Health insurance and mortality follow-up

by on February 13, 2010 at 9:05 am in Medicine | Permalink

On health insurance and mortality, you'll find Megan's further thoughts (which I agree with) here (and now here).  Neither of us is saying the real net effect is zero.  Also check out Matt, Ezra, Austin Frakt, all of whom make good points. 

Overall I'd like to see more numbers in the health care debate.  If the Obama plan spends $90 billion extra a year on coverage and saves/extends 10,000 lives a year (a plausible estimate, in my view), that is $9 million a life, a rather underwhelming rate of return.  That's a very gross comparison because life extension is not the only benefit and the $90 billion is not the only cost.  Still, as a starting point for analysis I don't think it makes the plan look better.  Keep also in mind that many of the newly covered people are bumping others back into the queue, since the overall supply of medical care isn't going up and may even be declining.

If you did a simple cost-benefit comparison, the Obama plan vs. a simple extension of Medicaid, more R&D through the NIH, and some targeted public health expenditures, I believe the latter would win hands down.  And the latter seems more politically feasible too.  It avoids the mandate, the unworkable and ridiculously low penalties for those who don't sign up for insurance, and the awkwardly high implicit marginal tax rates imposed by the subsidy scheme.  It probably involves fewer corporate and "back room" deals.

In its favor, the Obama plan makes it easier to become an entrepreneur without losing health insurance coverage.  I doubt if that's enough to swing the balance, but in any case it's worth thinking about.  

Please don't argue that the Obama plan saves money.  Even if you believe that (I don't), here we are talking about the marginal impact of one subcomponent of the overall plan.  That subcomponent does cost money.

When it comes to the Obama plan, the easy targets are stupid or hypocritical Republicans.  The hard target is why the plan should beat the alternative reforms I've outlined above or perhaps other ways of spending the money.  I'd like to see more people take on the hard target rather than the easy.

1 Bill February 13, 2010 at 10:06 am

“When it comes to the Obama plan, the easy targets are stupid or hypocritical Republicans. The hard target is why the plan should beat the alternative reforms I’ve outlined above or perhaps other ways of spending the money.”

Nah, take on the easy target.

They are representatives and they have the obligation and responsiblity to vote. And the alternatives wouldn’t be supported either and any marginal benefit from your alternative, if there is one, is probably miniscule.

2 john personna February 13, 2010 at 10:34 am

Put another way, looking at deaths might be a little like looking for car keys under the street lamp. Not a good place to look, but with some light.

3 Steven February 13, 2010 at 11:07 am

A Medicaid expansion avoids high marginal tax rates only if recipients don’t value the insurance very much. If they value it at anywhere near its cost, there would be a very high marginal tax rate at the income level where coverage begins.

4 Steve C. February 13, 2010 at 11:15 am

I think it’s important to tease out the incentives for the government and “the public”. The President can proclaim all he wants from the roof tops, but on balance he realizes (and all credit due him for this) that HIS problem is rising costs to the government for Medicare and Medicaid. The public has, to varying degrees other concerns: loss of job based coverage, pre-existing condition restrictions, high cost for individual policies and rising costs.

To their discredit, the federal politicians are effectively co-opting the private insurance market under the guise of “reform” and using newly available private money to solve their problem while offering crumbs of reform to the public.

5 peterg February 13, 2010 at 11:39 am

I agree with a lot of this, but there’s also a hard target for critics of the Obama plan. Given the nature of the opposition, the defeat of the Obama plan doesn’t mean that Tyler and Megan will then get to implement a much better plan (which I’m sure they could do). It means ten years of the current problems:
-perhaps $600B a year wasted, in comparison to the health sectors of other advanced countries
-huge economic friction in burdens and disincentives to fledgling companies
-an unknown amount (but I would guess significant – others may not) of needless pain, suffering and early death.

And after 10 years of that plus very rapid medical inflation, we would start again with the same congress and the same lobbyists in place. If you want to make a serious case that people should vote against the Obama plan, you need to make a case that it is worse than that scenario.

6 FatTriplet3 February 13, 2010 at 11:50 am

In what plausible way will the Obama plan deal with the issue of medical inflation and the “perhaps $600B a year wasted, in comparison to the health sectors of other advanced countries”? I also think that since the plan will likely lead to much higher premiums because of the weak mandates, it won’t ultimately help with the “disincentives” of bullet two either.

7 zbicyclist February 13, 2010 at 12:18 pm

If we want a cost-effective approach to health care and government entitlements, we can go back to the conspiracy theories — except instead of AIDS being a conspiracy to wipe out gays, we need some disease to wipe out baby boomers in order to save social security and medicare.

