. The article continues: “after the company’s the pharmaceutical factory in Shenzhen officially put into operation in 2012, the company could sell 2.5 million seasonal influenza vaccine in China.”
One of the goals of a government-run, single-payer, centralized health system is to give everyone equal access to quality care. The availability of health care in the UK’s National Health System should be the same for all people regardless of income or employer.
An article in the Telegraph reports that NHS employees are getting preferential treatment. The NHS “spent more than £12,000 on private treatment for hospital staff because its own waiting times are too long.” The amounted to 271 visits to private physicians.
Now, let us put this in perspective. The UK spends 8.4% of GDP on health care. This amounts to about £100 billion ($180 billion). So an expenditure of £12,000 is essentially meaningless in the grand scheme of things.
However, the principle is important. In a marketplace, those who are able to pay are the one who receive services. In a government-run system, the ideal is for everyone to be able to receive government services; what generally happens is that those with political connections get preferential treatment.
Mark Wallace of the TaxPayers’ Alliance said: “Their staff should have to wait like everybody else.
“Perhaps if they experienced it as their customers – that is the taxpayer – experienced it, they might be a little keener to improve their waiting times.”
Do you support a government-run health care system? Like anything, there are pros and cons to this, but one of the cons is the following: government-run organizations will inevitably exhibit cronyism and favoritism.
Do fat people earn lower wages? Finding a correlation between weight and wages does not mean that a causal relationship exists. For instance, assume that body type has no effect on wage. If more motivated people have higher wages and also exercise more, we may find a negative relationship between body weight and wages. On the other hand, people with high wages may have more money to pay for food and thus may be larger. Literally, they may be “fat cat.”
To control for these spurious correlations, we need a good instrument. The instrument would be correlated with body type but uncorrelated with unobserved factors which effect wages. Norton and Han (2008) use an innovative instrument: individual genotypes which help determine body weight. The authors also use siblings lagged BMI as an instrument as well. The data set used is Add Health, which focuses on adolescent health.
Both genetic and environmental factors determine weight. Thus we would expect the genotype to be highly correlated with the phenotype, weight. It must be the case that the genotype used as instruments must only effect weight. If the same genes that affected weight also influenced intelligence, then genotype would be a poor instrument.
Using these novel instruments, the authors conclude that “an increase in BMI as a late teen has no statistically significant effect on either employment or wages for a person in their mid-twenties.”
Paul Krugman won the Nobel Prize in Economics on Monday “for his analysis of trade patterns and location of economic activity.” More coverage is available at the Nobel Prize homepage and The New York Times.
This afternoon I will by flying to Washington, D.C. for INFORMS 2008. This is a conference discussing topics related to operations research. Posting will resume on Wednesday.
One way to insure that you have a high quality doctor is that they have a medical license. In fact, no doctor can legally practice in the United States without one. Yet Shirley Svorney’s article claims that we can reduce cost any maybe even improve quality by eliminating licensing requirements.
Many readers may pause here and say that they would never go to a an unlicensed medical doctor. Neither would I. However, it is important to distinguish between a license and a credential. Medical licensing prohibits workers from preforming certain tasks without the license. Private organizations bestow credentials to doctors who have reached a certain quality or knowledge threshold. How would the world look without medical licensing?
If you were seriously ill, you would be sure to go to a high quality doctor. You would be able trust that your doctor had a minimum competency level if they had given credentials. For instance, most specialty physicians today must be board-certified. Thus, life without licensing may look similar to life with licensing.
Let us say you had a basic cold and you needed some medical attention. A nurse practitioner would be perfectly qualified to handle this case. [Svory's article cites the AMA's Council on Medical Education which finds non-physician clinicians such as NPs can provide an acceptable level of care]. However, if the government mandated that you must see doctor first, this would make the health care visit more expensive. Thus, licensing has increase the cost of medical care without improving quality.
Other problems with licensing.
Too much education: Licensing often requires individuals who wish to enter the licensed field to receive “too much” education. As a PhD student, you may believe that I think that education is like Green Bay Packers victories: more is always better. However, increased education requirements increase labor costs and decrease labor supply. For instance, “starting in 2012, California will require new audiologists to have obtained a doctorate (Au.D.), raising concerns that the legislation would exacerbate a shortage of audiologists.”
Turf Battles: One reason licensing is so popular is that it decreases competition. Optometrists and ophthalmologists may be able to preform some of the same tasks, but ophthalmologists can decrease competition by prohibiting optometrists from conducting certain procedures.
Licensing may not truly improve quality. Dr. Svorny’s paper finds many examples to show that licensing may not be improving quality as much as we had hoped. For instance:
Without licensing what will insure high quality care?
Credentials could replace licenses. Credentials would verify a minimum quality level, but not restrict the scope of practice of other practitioners. Further, a doctors reputation is important. If the doctor preforms poorly, they will lose patients. In the past, it may have been very difficult for patients to verify quality; with the advent of consumer guides such as Consumer Reports, HealthGrades, Angie’s List, and insurer evaluations, patients can now more easily measure physician quality.
Conclusion
“Many of the most powerful innovations that disrupted other industries did so by enabling a larger population of less-skilled people to do in a more convenient, less-expensive setting things that historically could be performed only by expensive specialists in centralized, inconvenient locations.”
Wall Street wasn’t the only group helped by the economic bailout bill. Also included in the bailout bill was a law that requires equal coverage of mental and physical illnesses. The law was the culmination of many years of work by mental health advocates such as Senator Pete V. Domenici and Senator Paul Wellstone.
What will mental health equality in coverage mean?
“Medicare beneficiaries pay 20 percent of the government-approved amount for most doctors’ services but 50 percent for outpatient mental health services. The co-payment for mental health care will be gradually reduced to 20 percent over six years.”
However, for private plans this may not be as clear. What if a private health insurance plan has no coinsurance for primary care, a 20% coinsurance rate for dermatologists, and a 40% coinsurance rate for cardiothorasic surgeons. If mental health care must have equal coverage to medical care, which number must it be equal to? The of course does not take into account copayments either which often vary if you go to a primary care doctor compared to a specialist.
The benefits of this law will accrue to those who have or will have a mental illness. The cost of the plan will be shared by all through higher premiums. Someone must pay for these additional insured services; either insurance premiums will increase or taxes will rise if the government opts to subsidize mental health services (as it will likely do in the case of Medicare).
Is the the extra tax/premium cost worth having a mental health benefit? Reader, that is a decision for you to make on your own.
The Economist magazine has a comparison of the two presidential candidates plans to reform the American health care system. For my take on the two candidates plans, see my post on the Obama vs. McCain health care policies.
The 2008 Nobel Prize in Medicine was given to three European researchers who discovered viruses that cause cervical cancer and AIDS.
German virologist Harald zur Hausen discovered that HPV causes cervical cancer. This discovery eventually lead to the creation of the HPV vaccine against cervical cancer.
Two French virologists, Francoise Barre-Sinoussi and Luc Montagnier, shared the other half of the award for discovering H.I.V., the virus that causes AIDS.
The Nobel Foundation has complete coverage of the awards.
The Economist magazine took a poll of academic economists working at NBER to see who they would vote for. Barack Obama came out as the favorite. Even though 46% of academic economists list themselves as Democrats compared to only 10% who claim to be Republican, Obama came out overwhelmingly ahead.
Seventy percent of economists would rather work for Obama than McCain (compared to 10% for McCain). Eighty percent of economists believe Obama has a better economic team.
“John McCain has professed disdain for ‘so-called economists’, and for some the feeling has become mutual,” says Erik Brynjolfsson, a professor at the Massachusetts Institute of Technology Sloan School of Management.
Last night I watched a powerful documentary chronicling about the plight of four of the 47 million uninsured Americans. P.O.V.’s “Critical Condition” by Roger Weisberg follows four individuals through their experience of getting sick and attempting to secure medical care without insurance.
“What happens if you fall sick and are one of 47 million people in America without health insurance? Critical Condition puts a human face on the nation’s growing health care crisis by capturing the harrowing struggles of four critically ill Americans who discover that being uninsured can cost them their jobs, health, home, savings, and even their lives.”
“Critical Condition” does a good job of pointing out the problems of the American health care system, but does not offer any solutions. Carlos Benitez has a severe back deformity that causes severe pain. A surgery costs about $200,000 and even if Mr. Benitez has the surgery he has 10% chance of dying. In Mexico, the same surgery costs $40,000. Mr. Benitez is a chef at a French restaurant and cannot afford the surgery. Should the government pay for this risky surgery? In the end, UCLA offers to do the surgery for free and the surgery is successful.
Who should pay for this surgery? Mr. Benitez cannot afford it. Should taxpayers pay? In this case, this is a high risk, expensive surgery. Does the benefit of covering this surgery outweigh the cost?
A more depressing case is that of Joe Stornaiuolo. Mr. Stornaiuolo was a doorman for 15 years who got sick, and because of his illness lost his job. Because he lost his job, he lost his health insurance. Because he lost his health insurance, he could not pay for the medical care he needs. Mr. Stornaiuolo’s chronic liver disease could be managed with a regimen of prescription drugs. Since Mr. Stornaiuolo can’t afford these drugs, however, his sickness spirals out of control eventually leading to hospitalization, long term nursing home stay, and his eventual demise.
For Mr. Stornaiuolo having health insurance would likely have saved money for the medical suppliers. If insurance would pay for his pharmaceuticals, this would have significantly decreased the chance he needed to be hospitalized. Since he can not afford to pay for his hospitalization, the cost of inpatient care will be passed on to those who do have insurance in the form of higher fees. This is one case where giving Mr. Stornaiuolo health insurance could have actually saved money.
Whether you have insurance or not, getting sick is horrible. The Critical Condition documentary shows three key issues with medical care in America. First, medical care is expensive. We can reduce the cost of medical care by loosening patent laws and allowing pharmaceutical imports from other countries. We can also get rid of medical licensing. Despite these efforts, medical care will likely remain expensive in the future.
The second problem is that some most individuals do not have enough money to pay for this medical care. The way to fix this problem is with some type of redistribution of income. This involves taxing wealthy individuals in order to either have a government run healthcare system (which I oppose) or giving vouchers to poor individuals to purchase their own private health insurance.
Finally, competition in the insurance market is not always a good thing. Competition leads to higher quality service and technological innovation, but it also gives insurance companies an incentive to drop patients after they develop an illness. This is exactly the opposite of what insurance is supposed to do. A minimum package of benefits may solve this problem, but could also increase the price of health insurance and thus increasing the number of uninsured. There are no easy answers.
Illness is a horrible thing. Yet I challenge myself and all my readers to make an effort to improve the health care system in whatever ways they can.
The Health08.org website has a great tool to give voters a side-by-side comparison of John McCain and Barack Obama’s stance on a variety of health care issues. For some commentary on each of the candidates health care reform proposals see my post on Obama vs. McCain health care policies.
This year the Healthcare Economist, Jason Shafrin, will be completing his Ph.D. in health economics at the University of California, San Diego. He will be available for interviewing at the AEA meetings in San Francisco, January 3-5. For more information regarding Jason Shafrin’s credentials and his contact information, visit his homepage: jasonshafrin.com.
The John D. and Catherine T. MacArthur Foundation awarded 25 individiuals with their 2008 “Genius” grants. Among these 25 individuals, two deal specifically with the field of medicine.
Peter Provonost uses evidence-based medicine to standardize quality of care. To address the problem of catheter infections, “Pronovost culled lengthy guidelines into a simple checklist of five precautionary steps and tested its efficacy through a cohort study conducted in ICUs throughout the state of Michigan.” I describe some of his efforts in more detail in a December 2007 post.
Diane Meier is a geriatrician who “found that a high percentage of seriously ill patients in hospitals were experiencing limited communication between patients and clinicians, poor management of pain, and insufficient support and social services for family caregivers. Meier established the Hertzberg Palliative Care Institute at Mount Sinai, a model program that assists patients and families in navigating the complexities of illness and devises strategies for managing pain and other symptoms, such as anxiety, depression, sleeplessness, and loss of appetite.”
