Current Events

In this blog, I have frequently discussed the merits of Canadian and American health care systems (see Health Care Grudge Match).  One thing most people can agree with is that mental health care is subpar in both countries.  

The Vancouver Sun reports of a man committing suicide by jumping off the Granville Street Bridge.  
[In British Columbia]…family members of persons with severe mental health problems complain about the difficulty of getting loved ones committed. They cite restrictive confidentiality rules that isolate the family member in need, or the difficulty of getting doctors to agree to a commital or the system’s unwillingness to commit a patient until it is too late.

“In the 20-month period from December, 2006 through to Mr. Kwapiszewski’s suicide in 2008, Ms. Haboosheh — either directly or through her husband, Mr. Kwapiszewski’s GP, a lawyer, and a North Shore mental health worker — contacted Vancouver mental health services 16 times, desperately trying to get them to intervene as her brother showed more and more troubling behavioural symptoms. Three letters were also filed as part of, or in conjunction with, those contacts, and some meetings were also involved. Ms. Haboosheh also called the Vancouver Police Department on three different occasions to report him missing. Of the 16 calls and other contacts, 10 were with Mental Health Emergency Services and six with the Midtown Mental Health Team. They consistently, however, declined to commit Mr. Kwapiszewski for treatment, insisting he was non-committable. There was no mistaking his deterioration, however.”

There are fewer quantitative tests associated with mental health evaluations.  Also, there is also more of a stigma associated with mental compared to physician illness.  For both of these reasons, mental health problems too frequently take a back seat to physical health illnesses.

The cover story of this week’s Economist examings healthcare reform in America (”This is going to hurt“).  The story recounts some of the many ills of the U.S. healthcare system: too many uninsured, too expensive, and low quality outcomes.  This is not news.  What does The Economist propose to fix the American healthcare system?  

• Pay doctors a salary.  In general, I support this idea, but it only works if doctors are employees.  Medicare would never pay doctors a salary; they could never track how many patients they saw or how much work they did.  The only way Medicare physicians would be paid a salary was: 1) if they were direct employees of Medicare or 2) they worked for employers who decided to pay them a salary.  For instance, if large, centralized healthcare systems (e.g., Kaiser Permanente, Mayo Clinic) took payments from Medicare directly, it could pay their own physicians a salary.  Salaried remuneration decreases physician incentives to work hard compared to fee-for-service payment, but since overtreatment rather than undertreatment is one of the main problems in the U.S., the salary system could work.  See my own research on how physician compensation affects surgery rates.
• Get NICE.  The Economist believes that America could use a cost-effectiveness agency like the UK’s NICE.  I agree.
• Align incentives.  Will pay-for-performance improve health care?  The Economist thinks so but I am skeptical that it will have a large impact.  Medical care is so complicated that paying for better outcomes on one dimension will distract providers from focusing on less measurable, but perhaps more important dimensions.  For instance, the Economist advocates that paying bonuses in Sweden lead to shorter wait times.  However, in the UK, setting the goal that all patients should be treated within four hours of arriving at the emergency room, lead to some perverse incentives.  ”Thousands of people a year are having to wait outside accident and emergency departments because trusts will not let them in until they can treat them within four hours, in line with a Labour pledge.”

Overall, The Economist has some valid ideas of how to improve health care.  However, broad pronouncements will not get the job done.  We need a systems approach in order to decrease the amount of unnecessary medical services and increase the quality of the important medical services that are given.  Like any reform, this is easier said than done.

The L.A. Times reports on Frank Lucero, a man arrested for drug use, petty theft.  Mr. Lucero had glaucoma and while he was in prison, his eye ailment went untreated.  

Lucero hadn’t been able to see much since being diagnosed with glaucoma while at Soledad State Prison in 2005. Still, with medication, he was able to work jobs moving furniture in between time served for drug use, petty theft and skipped meetings with his parole agent.

…three months into a yearlong sentence, with dozens of appeals to see an eye doctor unheeded and the pain growing unbearable, Lucero said, he still had neither the anti-inflammatory medication nor a prescription for glasses.