Maybe Botox with a bit too much botulism toxin?

8 zbicyclist February 13, 2010 at 12:27 pm

More seriously, since the days in my childhood when doctors and dentists had charges posted on a wall (just like auto repair shops and bike shops) we’ve done lots of things to separate decision makers from considering economics.

It’s hard to see that any plan that doesn’t reverse this is going to truly control costs because it’s too politically easy for Congress to mandate that this coverage and that coverage has to be included — those who benefit are visible (literally poster children) and those who pay the costs are just a large group of taxpayer sheep. Insurance companies are willing to be demonized if they make money on the deal (it’s not the executives who have to answer the phones all day).

9 lark February 13, 2010 at 12:34 pm

“In its favor, the Obama plan makes it easier to become an entrepreneur without losing health insurance coverage.”


Social spending is not just for the poor! We are trapped by corporate jobs even as they outsource and cutback. It is insane. I have to say I am bitterly disappointed at the role you and Megan have played in this debate.

2 cases:

(1) My boss, an entrepreneur, during start up phase (in his 30’s) did not carry health insurance. Everything went into the business. He got cancer. Went bankrupt from treatment expenses (a million in the hole). Tried to come back with a new business. Failed. Killed himself.
(2) A brother in law, trying to start a business, began feeling very sick. No health insurance. He put all his money into the business. He got sicker and sicker, ended up in critical, now has a health condition much worse than if he had caught it early. Tens of thousands in debt, natch.

Needles to say, this is just from my experience.

No wonder we have a lower rate of small business start up than countries such as France and Denmark.

And we are supposed to depend on small business start ups for new jobs??? Dream on.

Thanks for your contribution to the social welfare, Tyler.

10 Richard A. February 13, 2010 at 12:36 pm

From the WSJ 2/11/10
A Simple Health-Care Fix Fizzles Out

It sounds like such a simple concept: Study different medical treatments and figure out which delivers the best results at the cheapest cost, giving patients the most effective care.

Even before Congress took up the now-stalled health-care overhaul, it appropriated $1.1 billion to fund these studies. Both the Senate and the House included it in their versions of the bill. President Barack Obama backed it.

Yet, an examination of one of the best-known examples of a comparative-effectiveness analysis shows how complicated such a seemingly straightforward idea can get.

The study, known as “Courage” and published in the New England Journal of Medicine in 2007, shook the world of cardiology. It found that the most common heart surgery—a $15,000 procedure that unclogs arteries using a small scaffold or stent—usually yields no additional benefit when used with a cocktail of generic drugs in patients suffering from chronic chest pain.

The whole article can be found at —

11 Andrew February 13, 2010 at 12:57 pm

Do left-wingers really believe that they can give healthcare to poorer people without increasing the delay, increasing the cost, or reducing the quality for others? Yay! Another free lunch! (getting through the din is hard)

“But if 28,000 to 45,000 excess deaths per year counts as “an effect [that] is not that large”

Those numbers are not correct. first they are meaningless. Second they are not accurate. Third, Megan did mention one of those papers and talked about methodological problems as well as a financial interest in the reform.

The one Ezra links to claims “excess deaths” to be 27,000 in 2006, which is the max, so that is below 28,000.

Further, the breakdown (for year 2000) is like this:
25–34 1,930
35–44 3,431
45–54 4,734
55–64 8,219

It makes it look a lot different when you say that the total “excess deaths” for those 44 or younger is about 5400/yr out of 350,000,000. AND we are assuming the researchers controlled for everything, including the possiblity that those people that go out of their way to get insurance take better care of their health.

12 Steve February 13, 2010 at 1:09 pm

I don’t see how expanding Medicaid would be any cheaper than the subsidies. If we just added 15 million qualified but unenrolled people to the rolls, then say another 10 million, that should cost about $10,000 per person per year (at least) or abut $250 billion. It we “phased out” the support (e.g. provided subsidies, sort of) it would create the same high implicit marginal tax rates.

13 FatTriplet3 February 13, 2010 at 1:43 pm


Thanks for the pointer to Ezra. He is in my RSS feed but I had missed that post. I still think my point is correct though.

IMHO, the legislation will lead to both higher premiums and higher healthcare costs. The first will happen because the weak mandates will cause healthy people to “opt out” of the system leaving sicker people in the risk pool and driving up premiums which will drive more people out. Eventually an equilibrium price for premiums will be reached but, I suspect, that the increases in the cost of premiums will be dramatic. The cost of health care will rise because the proposed legislation exacerbates the fundamental problem with our current situation, a broken price system.