In the UK, a dental clinic has opened in a Sainsbury’s grocery store. The grocery store dental clinics aim to fill a patient need caused by the shortage of dentists in the UK. BBC News reports,
“Dentist Lance Knight said the practice aimed at “making dental healthcare more accessible and convenient to better meet patients’ needs.”
The private surgery will go head to head with the NHS, charging £16 for a check up, which is slightly less than NHS fees.”
“Economist Gary Burtless of the Brookings Institution recently discovered this astonishing data: on average, annual health spending per person — from all private and government sources — is equal for the poorest and the richest Americans. In 2003, it was $4,477 for the poorest fifth and $4,451 for the richest.”
Continuing with yesterdays theme of fixing America’s fragmented health care system, I will review some of the Commonwealth Fund’s policy suggestions to improve health care quality.
Shih et al. (2008) “Organizing the U.S. Health Care Delivery System for High Performance“, Commonwealth Fund Report no. 1155.
NPR’s Marketplace Money discusses the pros and cons of allowing Google Health to store your private medical records.
[Dr. John Halamka, the Chief Information Officer at Beth Israel Deaconess Medical Center]: A patient can put privacy flags on any of this record that they wish. They can not change the facts in the record however. You can hide it, but you can’t change it.
The U.S. healthcare system is one of the more fragmented systems in the world. Traditionally, economists believe that a splash of decentralized planning with a heap of free markets is a recipe for efficient outcomes. In the case of health care coordination, however, information sharing, and collaborative work are needed if quality is to improve and decentralization may not be the best option. Cebul et al. (2008) describe some of the problems with America’s fragmented system. For instance:
In future posts, I will give some examples of organizations that have been able to overcome these problems, as well as policy prescriptions to improve the health of America’s medical system.
See also: Fragmented Medical Care II (The Models) and III (Policy Options).
Cebul RD, Reibitzer JB, Taylor LJ, Votruba M (2008) “Organizational Fragmentation and Care Quality in the U.S. Health Care System” NBER WP 14212.
According to the U.S. Census:
See also a USA Today story concerning these Census numbers on health insurance as well as income and poverty.
Barack Obama and John McCain both believe that they know how to improve the American health care system. A policy brief by Michael Tanner has nice summary of the two candidates policies. I will review some of this paper today.
Obama’s general health care policy
Obama goal is to expand government provided health care and create a form of “managed competition” originally developed by Alain Einthoven. Obama supports expanding SCHIP and Medicaid eligibility. Although Obama does not support a health insurance mandate for adults, he does support a mandate for children and young adults (any one 25 or under). Obama’s goal to increase health care access, he would support a “pay-or-play” mandate. All but the smallest employers would be required to provide health insurance; those who didn’t would be compelled to pay into a national fund covering these uninsured workers. The mandate would likely require a minimum benefits package. Overall, Obama is pushing towards more government provided health care and more regulation.
McCain’s general health care policy
Compared to Obama, McCain is generally against more government participation and regulation. Instead of moving the U.S. to larger risk pools (e.g., government insurance, employer insurance) that are more severely regulated, McCain want to move the U.S. towards more individually provided health insurance. McCain’s main policy initiative is a $2,500 health insurance refundable tax credit for individuals ($5000 for families). The goal is to make health insurance more affordable, but make individuals incur the full cost of “better” health insurance at the margin. McCain is also considering risk-rating these vouchers so that individuals with severe health problems will receive a larger voucher. McCain would also allow individuals to buy health insurance from any state.
Side-by-side comparison
| Obama | McCain | |
| Community Rating | Yes | No |
| Guaranteed Issue | Yes | No |
| Drug Reimportation | Yes | Yes |
| Expand SCHIP/Medicaid | Yes | No |
| Pay-or-play mandate | Yes | No |
| Government direct negotiations with drug companies? | Yes | No |
| End tax-exempt status of employer health insurance benefits? | No, but capped | Either eliminate or cap |
| Health Insurance Vouchers | No | Yes |
| Purchase out-of-state health insurance? | No | Yes |
| Allow non-traditional organizations to buy insurance (e.g., churches, professional organizations)? | No | Yes |
Commentary
So whose health insurance plan is better? If you are in favor of more government involvement in health care, you should support Obama. In the Audacity of Hope, Obama states that “the market alone cannot solve our health care woes–in part because the market has proven incapable of creating large enough insurance pools to keep costs to individuals affordable, in part because health care is not like other products or services (when your child gets sick, you don’t go shopping for the best bargain).” While Obama’s proposals will decrease insurance choice, increase regulation, and increase public funding of healthcare, Obama’s proposals are likely more progressive than McCains and will create larger risk pools. Obama’s plan is likely much more expensive. Further, an employer mandate may lead to higher unemployment levels (see Baicker and Levy paper).
If you are in favor of less government involvement, McCain is your man. McCain rejects “coercion and the use of state power to mandate care, coverage or costs.” The voucher system is similar to the one proposed by Victor Fuchs, and fairly similar to the Swiss managed competition system. A shift to individual–rather than employer-provided–health insurance accompanied by a decrease in regulation should: 1) reduce health insurance costs, 2) increase employment relative to Obama’s plan, 3) give insurance companies the incentive to create innovative products, 4) give workers more choice of their health insurance plan, and 5) be more fiscally sound for the government.
On the other hand, McCain’s plan will be more regressive and can adversely affect the ability of individuals with pre-existing conditions to buy health insurance (unless risk rating the voucher payment occurs). The McCain plan can only be successful if risk pooling can occur on the individual level. This is happening in Switzerland, but in Switzerland there is a standard benefit package which makes shopping for insurance coverage easier.
Additional Comment
Both candidates have proposals with respect to improving how medical care is delivered. Increased preventive care, EMR, and P4P are all popular measures. However, the NEJM states “Our findings suggest that the broad generalizations made by many presidential candidates can be misleading. These statements convey the message that substantial resources can be saved through prevention. Although some preventive measures do save money, the vast majority reviewed in the health economics literature do not.” The ability of any President to directly affect the quality of medical care provided to the patient is likely small. P4P initiatives are good in theory, but since most of medical care involves unmeasurable outcomes, or outcomes which depend on multiple causal factors (e.g., the quality of medical care, baseline patient health, patient behaviors), it is very difficult to implement them on a large scale.
The BBC recently reported that a Durham University professor David Hunter is claiming that obesity is such a problem that its “…threat to our future health is just as significant as the current security threat.” What is Dr. Hunter’s solution?
He said that bigger warning labels, changes in the taxation of “unhealthy” foods, and even the use of compulsory regulations to force manufacturers to cut levels of salt, sugar and fat in their foods could be employed.
I am not sure where you weigh in (pun intended) on this debate, but I think that this is pure hyperbole. Obesity is a health problem, but is one where rational individuals are able to trade-off buying inexpensive, tasty, high calorie meals against the health risks of due to increased obesity. Further, the benefits of eating high calorie, low cost meals are never mentioned. As the cost per calorie decreases, individuals in society are able to afford to purchase more goods (e.g., education, housing).
On the other hand, individuals who experience a terrorist attack are not able to choose their own fate.
If the price of health insurance was risk adjusted so that obese individuals–who are more at risk for diseases such as diabetes–would pay more for health insurance, this would give individuals an incentive to lose weight. In theory this makes sense, but sometimes individuals gain weight when they are sick (since they cannot exercise) and thus risk adjusting health insurance premiums for obesity may be problematic. Nevertheless, claiming that obesity is a bigger problem then terrorism is going too far.
Jin Ma, Mingshan Lu and Hude Quan have a wonderful article in Health Affairs which summarizes how China’s healthcare system has evolved over the years. Today, I will review this article.
Pre-Reform Era: 1949-1978
The health care system during this time–like the rest of the Chinese economy–was centrally plan. There were no private clinics or hospitals in China. The goal of the Chinese government was to ensure “equal access to the health care system for all” regardless of each individual’s ability to pay. Providers were paid on a salaried basis and the government set medication and health care service prices. Emphasis was put on integrating Western medicine with traditional Chinese medicine (TCM). The “face” of health care during this time was the barefoot doctor. These doctors were trained for the needs of the rural population and typically lived within the village.
Health insurance was provided through a number of plans. The Government Insurance Scheme (GIS) covered government workers, the Labor Insurance Scheme (LIS) covered employees of state-owned enterprises (SOE). The majority of the rural population was covered by the Cooperative Medical Scheme (CMS). Private insurance did not exist.
Post-Reform Era: 1978-present
As the government began to decentralize its economy, health care was also decentralized. The central government started to make block grants to each province (similar to the U.S. Medicaid system) rather than the cost-reimbursement system that existed prior to 1978. Physicians were still paid a salary, but could work during their leisure hours for extra income. High service fees were introduced for medical services which utilized the new high-tech medical equipment which was imported into China during this time. The Chinese also allowed forprofit hospitals and cilinics. By 2004, for-profit hospitals accounted for 13.8% of all hospitals and for-profit clinics accounted for 72% of all clinics.
In the 1980s, China allowed commercial insurers to enter the market. Commercial insurers, however, are not overwhelmingly popular since only 5.6% of the population had commercial insurance in 2004. As the market economy ate away at many SOEs, the government decided to merge GIS & LIS and created a new urban employee health insurance plan. It is rare for employers to fully cover their employees health insurance cost. Instead, it is popular to offer employees a fixed amount of month to cover basic health insurance and employees are responsible for covering the rest. In rural areas, a laissez faire attitude was adopted and most rural individuals pay out of pocket for health care. In 1994, less than 10% of China’s rural population had CMS and most barefoot doctors ceased practicing.
China’s Major Health Care Issues
Moving Forward: Reform in China
In order to improve the quality of health care, China has looked to increase regulation, expand health insurance coverage, and try to reward doctors based on the quality of care they provide rather than the revenue they generate. A new urban insurance plan is set to start in 2007 and a nationwide roll-out is planned for 2010-2011.
A New CMS (NCMS) was launched in 2003 to expand rural health insurance. In the NCMS, funding is provided in equal parts by the Chinese national government, local government bodies, and individuals–10 yuan ($1.46) each. The government portion increased to 40 yuan in 2006. As of 2007, 79% of rural residents were covered under NCMS.
A paper by Sun, Jackson, Carmichael, and Sleigh (2009) find that the NCMS has helped to reduce the severity and frequency of catastrophic medical costs in China’s Shandong Province.
According to U.S. Census projections, the number of individuals 65 and older will increase from 12.4% of the populations in 2000 to 20.7% of the population in 2050. With the expected incredible rise in the number of elderly in the U.S., one would expect a concurrent rise in the number of geriatricians.
NPR’s Marketplace, however, reports that there are too few geriatricians. Currently there are only 7000 geriatricians, a 22 percent decline eight years ago. Why isn’t the increased demand for geriatricians–due to the aging popualation–causing more medical student to choose to specialize in geriatircs?
Brandeis professor Dr. Stuart Altman reveals the reason: the insurance system is biased against doctors–like geriatricians–who concentrate on preventive medicine. “The way the health system pays the workers in it, it has a very strong bias in favor of high-tech services, highly specialized services and primarily services for acute care.” Time-intestive, non-procedure based primary care is not as highly compensated. In fact, geriatricians make a quarter to a third less than other specialists.
Some physicians who focus on primary care, however, are discovering that concierge practices give physicians more time to spend with patients and can be more lucrative as well. In my hometown of Milwaukee, Froedtert is opening its own concierge clinic.
In “Does Roche have Genentech’s Rx?“, NPR’s Marketplace reports on Roche’s bid to purchase all of Genentech, a firm that developed the three best-selling cancer drugs in the United States.
What happens to seized drug money? According to the Economist, in Montgomery County, Texas the sized drug money was used to fund the beer and liquor needs of the district attorney at their local county fair. The funds were also used to purchase a margarita machine.
Looks like seized illegal drugs were used to fund legal drug use (alcohol).