He had headaches and dizziness.  His equilibrium and speech were affected.

“Some days I couldn’t put together a sentence without yammering and stuttering,” he said.

On May 23, 2008, Lucero was sitting on his bunk, his head cradled in his hands, when his throbbing eyeball “just exploded.”

Should Prisoners get health insurance?
With state budgets reeling, how much of a priority should health care be for prison inmates?  Many people will argue that it should be very low on the list.  Why should prisoners get ‘free’ health care when there are 45 million employed Americans?

On the other hand, even employed Americans have the right to purchase medical using their own savings or through taking out debt.  Prisoners do not have this option.  Further, since the state is the custodian of these prisoners, it has a fiduciary right to give them at least a minimal level of health care.  

Giving Frank Lucero glaucoma drops would have been much cheaper than paying for an ambulance to after his eye burst from the pressure.

President Obama addressed the American Medical Association in Chicago today.  His goal was push through his health care reform agenda.  On Saturday, his Weekly Address also focused on health care reform.   What is this agenda and how will it be paid for?

 Obama wants a public health care plan for the uninsured.  The total cost of his proposed health reform is about $1 trillion (although some disagree with these estimates).  He has proposed a number of ways to raise this money.

Additional Revenues

Savings

Obama also has come up with $635 billion of additional “savings.”  These include:

• Incorporate productivity adjustments into Medicare payment updates.  Read: pay doctors less.
• Reduce subsidies to hospitals for treating the uninsured as coverage increases.  This means eliminating the DSH payments.  It makes sense that if most or all individuals are insured, then DSH payments can be drastically reduced.  I do wonder, however, whether immigrants (legal and illegal) will be eligible for the public insurance plan.
• Pay better prices for Medicare Part D drugs.  This means negotiated lower prices with drug companies.  It would be preferable to significantly limit the duration of patents in order that generics can more quickly compete with patented medicine.  Further, shortening patent life will lead to new add-ons and innovations based on these patents.
• Less Money for MRIs and CT scans.  Technically, Medicare will double ”the assumed utilization rate for calculating practice expense RVUs for the technical portion of reimbursement from 25 hours per week (50% utilization) to 45 hours per week (100% utilization).”  This means that Medicare that the equipment will be used more hours per week which reduces the price per scan.  One reason for the lower compensation, is because areas with more MRI machines and CT scanners do not have better health outcomes, only higher prices.
• Cut Fraud and abuse; increase Medicare payment accuracy.  This is easier said then done.  Dr. Rich is skeptical that fraud programs will significantly cut healthcare costs.  He cites his own experience with anti-fraud programs.
• Improve Quality.  Also easier said than done.  The Obama administration attempts to reduce hospital readmissions.  This may mean lower payments for patients who are readmitted to the hospital for the same disease.  If this is the case, hospitals may provide subpar care to patients who are re-admits or they may recode the patients as having a different disease to increase reimbursement.  The government also wants to expand the Hospital Quality Improvement Program. Because medical quality is so difficult to measure, some of these measures may be counterproductive.  

Presents for Physicians

The President propose two changes that doctors do like.

• Less paperwork.  Simpler paperwork would help smooth the operation of physician offices, especially for physicians in smaller practices.  However, making the paperwork simple isn’t so simple.  The more transparent the paperwork, the less information the government has and the less they know about the procedures they are paying for.  Further, Obama claims to clamp down on physician fraud.  More fraud-fighting requires more–not less–paperwork.
• Limits on malpractice claims.  Limiting malpractice claims will have little direct effect on health care costs. The indirect effect, however, could be large.  If physicians decide to do less tests and less precautionary medicine, this could significantly reduce health care costs.  Yet Barack Obama did say that “I’m not advocating caps on malpractice awards, which I personally believe can be unfair to people who’ve been wrongfully harmed…”

A final note

This leaves one question: is former Illinois senator Barack Obama a Green Bay Packers fan?  Probably not, but he did praise Green Bay as a place where health care costs are below the national average while excellent health care is available.

