The nature of the Medicaid cost problem

by on December 11, 2013 at 5:11 am in Data Source, Economics, Medicine | Permalink

Harold Pollack writes:

The bottom 72 percent of Illinois Medicaid recipients account for 10 percent of total program spending. Average annual expenditures in this group were about $564, virtually invisible on the chart. We can’t save much money through any incentive system aimed at the typical Medicaid recipient. We spend too little on the bottom 80 percent to get much back from that. We probably spend too little on most of these people, anyway. For the bulk of Medicaid beneficiaries, cost control is less important than improved prevention, health maintenance and access to basic medical and dental services.

The real financial action unfolds on the right side of the graph, where expenditures are concentrated within a small and incredibly complicated patient group. The top 3.2 percent of recipients account for half of total Medicaid spending, with average expenditures exceeding $30,000 annually.

Many of these men and women face life-ending or life-threatening illnesses, as well as cognitive or psychiatric limitations. These patients cannot cover co-payments or assume financial risk. In theory, one might impose patient cost-sharing with some complicated risk-adjustment system. In practice, that is far beyond current technologies and administrative capabilities. Even if such a system were available, we couldn’t push the burden of medical case management onto these patients or their families.

Very much worth a ponder, and there is more in the post.

W.E. Heasley December 11, 2013 at 6:07 am

If 72% use small amounts of the non-robust/non-price signal health-care supply [“The bottom 72 percent of Illinois Medicaid recipients account for 10 percent of total program spending. Average annual expenditures in this group were about $564“] – and – “Figure 1 shows 2012 data for Illinois’s 3.2 million Medicaid recipients”….. then 72% of 3.2 million users (2,304,000 users) times $564 average expenditure per user equals $1,299,456,000 of expenditure. Hey, it’s “only” $1.3 billion, what the heck.

Hence Pollack’s implicit and explicit argument thread is to focus the reader’s attention on the smaller number i.e. $564 and basically omit’s the larger number of 2.34 million users resulting in a $1.3 billion price tag.

Maybe the real question concerning state Medicaid programs and their trajectory of eventually becoming the only item on a state’s budget (total tax revenue = total Medicaid expenditure), is: the number of users. Why have all the wonderful schemes deployed by politicos through the mechanism of government produced 3.2 million users in the state of Illinois. -Or- is it merely dystopia and the associated dystopian(s).

“Second, Medicaid is underfunded.” “ Projected increases in Medicaid expenditures are quite manageable….” – Pollack

Really? Hence Pollock deploys categorical risk management, based upon collective action, making the assumption of unlimited funds, with all alternatives [cost] being meaningless as categorical risk management [the impossible] is beyond paramount. And yes, unlimited funds is a manageable position.

Pollack exercises incremental risk management with his money. Yet argues categorical risk management with other people’s money. An unlimited amount of other people’s money.

Very nice indeed!

Bill December 11, 2013 at 9:52 am

WE, I don’t understand your comment.

Is it that you disagree with the observation that the costs are skewed at the tail, or do you have problems with poor people getting $564 in care that averts future health problems? And, by the way, if those costs aren’t paid for, they get transferred to YOUR hospital bill as uncompensated care–unmanaged uncompensated care at that.

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mulp December 11, 2013 at 7:43 pm

So, you are in agreement with Ron Unz that the acceptance of a low wage model to benefit corporations is bad policy, and you support initiatives like his proposal to hike the minimum wage in California to $15/hour so people can pay their own way and not require welfare?

Jan December 11, 2013 at 6:25 am

The issue of a small number of patients generating the majority of the costs is quite well known in the health care field. Of course, even cheap beneficiaries can end up costing a good deal when you add millions of them. But he’s right that Medicaid is a very efficient and low cost program for most patients. It’s so low cost that there are some access issues–doctors unwilling to take new patients because the reimbursement rates are low.

What he doesn’t cover is what is going on to help those high cost patients. There are a number of initiatives targeted at managing their care and producing savings, but I don’t know if many best practices are emerging yet. One successful operation I am aware of provides intensive care to dually eligible Mediciad/Medicare patients, mostly at home, to reduce hospitalization and nursing home admissions: http://www.commonwealthcarealliance.org/about-us/history

prior_approval December 11, 2013 at 6:31 am

‘The top 3.2 percent of recipients account for half of total Medicaid spending, with average expenditures exceeding $30,000 annually.’

And it is worth pondering how many of them used to be employed, with health care provided through their employer. Until they lost their job, and thus lost the ability to pay for health insurance. And then were forced to use up all assets before being able to use Medicaid as their last resort. With a likely break either in medical care, or horrendous bills in the interim between employer provided health insurance and Medicaid coverage.

A process essentially unknown in all other industrialized countries, where health care costs are significantly lower. And no one is bankrupted before being able to apply for health care.

Here is some helpful information about just Medicaid works (and do notice the part about incurring bills – not paying them as such – before becoming eligible) –

‘Spending Down to Become Eligible as Medically Needy

A person spends down his or her excess income to the state’s medically needy limit by incurring medical expenses, such as doctor visits, prescription drugs, or anything else the state considers to be medical or remedial care. It is important to understand that the person does not actually have to pay an expense for it to count as an incurred expense. The person only has to incur the obligation to pay the expense.

The medical expenses the person has incurred are then subtracted from his or her income. If the remaining income does not exceed the state’s income limit, the person is eligible as medically needy.

The medically needy income limit varies considerably from state to state. In most of the states that cover the medically needy, the income limit for an individual is less than $500 a month.

As an example of how this works, Mr. George has income of $1,000, which is too high to qualify for Medicaid in his state unless he can qualify as medically needy. His state has a medically needy income limit of $400 a month. That means Mr. George has a spenddown liability, or spenddown amount, of $600, which is the difference between his income and the state’s income limit.

But, Mr. George also has incurred medical expenses of $600. The state will subtract that $600 in medical bills from his $1,000 in income, leaving him with $400 in countable income for the month. Since his countable income is no higher than the state’s income limit of $400, Mr. George can be eligible for Medicaid as medically needy.’ http://longtermcare.gov/medicare-medicaid-more/medicaid/medicaid-eligibility/financial-requirements/

This is in connection with long term/institutional care, by the way. Which, surprisingly, tends to be more generous. Why, you can even earn over $25,0000 dollars a year, compared to ‘normal’ Medicaid – ‘The amount of income a person can have is quite high, up to $2,130 a month in 2013. That is three times higher than the amount of income a person can have ($710 a month in 2013) and be eligible for Medicaid because he or she is receiving SSI benefits. The amount of countable assets a person can have is similar to other pathways, about $2,000 for an individual.’

And let’s not forget – this is the current state of America’s health care system, after putative ‘reforms.’

I will say, if social conservatives ever figure that many couples actually divorce to ensure that one becomes eligible for Medicaid, the cognitive dissonance will be as sadly amusing as that which occurs here so regularly.

John Thacker December 11, 2013 at 8:24 am

I will say, if social conservatives ever figure that many couples actually divorce to ensure that one becomes eligible for Medicaid, the cognitive dissonance will be as sadly amusing as that which occurs here so regularly.

In my experience, social conservatives are well aware that an enormous number of social welfare and benefit programs strongly encourage people to divorce in order to be eligible for benefits or more benefits. Most of that is due to how the federal poverty limit is calculated– the exact same effect occurs with the PPACA subsidy and premium limit cliff. Thanks to the definition of the federal poverty line, if two people make $90k combined, they save thousands, in some cases tens of thousands per year on health insurance if they divorce under the PPACA.