The New York Times (“The evidence gap“) has a great article about the high-priced cancer drug Avastin. Avastin treats patients with advanced forms of cancer by cutting of blood supply to the cancerous tumors. The cost-effectiveness of Avastin has been cast in doubt.
“Roy Vagelos, a former chief executive of Merck who is considered an elder statesman of the industry, said in a recent speech that he was troubled by a drug, which he would not name but which was a clear reference to Avastin, that costs $50,000 a year and adds four months of life. ‘There is a shocking disparity between value and price,” he said, “and it’s not sustainable.’
Some patient advocates are also troubled by very expensive treatments like Avastin coming into routine use on what they see as little more than a hope and an expensive prayer.“
The New York Times has an interesting report (“On Campus…“) discussing the fact that older, more liberal professors raised in the 1960s are slowly retiring. They are being replaced by younger professors who are less ideologically driven then their senior faculty members. Currently, over half of academic faculty is over 50 years old while only 10% of the faculty is under 35.
The shift away from liberal academic studies is caused by a number of reasons. First, younger faculty are less ideologically driven. Secondly, the most credible studies have been those which are data-driven, which leaves less room for ideological studies. And finally, “[h]ealth sciences, computer science, engineering and business — fields that have tended to attract a somewhat greater proportion of moderates and conservatives — have grown in importance and size compared with the more liberal social sciences and humanities, where many of the bitterest fights over curriculum and theory occurred.”
The Telegraph reports that Britain’s National Health Service (NHS) has enacted a constitution. “[The constitution] will set out the rights and responsibilities for patients and what they can expect from the NHS in the 21st century. It is being seen by ministers as a chance to reiterate the founding principles of the health service, emphasising that care should be universal, free at the point of access and based on clinical need, not ability to pay.”
The document includes a list of patient responsibilities which includes keeping appointments and treating minor ailments at home. The question is, what will happen if a person does not keep an appointment? Will there be a charge? Sometimes missing an appointment may mean the patient is irresponsible, while other times there may be a family emergency or a child who needs to be picked up from school. There is no sense of responsibility unless there is some reprocussion to missing an appointment.
Will the constitution significantly change how health care is provided in the UK? I doubt it. The constitution does not explicitly determine what services, drugs, operations and treatments the NHS will provide. Thus, if the NHS does not provide a given service to a patient, the patient will still not have legal remedy. If the NHS Constitution is simply a wish list of how health care within the NHS should look, it may serve as a motivating mission statement for employees and politicains.
The document will only be powerful if a patient can receive a remedy when their rights are violated. For instance, if there is a long wait for services, will the NHS pay for treatment overseas? The consitution allows patients the right to register with a GP, but will this be a true choice or will there be a long wait to register with all the best GPs?
In 1991, John Major instituted the Patient’s Charter which also set out a number of rights entitled to NHS patients, however the Patient’s Charter was ineffective since it had no power.
NHS Blog Doctor write about how the NHS Constitution creates an illusion of choice.
Which hospitals in your areas are considered high quality hospitals? The NetDoc.com website integrates hospital ratings metrics and Google Maps in a very user friendly way. Here is a sample for the San Diego.
Hat tip to the HealthCare Management Blog. The blog also has an interesting post on physician rankings.
What’s a doctor to do when a child comes in with the symptoms of vomiting, infected ears and being “clingy and cranky”? Dr. Perri Klass assumed that this was an ear infection, but discussion with the patient’s mother revealed that the child had fallen on his head just a day earlier. Should the doctor order an expensive CT scan when the probability that brain damage occured is very low, or should the doctor send the patient home with instructions of how to care for an ear infection and risk having the child die if brain damage is left undected. This moving story is in the May 29, 2008 edition of the New England Journal of Medicine.
Hat tip to The Sentinel Effect.
This past weekend, I went to Washington, D.C. for a conference. I was able to slip away for a few hours to spend some time at the Newseum, a very interesting museum about News. Thus, this week I will present the Health Wonk Review in newspaper format.
COVER STORY
Health Affairs Blog: Health Reform In The 2008 Election. A conversation with a Harvard health policy professor, the president of Health Policy and Strategy Associates Inc, and a health policy correspondent for NPR.
POLITICS & MEDICARE
Colorado Health Insurance Insider: Two former HHS secretaries discuss ways to cut the cost of Medicare. Donna Shalala advocates eliminating waste and streamline the process in an effort to provide universal health care while Tommy Thompson who advocates increasing Medicare premiums, increasing the age for Medicare eligibility, and cutting benefits.
Health Care Renewal: “Punching primary care in the face.” How the RBRVS Update Committee’s advice rebarding Medicare’s physician reimbursement system will affect compensation for primary and preventive care.
Healthcare Economist: Medicare Part D decreases average overall pharmaceutical price by 12%. Drug formularies and negotiation with pharmaceutical companies are the cause.
Toxic World Blog: Why is the Bush administration trying to loosen the regulations to reduce pollution recently? EPA figures state that “we would go from a cost of $20 billion to a savings of $23 billion if we tightened smog rules…”
Home of the Brave: “Over 50% of all inpatient psychiatric care is delivered in prisons in the US.”
BUSINESS & TECHNOLOGY
Code Blue Now: French doctors make twice the average French wage, but American doctors earn five times the average American wage. Why is this? It can partially be explained by looking at differences in malpractice laws and the fact that medical school is nearly free for most French physicians.
Disease Management Care Blog: Coordinated Delivery Systems vs. Integrated Delivery Systems. Can an “outsourced and modular approach to health care” improve quality?
InsureBlog: What the hell is a “Doctor Nurse?”
Workers Comp Insider: Why aren’t more insurers focusing on wellness in workers comp programs?
The Health Care Blog: The pro and cons of one Health 2.0 website. And why iMedix creeps out Craig Stoltz.
REGIONAL (Revealing my West Coast Bias)
Health Access California: John McCain’s health care reform plans including creating high-risk pools. California, already has a high risk pool: MRMIP. How is it working? While MRMIP is a lifeline for individuals with pre-existing conditions, it is expensive, has an annual benefit cap of $75,000, and has a waiting list of 500 people.
Health Business Blog: Interview with Richard Noffsinger, CEO of SafeMed. SafeMed is based in San Diego.
OPINION & MISCELLANEOUS
Freedom and Individual Right in Medicine: FAQ on Free Market Health Insurance. In a free market, insurers should be able to exclude individuals based on a pre-existing condition and one should realize that it is not one’s social obligation to subsidize the health care of those who can’t afford it.
Systems Thinker reminds us that May is Borderline Personality Disorder Awareness Month.
The Health Affairs blog has an interesting article on why Arnold Schwarzenegger’s health care reform plan for California has been shelved.
As General Eric Shinseki, former Chief of Staff, U. S. Army, said “If you don’t like change, you’re going to like irrelevance even less.”
Can we think of issues related to violent crime as basically similar to that of a contagious disease? This is the question an article in the N.Y. Times Magazine (“Blocking the Transmission of Violence“) attempts to answer.
Violence may spread like an epidemic; murders lead to revenge killings, which lead to more revenge killings. Stopping the “transmission” of violence at its source is the goal of Gary Slutkin and his CeaseFire organization. “CeaseFire tries to deal with these quarrels on the front end. [Interrupters'] job is to suss out smoldering disputes and to intervene before matters get out of hand.”
This is a radical approach, but will it work?
Academic journals are places where medical practitioners can go to view the latest, most cutting-edge, medical technologies. These journals are peer reviewed and are supposed to be places where rigorous, unbiased research is conducted. Some of these articles may not be as unbiased as once thought.
NPR’s Marketplace reports (“Drug Companies…“) that drug companies have been distributing academic journal articles to doctors in order to persuade them to use their drug. Prima facie, this may seem to be an innocuous practice–having drug reps show doctors cutting edge techniques helps to increase the physician’s knowledge. However, it has been found that some of these articles alledgedly written by academic researchers are actually ghostwritten by pharmaceutical companies.
Joseph Ross found when he led a study on medical ghostwriting. He says, in the best case, the drug companies provide information to independent experts and then get out of the way. But . . .
JOSEPH ROSS: Who knows how often that actually happens. The worst case scenario is, a company says, “We’ll have a medical publishing company handle everything. They’ll write the papers, we’ll approve it before we even send it to the doctors. Then we’ll let the doctors lightly edited it if they want to, and then we’ll send it out with their names on top.”
The New York Times reports (“Dental Clinics…“) that the American Dental Association’s branch in Alaska has filed a lawsuit to stop dental therapists from practicing.
“The dental associations say they simply want to be sure that patients do not receive substandard care. But some dentists in public health programs contend that dentists in private practice consider therapists low-cost competition. In Alaska, the federally financed program that supplies care to Alaska Natives pays therapists about $60,000 a year, one-half to one-third of what dentists typically earn.”
Who are dental therapists? Generally, one can think of them as similar to physician assistants or nurse practitioners in the dental world. To qualify as a dental therapist, candidates must undergo a two year training program. In Alaska, dental therapists may practice basic surgical procedures such as drilling and filling cavities and performing routine tooth extractions. Dental therapists may be cheaper, but are they doing a good job?
“So far, the program appears to be providing high-quality care, according to one study in 2006. The study, by the Baylor College of Dentistry, looked at about 600 procedures in more than 400 patients and found that the quality of procedures performed by therapists was no different from that provided by dentists.”
Medicare is inefficient and expensive. Medicare has been expanded through Medicare Part D, which covers prescription drugs. Can expanding an inefficient, expensive system be a good thing? Gary Becker argues yes.
Since drugs have high fixed research costs but low marginal costs, having the government pay for drugs can increase innovation. In fact, a working paper by Blume-Kohout and Sood (2008) finds that “…the passage of Medicare Part D was associated with significant increases in pharmaceutical R&D, especially for classes with high elderly market share.” Further, the fact that there are high fixed costs and low marginal cost means that passing Medicare Part D will likely reduce the average cost of drugs. According to Becker:
This property of the cost of producing drugs has two extremely important implications for Medicare costs. The first is that drugs are an efficient way to treat diseases and disorders that hit a large number of men and women since then the fixed costs can be spread over a larger number of users. This makes them particularly valuable to the elderly who are a growing share of the population in the United States and all other developed countries, and in many developing countries as well, including China…
Drugs are also valuable in inefficient delivery systems that have trouble choking off medical treatments that would not pass a benefit-cost calculation. This would characterize systems with highly subsidized medical care, with excessively low deductibles, or with rules that cannot deny treatments to the very elderly and those close to dying who would benefit only a little from receiving treatment. Surgery, hospitalization, and close physician supervision are expensive ways to treat seniors who do not benefit much from this care since the cost of these procedures tend to rise in proportion to the number treated. On the other hand, while treating seniors with drugs sometimes also may not add much in the way of benefits, the additional cost per user would be much smaller than the average cost per user.
Medicare Part D may increase efficiency in the “second-best” world in which we live today.
People who are sick are not able to shop around for medical care. This statement may be true in some cases, but not for the majority of illnesses. Those without insurance are especially sensitive to the price of medical care and are in fact very likely to shop for the combination of the lowest price, best quality care they can afford.
The RNCentral website gives some tips to the uninsured regarding how they can increase their access to care, improve the quality of care they are receiving, and reduce their out of pocket expenditures. One interesting company is TelaDoc. This firm provides a service which enables patients to phone a doctor 24 hours a day, 7 days a week to receive diagnosis and treatment information. While TelaDoc won’t cure cancer, it will help patients to find the correct treatment for minor illnesses.
Michael Cannon reports (“Pennsylvania Proposes to Defraud Non-Pennsylvanians“) that Pennsylvania is manipulating the Medicaid system. Pennsylvania is increasing Medicaid payments to hospitals (thus increasing the amount of federal matching funds) with one hand, but with the other is creating a tax on “profits of general hospitals in two counties, Allegheny [Pittsburgh] and Philadelphia.”