• The minimum wage will increase from $6.55 to $7.25 next month.  David Neumark thinks writes that we should delay the minimum wage increase.  I agree.
• Innovation in baseball ticket pricing.
• Best cities to live in as ranked by The Economist or median house price to median income ratio.
• Solving health care with a public plan co-op.
• Tyler Cowen ponders the implications of a public health plan.
• Is the public health plan a trojan horse?  Joe Paduda writes “I don’t see the public plan as critical to reform, or perhaps more accurately it is not nearly as important as comparative effectiveness with teeth and reimbursement reform and taxing health benefits.”

From the USA Today, here are the wait times to see a doctor in the following cities:

• Boston: 49.6
• Philadelphia: 27
• Los Angeles: 24.2
• Houston: 23.4
• Washington, D.C.: 22.6
• San Diego 20.2
• Minneapolis: 19.8
• Dallas: 19.2
• New York: 19.2
• Denver: 15.4 days
• Miami: 15.4 days

The first thing that jumps out from these numbers is that Boston has by far the longest wait to see a doctor.  Is this caused by the universal health coverage enacted in Massachusetts?  The answer is maybe.  Physician supply adjusts slowly (i.e., it takes a long time to finish med school).  On the other hand, Massachusetts decision to increase insurance coverage lead to a spike in the demand for medical services.  Thus, universal health care may have caused the run up in wait times, but this phenomenon may be short lived.  Physicians may migrate to Massachusetts as insurance coverage becomes more available.  

Do wait times reflect quality of care?  If Boston residents have very short waits to see nurse practitioners or physicians assistants, this could be a cost-effective substitute for services provided by physicians in the primary care setting.  Further, longer wait times for specialists could be a good thing.  While longer wait times would certainly hurt some patients–likely the most seriously ill patients–it would discourage other patients from waiting to see a specialist.  This patients could, instead, forego treatment if had a low marginal benefit to begin with or they could rely on their primary care provider.  

Let’s dig deeper into the numbers (see original report):

• Wait times for Boston cardiologists decreased from 37 days in 2004 to 21 days in 2009.  
• Wait times for Boston orthopedic surgery increased from 24 days in 2004 to 40 days in 2009.  
• Wait times for a Boston ObGyn increased from 45 to 70 days between 2004 and 2009 in Boston.
• Wait times for a Boston Family Practice physician was 63 days in 2009. 

We see that after the Massachusetts health reform was enacted, there was no uniform effect on specialist wait times, but there was a large increase in wait times for primary care providers.  This could be explained by a number of phenomenon:

• Those who gained health insurance after the Massachusetts health reform were a healthier population and used their new insurance coverage to increase the number of primary care visits, but not specialist visits.
• After the Massachusetts health reform, the increase in demand was homogenous across primary and specialty care.  However, physician supply adjusted.  Specialist may have been more attracted to practicing in Massachusetts, but primary care doctors were not.  Specialists may have moved to Massachusetts in larger numbers, particularly if New England health plans reimburse specialists at a much higher rate.  
• This could be a statistical anomaly.  Sample sizes in were less than 20 for five specialities in Boston.

Whatever the case, further study is needed to understand how health insurance expansions affect waiting times in both the short- and long-run.

Should we have “a public plan that Americans can buy into as an alternative to private insurance?”

• Yes: Paul Krugman.
• No: Greg Mankiw.

• That sucking noise: Taxpayer bailout dollars for the now bankrupt GM.
• GM Bankruptcy on retiree health benefits: Imagine the city larger than Peoria, Illinois losing health insurance.
• Japan has its first trade deficit in 28 years.
• Ranking Health Insurers.
• Bet on your life, win cash.

Last week a consortium of health insurers, health providers, hospitals and pharmaceutical manufacturers claimed that they could save the country $2 trillion in health care costs.  I was skeptical of this claim.

It turns out now that the American Hospital Association (AHA)–one of the signees of the letter–is also skeptical.  Fierce Healthcare reports that AHA president Richard Umbdenstock says “we did not say that we would save this country $2 trillion on our own.”  Looks like the letter to Obama is no more than empty promises.