Klein’s list does not come close to counteracting these more fundamental problems.


14 Barkley Rosser February 13, 2010 at 2:21 pm

Last time I checked, although this has been redone in a less straightforward way more recently, the EPA was estimating a human life at worth $7 million. That makes the $9 million not ridiculously outrageous.

How about relaxing immigration rules for physicians to what they were back in the mid-90s?

Oh, and just what is this “Obama plan” anyway? The House bill? The Senate bill? Something else?

15 Miller February 13, 2010 at 3:21 pm

Last time I checked, although this has been redone in a less straightforward way more recently, the EPA was estimating a human life at worth $7 million. That makes the $9 million not ridiculously outrageous.

But it’s not $9 million for a life. It’s $9 million for one additional year of life for one person. That does seem to me ridiculously outrageous.

16 Miller February 13, 2010 at 3:41 pm

I wonder what the rate of return, calculated on a similar basis, is for the war in Iraq.

I’m not sure what it’s even supposed mean to calculate the rate of return on a war and on health insurance “on a similar basis.” But if this is meaningful, I wonder what the rate of return has been for WWII. Do you think it was wrong to fight WWII?

17 Dan February 13, 2010 at 3:55 pm

As far as I can tell, none of the analyses of the implicit marginal tax rates implied by these health care bills has taken into account the dramatic reduction in implicit marginal tax rates that would occur at the current cutoffs for Medicaid and SCHIP (since under the new laws people would transition from Medicaid/SCHIP to large subsidies as their income increased instead of just losing it all). Since the government provides health insurance for the poor but not for everybody, there have to be significant implicit marginal tax rates somewhere as those benefits get withdrawn. Spreading those implicit marginal tax rates out with subsidies that phase out gradually, like the current bills do, seems like a better option than having large spikes due to means-tested programs (which is the status quo).

18 cushion February 13, 2010 at 4:32 pm

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19 David February 13, 2010 at 5:29 pm

I’ve tried discussing this issue with several of my leftish friends, and in the end, it’s like global warming, nuclear power, abortion, unions, and some other issues: their positions have become religious affirmations rather than reasoned stands.

It doesn’t matter how much evidence you bring to the table, how well-crafted your argument is, or how reasonable your alternative might be: you can’t reason someone out of a view that they didn’t reason themselves into.

20 Robert Nagle February 13, 2010 at 10:38 pm

For David (at Feb 13, 2010 5:29:11 PM):

I’ve tried discussing this issue with several of my rightish friends, and in the end, it’s like global warming, nuclear power, abortion, unions, and some other issues: their positions have become religious affirmations rather than reasoned stands.

It doesn’t matter how much evidence you bring to the table, how well-crafted your argument is, or how reasonable your alternative might be: you can’t reason someone out of a view that they didn’t reason themselves into.

21 Joe February 14, 2010 at 1:43 am


Throw in a government loan program (like Sallie Mae) for certain qualifying illnesses so even poor idiots without any assets don’t literally die for want of health care, and you have a deal. Feel free to make repayment terms as onerous as possible (non-dischargeable, eligible for garnishment, etc.).

Alternatively you could adjust the deductible according to age and force people to fund it through taxes, then they get that money back when they turn 65 or whatever.

22 Bill February 14, 2010 at 10:52 am

Chalk this one up to economists who are not empiricists and who do not live in the real world.

Case in point: How would you prove (or disprove) the hypothesis that not having health insurance affects mortality.

Think for a minute: ask yourself, who would lose money if the hypothesis were false.

Have the answer: ask an life insurance actuary (or underwriter). I did (rather, I asked the attorney for a health insurance who works with the actuaries and is familiar with the data needs). The actuary would not touch a potential subscriber who had not had health insurance. In fact, the questionairre you fill out for your life policy asks for your helath insurance history.

Why is empirical work so simple and why do economists hide from the real world.

23 Bill February 14, 2010 at 12:50 pm

I’m glad that Tyler did not float some of the other proposals as a solution to the healthcare problem. That does not mean there shouldn’t be a discussion of those proposals so that people would understand why some of them are just snake oil solutions in their current form.

Case in point: interstate sales of health insurance (absent a federal minimum standard policy or federal insurance regulation).

First, some form of national market for health insurance is a good idea–it’s just that proposals for simple interstate insurance sales are bad for several reasons (assuming you don’t correct for the problems, as will be discussed later):

1. Assume a New Yorker purchases the Texas health insurance policy regulated by the Texas insuarance commissioner. State insurance commissioners deal with claims disputes–how likely will the Texas insurance commissioner get involved with an insurance dispute for a NY citizen. Unlikely, pardner. You will be on your own, since you, as the NY citizen, don’t vote for the insurance commissioner.