Thus, the hospitals will be left with the same profit level–higher Medicaid payments will be eaten away by the special tax levy–however, Pennsylvania will have to pay a lower percentage of the cost because of the additional matching funds. Who is hurt? Only the taxpayers in those other 49 states.
Mr. Cannon analyzes the situation more acerbically: “…the federal Medicaid program allows Pennsylvania to siphon money away from other states. That sound you hear is your pocket being picked.”
The N.Y. Times (“…No Rhyme or Reason“) has an interesting essay about how doctors financial incentives pressure them to run too many tests on patients and refer them to too many specialists.
Doctors are usually reimbursed for whatever they bill. As reimbursement rates have declined in recent years, most doctors have adapted by increasing the quantity of services. If you cut the amount of air you take in per breath, the only way to maintain ventilation is to breathe faster.
The Healthcare Economist believes that money matters in medical matters. My research regarding specialist compensation shows that financial compensation has a huge impact on surgery rates.
Musing on the modern propensity for physicians to overtreat their patients, one hospital executive said:
“The hospital is a great place to be when you are sick…[b]ut I don’t want my mother in here five minutes longer than she needs to be.”
Megan McArdle has an interesting post (“Putting a price on health care“) about a U.S. single payer system. If a smaller country like Switzerland decided to have a single payer system, this likely would not create too large a distortion regarding prices or innovation. The U.S. would still have a (somewhat) private health care and the Swiss could learn the prices they should charge for different medical procedures. Also, the Swiss don’t have to worry about testing out innovation. The U.S. can advance new technologies. If the new medical procedures are valuable, the Swiss will adopt them. If not, the Swiss won’t. Of course, basic research in universities can provide much medical innovation, but if there is price control in a single payer system, innovation from private firms would likely decrease.
McArdle notes:
“Europe’s governments operate their health care systems in the context of an existing US market that provides information about demand for new treatments (and of course I would argue, also the new treatments). They don’t use that price information to set what they pay for drugs, but it does filter through to their markets–for example, more widespread use of Herceptin for breast cancer in the US is putting pressure on the British government to provide it. I think an American shift to single-payer would be more problematic than the European example for a variety of reasons related to our government structure. But one important reason is that if we did, we’d have no where left to get prices from.”
TechCrunch reports on a Facebook application that alerts potential donors to donate blood in times of shortage. Take all Types (TAT) is the name of the innovative non-profit which invented this application. The TAT website wisely states:
“There are always shortages of blood throughout the nation, even though there are plenty of potential donors out there. After All, we all have blood we can share. The main issue is communication!“
The latest edition of the Health Wonk Review is up at Workers Comp Insider.
VentureBeat (“…Health 2.0…“) profiles six innovative Health 2.0 firms which were at the 2008 Health 2.0 Conference in San Diego. Each firm on the list aims to reinvent the doctor patient relationship.
Included on the list is Carol.com which allows patients to do medical shopping. PharmaSurveyor allows users to enter the medications they are on and see if there are any harmful drug interactions.
There are lots of innovative ideas coming down the Health 2.0 pipeline.
How much money do you need to save for retirement? $100,000? $500,000? $1,000,000? $5,000,000?
Well whatever your figure is, you need to tack on an extra quarter of a million dollars in order to cover your health care costs in retirement. The Boston Globe (“Fidelity…“) reports that Fidelity now estimates that a couple will need to have saved $225,000 in order to pay for health care costs during retirement. When Fidelity initially conducted this study in 2002, the figure was $160,000, which means necessary savings for health care in retirement has increased by almost 6% per year.
You may think that Fidelity’s numbers are biased upwards since Fidelity has an interest in making people save more money (they make a commission off their investments). Boston College’s Center for Retirement Research also conducted a similar study, however, and found that a couple will need to have saved at least $206,000.
These figures are extremely high, especially considering that they take into account the fact that all of these people will be covered by Medicare. According to BC’s Center for Retirement Research currently 60% of older workers are “at risk” of being unable to maintain their standard of living in retirement.
[Hat tip to New Health Dialogue blog]
Seat belts save lives. At least conventional wisdom says so. But is this really the case?
Seat belts are useful because the reduce the chance that–given that you are in an accident–you will die or sustain a serious injury. But wearing a seat belt may give drivers an incentive to drive more recklessly since the driver may believe that accidents are not as dangerous. Thus, seat belts may increase accidents but reduce injuries when people are in accidents. The net benefit may be ambiguous.
An Economist magazine article (“A hazardous comparison“) expands on this and other safety issues.
In one experiment, a British psychologist, Ian Walker of Bath University, simply got on his bicycle and monitored the behaviour of 2,300 vehicles that overtook him. When he wore a helmet, drivers were much more likely to zoom past him with little room to spare; when he was bare-headed (and indeed when he wore a female wig) the amount of space that motorists left would increase. An experiment in Munich found that the drivers of taxicabs fitted with anti-lock braking systems were involved in no fewer accidents than those without. That is because the former used those superior brakes not to practise prudence but to drive more aggressively.
Such unintended effects are not confined to Europe. John Adams, a transport expert at University College London, has compiled data from all over the world to show that laws making drivers wear seatbelts do not make roads safer; they move deaths from inside cars to outside them because they encourage bad driving. The number of young children killed on the roads has fallen in recent years, he notes—but mainly because they are rarely allowed out alone, so today’s teenagers have less skill at navigating hazardous roads; and as a result, the number of teenagers killed in car accidents has jumped. He lauds the Dutch experiment in “naked streets” where most road signs and markings were removed to force travellers to keep their wits about them.
Joe Paduda has a great post (“Wasted Dollars“) reviewing a study by Alex Swedlow. The study focuses on waste in the health care sector with a focus on Workers Compensation. Mr. Paduda concludes the following:
There’s a lesson here for the non-workers comp world, and policy wonks in particular. It is this – providers overtreat, to the detriment of the patient and the payer. Draconian measures such as flat limits on the amount of treatment do work.
With health reform on the horizon, here’s a great example of the waste in our health care ’system’, waste that benefits the provider.
Paduda claims that Draconian measure work. They key is that policymakers/bureaucrats set these limits at an economically efficient amount. If the medical care becomes too limited (e.g.: the number of doctors visits allowed is below the optimal level for many patients) then patient care could be hurt. If the limits are too high, than there may be no cost savings.
In the California Workers Comp example, Paduda says regulators got it right.
According to Reuters (“All U.S. kids…“), the CDC’s Advisory Committee on Immunization Practices (ACIP) is recommending that all kids should receive an influenza vaccination. Previously, the CDC recommended that all children 0-6 receive a flu shot. Now, all children 18 and under should get the shot.
In addition to the direct health benefits the children will receive from a decreased likelihood of getting the flu, the probability that they will spread it to adults, teachers, other children, and senior citizens will decrease.
However, there will be costs to the flu vaccine expansion. According to the U.S. Census, there were 61.3 million children aged 5-19 in the U.S. Getting all these children vaccinated will be very costly and since the vaccines will be given in the fall, the logistics of providing 61 million additional flu shots will be difficult to manage.
Further, one of my working papers (“Adam Smith meets Jonas Salk: Estimating the Social Cost of Third-Party Influenza Vaccination Restrictions“) finds that when kids 0-18 year old must receive a flu vaccine efficiency losses could increase to as much as $560 million if insurance companies continue to prohibiting reimbursement to pediatricians for vaccinating adults.
The San Diego Union Tribune has an article (“Cross-border coverage“) profiling entreprenuer Jim Arriola and his low cost health insurance plan covering medical care in both the U.S. and Mexico.
His company, Sekure Healthcare, provides a limited-benefit insurance program through employers along with a discount health card program. Both can be used by Sekure members and family members to visit doctors and hospitals on either side of the U.S.-Mexico border.
The health plan is not as generous as typical employer-provided health insurance, but may be an attractive option for low wage workers who can not afford top-of-the-line coverage. Sekure specifically targets low wage Mexican workers in California.
While the plan certainly fills a niche, this type of cross border plan likely will not gain broad appeal. First, most people want to receive their medical care where they live. Thus, the option to have treatment in Mexico will likely only be attractive to frequent migrants or those living near the border (i.e. San Diego). Secondly, the Sekuye plan does not cover catastrophic medical costs.
“Sekure pays up to $50 for each doctor’s office visit and a maximum of $300 a year for the service. Beneficiaries can get up to $800 a day and a maximum of $3,000 a year for hospitalization. They pay out of their own pockets for any charges exceeding their benefits. “
The Sekure plan is the exact opposite of health plans advocated by Republicans. Instead of having catastrophic health insurance with a high deductible, the Sekure plan provides a minimal benefit and does not cover catastrophic costs.
Nevertheless, some insurance is better than no insurance for many low wage workers.
The Wall Street Journal has an interesting article (“Markets and Medicare“) by John Goodman, President of the National Center for Policy Analysis. The article has some innovative suggestions regarding how to improve the health care system.
Medicare should allow alternative payment mechanisms, such as compensating doctors for e-mail and telephone communication with the patient (I completely agree with this). Geisinger Health System “…offers a 90-day warranty on heart surgery, similar to the type of warranties found in consumer product markets. If the patient returns with complications in that period, Geisinger promises to attend to it without sending the patient or the insurer another bill.” While this may seem like a good idea, if someone falls sick within 90 days, it may not always be possible to attribute the complication direction to the heart surgery. It may be due other co-morbidities and how seriously the health system takes this guarantee is unknown.
Virginia Mason Medical Center in Seattle will not give patients MRIs for back pain without first seeing a physical therapist. This is entirely sensible and will greatly cut costs without affecting the quality of patient care.
It is interesting that Goodman advocates the “resticted MRI use” since the NCPA says that “The NCPA’s goal is to develop and promote private alternatives to government regulation and control, solving problems by relying on the strength of the competitive, entrepreneurial private sector.” Reducing the number of MRIs run is certainly the optimal solution from a systems point of view, but reducing MRI use smells like rationing. Physicians have no incentive to decrease the number of MRIs taken–unless the insurers refuse to pay for them–since the patients demand them and many physicians are owners of the MRI care centers to which they refer patients.
What we all must realize is that all good are rationed. They are either rationed through a price mechanism, through queues or through by insurance company or government mandates.
This week’s edition of The Economist magazine has some great articles on health care.
According to the USA Today, the influenza vaccine may receive a complete overhaul for the 2008-2009 flu season.
All three flu viruses in this year’s vaccine should be swapped for others next year because of a dramatic change in the mix of circulating flu bugs…
The decision launches a “time-critical, highly orchestrated” effort by public health agencies and vaccine makers to produce roughly 100 million doses of vaccine — a dated process that involves growing the virus in eggs, he said. “From egg to vial, it takes six to eight months,” Baylor said in a background briefing with reporters this week.
The egg-growing process is done only in the U.S. In Europe, vaccines can be produced faster since they are developed artificially in a lab.
This year’s vaccine protects against just one of three viruses that are dominating this year’s flu season, now reaching its peak. The Centers for Disease Control and Prevention said last Friday that 44 states are reporting widespread flu activity, with cases mounting in five others.
Scientists are unable to explain why all of a sudden, new flu strains have grown so much in prevalence.
Google is everywhere. CNN reports that Google is venturing into health records biz.
“Google Inc. will begin storing the medical records of a few thousand people as it tests a long-awaited health service that’s likely to raise more concerns about the volume of sensitive information entrusted to the Internet search leader.
The pilot project to be announced Thursday will involve 1,500 to 10,000 patients at the Cleveland Clinic who volunteered to an electronic transfer of their personal health records so they can be retrieved through Google’s new service, which won’t be open to the general public…
The third-party services are troublesome because they aren’t covered by the Health Insurance Portability and Accountability Act, or HIPAA, said Pam Dixon, executive director of the World Privacy Forum, which just issued a cautionary report on the topic.
Passed in 1996, HIPAA established strict standards that classify medical information as a privileged communication between a doctor and patient. Among other things, the law requires a doctor to notify a patient when subpoenaed for a medical record.