• HT: Joe Paduda

The state of California is in serious fiscal trouble.  Those troubles extend the state’s flagship university system.  

“The scenario that assumes failure of the May 19 state ballot propositions would leave the UC system with a net budget reduction of $322 million, or 10 percent, in the 2009-10 year. Taken together with the state’s underfunding of student enrollments and inflationary cost increases, the scenario would leave the university with a total budget gap of $531 million in 2009-10. The university’s current state-funded budget is $3.2 billion.”

• Daily Kos has an interesting post on what should be the threshold to close a school.
• A second American died from the swine flu.
• Hong Kong hotel quarantine.
• Will the swine flu become drug resistant?
• Although pork is safe to eat, many people still fear eating products made from pigs.  Hog farmers may face significant losses in the short term.  However, pork prices may be on the rebound.
• Fall Vaccination Campaign May Include 3 Flu Shots.

U.S. School Closures, Online Learning

• Fort Worth closes Schools.  
• Nearly 300 schools close.
• October 2006: Ohio proposes online learning as  a substitute for classroom learning during a flu pandemic.  Did these proposals actually get implemented?
• San Mateo County poses using the website Moodle for online learning during flu pandemics.
• Marketplace, however, says that the home internet capacity is insufficient to meet a surge in work-from-home demand during a flu pandemic.

Map

• Another Swine Flu Map.

Quotation

• “Ill-informed optimism is no better than ill-informed gloom.” - Stephanomics Blog

• U.S. has its first swine flu death.
• “The L.A. coroner’s office said this afternoon that further testing indicated neither of two flu-related deaths being investigated in Los Angeles County appeared to be linked to the swine flu.” - L.A. Times.
  
• Slate has a great article which answers the question “Why does the swine flu seem to be more deadly in Mexico?“ 

The World Health Organization (WHO) declared Swine Flu to be an international public health emergency.

MÉXICO

La Jornada claims that there swine flu has killed 81 people in México and infected 1324.  The entire country of México has closed schools until May 6th according to La Prensa:

“El gobierno federal ordenó la sus­pensión de misas, clases–hasta el 6 de mayo– y todo tipo de eventos abiertos o cerra dos en estadios, teatros, cines, bares y discotecas donde se generen aglomeraciones.”

Mexico is also considering shutting down all public transportation.

U.S. and CANADA

According to the New York Times, swine flu has been spreading and risks becoming a pandemic.  In fact, the U.S. has declared a public health emergency.  In the U.S. there have been at least 20 confirmed cases:

• 8 in New York,
• 7 in California,
• 2 in Kansas,
• 2 in Texas
• 1 in Ohio.
• 4 in Nova Scotia, Canada

SPAIN

After a visit to Mexico, 6 Spaniards have possibly contracted swine flu.

In Mexico, there has been an outbreak of swine flu which has lead to 20 recorded deaths and likely 40 more.  The newspaper el Universal reports that, the Secretaría de Educación Pública suspended classes in the Distrito Federal and the Estado de México.  This means that in the Mexican capital, 5,201 public schools and 3,965 private schools were cancelled.  

Yet this is not just a Mexican issue.  Swine flu has been found among residents of San Diego and Austin.  Further, after a Canadian citizen contracted swine flu after a visit to Mexico, it was the Canadian government that informed Mexico of the possibility of a swine flu outbreak.

Fortunately, the Mexican government claims it has enough drugs to combat the swine flu outbreak.

Nevada is contemplating ’slapping’ a $5 tax on sex acts in brothels.

Businessweek reports that the members of the G20 “…will pledge funds ‘more than doubling’ the amount the IMF initially sought to $750 billion.”  Bloomberg reports that “In the past six months, the fund has approved $16.4 billion for Ukraine, $15.7 billion for Hungary, $10.4 billion for Latvia, $2.5 billion for Belarus, $2.1 billion for Iceland, $7.6 billion for Pakistan and $516 million for Serbia.” 