2. States establish minimum standards for insurance policies so that their citizens, when they purchase a health insurance policy, actually get insurance. Sounds strange, but people really don’t look at what is in their policy–they just figure it is health insurance. That’s why states set minimum standards…otherwise, you might be buying snake oil, or at least a copper wristband for your ailments. This, by the way, leads to another problem: every healthcare specialty tries to get their illness mandated as a minimum standard in the policy, effectively raising costs. Interstate competition, in this respect, might reduce mandates. But, it could also lead in the opposite direction: states would compete, as they do now in the banking sphere, to have the worst consumer protection schemes (or policy terms) to attact more insurance companies (and premiums) to their states…think of credit card companies picking North Dakota and North Carolina as their headquarter states…This could be a real problem, where a low population state could bring in large taxable premiums into the state if they had lax regulation, poor consumer protection, and deceptive policy terms.

3. This leads to having a federal standard that would apply to state interstate sales. Without it, you will have snake oil on the waters. And, my bet is that those who propose interstate sales will have nothing to do with a federal standard or federal regulation. Just guessing. (Not really).

24 floccina February 14, 2010 at 8:06 pm

The only ways that might control spending that I see are:

1. Monopsony – Monopsony of course is hard on providers and perhaps on quality of service but the studies that show little benefit from insurance also show little benefit from marginal service so the decline in service may not be so important.

2. More direct spending – my preferred first try is pushing people to higher deductibles. again the studies that show little or no health benefit make higher deductibles look safe.

My compromise plan

@Barkley Rosser there are many immigrant doctors who are not allowed to practice. They need to make it easier to pass the boards!

25 mulp February 15, 2010 at 1:44 am

What I find incredible is how Tyler and Megan and a lot of others are thinking jut like Detroit automakers in the 70s, coming up with excuse after excuse to ignore the way the Japanese made cars, which ironically was taught to them by an American naming Deming who Detroit refused to listen to.

Detroit insisted that Deming couldn’t possibly teach them how to make cars cheaper because Deming said right up from, “ignore cost, focus on improving quality.” To those in Detroit, the problem was the cost of union labor, even tho Japan had stronger unions, the cost of benefits, even though Japan had better benefits, etc.

The joint venture between Toyota and GM now being shutdown is generally considered a great success for Toyota, and a huge missed opportunity for GM because GM ignored everything Toyota offered them at the plant.

Dozens of nations deliver higher quality health care overall, and do so at half the cost. The first step is covering everyone, and then maximizing the quality of care for everyone. The quality will rise significantly faster than the costs, and the pressure to spend more will diminish so costs fall relative to the economy.

According to the theory of health care offered by Tyler and Megan, the US health care should be 5% of GDP, half of what it is in the wasteful systems of dozens of other nations where no one knows what their health care costs because they don’t spend a dime to get it. Obviously in Canada and France and Israel, people massively overuse the health care system because its free and they have no reason to limit their use or shop around. And government central planners can never compete with the free market….

That Tyler can’t see the flaw in his thinking means he is just another Detroit class genius when it comes to competing in the global market place.

26 John Dewey February 15, 2010 at 10:24 am

tyler: “When it comes to the Obama plan, the easy targets are stupid or hypocritical Republicans. The hard target is why the plan should beat the alternative reforms I’ve outlined above or perhaps other ways of spending the money.”

What hypocritical Republicans?

“perhaps other ways of spending the money” should be changed to “other ways of redistributing wealth”. That’s what this so-called reform is really about, isn’t it?

We could probably make a case that “spending an extra $90 billion a year to provide new and safer automobiles” to millions of poor Americans will save/extend x number of lives. Or that “spending an extra $90 billion a year to provide three nutritious meals a day” to millions of poor children will save/extend x number of lives.

The problem, though, is that the money to accomplish any of those things must be taken from some individuals are not willing to part with it voluntarily. Or, in the case of loading up the nation with trillions in public debt, it will be taking wealth from a minority of citizens who are not yet born and cannot even protest.

When did extending/savings one’s life stop being the responsibility of individuals and parents and start being the responsibility of the productive and the unborn?

27 Miller February 15, 2010 at 7:17 pm

36 countries where people live longer than in the United States; all have health care systems well to the left of Obamacare and which cost something less than half as much. How stupid do you have to be to keep kicking the tires on this?

How stupid do you have to be to assume that the differences in life expectancy between the U.S. and those countries are caused by differences between the health care systems, rather than other differences like diet, exercise, smoking, drug use, accidents, crime, etc.?

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