That means a patient who agrees to transfer medical records to an external health service run by Google or Microsoft could be unwittingly making it easier for the government or some other legal adversary to obtain the information, Dixon said.”
The New York Times blog BITS also has a post about Google Health as well.
There is an interesting pair of blog posts by Ezra Klein and Andrew Sullivan. Mr. Klein advocates a more centralized health care system while Mr. Sullivan is opposed to expanding the government’s role in health care.
Who do you agree with?
Michael Cannon of Cato-at-Liberty cites a study from the Congressional Budget Office (CBO) that it is difficult for centrally planned medical care to eliminate local norms.
“…the centrally budgeted VA system does not display much less geographic variation in spending than is exhibited in the unbudgeted Medicare program . . . . In addition to exhibiting geographic variation in spending, the VA system shows substantial variation in patterns of clinical practice despite the fact that VA’s management tracks providers’ compliance with national guidelines for the treatment of many medical conditions . . . . The implication is that local norms can influence practice patterns, even in a relatively centralized system that places a strong institutional emphasis on adherence to clinical guidelines for care”
Cannon also concludes that pay-for-performance mechanisms may have a similar difficulties eliminating regional variations.
“In 1988, the first year for which data are available, there were fewer than 14,000 patients waiting for a kidney transplant and about 7,000 deceased-donor kidneys. Today, the waiting list has grown more than fivefold — an increase fueled partly by higher rates of diabetes — but the number of deceased-donor kidneys has only inched up. ”
There is a serious kidney shortage in the U.S. Any economist can tell you that shortages generally occur from either a natural disaster or when the government imposes a below market price on a commodity. In this case, the government has said that one can not sell organs; thus the market price for a kidney is set to zero. Could a market for kidneys solve this problem?
The Wall Street Journal has a pair of interesting articles (“Kidney Shortage…” and “A Market for Kidneys?“) on whether or not we should have a kidney market. Julio Elias of the University of Buffalo comes out in favor while Alvin Roth of Harvard University is against. Dr. Elias makes a case based on economic theory:
“The current system of live organ transplants resembles an autarkic economy in which patients in need of an organ transplant are constrained to the organs available in the pool of friends and relatives. The kidney exchange system developed by Al and others is a barter system, and clearly will provide an improvement over the current system.
But a general conclusion of economics is that barter is an inferior system when compared to a money system, since barter requires the coincidence of wants. With the use of computers, and a national registry, multilateral barter is a good possibility, but still less efficient than using general purchasing power; i.e., a market. The main disadvantages of the kidney exchange system are the limitations that only kidneys from relatives and friends can be used and that the exchange must happen at the same time. A market-based exchange does not have such serious limitations.”
Dr. Roth believes that creating a market is politically infeasible and socially repugnant. Although he does not reject the merits of an organ market, he does say that more practical steps–such as an organ exchange or making all individuals organ donors upon death unless they explicitly opt out–will currently be more politically feasible.
“There would be more live-donor transplants if everyone who wanted to donate a kidney to someone could do so, but a healthy person’s kidney is often incompatible with his or her intended donor. So, one way economists have helped is in helping organize kidney exchanges, which allow incompatible patient-donor pairs to exchange with other such pairs. “
What do you think?
According to the Daily Mail (…obesity epidemic…) the NHS could give “vouchers to the overweight to spend on healthy food in supermarkets” or cash prizes to those who manage to lose weight. The UK could also mandate cooking classes in school and more time for physical education classes.
The UK report on obesity states: “We need to rework the incentives for individuals and public bodies to encourage actions now, thereby avoiding much larger costs in later years.”
But will decreasing obesity save the government money? Not according to a recent paper in the PLoS Medicine titled “Lifetime Medical Costs of Obesity: Prevention No Cure for Increasing Health Expenditure.” The paper finds that healthy people have more lifetime medical costs that either obese individuals or smokers. How can this be the case? It is true, that each year an obese individual lives they will incur more medical costs than a healthy person. In particular, spending on heart disease, diabetes, and musculoskeletal diseases. Since a healthy person lives longer, however, the healthy person has more years of medical expenditures which will accumulate compared to an obese individual. Similarly, smokers have higher medical costs per year but since they have a shorter life expectancy, smokers actually incur fewer medical costs over their lifetime than healthy individuals.
It seems that giving prizes to obese individuals for losing weight will not only be costly in terms of the tax revenue needed to fund the project, but will also increase medical expenditures if people do in fact lose weight. The Healthcare Economist is proposing a revolutionary concept: let each individual choose their own weight make their own lifestyle choices without any government interference.
There is a law which states that drug companies must sell drugs to Medicaid at their the lowest price. It turns out the Merck was selling drugs to hospitals at a steeper discount than what they were giving to Medicaid. Merck will pay $399 million for overcharging in Philadelphia and $250 million for overcharging in Louisiana.
According to the New York Times (“$671 million“):
“Merck…was hiding the steep discounts it gave to hospitals by reporting higher prices to the government, prosecutors said.
From 1997 to 2001, Merck also gave money and perks to doctors and other health care professionals to entice them to prescribe Merck drugs, a practice the government called excessive.“
Merrill Goozner has an interesting post (“Unfair and Unbalanced Wonkery on Mandates“) arguing that insurance mandates aren’t good policy (I agree with him on this).
For the record: I’m opposed to mandates for two reasons. First and foremost, they’re bad politics. Americans don’t like to be told to do anything. They especially don’t like unfunded mandates.
That leads to point two. Without sufficient taxes on businesses that don’t provide insurance to their employees and/or significant savings from health care cost control (not likely given the opposition of insurance companies, drug companies, hospitals, doctors, and other providers in the system), mandates will result in inadequate plans for the uninsured — catastrophic plans that still leave the newly insured at the emergency room door for basic care and without preventive services. Higher taxes are a prescription for political failure. Lousy plans maintain the status quo in public health. Some choice.
The rest of the Goozner post argues that a single payer system is not socialized medicine. While it is true that physicians are not directly employed by the government in a single payer system, since the government is paying all physicians salaries–especially if the physician has not outside options to receive payment from another source–I would say that a single payer system is de facto socialized medicine.
According to the Telegraph newspaper (“Don’t treat the old…“), “Smokers, heavy drinkers, the obese and the elderly should be barred from receiving some operations, according to doctors, with most saying the health service cannot afford to provide free care to everyone.”
Should you be denied coverage because of lifestyle choices or because you are ‘too old?’ From a strictly medical point of view, there are likely some individuals who’s lifestyles will create a high risk of complications during surgeries. For some elderly, surgical procedures may offer a slim hope at the prospect of a better life, but at a cost of a significant risk of making the patient worse off. There should be little debate that when a doctor believes that an operation is not necessary or would create too high a risk of complications, then these patients should not be offered free care.
However, the government (i.e., NHS and Medicare/Medicaid) or third party (i.e., private insurance companies) have an incentive to limit the number of people who are eligible for surgeries to decrease cost. In a general equilibrium, free-market framework, if an insurance company would refuse treatment for many individuals, than these individuals can switch insurance companies and the less generous firms will lose market share. Health insurance, however, is not a perfect market and insurance companies have a financial incentive drop individuals with a poor unobserved health statuses.
When the government is running a health care system, then there is no market mechanism (unless there is an outside option of private insurance) and thus these entities will have an incentive to deny coverage for many operations. Health care is expensive and it costs a lot of money to run a single payer system. In fact, the Telegraph reports that “[a]mong the survey of 870 family and hospital doctors, almost 60 per cent said the NHS could not provide full healthcare to everyone and that some individuals should pay for services.”
Should a 95 year old receive a hip transplant even when their probability of living 5 more years is low? Should an alcoholic be refused a liver transplant if they refused to stop drinking?
These are important philosophical questions for a society to determine when insurance is provided publicly. Despite the many flaws of a free-market system where medical care is purchased through private insurance or out-of-pocket payments, these issues are attenuated in a free-market setting. Individuals would only pay for an operation if their benefit is higher than the cost and there would be no liability for a government or private payer entity. Further, in a free-market without insurance, there is a less of a moral hazard problem since individuals may engage in healthier behaviors in order to avoid paying for expensive operations. It may be the case, however, that moral hazard has a small impact because individuals always have an incentive to make effort to stay healthy.
According to the San Diego Union Tribune, yesterday PacifiCare was fined $3.5 million and the California Department of Managed Health Care is seeking up to $1.3 billion in additional penalties for “130,000 alleged claims-processing violations…in California between July 1, 2005, and May 31, 2007.” PacifiCare is the second largest HMO in San Diego and the fourth largest health insurer in California.
These violations have prompted California Insurance Commissioner Steve Poizner begin an audit of the eight largest California health insurers to determine whether or not these companies have engaged in similar billing practice.
Joe Paduda of Managed Care Matters argues that the ruling is another piece of evidence which favors a single-payer system. Mr. Paduda states:
For those (including me) forever excoriating health systems and hospitals for their outrageous error rates, the debacle at Pacificare, the recently-acquired division of United Healthcare (one of my past employers) make the delivery sector look like a paragon of performance. I’m not overly surprised, as mergers involve systems conversions, the amalgamation of provider networks and contracts, and the shifting of work around to different call centers and processing locations. Duplicate staff positions are identified and people laid off, and when they walk out the door so does the expertise and understanding that enabled the operation to run smoothly.
The question remains, would a single-payer system perform better? The government is not known as the paragon of efficiency. With a single payer system, likely one of two things will happen:
A single payer system may lead to improved claims processing. However, for anyone to be convinced that a single payer system is the way to go, one must not only show that the present system is flawed, but that a single payer system is a significant improvement.
The Sacramento Business Journal has an interesting article (“Better communication…“) on Kaiser Permanente’s online system for patients called “KP HealthConnect.” The system allows patients to schedule appointments, refill prescriptions, view lab results and email doctors.
In President Bush’s 2008 State of the Union address, health care issues were mentioned, but did not play a prominent role. Whitehouse.gov has the full State of the Union transcript.
State of the Union: Summary of Healthcare Issues Addressed
Bush reiterated his earlier reform proposals to end the tax deductibility of employer-provided health insurance and to expand health savings account yet no.
“To build a future of quality health care, we must trust patients and doctors to make medical decisions and empower them with better information and better options. We share a common goal: making health care more affordable and accessible for all Americans. (Applause.) The best way to achieve that goal is by expanding consumer choice, not government control. (Applause.) So I have proposed ending the bias in the tax code against those who do not get their health insurance through their employer. This one reform would put private coverage within reach for millions, and I call on the Congress to pass it this year. (Applause.)
The Congress must also expand health savings accounts, create Association Health Plans for small businesses, promote health information technology, and confront the epidemic of junk medical lawsuits. (Applause.) With all these steps, we will help ensure that decisions about your medical care are made in the privacy of your doctor’s office — not in the halls of Congress. (Applause.) ”
Bush also discussed the need to increase funding for basic research:
“On matters of life and science, we must trust in the innovative spirit of medical researchers and empower them to discover new treatments while respecting moral boundaries. In November, we witnessed a landmark achievement when scientists discovered a way to reprogram adult skin cells to act like embryonic stem cells. This breakthrough has the potential to move us beyond the divisive debates of the past by extending the frontiers of medicine without the destruction of human life. (Applause.)
So we’re expanding funding for this type of ethical medical research. And as we explore promising avenues of research, we must also ensure that all life is treated with the dignity it deserves. And so I call on Congress to pass legislation that bans unethical practices such as the buying, selling, patenting, or cloning of human life. (Applause.)”
President Bush also perceptively mentioned that entitlement such as Social Security, Medicare and Medicaid will eat up more and more of the federal budget as time passes and will necessitate large tax increases, benefit cuts, or an increase in the deficit, yet no new concrete solutions were proposed in the speech.
The final health care issue mentioned was President Bush’s desire to “double our initial commitment to fighting HIV/AIDS by approving an additional $30 billion over the next five years.”