One question is, what is the nature of a loan from the IMF?  It is not a contract between individuals or firms.  It is not a contract between governments and banks.  It is a contract between one government and another.  The politicians of developing countries are agreeing to pay back the loan in the future.  Unfortunately, while the promise of current politicians to pay back the loan may be made in good faith, this does not imply that future politicians will uphold their end of this bargain.  Future politicians in the developing world will claim that the West is imposing an undue burden upon them with these large loans.  Bono has been arguing for debt relief for developing countries for many years now. 

The book The Bubble that Broke the World chronicles the history of World War I reparations.  Germany could not afford to pay for reparations.  Germany then took out loans from the U.S. to pay for these reparations.  Germany then claimed that the reparations (and the loan) imposed too much of a burden and wanted to default.

We see that throughout history, loans between countries do not work out as intended.   There are better options than offering loans to these developing countries.  One option is that the developing countries could get loans directly from banks or issue bonds.  Although the foreign countries would pay higher rates then would be the case than if the loan was backed by the IMF, it would be free of the political taint of the burdonsome IMF loans.  With loans made from bankers, developed countries would have a responsibility to pay back the loan to creditors or else stigmatize their country to investors and thus face increased interest rates for many yeas to come.  

If the developed countries really want to help developing countries, they could just give them the money.  One should not think of loan as aid.  Bankers certainly do not.  

If the G20 wants to help developed nations, they should give them money.  If they would rather spend money on domestic issues, that is fine as well.  However, offering loans is a disingenuous way of ‘helping’ the developed world.

Last month, I blogged about allowing a government-sponsored health plan to compete with private insurers.  Joe Paduda gives one argument in favor of a public health insurer that any economist would love: increased competition.  

“The reality today is that almost every market is already dominated by a very few health plans, so much so that in most markets, there really is very little market competition amongst health plans…In 96% of markets, at least one insurer has share higher than 30%; in almost two-thirds of the markets, at one insurer has share greater than 50%.”

Could a public health plan actually increase competition?

The N.Y. Times has an interesting profile of Freeman Dyson, a man who claims that global warning may not pose a grave risk to civilization.  Dyson agrees with the scientific consensus that:

• Rapidly rising carbon-dioxide levels in the atmosphere are caused by human activity,
• The world is getting warmer, also due to human activity
• Using coal to generate energy creates “real pollutants” like soot, sulphur and nitrogen oxides, “really nasty stuff that makes people sick and looks ugly.”

So why does Dyson believe that global warming is not a big deal?  First, there has been no overwhelming evidence that warming trends will adversely affect humans or the environment.  Al Gore’s film “An Inconvenient Truth” claims that polar bears will drown if the ice caps melt, but it is more likely that polar bears will be able to adapt to changing conditions over time.  A change in temperature will affect some species adversely, but it may be favorable to other species (such as humans).  Dyson claims that many Greenlanders enjoy a warming of the globe since they can grow cabbage in their own yards.   

Dyson also support energy produced by coal.  Although coal energy is dirty, is it cheap.  Cheap energy can help bring India, China and other countries in the developing world from poor nations to ones securely in the middle-class.  Dyson says, “By restricting CO2 you make life more expensive and hurt the poor. I’m concerned about the Chinese.  [The Chinese are] changing their standard of living the most, going from poor to middle class. To me that’s very precious.”

As an economist, I know that models that predict large scale effects using non-linear modeling can be highly unreliable. Dyson claims that standard climate models take into account atmospheric motion and water levels but have no feeling for the chemistry and biology of sky, soil and trees. This likely exaggerates the danger of global warming.  Thus, large scale anti-global warming interventions involve very large, up front costs in exchange for extremely uncertain benefits far into the future.  

This is not to say that we should ignore the environment.  Clean air and water very important and clearly affect a population’s health.  Further, as a resident of the smog-filled Southern California, I would certainly appreciate efforts to clean up the air.  I believe a carbon tax would be the best way to reduce pollution, but setting a goal of zero carbon emissions is not only unfeasible, it is counterproductive.  

Climate-change specialists often speak of global warming as a matter of moral conscience.  Don’t hurt “the environment.”   We need more science and less ideology when evaluating the effects (good and bad) of global warming.  

• “The key to change…is to let go of fear” – Roseanne Cash