It’s impossible to have progressive taxation (or means tested and/or phased out benefits) and have a system that is truly neutral according to marriage status and allows people to pool their income and file jointly (which married people could do to some extent anyway by shifting some sorts of investment income to the spouse with a lower wage). You can have a system that gives all married couples bonuses for being married, essentially shifting more of the burden onto singles. Generally, yes, social conservatives have fought to ensure that federal tax and benefits have had more marriage bonuses, and thus shifted more of taxes onto single people.

Social conservatives continue to welcome any effort by Republicans, Democrats, or others to make married couples relatively better off compared to singles by tweaking taxes and benefits, in my experience. No cognitive dissonance.

John Thacker December 11, 2013 at 8:25 am

Also in my experience, liberals are more likely to deny that a significant percentage of people change their marriage behavior in order to claim more benefits. It’s usually conservatives that think so.

Boonton December 11, 2013 at 8:55 am

Marriage is pretty complicated economically. For example, marriage gives you legal claim to your spouse’s income and assets. So while today not being married to your spouse may get you some benefits you couldn’t get while married, should your ‘spouse’ suddenly strike it rich, he or she could walk away from you and you would have no legal rights at all. So in some ways marriage can be looked at as a type of ‘option’. Today it may cost you a welfare benefit but tomorrow it may allow you to claim your partner’s good fortunes (better job, winning the lottery, an inheritance etc.) Likewise marriage may also come back to bite, you may be the one saddled with debts incurred by the partner you opted to legally marry.

In terms of an older couple, the welfare aspect may be all that matters if you are, say, considering divorce in order to get Medicaid. In terms of younger couples it’s not so obvious IMO. I once worked with a woman whose husband won the lottery 6 months after their divorce was finalized.

John Thacker December 11, 2013 at 12:01 pm

Oh, yes, it’s pretty complicated. One of the problem with marginal effects is that not everyone is on the margin. So even if extending unemployment benefits makes some people not take a job, it’s certainly true that it won’t be *everyone* who’s affected on the margin. Ditto for discussion of minimum wage and unemployment, or marriage effects here. People can easily acknowledge that some people on the margin will be affected while thinking that the policy overall is superior.

I just think it’s absurd for prior_approval to pretend that social conservatives aren’t aware of this issue– a lot of them are the most concerned about government discouraging marriage; they take it farther than I do certainly.

Govco December 11, 2013 at 12:58 pm

You can game student loans by divorcing, not just Medicaid, ACA and income taxes. A couple with 3 kids close to college should divorce and place custody of the kids with the low/non-earner.

Boonton’s option analysis is an excellent point, but can be mitigated (not eliminated) in the amicable divorce “settlement” and can be eliminated by a successful common-law marriage claim after the windfall. Anyway, I’ve made that argument to my wife but I don’t think she’s buying it.

Discussing with the low earner spouse is another countervailing point to this strategy, trust me.

It little profits that an idle king,
By this still hearth, among these barren crags,
Match’d with an aged wife, I mete and dole
Unequal laws unto a savage race,
That hoard, and sleep, and feed, and know not me.

Boonton December 11, 2013 at 7:55 pm

The problem with games like this is that they become very difficult to enforce legally. While many married couples will say they trust their spouses, the fact is the legal force behind marriage is almost certainly a factor. John points out, margins matter. At the margin no doubt some marriages didn’t end because one or both parties said to themselves that divorce could become very messy and very expensive.

So if you are going to strategically divorce and then remarry to optimize on taxes and other benefits, Good luck to you but I think trust is a problem here. By giving your spouse periodic ‘freedom’ as a single person you run the risk that they will screw you when the opportunity presents itself, say be keeping windfalls for themselves. Good luck going to court then to enforce your ‘understandings’.

mulp December 11, 2013 at 10:09 pm

Are you saying that if you and your wife are making $8/hour, that promotes divorce because tax rates are progressive, and getting raises to $10/hour would result in net income less than at $8/hour?

TallDave December 11, 2013 at 9:55 am

A process essentially unknown in all other industrialized countries, where health care costs are significantly lower. And no one is bankrupted before being able to apply for health care.

And all they had to give up was actual medical treatment, of which they do much less.

Brandon December 11, 2013 at 10:52 am

[citation needed]

john personna December 11, 2013 at 11:41 am

Come on Brandon, you know the routine. Those other industrialized countries get to higher life expectancy than us, without medical treatment, because they aren’t as “diverse” as we are.

Thomas December 11, 2013 at 12:02 pm

The statistics show that there are large discrepancies between race and life expectancy.

As John Stewart would say, “Reality is biased”.

TMC December 11, 2013 at 12:05 pm

An apples to apples comparison does show the US to be on top in medical outcomes.
So while being snide, you were also correct.

john personna December 11, 2013 at 12:11 pm

bing, bing, we have winners. (Of course better students of statistics will know that you can “mine” for that answer if you want, or you can use more general information on income and education (or income and education of parents) and get a more general answer.)

john personna December 11, 2013 at 12:43 pm

Related: “By 2008, life expectancy for black women without a high school diploma had surpassed that of white women of the same education level, the study found.”

Govco December 11, 2013 at 1:32 pm

C’mon John, don’t do that.

Most claims that U.S. healthcare outcomes are worse at higher cost* originate with the OECD’s study. LE is not the only legit criticism, OECD used “inequality” (e.g., Tanzania scores higher than the U.S.) and incompatible statistics (e.g., infant mortality is defined in the U.S. differently than in France), etc. The OECD approach (and LE) are fairly called inferior measures of medical care when compared to “earlier diagnosis”, “diagnosis to treatment” or “diagnosis to fatality”.

But, yes, those more specific measures have their own limitations. Let us agree that a definitive comparison is currently impossible. Does uncertainty support (i) status quo (ante 2010) mixed Federal-state; (ii) complete Federal take-over (post-2010), or (iii) Federal withdrawal, leaving autonomous healthcare system for each state (i.e., the European system)?

*(I don’t understand the cost issue. U.S. residents spend more money per capita then, say, French citizens overall, and on particular items like cars, TVs, and housing. In fact, our Federal govt spends less on medical care per capita, because individuals, employers and states pick up most of the cost. Where’s the case for Federal intervention?)

john personna December 11, 2013 at 1:48 pm

Life expectancy isn’t the be-all, end-all, but it is certainly “good.” We each want more of it. And generally the more expectancy you have, the more “good years” you have.

Other data as you say is useful, but noting has the broad data collection and deep history of death records.

TallDave December 11, 2013 at 4:00 pm

Govco — yes, and additionally the U.S. leaps right to the top of the LE charts if you adjust for car accidents and homicides.

http://www.forbes.com/sites/theapothecary/2011/11/23/the-myth-of-americans-poor-life-expectancy/

And of course, looking at the fate of people from other OECD countries we usually find them doing about the same here:

http://minorityhealth.hhs.gov/templates/browse.aspx?lvl=2&lvlID=53

TallDave December 11, 2013 at 11:54 am

I’m amazed people still don’t know this even after the whole PPACA debate — twice as many MRIs per capita, twice as many organ transplants, three times as much cancer screening. And our top five hospitals do more trials than any other entire country. We get drugs a year sooner and are

http://classicalvalues.com/archives/2009/10/health_care_man.html

Adjusted for ethnicity we actually do have about the best LE in the world.

john personna December 11, 2013 at 12:23 pm

Why would anyone adjust for ethnicity? If you want to subtract the poor you should adjust for income. If you want to subtract people who have lower knowledge of prevention, you adjust for education.

Of course if you subtract those, and only have the rich and educated, then yes, the rich and educated can take care of themselves.

If you are rich, educated, and self-interested, I suppose that’s all you need.

TallDave December 11, 2013 at 12:26 pm

Why would anyone adjust for ethnicity?

Because LE is correlated to ethnicity, and you’re not trying to measure ethnicity, you’re trying to measure the effect of healthcare.

john personna December 11, 2013 at 12:32 pm

Well Dave, either you were using some unfortunate shorthand, or you could benefit from Udacity’s Introduction to Statistics

Self-reported ethnicity is a very independent variable, compared to health care data. You don’t find it in health care data. It is something you choose to test for correlation. You could choose something, as I say, more general like education or income level. In health care I’d think the education and income level of parents would be a strong influence.

So, why as would you in particular choose to investigate the “ethnicity” angle? Are you trying to help specific communities? Or are you under the mistaken impression that if you have the “right race,” but no income or education, you’ll do fine?

TallDave December 11, 2013 at 12:42 pm

You’re making less and less sense, john. The goal is not to “help” any “community” or “investigate the ethnicity angle.”

The goal is to measure the effect of U.S. healthcare, relative to other countries, on life expectancy, which means removing confounding factors. Yes, we have data on LE by ethnicity, it does exist and has for decades, and if you compare (say) Swedes to Swedish-American or Mexicans to Mexican-Americans or Japanese to Japanese-Americans, we always do quite well.

Overall LE in the U.S. does not look as good as the OECD because African-American LE is much lower. OTOH, (unsurprisingly) it is much higher than in most African countries, but there are no African OECD countries so we can’t really do a fair comparison of how Africans might do in an OECD-comparable situation of socialized healthcare.

john personna December 11, 2013 at 12:46 pm

I posted this link above. If that doesn’t explain it for you, nothing will. That is, your preference for an “ethnic” explanation is irrational and fixed.

TallDave December 11, 2013 at 12:49 pm

Your article says exactly what I just did:

“But blacks over all do not live as long as whites, while Hispanics live longer than both whites and blacks.”

You seem to having trouble with reading comprehension and staying on the topic, which is how to measure a nation’s healthcare, not “blame the darkies” or whatever you’re imagining.

john personna December 11, 2013 at 12:52 pm

My position is that “ethnic” explanations are foolish, and you just reinforced that. Are we done now?

TallDave December 11, 2013 at 12:57 pm

Are you claiming the correlations don’t exist? Your own article said they did. Note that Hispanics are low income!

Are you claiming the correlations should be ignored even though they do exist? You’re the guy who just suggested an Intro to Stats class, and now you want to ignore confounding factors?

You seem confused, to say the least.

john personna December 11, 2013 at 1:04 pm

Do correlations adjusted for income and education exist? Or in fact are you using self-reported ethnicity as an inefficient proxy for income and education?

I’d say that if “life expectancy for black women without a high school diploma had surpassed that of white women of the same education level” we have our answer.

Self-reported ethnicity is NOT a dominant factor, it is just one chosen by (a) people seeking to aid disadvantaged groups, and (b) people seeking to deny aid to disadvantaged groups.

john personna December 11, 2013 at 1:05 pm

Really Dave, you are using a statistical fail to justify your position here.

TallDave December 11, 2013 at 1:10 pm

As has been pointed out three times now, whites have higher incomes but lower LEs than Hispanics.

Anyways, income and education don’t vary nearly as much as ethnicity within the OECD (e.g. Japan is 99% Japanese), so they’re not relevant to national comparisons of LE.

TallDave December 11, 2013 at 1:12 pm

I don’t even have a position, I’m just citing the relevant facts and marveling at your confusion.

john personna December 11, 2013 at 1:16 pm

From “The Price of Life: The Future of American Health Care” by Robert H. Blank:

“Although it is often postulated that race differences might have an independent effect on health status, most studies have found that it is likely indirect and the result of other socioeconomic indicators, particularly education. Pappas et al. conclude that while race has been understood as a proxy for social class, the gap between black and white health status is affected significantly by low income and poor education (1993:107). Several recent studies have found that education is more strongly correlated with mortality from coronary disease and life expectancy than race (Keil et al. 1993, Guralnik et al. 1993). Haan and Kaplan (1985) found that when adjusted for income, marital status, and household size, the difference in mortality according to race were eliminated. Except in a few conditions, such as hypertension that affect blacks disproportionately, the poorer health of black Americans probably reflects other correlates of SES rather than race itself (Angell 1993:126)”

john personna December 11, 2013 at 1:17 pm

My confusion Dave? Me and all those researchers you mean?

TallDave December 11, 2013 at 1:19 pm

Again, black-white differences within the U.S. are not relevant to international comparisons, so I don’t know why you keep bringing them up. And for the fourth time now, Hispanics have lower incomes but higher LEs.

TallDave December 11, 2013 at 1:25 pm

That page in Robert H. Blank’s book is pretty hilarious. It has a chart that shows black, white, and Hispanic LE. The Hispanic values have been omitted. Gee, I wonder why?

john personna December 11, 2013 at 1:26 pm

I can only conclude now that … well to be generous, there are actually two possibilities. You might just be a stubborn commenter. If you are, in the next day or two you’ll think it over, and realize that if health care in the US is actually most correlated to socioeconomic factors, it isn’t really fair to compare the US to other countries by dropping our poorest. I mean, they don’t drop their poorest, do they?

Of course the other possibility is that you are an irrational racist, who will stick to an ethnic explanation until your own expensive end-of-life health care situation.

TallDave December 11, 2013 at 1:28 pm

Hispanics are poor and have higher LEs than whites. That destroys your thesis. Sorry you think it’s some kind of racist plot.

Since I’m tired of repeating the obvious, enjoy your day, I won’t read further.

john personna December 11, 2013 at 1:38 pm

I guess the easy catch is that when you just say this is “my thesis” rather than the results of many wide studies, you are seeking to diminish and distract from those wide results. Beyond that, you really have run a long way from your starting position, that we should just look at “white” life expectancy and forget the rest. Your idea now is that since Hispanics might have something (culture, diet, religion) that helps them … that justifies the “white” grouping?

That’s not terribly convincing, to the rational or non-racist. I mean the bottom line is that socioeconomic conditions matter most. Only a racist would seek to deny that.

TallDave December 11, 2013 at 2:37 pm

OK, just one last time for posterity: no studies find Hispanics have shorter LEs than whites. Sorry.

Let me gently suggest again that your reading comprehension is not good here. I did not suggest throwing out blacks (who have incomes right at about the OECD median anyway) or that we should we should just look at whites, I suggested comparing like ethnicities under socialized systems.

I will also gently suggest that as I have multi-racial children, repeatedly impugning me as some sort of white supremacist is very silly.

And now I really have to do something more productive than read the flow of nonsensical sewage you’re producing.

john personna December 11, 2013 at 3:06 pm

That’s interesting Dave. Let’s dive into that. Do you think that if you ask your children to self-identify as one race that will tell you something meaningful about their future health? Remember, in your framing there is no one multi-racial. There are only black, white, and Hispanic.

Who isn’t keeping their statistical data straight here?

And again, yes, when you seek to quantify US health by dividing down to “white health,” you implicitly restrict your sample in terms of wealth and education.

john personna December 11, 2013 at 3:08 pm

(I never said Hispanics had lower LE, I just said they might have something socioeconomic about them that might explain it. Indeed they must, since studies tell us that on a national basis socioeconomic influences are the number one correlation. Perhaps they work physically harder, walk more, drive less?)

john personna December 11, 2013 at 3:13 pm

Seriously, the tl;dr here is “studies show that socioeconomic factors are the number one correlation for health care outcome.” But “no thanks, I prefer race anyway.”

Jay December 11, 2013 at 12:30 pm

Is it at all a controversial statement to say that typically single-payer/government run healthcare rations to control costs via waiting time and/or treatments available? I thought this was well understood, but I could be wrong.

john personna December 11, 2013 at 12:33 pm

That’s both a simple and non-simple answer, Jay. Much of this thread is about US overspending in end-of-life scenarios. If we can’t “ration”‘ there, we can’t control costs.

TallDave December 11, 2013 at 12:46 pm

They do about half as many diagnostics, too. There’s a lot of money to be saved in doing less prevention.

mulp December 11, 2013 at 11:02 pm

You do know that the biggest way the US tries to control health care costs is by denying access to treatment, don’t you?

How is the USA better than Canada in its method of rationing care and denying access to care?

Other than the fact that Canada has lower taxes to pay for health care per capita than the US and a more rational way of rationing care…

mulp December 11, 2013 at 10:53 pm

In the US millions of American pay taxes to fund health care for others but are both uninsured and too poor to get their own care unless they can find and get to an ER where they get some limited care they are billed for, and can not pay by ignoring all the bill collectors.

But explain how all the millions of Americans who can’t get a doctor’s appointment because they do not have insurance nor have a way to convince the doctor’s staff the bill will be paid promptly is NOT “all they had to give up was actual medical treatment, of which they do much less.”

If you are working poor with no insurance because you can’t afford it after paying rent, for the car you must have, food, etc, and you are diagnosed with cancer in the US, are you saying the government will give you free cancer treatment? Or the doctor will just provide it for free, paying the $10,000-$50,000 drug bill out of his profits?

You are obviously ignoring the number one nation in cutting health care costs by denying medical treatment: the USA.

Doug December 11, 2013 at 6:32 am

Anyone with a passing knowledge of Robin Hanson would probably conclude that very few people are seeing positive marginal health benefits at $30k/yr+ in medical spending. My guess is that the vast majority of that 3.2% would see significant health improvements from having their medicine cut.

Roy December 11, 2013 at 9:47 am

Oh really?

I had a kidney transplant and several years of anti viral therapy that cost well over that yet I am employed and much more productive after treatment. Does Hanson know anyone who has gone into long remission from a serious cancer? HIV treatment still runs well over half that amount and yet I know people who are very productive who have lived more than two decades with those drugs. So where do you draw this magical line?

Dan Weber December 11, 2013 at 10:12 am

The first step is to admit that there is a line that you are willing to draw.

john personna December 11, 2013 at 11:16 am

Well Roy, we should use exactly the distinction you imply, whether the treatment will realistically add years to to someone’s life, or whether it will only add up to a very expensive 30 days. (I am not a medical ethicist with clinical experience, and so I don’t know how wide the gray zone is between those two, but I’d hope the “death panels” could make a compassionate recommendation.)

TMC December 11, 2013 at 12:10 pm

Agreed. In the last days of someone’s life they should be made comfortable, not attempt an impossible cure or be treated for things they will never die from. Been through it once with a family member and now doing it again.

Not sure if its the medical system or the family that’s the larger problem.
Personally, I’m in favor of Dr. Kevorkian.

mike December 11, 2013 at 3:02 pm

How did you get HIV, Roy? Bad blood transfusion? Then I assume you sued the Red Cross or whoever and they paid for it. I mean, obviously you didn’t get it from the one or two obvious sources that everyone knows cause HIV, because I’m sure you realize it would be pretty obnoxious to complain about that especially if your treatment was paid for by the government.

And if you paid for it yourself, then nobody here is saying you shouldn’t be allowed to do that.

Benny Lava December 11, 2013 at 7:20 pm

I thought conservatives were in favor of tort reform limiting the ability of patients to sue the health care industry.

bxg December 11, 2013 at 8:18 pm

I think you are missing Doug’s point. Having a “passing knowledge” of Robin Hanson is the important point here. If you had no knowledge, you wouldn’t suspect it. If you had more than passing knowledge of the quality of Hanson’s arguments in general, it would never occur to you either!

The let-them-die crowd really needs to settle on a consistent set of facts to make up. You can make up that health care isn’t that useful, and so there’s no real dilemma in cutting off folks currently costing $30/k off. Or you can say that no one else in the world does as well in the US because (and this is the part you just make up out of nothing:) other countries “give up was actual medical treatment, of which they do much less”. Or you can make up that “no one in the U.S. is denied health care”.

A _consistent_ fiction would be more convincing.

(Oh, I see we now have a new one: yes it’s maybe expensive to treat you, and maybe it helps you, but either someone else caused it and should be sued, or it’s your own fault. Either way, government and society are – yet again! – conveniently off the hook somehow.)

mulp December 11, 2013 at 11:06 pm

But Hanson will not invoke creative destruction and free market medicine like auto towing and repair:

If you don’t have enough money to pay for the ride to the ER and the ER bill, then euthanize and sell the body parts to recover sunk costs.

Instead is is all “free market” as if the free in free market means stuff for free.

dearieme December 11, 2013 at 6:42 am

“cost control is less important than improved prevention, health maintenance …”: very pious, but to what extent is it true? Even the hallowed American annual check-up is, apparently, of no demonstrable use.

Z December 11, 2013 at 8:56 am

They are very useful to people making a living from prevention, maintenance and regular checkups!

Dan Weber December 11, 2013 at 10:09 am

I was going to agree with you (and I did a control-F to see who else had looking at this), but this is the 80% that is only taking 20% of the spending. We probably can worry a bit less about const containment for them.

RZ0 December 11, 2013 at 7:21 am

Amazingly, we spend most of our health care dollars on sick people.

Gotta find a way to stop doing that.

derek December 11, 2013 at 8:30 am

If only these sick people would stop showing up, then we could get the system working just right.

TallDave December 11, 2013 at 9:56 am

Then the system could focus on its real purpose of delivering contraceptives.

Mike December 11, 2013 at 11:30 am

But only to people whose kids would be unproductive. Someone has to pay for my health care when I get old.

Michael December 11, 2013 at 10:44 am

Yeah, I’m pretty sure that data doesn’t prove his point, either. Ross makes a point about over-consumption, and Harold responds by pointing out that costs seem to be concentrated in groups that consume lots of dollars. He may even be backing up Ross’s point, once you factor in the (almost complete lack of) health improvement in the Medicaid population.

joan December 11, 2013 at 8:02 am

Nearly half of medicaid spending is for nursing home care for seniors.

Jan December 11, 2013 at 8:36 am

No, long-term care is less than a third of Medicaid spending. And only about 40% of that is for nursing homes. http://kff.org/medicaid/state-indicator/spending-by-service/

However, I will give you that long-term care is going to be a huge issue in the next thirty years or so as baby boomers transition from unpaid family caregivers to the ones who need care. It is a grey tsunami and we are not prepared.

sdb December 11, 2013 at 9:02 am

What about other medical spending for people in longterm care?

Jan December 11, 2013 at 10:24 am

That is generally counted among the nursing home costs, though I believe ambulatory care and hospital costs for people who are also receiving long-term services in their homes are counted separately in the medical benefit.

Yancey Ward December 11, 2013 at 11:03 am

Some of it is counted, but I would wager most is not. Nursing home care comes with a lot separate bills for primary care, hospital care, and testing services. However, you don’t have to be old and in a nursing home to be on Medicaid. If you are poor enough, Medicaid basically becomes your Medicare Part B funding source.

Mondfledermaus December 12, 2013 at 12:57 pm

The way to stop the Gray Tsunami is with Soylent Green.

dead serious December 11, 2013 at 8:57 am

They make good soup. Boil them down and feed it to the poor.

Republican Nirvana.

The Anti-Gnostic December 11, 2013 at 12:52 pm

LOL. I swear liberals are the silliest, most backward-looking people on earth. They imagine some monocled-top hat Monopoly game character, boiling down old people and slopping it out to his (patriarchy!) factory workers, chained to their looms. [Cue smokestacks, breadlines, Potterville]

“The poor” prefer their Tater Tots and purpa drank, thank you very much.

Bill December 11, 2013 at 8:49 am

Is it the same 3.2% year after year, or is it simply the expected distribution within a scheme of insurance?

sdb December 11, 2013 at 9:01 am

That is my question as well. Isn’t the important thing to know the distribution of integrated expenditures over the lifetime of beneficiaries? How long does the typical beneficiary stay on medicaid? Are the expensive 3.2% folks who were on medicaid over the longterm, or where these mostly people who entered the program already sick?

john personna December 11, 2013 at 11:22 am

We have the well known statistic that “Medicare, the health insurance program for the elderly, spends nearly 30 percent of its budget on beneficiaries in their final year of life”

That would seem to imply that they aren’t’ coming back for more, no.

mike December 11, 2013 at 3:04 pm

That’s a backward-looking statistic though. How do you know who’s going to die within a year and who’s not, before you give the treatment? That would be a more interesting analysis.

john personna December 11, 2013 at 3:11 pm

Who? Medical ethics consultants, AKA Death Panels.

sdb December 12, 2013 at 3:26 pm

How is that relevant? Medicare is for old people, and they have it until they die. Evidently only about 12% of medicaid is going to nursing homes and medicare is picking up the hospital care.

TomHynes December 11, 2013 at 10:21 am

Agreed. Do you have a bunch of $500 years, then a $30,000 year, then back to $500 years, or do you have $30,000 years until you die. If the latter, is it one or two years or twenty years.

Do single payer countries handle the $30,000 years differently?

How about the $300,000 years?

JWatts December 11, 2013 at 10:39 am

I can’t speak for that particular Medicaid population, but the average Medicaid recipient will transition to Medicare at 65+. And generally, a large chunk of Medicare spending is in the last 18 months of life. And a whole lot of that is considered by some to actually be worse than no care.

Here’s some comments by the author of the Dilbert comic strip:
“My father, age 86, is on the final approach to the long dirt nap (to use his own phrase). His mind is 98% gone, and all he has left is hours or possibly months of hideous unpleasantness in a hospital bed. I’ll spare you the details, but it’s as close to a living Hell as you can get.

If my dad were a cat, we would have put him to sleep long ago. And not once would we have looked back and thought too soon.

Because it’s not too soon. It’s far too late. His smallish estate pays about $8,000 per month to keep him in this state of perpetual suffering. Rarely has money been so poorly spent. ”
http://dilbert.com/blog/entry/i_hope_my_father_dies_soon/

Yancey Ward December 11, 2013 at 11:42 am

Pretty much every senior citizen in my family, or that I know as friends and acquaintances, have run up bills in Medicare that are over $100,000 before they have died. My two grandmothers were certainly in excess of 1/2 million dollars from multiple cancer surgeries and/or bouts with infections, and neither of the died in a nursing home. Today, if you don’t die quickly, you die expensively.

chuck martel December 11, 2013 at 4:50 pm

That “expensively” is money that’s the income of many different people. They probably think that they need a raise.

Peter H December 11, 2013 at 3:58 pm

It varies. Some of the big cost people are people with severe but non-fatal disabilities who require round-the-clock care. Those will persist for many years. Others are end-of-life care or nursing home care which doesn’t persist for as many years.

The thing with Medicaid is that it’s the program that takes the most severely disabled people. Many of them are really unemployable in any context and require massively expensive care. It’s not terribly comparable to the large group market in that way.

Z December 11, 2013 at 8:51 am

I love stuff like this. it takes a “wonk” to doiscover what everyone has known for 5,000 years. Old sick people use most of the medical services? I’m shocked! I bet the next thing Harold Pollack is going to tell us is there’s no way to limit demand from old sick people. They will just keep showing up at hospitals no matter how much we tinker with the perpetual motion machine that is state run health care.

As I’m fond of pointing out on my blog, all goods and services are finite. Therefore they must be rationed. There are no exceptions and there never will be exceptions. The only question with regards to health care is who does the rationing. If you prefer the state to do it, then get rid of your silly notions about participatory democracy and representative government. Install a ruling elite as the East Asians prefer and let them do the rationing. Alternatively, you can junk the state and let the market ration health services through price. It works really well in veterinary medicine so you may want to consider it before going for the totalitarian option.

sdb December 11, 2013 at 9:13 am

“Alternatively, you can junk the state and let the market ration health services through price. It works really well in veterinary medicine so you may want to consider it before going for the totalitarian option.”

Perhaps, but it worth noting that per capita expenditures on vet care are about the same as health care spending. All have more than tripled since the mid-80′s (340% versus 350% respectively):
http://www.scottwinship.com/1/post/2009/07/that-veterinarian-services-vs-health-spending-chart.html

Z December 11, 2013 at 10:43 am

That’s just fun with numbers. According to the AVMA’s demographic source book, annual cost per dog is $225 and a cat is $90. A 100% increase in the average cat’s vet bill is a rounding error in most household budgets.

dead serious December 11, 2013 at 11:34 am

Cats and humans require similar levels of care AND costs are similar. Tell me something else I didn’t know.

sdb December 12, 2013 at 3:43 pm

So does the inflation of various services scale with price? The amounts we spend on greeting cards, haircuts, shoe shines and socks are also trivial amounts of most household budgets. Have these shown price increases comparable to vet bills and healthcare? Regarding the average annual cost per dog, in my experience, you never pay the average. You pay a trivial amount for a check up most years, then have very large spikes.

Eric Johnson December 11, 2013 at 8:52 am

If the conclusion is there is no money to be saved by tweaking the benefits of the 72% healthiest Medicaid recipients, I’ll tell you one big item that this static analysis is overlooking.

Medicaid pays for IVF treatments.
IVF is highly correlated with multiple births and premature births.
Premature babies end up in the top 3.2% in Medicaid spending.

See how that works? Spending on the relatively healthy Medicaid recipients directly leads to additional people in the expensive group.

dearieme December 11, 2013 at 9:43 am

The experience of the NHS is that it is politically difficult to avoid paying for treatments that many of the taxpayers funding the whole enterprise think to be invalid uses of the money. It’s the usual business of small groups who want something very much versus large groups whose interests are diffuse.

JWatts December 11, 2013 at 10:41 am

I.E. – Disbursed costs vs concentrated benefits.

Boonton December 11, 2013 at 10:37 am

I doubt that anything but a trivial portion of IVF babies are Medicaid patients. Even if some are, though, you’re being a big short sighted. A premature baby may be in the top 3.2% of Medicaid spenders, but they have a whole lifetime to look forward to of economic productivity.

Eric Johnson December 11, 2013 at 11:05 am

My wife spent 10 years as a NICU nurse. The majority of NICU babies are covered via Medicaid, at least in NYS. The reason that is so, is once a baby is in the hospital for a certain number of days, the coverage automatically transfers to Medicaid.

And before you get all preachy, I’m not suggesting that we let babies die on the side of a mountain if they are born premature.

What I am suggesting is we stop paying IVF for medicaid recipients. . It seems if you can’t afford to take care of yourself, then having the taxpayer spend money so you can have a baby that you can’t afford isn’t the best use of funds. Given the elevated risks of IVF babies, it seems like a no brainer to me.

Eric Johnson December 11, 2013 at 11:29 am

The average cost of an IVF cycle is $12K.

The average cost of a premature birth is $50K in the first year. You can prorate that out for multiple births, which are a side effect of IVF.

Seriously….This adds up to real money.

Careless December 11, 2013 at 11:44 am

Many years of, on average, being a net tax drain. Joy.

Boonton December 11, 2013 at 8:02 pm

What none of you seem to be noting is that even at $50K for a premature birth society still gets a new baby out of it. That baby will more than pay that back even if he works only slightly above min. wage jobs

Also it’s not like IVF=premies. See http://www.reuters.com/article/2010/03/18/us-infertility-treatments-idUSTRE62H3S020100318

Only 8% of IVF treated women give birth to premature babies. The rate for non-IVF births is 5%. Even if Medicaid pays for some IVF’s, fact is it’s not going to dramatically alter the cost of birth for the population as a whole. Most babies will be born to term.

Eric Johnson December 11, 2013 at 8:48 pm

The numbers I’ve seen state that IVF doubles the rate of prematurity for singletons. Furthermore, 25% of IVF pregnancies lead to multiple births, vs 1% for natural pregnancies. Multiple births increase your risk of prematurity 7 fold.

Even if I take your numbers, bear in mind that a normal delivery cost about $2500,. So a 3% increase in incidence coupled with 20 fold increase in cost ($50K) is significant.

Eric Johnson December 11, 2013 at 9:15 pm

“What none of you seem to be noting is that even at $50K for a premature birth society still gets a new baby out of it. That baby will more than pay that back even if he works only slightly above min. wage jobs”

As far as a cost/benefit analysis, I think you’re missing quite a bit. For starters, society is on the hook to educate this child. You also need to apply a discount rate as you are spending that $50K today, and the income tax stream that goes in the benefit side of the ledger isn’t going to start until 18 years in the future. Not to mention that children born into poverty are more likely to live in poverty as an adult.

I’m reasonably sure careless post above is on the mark. If you’re going to break it down to cold hard numbers, on average, this child is going to be a drain on society. Not a plus.

Boonton December 12, 2013 at 6:40 am

1. Education is not a marginal cost here, whether a kid is premature or not he needs to be educated.

2. I doubt the validity of your present value. The ‘depreciation rate’ on a human is pretty high since we have maybe a good 30-40 years only of work in us. Hence the ‘return’ on getting a new human ready for entering the workforce has to be equal too or greater than that otherwise our GDP growth would be negative in the long term.

Eric Johnson December 12, 2013 at 8:51 am

“Education is not a marginal cost here, whether a kid is premature or not he needs to be educated.”

The relevant question isn’t whether or not the kid is premature. The question is whether or not the child is born. In that frame of reference, education is most definitely a marginal cost.

I don’t really get your point regarding depreciation.

I’m not saying I have done a complete cost benefit analysis. My point is your calculation of comparing a child’s birth cost vs the tax revenue returned from his working years is so incomplete to be essentially useless.

Boonton December 12, 2013 at 10:32 am

GDP is produced by Capital and Labor. Capital depreciates (wears out) so over time you have to replace it. Labor likewise wears out as people get old and die. If no one new is ever born and we don’t achieve some type of fountain of youth that stops aging in 30-40 years GDP will fall to $0 since there won’t be anyone around to actually make any goods or services.

So clearly there is some ‘return’ to society as a whole by the generation of new people…even if some of those new people incur higher than average hospital birthing costs.

Now suppose we are making too many people. Diminishing returns would then suggest that despite adding more Labor, GDP will cease to increase and may even start to fall over the long run. In that case you could argue that adding people isn’t a net positive, but even with the recent downturn in growth it still seems over the long run GDP is positive. That would indicate our ‘investments’ in generating both new people and new capital are yielding returns.

The Anti-Gnostic December 12, 2013 at 10:06 am

Only if that $50K is his only net tax consuming event. I’m going out on a limb here and predicting your little IVF-Medicaid snowflake won’t grow up to harness the power of nuclear fusion.

About half of us aren’t pulling our weight, and that includes everybody from Grandpa with the two knee replacements and quadruple bypass to Sallie Mae to General Motors to Rachel Jeantel. And it gets much, much worse. You know how if you want more of something, you subsidize it and less, you tax it? We’re taxing K-selection to fund r-selection.

You can preach all the ethics and social justice you want. All irrelevant. This ends very badly.

Boonton December 12, 2013 at 10:41 am

http://www.money-rates.com/news/what-do-you-really-pay-in-taxes-over-your-lifetime.htm

Just an average worker earning the average income can expect to pay $355K in Federal income taxes alone over his lifetime. Of course state taxes are typically less than the income tax, (and states contribute to Medicaid BTW), but even so the state taxes alone probably are sufficient to offset a $50K ‘investment’ at birth.

Of course if we are talking about the entire economy (which we should) rather than just government accounting a person who only gets a HS degree can expect to earn about $1M over his lifetime. Let’s say a college degree increases that to about $2M. Since earnings = GDP even spending $150K on a premature babie generates a nice return. If you get twins you’re twice as well off (cost of the investment is ‘only’ a single 9 month pregnancy and one childbirth!).

You can try to make the numbers work against this by choosing a very high discount factor to make the present value of a lifetime less than $50K or $100K but in a world of 1% interest rates that’s not very convincing.

Eric Johnson December 12, 2013 at 2:04 pm

@Boonton

You are assuming that if a person earns $1 million over his lifetime, his NET contribution to others in the society is $1 million. That is not the case.

At first approximation, a person who earns $1 million has a GROSS contribution to others of $1 million, but his BURDEN on others in society will be $1 million, netting out to zero.

What the first approximation does not take into account is externalities created by this persons existence, and producer/consumer surplus resultant from his/her economic activity. Taking into account these externalities you could make a case that the average American creates a net benefit to others, and I would probably agree with that assessment. Where we differ, is I have doubts that your average Medicaid recipient’s offspring is a net benefit to society. If you want to convince me that they are, go ahead and try, but your past attempts were an exercise in counting up benefits and ignoring costs.

Boonton December 13, 2013 at 10:22 am

What the first approximation does not take into account is externalities created by this persons existence, and producer/consumer surplus resultant from his/her economic activity. Taking into account these externalities you could make a case that the average American creates a net benefit to others, and I would probably agree with that assessment. Where we differ, is I have doubts that your average Medicaid recipient’s offspring is a net benefit to society.

I think a problem you have here is that Medicaid (at least until the ACA) is not simply for people with low-income, it’s for categories of people with low income. For example, pregnant women are in, a non-pregnant woman who doesn’t have much income isn’t. So a lot of “medicaid babies’ being discussed here are not lifetime medicaid cases but cases where the woman temprarily qualified for medicaid. This is one reason why I’m skeptical of the claim that there’s a lot of IVF babies from Medicaid. I suspect most fertility doctors have no or very few Medicaid patients and most don’t even bother accepting it.

So I think the burden is on you to demonstrate what evidence there is that a particular sub-group not only deviates from the average ‘net gain from existing’ for an individual but is actually a net negative (that means, strictly speaking, that a nurse who wanders the maternity ward killing such baby is actually adding to society on balance! That’s a tall argument to make and before one even begins actually producing evidence is a pretty basic requirement!).

Personally I think in general more people are better than fewer people and even if a few babies cost $150K in the hospital there are very few groups who don’t more than contribute back to that over their lifetimes. The point about even a simple HS grad earning $1M and paying $330K in Fed. income taxes over a lifetime is to illustrate that you don’t have to cure cancer or colonize Mars to ‘be worth the air you breath’. Even a very modest life will do the trick. Since the bar is really quite low, I think it makes less sense to try to ‘select’ people who would ‘naturally’ leap over it as opposed to simply helping those who might be having trouble leaping it.

Eric Johnson December 14, 2013 at 9:45 am

“This is one reason why I’m skeptical of the claim that there’s a lot of IVF babies from Medicaid. I suspect most fertility doctors have no or very few Medicaid patients and most don’t even bother accepting it”

I can’t quote you a study. However, as I previously stated, my wife has worked in a NICU for over 10 years, and she regularly cares for IVF babies from Medicaid mothers. This is not an isolated incident. Every few months there will be a new case. Some are singletons, some are twins, triplets, occasionally quads…This has been going on as long as she was a nurse, well before the affordable care act. And these are not middle class mothers who happen to qualify for Medicaid. These are women who are receiving every social service under the sun.

My wife works at a fairly large hospital. However if she is seeing this, I would assume other hospitals in the state are seeing it as well. Whether you believe me, or not, I have no reason to lie about it.

john personna December 11, 2013 at 11:29 am

That’s pretty crazy. Medicaid should not pay for IVF.

aidian December 11, 2013 at 12:48 pm

I’d like to see some data on how common IVF treatment is for medicaid recipients. My gut says it’s pretty rare. I was raised by a welfare mom in famously — comically — liberal california. I’ve known LOTS of people on medicaid; there were years when the people I knew who weren’t on medicaid were the exception. I’ve never known anyone on medicaid who got IVF treatments. It’s still crazy to think that medicaid is paying for even one IVF treatment. But I’m skeptical that this is a significant issue.

Eric Johnson December 11, 2013 at 2:10 pm

I don’t know about California but New York pays for 2 cycles of IVF on Medicaid. I can’t give you overall stats, but I can tell you that the hospital where my wife works regularly has IVF babies in the NICU from parents on Medicaid.

Is it a significant issue? What is your threshold for significant? Knowing that one set of IVF triplets can cost the state $150K or more?

Another point…You claim you’ve know lots of people on Medicaid and never knew of anyone who got IVF treatments. I’d like to point out that couples who are having problems conceiving are generally private about their troubles. The fact that your neighbors weren’t broadcasting their IVF treatments wouldn’t surprise me.

fernandobarreto1Fernando December 11, 2013 at 9:50 am

So,it is not good to say but unfortunately the interest of bigger groups always win

prior_approval December 11, 2013 at 2:00 pm

Fernando has the rancidly sweet smell of marketing ‘audace’ty.

TallDave December 11, 2013 at 9:51 am

I know someone working on their second million for a child with brain cancer.

Does anyone seriously think this happens in other OECD countries? Millions of dollars vs. Liverpool Pathway? Quickly, someone fetch us data…

Harold Pollack December 11, 2013 at 10:00 am

Thank you for noting my work.
best
HAP

RSaunders December 11, 2013 at 10:23 am

If there is any case mgmt at all for these patients, it is nearly all handled by the patient and family.

Michael December 11, 2013 at 10:49 am

I’m pretty sure that the WP post is worthless. The problem with Medicaid ain’t the spending– we’ve already tweaked that to below-functionally performing levels. The problem with Medicaid is the almost complete lack of positive health benefits for its beneficiaries. The entire column is just a statist yelling “Squirrel!”

Brandon December 11, 2013 at 10:54 am

On what do you base that claim?

john personna December 11, 2013 at 11:35 am

It sounds like a misinterpretation of the Oregon results, where they found that adding poor but healthy people to a pool doesn’t measurably improve outcomes. I think in Oregon the sick people were already in the pool. They were added as they demanded treatment.

pyroseed13 December 11, 2013 at 3:23 pm

“It sounds like a misinterpretation of the Oregon results, where they found that adding poor but healthy people to a pool doesn’t measurably improve outcomes.”

Poor but healthy people? Shouldn’t these people not exist? Wouldn’t they be dying in the streets without government health care, as we’ve told many times? So if these people are healthy what is the justification for expanding coverage to them?

Brandon December 12, 2013 at 2:43 pm

I assumed it was misunderstanding of the Oregon study, but I didn’t want to prejudge the argument.

Oregon found measureably improved outcomes in a few areas, notably in depression. That ties in really well with other recent research on the mentally debilitating effects of chronic stress, which poverty and health care insecurity can certainly trigger.

What the study didn’t find, because it didn’t have the statistical power to do so, were better outcomes in a couple of areas like blood pressure. But it did find a pretty substantial drop in emergency care spending, which would seem to indicate at least some level of improved health outcomes or at least improved quality of life.

Michael December 11, 2013 at 11:52 am

See Avik Roy’s new book. See here too for an overview:

http://www.theatlantic.com/magazine/archive/2010/03/myth-diagnosis/307905/

http://www.nationalreview.com/agenda/231148/re-uva-surgical-outcomes-study/avik-roy

There’s also no misinterpretation of the Oregon results needed. John can wish it away all he wants, but the data is the data, and he’s got none, other than vague, un-sourced “thoughts”. The evidence is piling up, even when you cherry-picking the best studies, the health improvements of Medicaid patients is very small compared to privately insured patients, and little to no improvement compared to the uninsured.

TallDave December 11, 2013 at 11:57 am

Yeah, that was a surprising result even to people who aren’t fond of Medicaid anyway.

But it reinforces the point I keep making: healthcare has very diminished average returns at these spending levels.

john personna December 11, 2013 at 12:18 pm

It was a surprise to some that the Oregon study did not show immediate benefits from “prevention.” That’s true, and it might be a reasonable way to attack the idea that healthy people need more care. In retrospect, maybe that was a silly idea. Your error though Michael, which is pretty basic, is that sick people don’t need care.

TallDave December 11, 2013 at 12:31 pm

“Sick people need care” is not the same as “more people need Medicaid.”

john personna December 11, 2013 at 12:36 pm

Sure Dave, but look back to the root comment. It was a claim that Medicaid did no good.

TallDave December 11, 2013 at 12:52 pm

Yes, that’s the point.

john personna December 11, 2013 at 12:56 pm

Um. The top article cited by Tyler says that most Medicaid money goes to sick people.

TallDave December 11, 2013 at 12:59 pm

Those aren’t incompatible. Think it through again.

Michael December 11, 2013 at 2:34 pm

John,
At no point did I say that sick people don’t need care. You, and the author of the original article, make a number of erroneous assumptions:
1. That all the people who receive $ from medicaid are “sick”
2. That all sick people on medicaid are receiving care
3. That the treatment that sick people do receive is proper and sufficient (i.e. as good as privately insured folks get)
4. That uninsured people don’t receive any treatment
5. There are no other avenues for poor, sick people to receive free care.

None of those assumptions are true, and this is borne out by the many studies that show little to no difference in health outcomes between Medicaid and uninsured populations.

TallDave December 11, 2013 at 3:03 pm

Excellent summary Michael. It’s thoroughness fairly screams for likes, if only MR had a rated comment system.

Boonton December 12, 2013 at 8:36 am

It was a surprise to some that the Oregon study did not show immediate benefits from “prevention.”

Why would ‘prevention’ have an immediate benefit? By definition it seems like prevention is something you need to wait a long while before you see the results.

Boonton December 12, 2013 at 9:43 am

To illustrate, suppose I waved my hand and prevented all house fires starting now. For the first hour to first day or two no one is going to notice anything. A day without any calls to any fire department nationwide for housefires might be chalked up as a statistically quirk, if it’s noticed at all. Two years from now it’s going to be a huge story. Five years from now Tea Party advocates will be demanding disbanding fire departments and home insurance rates will be plunging.

Yet if you conduct a ‘study’ of my magic spell a day or two later you’ll notice little if any benefit to my ‘prevention’.

Brandon December 12, 2013 at 2:55 pm

Michael, where are these “many studies” on Medicaid that show no difference in health outcomes? It was my understanding that the Oregon study was a very unique opportunity, and the other one referenced in the McArdle article was looking at Medicare and pretty short time frames.

Austin Frankt also had some follow-up responses to that Avik Roy link you posted. The conversation didn’t end there.
http://theincidentaleconomist.com/wordpress/avik-roy-medicaid-reader-comments-etc/

Boonton December 12, 2013 at 4:18 pm

Brandon,

Something to consider about the Oregon study in light of the post that began this thread. The bottom 72% of those on Medicaid make up less than 10% of Medicaid’s cost. With this in mind the study’s ROI should be re-examined.

Normally one would say Population X was given Medicaid, the average cost of Medicaid is $Y per year therefore X times $Y is the cost of that expansion. Now how does that compare to the benefits?

But the fact is I think it’s reasonable to suspect many who got the Oregon expansion were probably not among the sickest Medicaid users (those people were probaby already on Medicaid or covered elsewhere) So you should be considering the cost of the expansion as more $Y/10 since if you’re adding people who look more like the bottom 72% their Medicaid cost is only 10% of the average.

If that’s the fact you don’t need an amazing increase in health outcomes over a short time period to justify the expansion.

Brandon December 12, 2013 at 2:46 pm

I’ve seen some pretty hackish stuff from Avik Roy before, which doesn’t really lead me to believe he’s saying something worthwhile now.

JWatts December 11, 2013 at 12:07 pm

“The real financial action unfolds on the right side of the graph, where expenditures are concentrated within a small and incredibly complicated patient group. The top 3.2 percent of recipients account for half of total Medicaid spending, with average expenditures exceeding $30,000 annually.

Many of these men and women face life-ending or life-threatening illnesses, as well as cognitive or psychiatric limitations. These patients cannot cover co-payments or assume financial risk. In theory, one might impose patient cost-sharing with some complicated risk-adjustment system. In practice, that is far beyond current technologies and administrative capabilities. Even if such a system were available, we couldn’t push the burden of medical case management onto these patients or their families.”

None of that means that there aren’t significant cost savings to be had. If we set Medicaid treatments to the same standard as the UK’s NHS with similar waiting periods and treatment options, we’ll save a significant amount of money. At least enough to fund the Medicaid expansion without raiding Medicare’s funding.

TallDave December 11, 2013 at 3:08 pm

If we set Medicaid treatments to the same standard as the UK’s NHS with similar waiting periods and treatment options

I always chuckle at this idea. Hey, no one’s ever claimed the Liverpool Pathway doesn’t save money…

JWatts December 12, 2013 at 12:41 am

Indeed, it saves a lot of money, it’s all single-payer and based on a European socialist model health care service. So, the Left should love it, no?

TallDave December 12, 2013 at 9:44 am

There’s an amusing cognitive dissonance in which some are outraged that anyone suggests such a thing exists, while others argue that it’s a great idea. Sometimes they’re even the same people!

Richard Marpet December 11, 2013 at 12:15 pm

Using agriculture as template, we need to treat health care like agriculture treats water: a scarce & valuable resource. We need to develop a ‘drip irrigation’ template for heath care & deliver the right medical resource to exactly the right medical need, rather than flood the field.

Steve Sailer December 11, 2013 at 4:14 pm

I spent a lot of my insurance company’s money on my health care in 1997 when I was being treated for cancer. But that’s kind of the point of insurance.

Ricardo December 11, 2013 at 5:45 pm

But Medicaid isn’t an insurance program, it’s a transfer program.

Boonton December 12, 2013 at 9:09 am

Insurance is both risk management and a form of prepaying/savings.

Risk management – Auto and home insurance. You may never have a car accident and yoru house may never burn down. Yet you pay for the company to take on the burden of this relatively small risk.

Prepaying – Life insurance. Death is not a ‘rare event’. 100% of us will die. Life insurance is a combination of managing the risk of an unexpected early death and saving to fund your eventually certain death.

Health insurance used to be more like the first thing because there really wasn’t much in the way of medical care. You were either healthy, or needed an operation (say an appendix taken out) or you were going to die (i.e. cancer). Today health care is moving more towards a state of constant management. A minority of people above 40 or so are ‘healthy’ in the sense that they require no medical intervention. It’s becomming a question of managing health by either juggling multiple chronic conditions (heart disease, diabetes) or holding off the same (blood pressure medication, pre-emptive screenings etc.)

Boonton December 12, 2013 at 9:03 am

Sorry way too many comments here so maybe this has been covered before but:

1. It seems to me this would indicate the ACA’s expansion of Medicaid was a very good idea. Basically it is saying Medicaid has little or no ‘cost problem’ except for the very sick.

2. The ‘very sick’ are already costing us a lot since, presumably, the ‘very sick’ are being taken care of somehow already. That would imply expanding Medicaid for the working poor would be very inexpensive since you would be talking on essentially more ‘bottom 72%’ type people whose costs are only 10% of the program. For very little added cost you’d be adding a lot of peace of mind as well as provide needed coverage for many people. Of all types of healthcare reform, this is probably the most potent possible ‘bang for the buck’.

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