Healthcare Economist commentary
The Healthcare Policy and Marketplace Review notes that none of Bush’s 2007 healthcare reform proposals (e.g.: standard tax deduction for health insurance, expand Health Savings Accounts, medical liability reform) were enacted so why would this year be any different? It is likely that none of the 2008 proposals will be enacted as well. With a new president set to take office in less than a year, there is little chance of wholesale reform.
I do agree that employer-provided and individually purchased insurance should be treated similarly, but offering tax deductions for both is not the answer. The tax deduction is more beneficial for individuals with a higher marginal tax rate (the rich) and thus the tax deduction will most those who need it least. Instead, we should end the tax deductibility of health insurance completely. A flat rate subsidy or voucher for every individual (or possibly a risk-adjusted subsidy based on the indivdidual’s age and sex) would make more sense.
Conceptually, I am in favor of health savings accounts, but not as they currently are used. HSA are simply a tax deduction mechanism for those with sufficient wealth and liquidity. Poor individuals who need more liquid asset will not be able to take advantage of the HSA. Singapore has a mandatory HSA in which funds are automatically are deducted from one’s checking account. I am generally not in favor of mandatory saving, but this Singaporean example is intriguing and fairly egalitarian.
I do support President Bush’s proposal for more funds for basic science research and HIV/AIDS treatment.
It will be Barak Obama, Hilary Clinton, John McCain, Mitt Romney or some other presidential candidate who will have the opportunity to institute significant health care reform because this will not happen during the final year of the Bush presidency.
Reuters reports (“Too few…“) on the problem that U.S. adults not receiving necessary vaccines.
“Only 2 percent of U.S. adults last year got a shot that can protect them from painful bouts of shingles, health officials said on Wednesday in a study that shows what they call unacceptably low rates of adult vaccination against a range of diseases.
Adults also failed to get vaccines that can protect them against tetanus, whooping cough and even influenza — despite years of campaigning, the U.S. Centers for Disease Control and Prevention [CDC] found.”
There are a variety of vaccines and different vaccines only apply to certain demographic groups based on their age, sex and risk factors. Some risk factors are obvious (e.g.: being HIV positive, having sex with prostitutes) but others are more mundate (e.g.: working in the healthcare or public safety sectors, being a first-year college student, traveling abroad).
Here at the Healthcare Economist, I don’t just point out potential problems, I offer solutions:
If you do not know which vaccines you need to get, go to the CDC Immunization website and TAKE THIS QUIZ. Childhood immunization schedules are also available.
Want some more information on the presidential candidates views on healthcare reform? The Healthcare 08 website has an interesting “PoliGraph” showing where the candidates stand. Candidates are characterized according how government driven and how important health care issues are. The graphs include issues such as: overall health care reform, drug prices, the uninsured, and stem cell research.
The graphs are very well done and the information is very accessible.
Richard Posner and Gary Becker, two preeminent economists, discuss some of the presidential candidate’s plans for healthcare reform.
Posner laments that the U.S. spends 16% of GDP on healthcare, but only has 37th best healthcare system according to the World Health Organization. What is to be done? Most candidates promise to reduce costs and increase health insurance coverage. But expanding insurance coverage will likely increase cost.
Posner derides some of the other reform ideas:
“Some of the proposals for reducing aggregate costs are either fluff, like reining in jury awards in medical malpractice cases (those awards are a tiny fraction of total health costs, and already are being reined in by judges and by tort-reform measures adopted by state legislatures), or measures that the market is in process of implementing, such as the digitization of medical records. Other economizing proposals have hidden negative implications for quality–such as placing price controls on prescription drugs, reducing the protection that the patent laws provide against competition by generic (nonpatented) substitutes, and permitting the reimportation of drugs from countries that have price controls on drugs.”
What is the solution?
“The way to economize on expenditures on health care, though it is utterly infeasible politically, would be to eliminate the tax subsidies for health insurance and health care and institute a means test for Medicare, and at the same time to limit medical services. Then both the demand for and the supply of those services would be reduced, and the percentage of GNP that goes for health care would drop. But the principal result might be to reallocate consumption spending to goods and services that most people value less at the margin than they do health care. Moreover, there is an economic argument for some level of tax subsidies for health insurance premiums or health care. Medical care increases human capital, and is thus an investment, and investment expenditures need not be (probably should not be) taxed as long as the revenues generated by them are.”
In Becker’s post, he supports four main health care reform ideas:
A Healthy Blog has an interesting post (“Stories of Harm“) giving patient video testimonies regarding their experience with medical errors and how it has impacted their life.
The Consumer Health Quality Council is a group of Massachusetts patients who have been harmed by medical errors and they are calling for reform within the health care system.
Their stories are truly moving…and sad. It’s sad that, according to this website, medical errors are the fifth leading cause of death in the U.S.
Many of the Democratic candidates support having employers provide insurance for their employees with the threat of a fine or tax if an employer decides not to comply. This of course will increase the cost of an employee for firms. If employees truly value the health insurance, then the cost of insurance can be passed on to the employee through lower wages.
This cannot happen, however, if you are a low-wage worker whose wage is at or near the minimum wage. This is, of course, because employers can not pay wages below the minimum. Thus, a “Pay or Play” mandate may reduce employment for the lowest skilled workers. A paper by Baicker and Levy examines this issue.
The authors find the following:
“The authors calculate the average cost of a health insurance plan to be about $9,000 for family coverage during their sample period, or $3.66 per hour for a full-time worker. Assuming that a mandate required employers to provide coverage similar to the average plan and to pay 80 percent of premiums, wages would need to fall by $3 per hour to fully offset the cost of the mandate.
The authors estimate that one-third of all uninsured workers, or 5.5 million U.S. private sector workers, have earnings within $3 of the minimum wage.
…the authors estimate that the implied increase in compensation resulting from the mandate would cause 224,000 workers to lose their jobs. The affected workers would be disproportionately low education, minority, and female.”
From the NBER Fall 2007 Bulletin on Aging and Health.
Barack Obama wins Iowa and is predicted to win New Hampshire according to Gallup polls. Then Hillary Clinton wins New Hampshire. Why were Gallup poll predictions wrong?
The Statistical Modeling blog tries to make sense of this in their post “What was going on with the New Hampshire polls?“ The post gives three reasons why the Gallup polls could have been wrong:
So you’re a Republican and you don’t know who to vote for. Which of the Republican candidates has the best plan for health care reform? This is what I will discuss today.
If you are a Democrat, please read my “Guide to the Democratic Candidates” yesterday.
Similarities
Almost all the Republican candidate are in agreement on the following issues:
Differences:
A chart will be helpful here (ordered from most to least votes in Iowa caucus).
| Huckabee | Romney | Thompson | McCain | Paul | Giuliani | |
| Insurance mandate? | N | N | N | N | N | N |
| Expand SCHIP? | N | N | N | ? | N | N |
| Guaranteed issue? | N | N | N | N | N | N |
| Community Rating? | N | N | N | N | N | N |
| Insurance subsidies? | Y | Y | N | Y | N | Y |
| End tax deductability of employer-provided ins? | N | N | N | N | N | N |
| Begin tax deductability of individual ins? | Y | Y | N | Y | Y | Y |
| Regional Purchasing | N | N | N | N | N | N |
| Allow drug imports? | ? | ? | N | Y | Y | N |
| Expand HSA? | Y | N | N | Y | Y | Y |
The Republican candidates seem much more satisfied with the status quo than the Democrats. Philosophically, Republicans want to put more health care decisions into the hands of consumers. Thus, most candidates support making individually-purchased health insurance tax deductible with the exception of Fred Thompson. Rudy Giuliani would allow a standard tax deduction of $15,000 for families and $7,500 for individuals.
Huckabee, Romney, McCain and Giuliani would all give poor individuals subsidies to purchase health insurance, but none claim that they will end Medicaid. Likely, they would offer low income families the option of purchasing health insurance with a subsidy or possibly the ability to opt out of Medicaid. Thompson and Paul do not support these subsidies.
One would think that free-market Republicans would support the right to import drugs, but only McCain and Paul believed this was a good idea.
Health savings accounts (HSAs) were very popular as well. Many candidates supported allowing the creation of an HSA without having a high-deductible health plan (HDHP). Romney and Thompson did not explicitly support this idea, but they were not against it either.
Healthcare Economist’s Take
Most Republican candidates believe that less–not more–government involvement is the best way to cure what ails the healthcare system. While I am sympathetic to this line of thought, pure political ideology will not improve the healthcare system.
Huckabee calls for a “complete overhaul” of the health care system but only does not really offer concrete solutions. His plan to increase HSAs is widely shared by almost all of the candidates. I am not sure why HSAs are a good idea. They limit the liquidity of consumers income. This means that only individuals with large savings (i.e.: the rich) will be able to take advantage of HSAs while the liquidity constrained poor will need to have their money available for food, utilities, gas clothes and shelter and will not be able to benefit from HSAs.
Despite significant health care reforms in Massachusetts, Romney’s national health care reform plans are meager: make health care expenses and insurance premiums–including nongroup policies–tax deductible.
Thompson’s health care plan is basically to be content with the status quo.
McCain gives the most detailed healthcare plan. Like Barak Obama, he wants to create national standards for measuring and recording treatments and outcomes. He also supports clinics in retail outlets (e.g.: Minute Clinics) and the expansion of the role of nurse practitioners and physician assistants, and a $2,500 tax credit ($5,000 for families) to increase incentives for insurance coverage.
Ron Paul is the most radical candidate. He wants reduce the role insurers–especially HMOs—play in the financing of healthcare. He wants patients to be responsible for paying the first dollar of health care. Despite his qualifications as a physician, Paul does not offer very creative solutions to the healthcare problem. While he is a libertarian, he does not propose any limits on Medicare or Medicaid and in fact wants to expand government coverage to include alternative medicines.
While McCain supports a tax credit, Giuliani supports a tax deduction of $15,000 Family, $7500 health insurance deduction. This helps those with a higher marginal tax rate more (i.e.: the rich) and the poorest individuals who don’t pay tax will not even benefit from this legislation. Giuliani does advocate a Health Insurance Credit for the poor as well and poor individuals could use these funds–as well as funds from Medicaid or their employer–to purchase private health insurance. Any social program that gives money to the poor and then tells them how to spend it–on this case on health care–must be compared against a simple government cash transfer program.
The Healthcare Economist Democratic Pick: McCAIN
While little separates the Republican candidates in terms of their view on health care reform, I would support John McCain. I am strongly in favor of importing pharmaceuticals from other countries and innovative medical delivery systems such as the Minute Clinics. McCain supports both of these initiatives. Also, McCain has a $2500 tax credit ($5000 for families) for all Americans and this will help to eliminate the bias toward employer-sponsored health insurance.
Rudy Giuliani has a very similar health care reform proposal as McCain, but does not support the importation of pharmaceuticals from developed countries. Further, Giuliani’s tax deduction is regressive compared to the McCain tax credit which is a more proportional subsidy for everyone (although Giuliani does offer a Health Insurance Credit for the poor). I am partial to Ron Paul’s libertarian leanings on many issues, but trying to eliminate third party payers is not a feasible solution to the healthcare crisis, especially when catastrophic illnesses are so expensive.
Candidates’ Statement on the Health Care Issue
So you’re a Democrat and you don’t know who to vote for. Which of the Democratic candidates has the best plan for health care reform? This is what I will discuss today.
If you are a Republican, please read my “Guide to the Republican Candidates” tomorrow.
Similarities
All of the Democratic candidates support the following actions:
Differences
A chart may be helpful here:
| Obama | Edwards | Clinton | |
| Insurance mandate? | N | Y | Y |
| Expand SCHIP? | Y | Y | Y |
| Guaranteed issue? | Y | Y | Y |
| Community Rating? | ? | Y | ? |
| Insurance subsidies? | Y | Y | Y |
| End tax deductibility of employer-provided ins? | N | N | Y |
| Begin tax deductibility of individual ins? | N | N | N |
| Regional Purchasing | N | Y | N |
| Allow drug imports? | Y | ? | ? |
| Expand HSA? | N | N | N |
Healthcare Economist’s Take
Electing a Democratic president will likely move us closer towards a universal health system. Subsidizing health care will help poor individuals afford the care they need. I like the egalitarian approach of Democrats but this type of system will be expensive.
Many of the candidates propose that the federal government will reimburse employer health plans for a portion of the catastrophic costs they incur above a threshold. This may decrease insurance companies incentive to provide inexpensive preventive care. For instance, insurance companies have a large incentive to provide beta blockers to reduce heart attacks, but if the federal government will pay for most hospitalizations, than the incentive to provide this care diminishes.
While there is no one optimal standard for insurance benefits, standardizing insurance benefits can help eliminate some of the patient-third payer confusion of what will actually be reimbursed. It will also help stop the insurance company practice of denying claims to increase profits.
The one drawback to this system is that it is expensive. Taxes will have to be raised. Although the candidates talk generally about preventive care and EMR, without having individuals bear a significant share of the marginal costs of medical care, medical spending will like increase significantly.
The Healthcare Economist Democratic Pick: OBAMA
If you are a Democrat and are voting solely based on a health care reform agenda, I endorse Obama. Obama does not mandate insurance coverage. Instead, he is trying to make care more affordable without telling individuals how to spend their money. Further, I whole-heartedly agree that patients should be able to buy prescription drugs from developed countries. Obama’s goal is to expand coverage which still allowing significant choice. The Edwards plan is one step away from nationalized health care.
Obama also has an explicit proposal to create and fund an “independent institute to guide reviews and research on comparative effectiveness.” Although the government may not be the best mechanism for this, disseminating medical ‘best practice’ methods is vital to improving medical quality.
The Obama plan will be expensive and either taxes will have to be increased, or spending must be cut elsewhere. Still, Obama is the best Democratic option.
Candidates’ Statement on the Health Care Issue
Tomorrow: Guide to the Republican Candidates
The USA Today reports on your government in action (“Subsidies…“):
Flying round-trip from Lewistown, Mont., to Billings — also a two-hour-drive — costs $88 as well on Big Sky. The government cost: $1,343 per passenger. Just two people a day took the Lewistown-to-Billings flights on average in 2006, according to the DOT.
According to the N.Y. Times (“…Benefit Cut at 65 in Retiree Plans“) in 2001it is estimated that one-third of large employers and fewer than one-tenth of small employers offered health benefits to retirees. These numbers may trend towards zero in the near future after an Equal Employment Opportunity Commission (EEOC) ruling.
NPR’s Marketplace reports (“Employers let off one health-care hook“) the EEOC has ruled “that companies can cut their retirees’ health-care benefits once they turn 65.” This will lead to more government provided health care. Is this a good thing?
Businesses will certainly benefit from not having to be in the business of planning for the health insurance of seniors.  According to the N.Y. Times, Dianna B. Johnston, a lawyer for the commission, said many employers and labor unions had told it that âif they had to provide identical benefits for retirees under 65 and over 65, they would just drop retiree health benefits altogether for both groups.â?
Further, a paper by Gopi Shah Goda, John B. Shoven, Sita Nataraj Slavov (reviewed on 10 Oct 07) claims that having Medicare as a Secondary Payer (MSP) creates an implicit tax for elderly workers. The authors find that the tax is 15-20 percent at age 65 and increases to 45-70 percent by age 80. While the authors claims are based on how MSP effects seniors’ incentives to work, it does not comment on whether or not implicit contracts guaranteeing retirees right to private insurance should be abolished or not.
In essence, this ruling is a transfer from retirees to businesses. Retirees who believed they would receive private health insurance from their employer now must rely on Medicare or pay for private insurance in the individual market. Businesses benefit from being able to eliminate costs from insuring retirees.
This raises the larger question of who should be paying for health insurance. The government could do it, but this may lead to a monopolistic system with little choice and a potential for corruption. Individuals could buy their own insurance, but without a mechanism to pool risk, sick individuals will have to pay significantly higher premiums than healthy individuals. Insurance is supposed to insulate individuals from income shocks due to changes in their health status and an individual market will not be able to accomplish this goal. A natural risk pooling institution is the employer, but employers do not want to be in the business of planning their employees (large) health insurance choices. Who should pay for health care is at the crux of the health care debate and needs to be resolved before policy reforms are implemented.
On Monday, the California Assembly passed a bill that mandates health insurance for all California’s citizens. The government will provide subsidies households with incomes below 250 percent of the federal poverty level. Those earning between 250 percent and 400 percent of the federal poverty level [FPL] would be able to deduct premium costs that exceed 5.5 percent of their incomes. Health insurance will still be privately run, but the government will pay a larger portion of the premiums.
One odd twist of the legislation is that “some Californians would be granted exemptions if their income is too low to afford premiums but too high to qualify for heavy government subsidies.” Which type of people would fall into this group? The poorest poor have Medicaid. People between with income between 0-250% of the FPL are receiving large subsidies from the government.
One of the major arguments in favor of universal health care is that it creates a more equal society, giving the poor a helping hand. Yet if the working poor are exempted from buying health insurance, why is California spending all this money for health insurance when the working poor don’t have insurance.
Of course, providing these subsidies will be expensive. According to the L.A. Times, California is “about to enter a ‘fiscal state of emergency’ because of a $14-billion budget shortfall.” Who is going to pay for the subsidies?
Do I think the California plan is a step in the right direction? Maybe one step forward and one step back. Providing means-tested subsidies to help the poor afford health insurance is a step in the right direction for those who prefer a more egalitarian society. Further, although the state is financing much of the insurance premiums, it is leaving insurance to the private market. However, in the presence of a private insurance market, I believe that a minimum standard of health insurance should be established by either the government or decided on by insurance groups. This is not because I think regulation is good in general, but because 1) the insurance contract customers sign is incomprehensible and customers do not know the benefits they are receiving and 2) insurance companies often deny claims that they should pay. Setting a minimum standard with regulation could help to clear up some of this ambiguity while allowing insurance companies to offer more generous, more expensive plans if they choose.
What I do not approve of in the California plan is that health insurance is mandated. Poor families may better be able to use cash to buy food and pay for rent rather than health insurance subsidies. Healthy individuals are forced to buy a product they don’t need. Further, do not be fooled by the Governator’s statements that ‘this plan will pay for itself’; this piece of legislation will be very expensive and increase the utilization of medical care in the U.S.
Here are some news stories covering the issue:
And here is the actual text of the bill.
The Sunday New York Times had an interesting article (“Disparately seeking a kidney“) on kidney transplantation. The author, a kidney recipient, suggests the following:
“Altruism is a beautiful virtue, but it has fallen painfully short of its goal. We must be bold and experiment with offering prospective donors other incentives for giving, not necessarily payment but material reward of some kind — perhaps something as simple as offering donors lifelong Medicare coverage. Or maybe Congress should grant waivers so that states can implement their own creative ways of giving something to donors: tax credits, tuition vouchers or a contribution to a giver’s retirement account.
In short, we should reward individuals who relinquish an organ to save a life because doing so would encourage others to do the same. Yes, splendid people like Virginia [the author's kidney donor] will always be moved to rescue in the face of suffering, and I did get my kidney. But unless we stop thinking of transplantable kidneys solely as gifts, we will never have enough of them.”
I have touched on this subject last month in my post on “Organ Sales.”
A very interesting article in the L.A. Times (“Defining government’s role in healthcare“) points out the following:
Though many Americans may not realize it, government is already the dominant player in healthcare, with federal and state expenditures accounting for 47% of the projected $2.3 trillion the nation will spend this year. Indeed, many private insurers follow the lead of the biggest government program, Medicare, in setting coverage policies.
Even if nothing changes, government will pick up more than half the nation’s healthcare tab by 2017. Universal coverage proposals from the leading Democratic presidential candidates would advance that tipping point to 2011, according to a recent analysis by the consulting firm PricewaterhouseCoopers …
“If we are going to get to broad-based reform, it’s not going to be the model of government paying for most of it,” said health economist Mark McClellan, who served as Bush’s Medicare administrator. “Rather, it’s coverage that would provide help from the government but expect real contributions from individuals, with partial subsidies at higher income levels.”
Thanks to Michael Cannon for the link.
A New Yorker article (“The Checklist“) recounts Peter Pronovost’s efforts to improve the delivery of medical care. One of his simplest ideas was to invent a 5 step checklist to reduce line infections:
Doctors are supposed to (1) wash their hands with soap, (2) clean the patientâs skin with chlorhexidine antiseptic, (3) put sterile drapes over the entire patient, (4) wear a sterile mask, hat, gown, and gloves, and (5) put a sterile dressing over the catheter site once the line is in.
All doctors know these 5 steps, but in the distraction-filled world of the I.C.U., it is very easy for the physician to forget any one of the steps. Dr. Pronovost’s checklist idea has extended to other treatment areas as well. Yet he believes that Americans are still not getting serious about treating medical care as a science.
âThe fundamental problem with the quality of American medicine is that weâve failed to view delivery of health care as a science. The tasks of medical science fall into three buckets. One is understanding disease biology. One is finding effective therapies. And one is insuring those therapies are delivered effectively. That third bucket has been almost totally ignored by research funders, government, and academia. Itâs viewed as the art of medicine. Thatâs a mistake, a huge mistake. And from a taxpayerâs perspective itâs outrageous.â? We have a thirty-billion-dollar-a-year National Institutes of Health, he pointed out, which has been a remarkable powerhouse of discovery. But we have no billion-dollar National Institute of Health Care Delivery studying how best to incorporate those discoveries into daily practice.
Checklists are not the solution to every problem. A large portion of medicine deals with complex condition with large uncertainties and many disease interactions. Further, it may be more difficult for an insurance company to institute checklists than a hospital manager or someone further down the chain of command. Nevertheless, standardization in medicine should help to dramatically improve quality.
A recent Yahoo! News article (“Half of U.S. Doctors mum…“) uncovered some disturbing findings regarding physician practices in the U.S. For instance:
What does this tell us about doctors? That they are horrible people? No, simply that they are human.
Physicians–like the rest of us–do not like getting in trouble. They do not like to “tattle” on their colleagues and will order unnecessary tests to protect themselves from malpractice lawsuits. These findings should not come as a surprise; more patients need to realize that doctors make errors and that even physicians can have a “bad day.”
Forbes’ The Science Business blog has an interesting interview with Congressman Fortney âPeteâ? Stark (D-Calif.). Mr. Stark was the legislator responsible for the creation of the Stark laws banning self referrals by doctors to facilities in which they had an ownership interest. For instance, the law means that “a doctor can’t refer a patient to an physical therapy practice, lab or other facility that she owns part of because then she’ll benefit from the revenue associated with the services provided.”
Supplier-induced demand is a serious problem and one reason for rising medical costs. Yet Mr. Stark regrets his decisions. He would instead prefer to “go back and strip down out the original fuzzy language so the law simply forbids kickbacks.”
I recently received an email from the Patient Privacy Rights organization. They are conducting a campaign to protect the privacy of individual’s prescription drug information. According to their website, a Newsday article reports the following:
Randee Lonergan filled her prescriptions at the same pharmacy for years. But a month ago she was shocked to find the pharmacy closed and all her family’s medical records sold to a nearby Target store in Levittown. Her information was sold legally because of a loophole in medical privacy law that allows pharmacies to “auction off” customer records – including prescriptions, information about medical conditions, Social Security numbers and insurance records – “to the highest bidder,” Sen. Charles Schumer said yesterday. The practice of selling off records, Schumer said, is a nationwide problem. Federal law requires doctors to let patients know when their medical history is being shared. But the law allows pharmacies to sell patient information to other pharmacies, Schumer said.
This sounds horrible. Patients should have a right to keep their medical information private. No one should be able to buy information that would tell them whether I take Zoloff for depression, Flomax for frequent urination, AZT to treat HIV or Viagra for erectile disfunction (see video).
I was about to sign the petition when I realized that sometimes I do want people to know what medications I am taking. One of the major benefits of electronic health records (EHR) is that emergency room doctors who I have never seem before can have instant access to my current medications and my allergies. EHR can help to provide a patient’s network of doctors with standardized information which can help in the treat of medical ailments.
How can we limit patient medical data to only the people and organizations that we want to have it? Would providing strict patient privacy protection make a standardized EHR impossible? Is it feasible to restrict access to medical records in a manner which protects patient privacy, but enhances medical care? These are complicated questions of which we need to find an answer.
The incapacity benefit system in the UK is intended to provide an income support for those unable to work. Like any government program, many of the beneficiaries are in dire need of the money and are truly unable to work, but many other individuals who are able–but not inclined–to work have taken advantage of government largesse. Liberals will highlight the fact that these programs help the needy while conservatives will generally retort with numerous examples of how individuals are able to take advantage of ‘the system.’
Last week, The Times of London reported (‘Too fat to work‘) that “Almost two thousand people who are too fat to work have been paid a total of £4.4 million in benefit.” Should obese individuals receive a disability benefit? If obesity is truly a disease, than one may say yes. On the other hand, there is a seemingly simple cure for obesity–eat less and exercise more. For those who are obese, however, accomplishing this physiological feat is not as simple as it sounds. It is possible that the incapacity benefit may actually make the obese worse off. Allowing the obese to collect an incapacity benefit may reduce an overweight individual’s incentive to lose weight in order to be able to work.
Any input on this subject would be greatly appreciated.
Thanks to my colleague Mike Ewens for the referral to the Times article.
Libertarians often complain that the government intrudes too much in our lives. Nanny State, a book by Denver Post columnist David Harsanyi, claims that the government is regulating what we do to an extent that it is becoming a surrogate parent. “Why are we allowing politicians, bureaucrats, and social activists to dictate what we eat, where we smoke, how much we drink or what we watch and read?” (source: Power Line). If you believe the diatribes of these delusional government-haters, pretty soon the government will be monitoring how clean our room is!
Well, looks like the government is not going that far just yet. Right now, Uncle Sam only cares about how neat our carry-on bags are. According to in article (‘Holiday airline travelers urged to chuck carry-on clutter‘) in the USA Today, “the Transportation Security Administration (TSA) today launches a campaign urging travelers to eliminate clutter in carry-on bags. Pack in layers. Keep items neat. Messy travelers could spend more time in line if their carry-ons are cluttered because such bags are more likely to be pulled aside and searched by hand, TSA spokeswoman Ellen Howe says.”
Are messy people more likely to be terrorists? If so, any TSA officer who might have inspected my bedroom when I was 10 years old would have believed that I was Osama bin Laden himself.
Here is some of the latest health news concerning China:
Here’s some interesting reading to cure your mid-week blues:
This is the question asked to undergraduate economics students a public health students by Atheendar of ‘Dar he Blogs. One third of the economics student said yes, but all the MPH students said no. Atheender concludes the following:
I think there are two things to take from this. First, there is a great deal of self-selection on the margin of political leanings in public health. Most MPH students tend to identify with democrats/liberals (or, on one of my more cynical days, “pink-os”), which probably is what induces them to pursue a service-oriented field like public health in the first place. (I’m not sure if the causality works the other way: does learning about public health shift people’s voting preferences to the left?).
Second, and most germane to this post, is that, despite what Michael Moore says, not everyone thinks the U.S. health care system is a complete disaster. Slowly but surely, some recent press and research work suggests that the American system isn’t really as bad as it seems when making general comparisons with systems in other OECD countries.
Can a state run petroleum company be as efficient as a private sector company? The answer is a resounding, “yes but…” It is possible that state-run petroleum companies can be efficient as long as they stick to the business of producing oil. Yet Tina Rosenberg’s “The Perils of Petrocracy” article in the N.Y. Times Sunday Magazine examines what has happened in the case of Hugo Chávez and Venezuela.
Chávez has siphoned off millions of dollars from Venezuela’s oil company, Petróleos de Venezuela S.A. (Pdvsa), for his own political uses. Much of the money has gone towards funding schools, medical clinics, and misiones for Venezuela’s poor. While this providing health and educational infrastructure for Venezuela’s poor is a laudable goal, it is unclear that conditions in Venezuela have improved.
“…the percentage of those living without running water and living in inadequate housing, as well as the number of young children not attending school, has scarcely budged in the last 10 years.”
Chávez heavy handed tactics have led to Pdvsa hirings based on political affiliation, not merit. Investment in oil rigs, maintenance, and other operational necessities has diminished during the Chávez era and it is likely that long-run oil production will steadily decrease. Pdvsa not longer published clear, S.E.C.-style financial reports regarding where funds are spent. Also, other governmental policies have lead to high inflation rates, leading to decreased investment in Venezuela. The cult of personality surrounding Chávez is growing and even spawning Chávez-emulating governors in Carabobo (see “An Imitator of Chávez“).
How is health care in Venezuela? While the Cuban physician-staffed misiones are providing more primary care to poor citizens, disinvestment in other forms of medical care has meant that Venezuela’s hospitals are “falling apart.”
What is the solution? While not as politically attractive as nationalization and spouting slogans such as “El Petróleo Es Nuestro,” privatizing the oil sector and extracting heavy taxes or royalties seems to be a much better solution. The tax revenue can be used to pay for social programs and the long run viability of oil production will remain high. One complication with privatization is that firms may bribe politicians in order to pay low taxes or reduce payments for mining rights below their fair-market value. Nevertheless, privatization is better than Chávez’s corrupt cronyism.
Can we estimate risk aversion and prudence using a survey question for the general public? This is what a paper by Eisenhauer and Ventura attempts to do.
Methods
In the 1995 Survey of Italian Households’ Income and Wealth, one question asked:
You are offered the opportunity of acquiring a security permitting you, with the same probabilities, either to gain 10 million lire [5165€] or to lose all the capital invested. What is the most you are prepared to pay for this security?
Assuming, the respondents answer honestly and precisely (which is a big assumption to make), the authors can create and individual’s utility function:
The variable w represents initial wealth and z is the amount individual would pay for a security. Using a Taylor expansion, we can create an estimate of absolute risk aversion.
The term A(w) represents the Arrow-Pratt measure of absolute risk aversion while R(w) is equal to relative risk aversion. If we differentiate the second equation above with respect to initial income, w, we can calculate a measure of prudence (-U”’/U”).
The term η(w) measures absolute prudence while Ï?(w) measures relative prudence.
Results
Since the authors have information regarding each individual’s initial earnings and various sociodemographic factors, they can analyze which type of people are risk averse.
Healthcare Economist critique
Finding that people are risk averse and prudent is unsurprising, but the levels of risk aversion and prudence are very high compared to other studies. While having a vast array of sociodemographic information is important, simply eliciting a willingness to pay for a risky gamble is likely not a precise estimate of risk aversion. Likely, most people will respond to the question categorically (5 million lire, 4.5 million lire, 4 million lire, etc.). Further, finding that people with health insurance are less risk averse is counter-intuitive. One explanation is that having health insurance may be a proxy for wealth. Thus people with heath insurance in general could be more risk averse, but since this group of people is also richer (and more affluent people are generally less risk averse) we could have opposing effects.
As most of you know who have been reading the news, the wildfires in San Diego, my home, have been causing much devastation. According to San Diego’s NPR station KPBS, an “estimated 245,000 acres burned and 1200 homes destroyed in San Diego County” (reported as of 10:09am Pacific time). Over 250,000 individuals have been evacuated in San Diego County alone. Yesterday the smoke and ash from the fires was so thick at my school that it would sting your eyes just to got outside. At 11am the sun only had the strength of a newly-risen sun because of the thick cloud cover. And where I was in La Jolla was not even the worst of it.
Currently I am staying at my girlfriend’s house in Irvine, CA but even here there is a fire in Portola Hills, about 4-5 miles away. Due to evacuation traffic, it took me 3 hours and 15 minutes to travel the 65-70 miles between La Jolla and Irvine. Nevertheless, I am thankful to be safe and sound.
What I would like to write about today is the well-coordinated effort of government officials, red cross workers, emergency personal, police, firefighters and volunteers. The key to a successful emergency effort is coordination between local police and firefighters who have an detailed understanding of a city’s needs, with larger state (e.g.: Cal Fire) and federal (e.g.: FEMA) workers who bring additional capital and manpower resources to the region.
Reverse 9-1-1 calls were made for individuals who had to evacuate from their homes. Police patrolled these evacuated homes to protect them from looters. Numerous shelters were set up in the safer areas of San Diego. The city/county even had a plan so that if these shelters filled up, backup shelters were prepared to come on line. After the Virginia Tech massacre, my university (UCSD) installed text message, email and phone alert system and employed these methods to inform faculty, students and staff of wildfire risks and school closure. The evacuation of over 100 sick and elderly patients from Pomerado Hospital even seemed to take place in an orderly fashion.
This is not to say that there have been no problems. Firefighters on the ground in Orange County called for more air support to put out the flames, but high winds for much of the day yesterday made the use of water and flame retardant from the air infeasible.
While Katrina was one of the greatest disasters in U.S. history, the repercussions from that disaster have made municipalities all over the U.S. have to prepare for the worst. In San Diego, these preparations are helping to save many lives.
I wish that everyone in southern California is able to stay safe.
An explanation for the recent General Motors-United Auto Workers deal is pretty simple: it is a transfer of risk. GM will set up a Voluntary Employee Beneficiary Association (VEBA) which will be controlled by the union. According to the Detroit Free Press (” UAW ratifies”) GM will place about $30 billion dollars in the account which will pay for the health care benefits of GM retirees. The benefit to GM is that it can now focus on cutting costs and improving quality in car production, rather than worrying about the risk of increasing health care premiums. The health care inflation risk is now being transfered to GM retiree beneficiaries. If health care costs in the future exceed the $30 billion in the VEBA, then GM retirees will have to pay for these costs out of their own pocket.
Why wold the UAW accept this agreement? Although the UAW accepted increasing risk due to inflationary medical costs, it eliminated another type of risk: bankruptcy risk. Because the VEBA is controlled by the UAW, GM retirees will still have funded health care even if GM goes bankrupt. Thus, UAW retirees have eliminated the catastrophic risk (GM bankruptcy) in exchange for accepting increased risk of increasing health care costs.
I believe the VEBA will work out well for both sides. The deal also may be the death knell for defined benefit programs.
The work of three researchers who developed the procedure of gene targeting have won the 2007 Nobel Prize in Medicine. The winners are:
Further coverage is available at:
Yesterday, Microsoft announced the introduction of the online medical records system titled Health Vault. Online medical records would greatly increase productivity in the health care industry since:
The N.Y. Times states:
âThe value of what weâre doing will go up rapidly as we get more partners,â? said Peter Neupert, the vice president in charge of Microsoftâs health group…
The company hopes that individuals will give doctors, clinics and hospitals permission to submit information like medicines prescribed and data on blood pressure and cholesterol levels. Mr. Neupert said such data transfers would then be automatic, over the Internet, which is why the partnerships are so important.
Microsoft wisely decided to name to online medical system Health Vault. This is a shrewd strategic move because the major impediment to online medical records is patient privacy and information security.
This is where a paradox occurs. According to the Economist:
Sean Nolan of Microsoft explains that the business model depends on one thing: targeted search. Microsoft is betting that people will use its Health Vault Search to find out about their ailments. This service relies on an approach known as âvertical searchâ? which attempts to provide more relevant results than generalist search engines like Google and Yahoo! by specialising in a particular field. The firm’s recent acquisition of Medstory, a vertical-search engine focusing on health care, has given it a boost in this area.
Health Vault’s search engine would definitely work better than those of rival sites if it could examine users’ health records and past queries, and thus provide the responses that are most relevant to each individual’s situation. But in order to attract any users in the first place, Microsoft has promised to enforce strict privacy rules. These, says Mr Nolan, would preclude such data-mining.
More coverage is available here:
