My health care question

by on July 31, 2017 at 1:41 am in Data Source, Medicine | Permalink

In the United States, Medicare starts at age 65.  So to the extent health care improves health outcomes, we should see a noticeable uptick in results as people reach 65, at least relative to the trajectory of aging they otherwise would experience.  Of course many other national health care systems treat 64 and 65-year olds as the same, so we can compare the American case to those alternatives.  That would give us a better sense of the relative performance of single-payer coverage, no?

Has such a study been done, and if so what did it yield?

1 Ray Lopez July 31, 2017 at 1:44 am

More questions than answers, but good questions. I would guess that other countries are apples to our oranges, because they are not obese like Americans, so the study is not really proving anything.

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2 Cjones1 July 31, 2017 at 2:31 am

My wife notices that we have the most overweight poor people.

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3 Ben July 31, 2017 at 4:24 am

And your point is?

If you’re poor, you’re less likely to have the time or the money to buy and cook good food. Or the time to do proper exercise. It’s the same in more and more countries these days.

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4 Deek July 31, 2017 at 5:48 am

Nonsense. It’s just as cheap to eat healthily as it is otherwise. The problem is culture and education.

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5 LearnedHand July 31, 2017 at 6:12 am

@Deek

Russ Roberts recently recorded an Econtalk podcast which went a long way to explaining why processed foods are more expensive than fresh vegetables (excluding ‘row crops’).

I recommend you go listen to it, the shorter version is that industrialization is less advanced in the production of non-row cropped vegetables than other types of foods.

6 LearnedHand July 31, 2017 at 6:13 am

I meant *less expensive obv.

7 A Definite Beta Guy July 31, 2017 at 9:12 am

Great podcast by Russ Roberts, would recommend it.
However, canned veggies and fruit are relatively cheap.

8 Scott Mauldin July 31, 2017 at 9:27 am

No, the cheapest foods, or rather the foods most common in poor areas like rural communities and inner cities – have very low ratios of nutritional value to calories – people have to eat more to feel full. These include starches, breads, and foods high in preservatives.

9 egl July 31, 2017 at 11:10 am

Somehow “the poor” turn out not to be homo economicus. Is that the lesson here, another case where economics falls short?

10 Scott Mauldin July 31, 2017 at 12:06 pm

Homo economicus is an ideal that few if any real humans actually approach. As rational as we think we are we are ultimately influenced by emotions, social pressures, and whims.

11 adam July 31, 2017 at 12:59 pm

That same podcast explained why canned tomatoes are much cheaper than fresh ones, but canned is every bit as healthy.

12 Floccina July 31, 2017 at 1:37 pm

@LearnedHand
1. Mechanically harvested crops like carrots are cheap as are other root crops beats, turnips etc. greens are cheap, bananas and oranges are cheap watermelon is very cheap by the lb. Dries beans are cheap etc.

2. Very, very few USAers are lacking essential amino acids or vitamins and minerals (if they were a one a day multivitamin would do the trick), so just eating less would not put their health at risk.

https://www.youtube.com/results?search_query=how+to+eat+for+%242+a+day

13 J July 31, 2017 at 4:30 pm

Just about any block will have a fast food place where you can feed yourself (and perhaps, your kids) quick, easily (and tastily) for under $5 per person, and be in and out in seconds. What’s the healthy alternative that’s as quick and cheap, and will make the kids shut up for a few minutes?

14 Charlotte Allen August 1, 2017 at 1:01 pm

Poor people used to be skinny. Look at any photos of poor people–and they were a lot poorer than they are now–taken before 1970. There are all sorts of tasty things you can cook for a lot cheaper than the “under $5” per person ($20 for a family of four) at fast–food joints. No you can’t be “in and out in seconds” but you don’t need to spend hours at the stove, either. Just get some cheap cut of meat from the supermarket half-price bargain bin (my husband and I paid $4.20 for a 2.74-lb. boneless pork blade roast last week) and stick in into a cheap crock pot (try the Good Will) with…anything. You can’t tell me that a McDonald’s burger is tastier. Frozen vegetables are just as nutritious, cheaper than raw, and often on special. If your kids complain, tell them we can go to McDonald’s once a week/month/whatever, and they ought to be grateful they live here in America, not in Ghana. And even kids–surprise, surprise!–actually like good home-cooked food. I did when I was a kid.

15 asdf July 31, 2017 at 7:17 am

The poor have the most time, many are unemployed and sit around all day.

A quick trip to a grocery store would inform you there are lots of healthy cheap options that aren’t hard to cook. They don’t taste as good and they require minimal effort, so the poor don’t choose them.

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16 prior_test3 July 31, 2017 at 7:44 am

‘They don’t taste as good and they require minimal effort, so the poor don’t choose them.’

Neither do the rich.

17 Ray Lopez July 31, 2017 at 10:39 am

Yeah but have you tried to eat natural foods like an apple, without having an advanced science degree? How do you peel an apple? Go to YouTube and Google Jim Carrey’s “Juice Weasel” skit, hilarious! “Yeeesssssss!” “LOOK AT IT!” LOL.

18 Floccina July 31, 2017 at 1:40 pm

I love carrots, they are cheap, I eat them raw and am mostly to lazy to even peel them, just pull them out of the bag and eat them. Oranges are not very expensive either.

19 JonFraz July 31, 2017 at 3:48 pm

Take the following anecdote however you will:

I live in a low income area, with a discount grocery store a short ways from my house. I see a lot of food stamp usage in that a store. When I see elderly poor people, or women with young children, buying a large grocery order with food stamps, they generally seem to be shopping sensibly for decent nutritious food (as much so as middle class people that is). When I see young people alone using food stamps, and especially young men, they very often are buying junk food or highly processed food.

(By the way the stereotype of the poor as being all unemployed is not so true these days. Many of them work low wage jobs– and jobs plural, since it’s not uncommon for them to have two part time jobs).

20 Sure July 31, 2017 at 7:22 am

Time, yes that may be a problem for the poor, though in my experience the non-working poor spend a disproportionate amount of time watching television when I take in-depth social histories (to be fair these interviews are for patients that tend to have more problems than normal).

Money, no it is by far cheaper to buy healthy food to cook for yourself. These days you can have most staples delivered by Amazon or a competitor cheaper than you can eat fast food, but the latter is typically quicker and definitely requires less effort.

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21 byomtov July 31, 2017 at 10:53 am

A Big Mac costs about the same as two lbs of chicken at the grocery store. Maybe three pounds some times.

I don’t think price is the problem.

22 JWatts July 31, 2017 at 2:19 pm

“A Big Mac costs about the same as two lbs of chicken at the grocery store. Maybe three pounds some times.

I don’t think price is the problem.”

A Big Mac can be eaten immediately. The 2 lbs of chicken needs a significant amount of additional labor, including preparation of the area (clean utensils), cooking and then cleaning up afterwards.

It has a far higher cost when you factor in time.

23 The Anti-Gnostic July 31, 2017 at 12:46 pm

This is the biggest canard out there, promulgated by people who buy organic basil for their shrimp curry.

I know gym rats, monastics, grad students, and pure nomads among family and friends who live healthily on a few dollars a day. I did it during my lean years. It’s about intelligence and capacity for self-discipline. Brown rice, chicken, eggs, and greens are all cheap and readily available. They don’t provide the same pleasure-zone hit as tater tots or frozen pizza, so most poor people don’t eat them. This is not a moral failing, it’s just simple doing as simple does.

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24 Floccina July 31, 2017 at 1:30 pm

@Ben I have good news for you: To not be obese you just have to eat less and eating less is not time consuming or expensive.

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25 Will Barrett July 31, 2017 at 4:41 pm

Where’s the “like” button?

26 Art Deco July 31, 2017 at 2:59 pm

If you’re poor, you’re less likely to have the time or the money to buy and cook good food. Or the time to do proper exercise. It’s the same in more and more countries these days.

You’re confused. Professional people tend to work longer hours than wage-earners. As we speak grocery expenditures amount to 6% of personal income (v. about 15% in 1970). I’d like to see a dietician offer a presentation which actually demonstrates that wholesome food is (on balance) more expensive than junk food.

It is true that the impecunious are less able to afford gym fees and are more inhibited about outdoor exercise because of the security situation in sketchy neighborhoods. This last only applies to the slum poor, not the poor in general.

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27 JonFraz July 31, 2017 at 3:51 pm

Re: Professional people tend to work longer hours than wage-earners.

Well, they tend to say they do. For a few, notably in healthcare, it’s probably true. But how many of these people are reporting as “working time” periods when they are not at work but pay occasional attention to and answer work emails via their smart phones?

28 Art Deco July 31, 2017 at 4:57 pm

There could be problems with the survey methods. Multiple job-holders are as we speak 5% of the working population. About 1/3 of them have two p/t jobs, so you’re really looking at 3.3% of the workforce. or 4.5 – 6.5% of hourly employees. A deficit of time per se is not what is inhibiting exercise.

29 Lonely Libertarian August 6, 2017 at 10:02 pm

If they were truly “poor” they would not be “obese”
Fat or whatever. Life is about the choices we make – some choose to have a smartphone and cable and a car and have the rest of us pay for it

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30 Cjones1 July 31, 2017 at 2:37 am

I am told that China uses a HSA type health care system and you pay for your own pharmaceuticals. The family must go and buy them when family members are sick…even in the hospital.

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31 Ray Lopez July 31, 2017 at 3:04 am

That’s interesting. In a lot of developing countries, the ‘free’ or ‘state paid’ health care is so bad, that people spend extra if they want decent care. That’s the case in the Philippines and Greece for example.

Off to bed for me…it’s 3:00 AM and I’ve played enough blitz chess.

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32 GoneWithTheWind July 31, 2017 at 11:00 am

First of all it is the wrong question. Single payer cannot work because it will lead to excessive use of a limited resource which will lead to efforts to cut costs/usage resulting in an inevitable spiral of cutting costs and cutting service in a race to the bottom. What we should be moving towards is more “payers” and not a single payer. More patient responsibility (co-pays, paying for their insurance, etc.) not less. More freedom and profits for doctors and hospitals. America has the best health care system in the world because it is not single payer/socialized. Where else can a common citizen walk into a doctors office with a complaint get a CT scan within the hour to evaluate the symptoms? Certainly not in any country with socialized health care.

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33 JonFraz July 31, 2017 at 3:57 pm

Your assertion does not pass the common-sense-in-the-real-world test.
While there are a few true hypochondriacs in our population, most people by far are not hypochondriac. They put off going to the doctor as much as possible. Irregardless of cost, healthcare consumes time that can be more usefully– and enjoyably– put to other uses. Additionally, healthcare can sometimes be unpleasant in and of itself. Any over-use problem is likely to limited to a small fraction of the population, people with lots of time on their hands and who have a sort of masochistic addiction to seeing themselves as ill and needing unpleasant tests and treatments. That does need to be addressed, but not at the cost of afflicting the vast majority of people.

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34 GoneWithTheWind July 31, 2017 at 5:59 pm

Your refutation does not pass the experience test. When health care is free or almost free it is used more and for insignificant reasons. Every socialized health care experiences much higher patient visitations and greater costs which are always followed by rationing to limit patient visits and cost cutting which limits the amount of health care actually available.

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35 JonFraz August 1, 2017 at 3:50 pm

Your assertion does not cohere with what we know about human nature. People only go for “free” stuff if the stuff is desirable in and of itself. Advertise “free dog poop” and you will not get many (if any) takers. Unless you are significantly ill or injured healthcare is much closer to dog poop, for reasons I described above, than it is to, say, free chocolate bars.

36 Unanimous August 2, 2017 at 7:13 am

From personal experience of free health care I can tell you it appears to be limited by waiting. Anyone who is prepared to wait in a chair or on a list for a time the medical staff believe is apppropriate to the urgency of the problem gets treated.

37 Normal July 31, 2017 at 8:08 pm

Gone, I’ll pick two bones:

1. Nobody goes to the doctor or a medical procedure for entertainment. We go for medical procedures either because we need them or because our doctor started us on a wild goose chase. Because we don’t know it is a wild goose chase until it’s over, we pay whatever they charge. There would not be excessive use under single payer.

2. I’ve been paying 100% of my medical expenses for 20 years. Smart shopping for medical services is impossible. In 20 years I have not been able to become an expert shopper. It is almost impossible to get an accurate price for a procedure, much less shop among multiple providers. Competition is intentionally frustrated by savvy sellers selling to unsophisticated individuals. An don’t forget that more freedom for providers also means more freedom for private equity and the long line of others wanting a piece of 16% of GDP.

I’m planning a party when I become eligible for Medicare. Free market medicine is already here for some of us, and it’s miserable.

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38 Vikram July 31, 2017 at 1:50 am

David Card has a study showing that health care utilisation jumps at age 65 in the US. I don’t think there is much on health outcomes in that paper though.

https://www.aeaweb.org/articles?id=10.1257/aer.98.5.2242

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39 prior_test3 July 31, 2017 at 2:16 am

The abstract invalidates the very point of Prof. Cowen is trying to make through a comparison, as there is no change in health care utilization based on age in societies where essentially all citizens have enjoyed health care for their entire lives – ‘The onset of Medicare eligibility at age 65 leads to sharp changes in the health insurance coverage of the US population. These changes lead to increases in the use of medical services, with a pattern of gains across socioeconomic groups that varies by type of service. While routine doctor visits increase more for groups that previously lacked insurance, hospital admissions for relatively expensive procedures like bypass surgery and joint replacement increase more for previously insured groups that are more likely to have supplementary coverage after 65, reflecting the relative generosity of their combined insurance package under Medicare.’

In other words, comparing hip replacements or bypasses between 64 and 65 year olds in a country like Switzerland or France would yield nothing but a number reflecting the actual number of operations. And since one assumes that a hip replacement is actually a desirable (not to mention cost effective) outcome, it would be difficult to say that joint replacements in general are just a waste of money with no meaningful improvement.

(However, there is still that typically American conflation between ‘health insurance’ and health care – Medicare is not ‘health insurance,’ it is basically essentially universal coverage health care, very more or less on a model familiar to anyone living in countries with comparable health care, that costs at least a third less than the current American system.)

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40 prior_test3 July 31, 2017 at 2:36 am

To make it clear – a typical American with a hip problem at the age of 63 that can be repaired, but who lacks adequate health insurance to pay for the procedure will wait 2 years, until Medicare pays. One would assume it is apparent that such a health outcome is broadly beneficial, whether at 63 or 65, and yet the problems that that 63 year old American suffers for 2 years somehow magically disappears from the equation being proposed.

This is about costs and benefits, though in Prof. Cowen’s world, apparently the benefits are difficult to see, assuming they exist at all, of course.

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41 Slocum July 31, 2017 at 7:11 am

“One would assume it is apparent that such a health outcome is broadly beneficial, whether at 63 or 65,”

And yet, one may be wrong about that (if hips are anything like knees):

https://www.nytimes.com/2014/10/07/upshot/the-placebo-effect-doesnt-apply-just-to-pills.html

And what about common cardiac procedures that might be performed on a 65-year-old?

http://www.nytimes.com/2012/02/28/health/stents-show-no-extra-benefits-for-coronary-artery-disease.html

We really can’t assume that all the procedures that are performed on 65-year-olds who have just come into their Medicare money are actually beneficial. Well, not for the patients, anyway.

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42 prior_test3 July 31, 2017 at 7:55 am

That ‘placebo’ study was already discussed here – http://marginalrevolution.com/marginalrevolution/2017/07/thursday-assorted-links-118.html

Basically, it compared elective procedures. Generally, hip joint replacement is not precisely an elective procedure after a hip fracture, at least in terms of regaining mobility (major surgery, one size does not fit all, benefits for a 93 year old may not be comparable to someone who is 58, etc., etc.).

‘We really can’t assume that all the procedures that are performed on 65-year-olds who have just come into their Medicare money are actually beneficial.’

Why would anyone assume that? The point is that someone at 63 years of age with inadequate health insurance is likely to delay something like a hip replacement until Medicare pays for it, and yet this time span is not considered to be a negative, somehow. Along with the health outcome seeming to be clear in most cases.

43 Hazel Meade July 31, 2017 at 10:07 am

Hip replacements aren’t a great example, since that’s one of those things that is often a result of sedentary behavior and/or obesity. Many people would be better off losing weight and exercising, especially earlier in life. Physical therapy might also be sufficient for many patients, but if Medicare is paying for a total hip replacement, why not get it? This once again goes back to the lack of financial incentives not to spend other people money on health care. Perhaps in Germany they require the PCP to state that the hip replacement in medically necessary or require that the patient try physical therapy and/or steroid shots first. That isn’t really the case in the US. Doctors are not required to attempt low cost treatments before moving on to high cost ones.

44 Floccina July 31, 2017 at 1:54 pm

The point is that someone at 63 years of age with inadequate health insurance is likely to delay something like a hip replacement until Medicare pays for it, and yet this time span is not considered to be a negative, somehow. Along with the health outcome seeming to be clear in most cases.

They might also delay until they are retired and have more time.

It is just a one guy but it illustrates how health care is not ALWAYS beneficial especially for the old, a friend had an aneurysm and waited until he was on Medicare to have it operated on he was fine up until then doing physical work and walking around fine, couldn’t walk much after the operation. Medicare was bad for his health.

45 prior_test3 July 31, 2017 at 3:19 pm

‘Hip replacements aren’t a great example, since that’s one of those things that is often a result of sedentary behavior and/or obesity.’

Or, as noted by the Daily Mail, this group of people – ‘Having a hip replacement is something that happens to old ladies after a fall – not healthy women in their 40s and 50s.

But recent news suggests that’s no longer the case. Earlier this month, ballerina-turned-Strictly Come Dancing judge Darcey Bussell, 46, revealed she has already had her hip resurfaced and will soon need a full replacement, after decades of ballet have taken their toll.

—————————————————–

Mr Moyes says he’s seeing increasing numbers of people suffering overuse injuries as a result of workouts.

‘These are much more than just weekend warriors, they’re putting their bodies through tough training regimes – classes, weights, triathlons and more – as a lifestyle choice,’ he says.

‘Most of the population aren’t active enough, so being really fit is obviously a good thing. But overuse injuries can be a side-effect.’

Lucy Kelly, 46, is one such patient. When she complained of hip pain and stiffness, doctors diagnosed wear and tear, caused by her passion for running.

Now a hip replacement is on the cards. ‘I was sporty at school but exercise took a back seat when I had my four children – Oscar, 19, Harvey, 17, and twin daughters, Niamh and Mia, 15,’ says the beautician from Caterham in Surrey. ‘By the time my girls were settled at school I was 36, a size 12 to 14 and out of shape.

‘So I threw myself into exercise. At first I did Step aerobics and Body Pump classes. Then I took up running. After six months I was doing 10 km on the treadmill in about 40 minutes, which is fast. I ran four or five times a week. It never occurred to me I might be overdoing it.’

About 18 months ago, after eight years of running, Lucy started to get pains in her right hip. ‘When I walked it would jar,’ she says. ‘It felt like bone was rubbing against bone. If I’d been sitting for a while, I’d find I was too stiff to stand up. It soon became so bad I’d bend down to load the washing machine then not be able to straighten up again.’’ http://www.dailymail.co.uk/femail/article-3404179/Why-women-needing-hip-replacements-40s-s-not-just-Darcey-Bussell-Fitness-fanatics-pay-painful-price-diligence.html

It is the Daily Mail, so as always, scoffing is fine, but a number of life style choices lead to problems – including a certain group of people who are anything but sedentary and/or obese.

46 prior_test3 July 31, 2017 at 3:26 pm

‘Doctors are not required to attempt low cost treatments before moving on to high cost ones.’

Just to emphasize this point (and assuming, reasonably, this is accurate) – if this is so, the problem is with the U.S., since nobody designing a sane health care system would ever allow the medical profession write their own checks.

Though in the U.S., even after 14 years, this appears to be the case – ‘Despite this election season’s divisiveness, both major parties’ presidential candidates have embraced the idea of authorizing Medicare Part D to negotiate directly with drug companies to set prescription drug prices. The Medicare Modernization Act of 2003 (MMA), which established Medicare Part D, included a ban on such negotiation.’

Really, this is the still almost unbelievable history – ‘As noted above, from its creation and through Bill Clinton’s presidency, Medicare lacked a prescription-drug benefit. It was not until 2003, under President George W. Bush, that Congress added the Part D benefit, through which Medicare pays for seniors’ prescription drugs. The enactment followed a controversial House roll call vote, which Republicans held open for several hours as party leadership maneuvered to secure enough votes for passage. One bargaining chip to attract market-oriented Republican votes was the so-called “noninterference clause”—a provision drug manufacturers had a major role in writing and getting through Congress—which banned negotiations between Medicare and pharmaceutical companies on drug prices and prevented the government from developing its own formulary or pricing structure. Instead of CMS negotiating on Part D plans’ behalf, prescription drug plans compete for enrollees and negotiate directly with manufacturers.’

47 JonFraz July 31, 2017 at 4:02 pm

Re: Doctors are not required to attempt low cost treatments before moving on to high cost ones.

When it comes to expensive things, including pricey Rx, American doctors most certainly are required to justify the procedure, often by showing that cheaper means were attempted without success. Just about any invasive procedure these days, including in dentistry, requires a prior authorization from the insurer.

48 david July 31, 2017 at 1:52 am

David Card (not this commenter) has a bunch of papers on this theme, e.g.

https://blogs.iq.harvard.edu/does_medicare_s

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49 Ray Lopez July 31, 2017 at 1:56 am

Good one. And it seems that one key might be whether granny can call the ambulance to get her annual health checkup or not (Medicare pays for ambulances, while regular health insurance does not). “But, I wonder whether the generous coverage of prehospital care under Medicare causes beneficiaries to call the ambulance, and thus receive earlier medical intervention, more than they would under a standard insurance policy (under which coverage for ambulances is more variable).”

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50 Normal July 31, 2017 at 8:19 pm

People like me who pay 100% of their health care expenses increase their utilization at 65 because they know that their coverage will change and they forgo procedures until Medicare kicks in – sometimes for years.

This says nothing at all about the elasticity of demand. As I said in another post, nobody goes to the doctor for entertainment.

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51 prior_test3 July 31, 2017 at 2:05 am

‘So to the extent health care improves health outcomes’

A 71 year old person with a broken hip – no improvement in health outcome when repaired?

‘That would give us a better sense of the relative performance of single-payer coverage, no?’

How many 24 year olds have broken hips? There is no reasonable way to compare differently aged groups, something that a person in their mid-50s should be aware of by that point in their life. The health care needs (and outcomes) of a 6 month old baby, a 14 year old, a 27 year old mother, a 54 year old man, and a 82 year old woman are simply too divergent to treat meaningfully by comparing against each other.

Unless, of course, one continues to hammer the point that the U.S. is unable to provide essentially universal health care for a 1/3 less of the cost the way that other comparable health care systems do. Which may be a thoroughly defensible position, to be honest – American dysfunction has become even more apparent in the last period of time. After all, no other country with essentially universal health care had a recent debate about removing coverage from millions of its own citizens.

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52 mb August 1, 2017 at 9:22 am

you need to relax and think. If hip replacement worked 100% of the time with 0 complications than it would be your “no brainer” situation. Look at real world results and think.

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53 Jazi Zilber July 31, 2017 at 2:08 am

Problematic measure

Single payer is mostly better because it means a completely different healthcare system. With various positive externalities.

The usa Medicare kept the rotten system fully.

Subsidy per se isn’t that much of a great solution

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54 Max July 31, 2017 at 2:19 am

Why should it be better? I live in a country with something akin to single payer and their service degrades year by year and they have to increase the money the put in the system. On top of that prices are only low because other countries (US) pay for most of the R&D costs. Still we triple the prices of countries like turkey when it comes to generica drugs.
On top we have not enough doctors in all areas leading to more and more queuing.

Is this preferable?

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55 prior_test3 July 31, 2017 at 2:27 am

Which country?

‘On top of that prices are only low because other countries (US) pay for most of the R&D costs.’

This however, is incorrect, if something that most Americans believe with religious fervor.

‘US Pharmaceutical Innovation in an International Context

Objectives. We explored whether the United States, which does not regulate pharmaceutical prices, is responsible for the development of a disproportionate share of the new molecular entities (NMEs; a drug that does not contain an active moiety previously approved by the Food and Drug Administration) produced worldwide.

Methods. We collected data on NMEs approved between 1992 and 2004 and assigned each NME to an inventor country. We examined the relation between the proportion of total NMEs developed in each country and the proportion of total prescription drug spending and gross domestic product (GDP) of each country represented.

Results. The United States accounted for 42% of prescription drug spending and 40% of the total GDP among innovator countries and was responsible for the development of 43.7% of the NMEs. The United Kingdom, Switzerland, and a few other countries innovated proportionally more than their contribution to GDP or prescription drug spending, whereas Japan, South Korea, and a few other countries innovated less.

Conclusions. Higher prescription drug spending in the United States does not disproportionately privilege domestic innovation, and many countries with drug price regulation were significant contributors to pharmaceutical innovation.’ https://www.ncbi.nlm.nih.gov/pmc/articles/PMC2866602/

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56 John Smith July 31, 2017 at 10:44 am

You’re right. We have discussed this before. Your innovation index is a nice academic metric, but has nothing to do with the fact that any M&A model in biotech begins with the US market.

US spending justifies the development of bleeding edge medical technologies, even if the science behind such technologies isn’t developed here (your index).

The only time this doesn’t apply is when a company may be attempting to find a low-cost alternative for some regional emerging market, which they don’t do often, and is typically a competitive response, not a therapy innovation.

Revenue in most projects is typically equally weighted or slightly heavier for outside-US, but only after the midpoint on the pro forma, and typically at worse gross margins that would never have been acceptable out the outset.

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57 prior_test3 July 31, 2017 at 3:08 pm

‘Your innovation index is a nice academic metric, but has nothing to do with the fact that any M&A model in biotech begins with the US market.’

Biotech maybe, but the problem is with trying to figure out who is American and who isn’t, which is actually a better, though far murkier subject. Here is a simple Wikipedia example from a noted innovative market success – ‘Sildenafil (compound UK-92,480) was synthesized by a group of pharmaceutical chemists working at Pfizer’s Sandwich, Kent, research facility in England. It was initially studied for use in hypertension (high blood pressure) and angina pectoris (a symptom of ischaemic heart disease). The first clinical trials were conducted in Morriston Hospital in Swansea.[40] Phase I clinical trials under the direction of Ian Osterloh suggested the drug had little effect on angina, but it could induce marked penile erections.[41][42] Pfizer therefore decided to market it for erectile dysfunction, rather than for angina; this decision became an often-cited example of drug repositioning. The drug was patented in 1996, approved for use in erectile dysfunction by the FDA on March 27, 1998, becoming the first oral treatment approved to treat erectile dysfunction in the United States, and offered for sale in the United States later that year. It soon became a great success: annual sales of Viagra peaked in 2008 at US$1.934 billion.’ https://en.wikipedia.org/wiki/Sildenafil#History

This link does a good job trying to show how that works – and yes, it is concerned about M&A. Basically, if one wishes to argue that at this point, pharma development is a global endeavor utilizing research facilities in a number of advanced economies to achieve maximum profit for a number of global companies, it would probably be more fruitful. From the first two paragraphs – ‘A lot has been written lately about innovation, or the lack thereof, in the world of biopharma. One question that often gets asked: which countries lead the way in creating new medicines? Many people think that drugs originate in the nation where the companies that produce them are headquartered. The truth, however, is much more complicated. Given that multi-national firms market the majority of medicines, figuring out where each one of their drugs originated requires digging through some extensive data vaults. A proper analysis requires the examination of company histories, free market deal making, and in some cases government interventions. Consider the following examples:

Roche is headquartered in Basel, so you might think that all of its drugs are created in Switzerland. Actually, many of Roche’s biggest blockbusters were born in the USA at Genentech, its South San Francisco based subsidiary. Roche’s acquisition of Genentech (initiated in 1990 and completed in 2009) has been a transformative driver of the company’s success in recent years. It led Roche to abandon the PhRMA trade group in favor of BIO, and to rebrand of many of its drugs from having the Roche imprint on the label to Genentech.’ http://www.xconomy.com/seattle/2014/09/02/which-countries-excel-in-creating-new-drugs-its-complicated/

Do note that the profits flow to Roche, and Roche is always happy to charge as much as possible. And whether one wishes to consider Roche a Swiss or American company, the money flows to Roche, who decides where to invest it.

And this is a fine example of American pharma innovation – ‘The innovation and country of origin story gets even more complicated. Sometimes a company’s headquarters don’t change as a result of a merger, but its tax status can migrate to another country. U.S.-based Auxilium Pharmaceuticals (NASDAQ: AUXL) is planning to merge with Canada’s QLT. The combined company’s headquarters will remain in the U.S., but because of the 24 percent Canadian stake, the “New Auxilium’s” tax rate will drop from 35 percent (the U.S. rate) to Canada’s 15 percent rate. The deal will only happen if the combined company will “not be treated as a U.S. domestic corporation for U.S. federal income tax purposes.” Would this make the New Auxillium’s drugs Canadian, or will they be American? And will QLT’s products now be considered to be from the U.S.? Similarly, Chicago based AbbVie has recently acquired Ireland’s Shire with a similar “tax inversion” in mind, although the actual tax savings from this hookup have been called into question.’

That is real innovation of the type that all Americans can be proud of, especially the shareholders

58 John Smith July 31, 2017 at 5:05 pm

Even with a strong hint from TMC, Prior misses the mark.

It is unsurprising you’re readily familiar with the Viagra wiki page.

59 TMC July 31, 2017 at 11:30 am

“Conclusions” This would be more interesting if those EU countries did not have America for a market place. If they just sold to EU, and we just sold to the US would be the correct mix to evaluate.

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60 Mark August 1, 2017 at 2:05 pm

The conclusion you provided does very little to combat the argument about the US subsidizing R&D. In fact, I think it is irrelevant.

The argument isn’t high US costs –> high US pharma innovation, the argument is that high US costs –> higher global pharma innovation. Pharma is a global market. Even non-US pharma companies and innovators suckle at the teet of the US consumer.

The US market for Roche is 49.6% of total revenue. The US market is larger than the entire European market in terms of net sales for Novartis. Those are the two largest non-US pharma companies. If you went down the list everything would look the same. The money comes from the US; the decisions on investment decisions are thus driven by the US. The entire world is indeed extracting externalities from the US pharma market.

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61 Bernard Guerrero August 1, 2017 at 3:48 pm

+1

62 chuck martel July 31, 2017 at 5:57 am

A segment of the US population has single-payer health care, the native Americans. It hasn’t worked out all that well for them: http://www.medicaldaily.com/native-american-reservations-healthcare-terrible-372442

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63 Miguel Madeira July 31, 2017 at 6:17 am

Reading the article, the health system of Native Americans seems more a thing similar to the VA or the British NHS (public production of health services) than the “single payer” (who, if I undestand, means “Medicare/Medicaid for all” – private production but public payment).

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64 prior_test3 July 31, 2017 at 7:58 am

‘It hasn’t worked out all that well for them’

Strangely enough, that applies to pretty much everything managed by the Bureau of Indian Affairs – ‘In his testimony before Congress, John Echohawk, director of Native American Rights Fund, called it “yet another serious and continuing breach in a long history of dishonorable treatment of Indian tribes and individual Indians by the United States government.”

Arizona Senator John McCain, the chairman of the Senate Committee on Indian Affairs, bluntly called it “theft from Indian people.”

These men were describing the single largest and longest-lasting financial scandal in history involving the federal government of the United States.

With no other recourse left at their disposal, NARF, along with other attorneys, filed a class action lawsuit in federal district court on June 10 on behalf of more than 300,000 American Indians. The suit charges Secretary of the Interior Bruce Babbitt, Assistant Interior Secretary of the Interior for Indian Affairs Ada Deer and Secretary of the Treasury Robert Rubin with illegal conduct in regard to the management of Indian money held in trust accounts and managed by the Bureau of Indian Affairs.

If the lawsuit’s claims are correct, and there’s an overwhelming body of evidence that suggests they are, then the federal government has lost, misappropriated or, in some cases, stolen billions of dollars from some of its poorest citizens.

The trust accounts in question — which hold approximately $450 million at any given time — aren’t filled with government handouts. They contain money that belongs to individual Indians who have earned it from a variety of sources such as oil and gas production, grazing leases, coal production and timber sales on their allotted lands.

Revenues from such sources are held in more than 387,000 Individual Indian Money (IIM) accounts managed — or according to detractors, “mismanaged” — by the Bureau of Indian Affairs (BIA). “The BIA has spent more than 100 years mismanaging, diverting and losing money that belongs to Indians,” Echohawk says. “They have no idea how much has been collected from the companies that use our land and are unable to provide even a basic, regular statement to Indian account holders.”‘ http://www.albionmonitor.com/free/biatrustfund.html

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65 Roy LC July 31, 2017 at 10:39 am

They may win the lawsuit, they have won large numbers of lawsuits over breached treaty rights, but Congress still needs to vote the money.

Cobell v Salazar settled $150 billion in claims for $3.4, and that was close to a miracle, and there was no doubt about the initial complaint’s validity, if not the nature of the settlement. Crooked land trusts have been well documented since the 1880s.

66 Just An Australian July 31, 2017 at 3:12 am

hard stuff to measure here because of delays in effect, and because prevention is better than cure, but most (not all) prevention is too late by age 65

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67 prior_test3 July 31, 2017 at 5:21 am

‘because prevention is better than cure’

Not in America’s profit driven health care system. Prevention is merely another way of saying reduced revenue stream, and that is anathema in an American context.

Notice how rarely Prof. Cowen actually writes about prevention and its cost benefits while decrying the horrible costs associated with offering health care to all Americans?

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68 Slocum July 31, 2017 at 7:34 am

Preventative medicine generally is not cost effective:

http://www.reuters.com/article/us-preventive-economics-idUSBRE90S05M20130129

If you mean, for example, that staying fit and keeping weight under control is a good way to avoid type II diabetes, and that 65 is too late to start — that’s hard to argue. But that’s a question of diet and lifestyle. Free annual checkups aren’t going to help.

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69 prior_test3 July 31, 2017 at 8:04 am

‘Free annual checkups aren’t going to help.’

That is not preventative care, nor is it something practiced in Germany, generally.

‘that staying fit and keeping weight under control is a good way to avoid type II diabetes’

Absolutely – ensuring that people can easily walk to shopping, even in a small town, is the sort of thing that is considered important in local German politics. As is ensuring that it is just as easy to use a bicycle as it is to use a car, or that playgrounds are available everywhere. The list goes on, actually – the idea of health is not something exclusively reserved for those who consider themselves medical professionals.

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70 Samuel July 31, 2017 at 8:37 am

This is an important difference in comparing the US healthcare system to other countries. The US traditional approach to transportation and urban/suburban planning has had important health consequences that have been largely ignored, at least until recently. Additionally, we have a traditional approach to freedom and choice that make it challenging to drive healthier lifestyles via policy (c.f. the large soda bans and bicycle helmet laws in NYC).

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71 prior_test3 July 31, 2017 at 8:11 am

And in all fairness, that article seems to recognize that, to a degree, as seen here – ‘It also requires a more expansive definition of preventive medicine. The Trust suggests such steps as extending bus lines to parks so people without cars can go someplace pleasant for physical activity and other “community-based” efforts. These strategies save more money in healthcare spending than they cost.’

But then we return to American reality, where they would be no health savings in Germany, as no one uses the emergency room for managing a chronic condition – ‘For instance, at a program in Akron, Ohio, profiled in the new report, physicians and others coordinate care for patients with Type 2 diabetes. It reduced the average cost of care by more than 10 percent, or $3,185 per year, largely by reducing pricey emergency-room visits.’

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72 Slocum July 31, 2017 at 9:19 am

In my experience, approximately none of the sedentary, overweight people I know are that way because they lack convenient opportunities for exercise where they live. That idea is as bogus as ‘food deserts’.

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73 prior_test3 July 31, 2017 at 2:41 pm

In my experience, Germans are less obese than Americans.

This link seems to agree – ‘Obesity
(Germany) 12.9% Ranked 14th.

(US) 30.6% Ranked 1st. 2 times more than Germany ‘ http://www.nationmaster.com/country-info/compare/Germany/United-States/Health

Dueling anecdata, it seems – mine involving literally hundreds of millions of people living in two different societies with different priorities when it comes to handling a major problem in terms of health care costs.

74 Slocum July 31, 2017 at 3:26 pm

“In my experience, Germans are less obese than Americans.”

I’m sure that’s true. I just don’t believe that it’s about lack of access to places to exercise — culture is a thing. So was the terrible decades long push by U.S. government authorities to encourage low-fat diets — a time period that saw a dramatic increase in obesity rates in the U.S.

https://www.nhlbi.nih.gov/research/resources/obesity/

75 Floccina July 31, 2017 at 3:29 pm

1+

76 Sure July 31, 2017 at 10:21 am

Using such expansive definitions, also undercuts a lot of comparisons between systems. When comparing costs, how much of the German transportation budget would we need to count as a healthcare cost? How about the rental laws in Germany that increase housing security, what is their effective cost?

The other problem is that even when policies are similar, like NYC and Berlin, we do not see similar useage of services provided. Germany has a very different culture that has been reinforced from Bismarck through the Nazis and on through the post-war and reunification eras.

Culturally, most of America is far closer to Utah, but somehow that model is never mentioned for emulation even though it would be much closer to how the vast majority of states live and work.

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77 prior_test3 July 31, 2017 at 2:52 pm

‘When comparing costs, how much of the German transportation budget would we need to count as a healthcare cost?’

I’m not sure – since most German streets are used for bicycle riding routinely (bike paths tend to be either parallel to major roads or shortcuts through place like parks), the cost is likely fairly trivial. And as many German school students travel to school after getting their bicycle driver’s license in 3tf grade, that is likely easily balanced by the cost of America’s massive school bus fleet, even in places where it is not required (many high school students in this town bicycle around 3-4 miles or so to their school in the next town).

The bicycle was invented in Karlsruhe a half century before Bismarck ruled a unified Germany. And the Nazis, in particular, were huge fans of the automobile. When building a house in Germany, it is mandatory to provide parking spaces for cars using a formula based on house size. It is a Nazi era law that has never been repealed. (German only – ‘Dorothea Heintze zieht verspätet in ihr Hamburger Wohnprojekt ein – und das hat mit der Reichsgaragenordnung von 1939 zu tun. Aus ihr haben die Bundesländer die „Stellplatzpflicht“ übernommen: Bauherren müssen für jede neue Wohneinheit Parkplätze vorhalten.’ http://www.taz.de/!5068956/ )

‘Culturally, most of America is far closer to Utah’

As a native Northern Virginian, I disagree. But there is no question that a place like Alexandria (where I was born) or Arlington (where I lived for a number of years) or Vienna (ditto) are not the sort of model that most Americans think of when talking about their culture.

78 Floccina July 31, 2017 at 3:31 pm

Do you think any of that has to do with the fact that German cities were built before many people could afford cars?

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79 Wayne H July 31, 2017 at 5:46 am

My quick starter is looking at life expectancy and filter for countries by OECD membership and/or GDP per capita as crude proxies for country similarity, a quick look at existing
information see https://en.m.wikipedia.org/wiki/List_of_countries_by_life_expectancy, suggests Canada maybe doing something different than the US, but since both have reasonably similar social and cultural habits eg eating, exercise then there is something different in other variables such as health care that is producing the difference.

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80 A Black Man July 31, 2017 at 9:01 am

Given that Canada has a very different racial makeup than the US, you would first need to adjust for race and possible age. Even better would be a break it down further into ethnic categories. Most likely, the health outcomes of Italians in Canada tracks with health outcomes of Italians in America, and Italy.

Despite the best efforts of the blank slate types, genetics remains a real thing.

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81 enoriverbend July 31, 2017 at 9:03 am

“both have reasonably similar social and cultural habits eg eating, exercise”

What? No.

http://www.nationmaster.com/country-info/stats/Crime/Murder-rate
http://www.nationmaster.com/country-info/stats/Health/Obesity

etc.

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82 G July 31, 2017 at 5:51 am

Hard to do this comparison because health is generally considered to be more like a stock than a flow.
So the effect would be a change in depletion of the stock. But this is hard to detect.

In addition, we can’t use summary stats because there are other concurrent things that happen. 65 is an age that lots of people retire — with well documented health effects.
Beyond this though, because only a subset of the population starts without medical care, the effect size is smaller.
I can even draw a model where where medicare dominates pay for options because its low cost, but medicare is worse than the payfor options people would pick, making large subsets of the population switch to inferior care — so large summary stats of population as a whole could show negative effects. You would need to zero in on the subset gaining care to measure benefit size.

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83 TMC July 31, 2017 at 12:08 pm

“65 is an age that lots of people retire — with well documented health effects.”

+1 Add in that people wait for some of the larger procedures for when they have plenty of time to heal – retirement.

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84 mkt42 July 31, 2017 at 3:30 pm

Very good observations. There are a number of confounding influences, and Tyler is asking a question which is too close to “post hoc ergo propter hoc”.

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85 Todd K July 31, 2017 at 6:09 am

“…but since both have reasonably similar social and cultural habits eg eating, exercise then there is something different in other variables such as health care that is producing the difference.”

Canada has a slightly lower rate of violence than the U.S. as shown by a somewhat lower murder rate at 1.7 than the U.S. at 5.2 per 100,000.

24% of Canadians are obese whereas 34% of Americans are, so reasonably similar eating and exercise habits but possibly an area of further exploration as strains on each health care system.

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86 The Anti-Gnostic July 31, 2017 at 12:51 pm

Of course, America consists of at least three countries.

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87 msgkings July 31, 2017 at 2:42 pm

So does Canada

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88 Todd K July 31, 2017 at 5:18 pm

I was wrong to consider America one country since there are really 10 ^ 500 Americas – or is that dimensions in string theory?

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89 The Anti-Gnostic August 1, 2017 at 10:10 pm

The three main population groups in the US have pretty markedly different statistical outcomes on various metrics, particularly in homicide rates per 100K.

90 The Anti-Gnostic August 1, 2017 at 10:05 pm

Canada has the First Nations with their awful metrics. Other than that it’s mostly white and some East Asian.

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91 Dr Blair Adams July 31, 2017 at 6:10 am

After 64 years of no health care most bodies would, on average, probably have suffered negative effects that would not be significantly reversed by adding a few Band-Aids so late in life.
Studies of societies with larger percentages of cohorts that live to advanced ages would probably show those people had greater health care support from birth and – more importantly – healthier life-styles and genetics. (Choose your parents wisely.)
A more successful approach might be to have health insurance for all those from birth to age 5, and then every 5 years, bump up the health care another 5 years. ( birth to age 10, birth to age 15 and so on.)

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92 Samuel July 31, 2017 at 8:33 am

While I don’t have solid numbers to support this, my sense from treating patients is that a high proportion of those 65 and older have substantial health problems that are not easily reversible now, but perhaps could have been when they were younger in a better healthcare model. Conditions such as heart disease, diabetes, and renal failure are very common amongst Medicare recipients but do not develop overnight.

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93 Harun July 31, 2017 at 11:18 am

The Medicaid study in Oregon showed that access to Medicaid didn’t help any key medical benchmarks like BP, etc.

I’m pretty sure they chose those benchmarks assuming they would show movement.

This suggests that earlier access to healthcare would not necessarily help those conditions. Many people apparently wait until they are really sick to see the doctor.

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94 JonFraz July 31, 2017 at 4:15 pm

Yes, and this rather refutes the argument that given free or low cost healthcare, people would over-use it.

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95 Normal August 1, 2017 at 7:59 am

Triumph of fact over theory.

96 Boonton July 31, 2017 at 6:39 am

We have a problem here and I’ll use the analogy again to cars that have collision coverage versus those that don’t.

On Jan 1 you take a sample of 1000 cars with and without coverage. On Dec 31st you see how many of those cars are still on the road versus in the junk yard. All things being equal collision coverage increases the odds of a car being on the road. With collision, insurance will pay to fix up a car in an accident. Without it the car’s owner will only pay the hefty body shop if the car’s value is still more than what the repair will cost.

But that’s an immediate ‘health intervention’ on the car. Don’t have coverage and don’t have cash and you’re out of luck, your car is junk. But at age 64 if you suddenly clutch your chest in the middle of the mall with a heart attack, people will call 911 and you will get immediate intervention regardless of insurance.

How about more basic stuff though? Like consider people that buy new cars…some people buy them with a special maintenance deal that does all the first few years of maintenance free and others have to pay for maintenance themselves. The people who have to pay themselves will probably skimp to some level on maintenance, yet you will probably have a hard time seeing that in the first few years of the cars’ lives. A new car running a year in without an oil change is probably not going to look that different than one that is on its 2nd oil change.

Another example, chatting with a woman this weekend who has an older friend. Let’s say she’s 60. Got laid off, spent her savings on COBRA. When that was exhausted she went to Medicaid but was under the impression (wrongly) that if she found a new job she would have to pay back all of her Medicaid spending. As a result she skimped on controlling her diabetes. Now several years later she is in danger of losing an eye.

Like going an extra few months on your car’s oil change, she probably didn’t see a dramatic change in results from ‘interventions’. AS a result she thought she could skip here and there to save money. The cost, though, shows up with a vengeance later.

So interventions with clear immediate benefit are almost always provided regardless of coverage (just call 911 or visit the ER). Interventions with longer term benefit, though, are often denied or sporadically provided without good coverage. How then would you measure your results? Perhaps look at how people 65-75 with medicare fare versus those that don’t have medicare? But almost everyone in that bucket has medicare the few that don’t might be recent immigrants, or illegal immigrants, people with radically different demographics than the ‘average American’. You might also have super rich old money types who never worked hence don’t get Medicare….but they no doubt have coverage or pay directly for care at least equal to Medicare. The best you can do IMO is look at people in developed countries with universal coverage to see how they fare 65-75 given they had full coverage before 65 versus the population in the US which has imperfect coverage before 65.

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97 Steven White July 31, 2017 at 6:49 am

Several papers look at the introduction of Part D and find increased use of statins and the like and a drop in deaths from heart attacks. (No change in cancer deaths which were already covered by Part B.)

Card et al finds modest improvements for people with heart attacks if I remember correctly using RD based on age like proposed above.

Health care works. There are tons of RCTs showing most medicines work. I don’t think this is really up for debate.

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98 Anon. July 31, 2017 at 7:18 am

How exactly do you extrapolate from statins to healthcare as a whole?

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99 Steve August 1, 2017 at 12:45 pm

You don’t. No one know or will ever know things like that.

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100 Harun July 31, 2017 at 11:20 am

Same statins were presumably available in the Medicaid study.

Why no improvements in those benchmarks?

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101 Steve August 1, 2017 at 12:51 pm

They couldn’t reject the null hypothesis of no improvement. If they had the null as the expected effect of statins (which would be very small in a population of non-elderly people since few would need them and the increase in access would be small since there are tons of cheap generics you can buy without insurance) they would also have failed to reject that too.

The study just wasn’t designed to answer a lot of questions that people are interested in, like how Medicaid impacts people’s health, esp. subpopulations of interest like people with HIV.

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102 dearieme July 31, 2017 at 6:57 am

“if so what did it yield?” Alas, it may well have yielded whatever its sponsors wanted it to yield. Who would trust academic research today on any topic that’s politically contentious? Or on any other topics, come to that.

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103 rayward July 31, 2017 at 7:03 am

True or false: seniors consume a disproportionate share of health care services in the U.S. The answer will likely surprise readers. I believe it was Cowen who provided a link to the study. If it was, I will let him provide it again. If not, I probably can find it.

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104 TMC July 31, 2017 at 12:18 pm

True. Interesting graphic, comparing age cohorts, but against other countries.

http://4.bp.blogspot.com/-JEa4YZGJKpo/U-4zvTL1mLI/AAAAAAAABWI/D47i8yLucfQ/s1600/health%2Bcare%2Bcosts.gif

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105 Blaise July 31, 2017 at 7:07 am

Interesting question. I hope the answer will be reported even if it contradicts Tyler’s worldviews. Anyway as previous comments said that may not not be straightforward as health is more a stock than a flow and the study should focus on the ones impacted by the change.

The US under perform in terms of life expectancy at birth and life expectancy at 65. I guess it could be interpreted as a failure of Medicare but it also could be seen as the accumulation of bad health care of a 65 year old American compared to 65 year old in a typical rich country.

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106 Todd July 31, 2017 at 7:38 am

Medicare slashed the poverty rate among seniors. Poverty increases the chances of poor health, no?

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107 Ricardo July 31, 2017 at 12:16 pm

Omitted variable bias.

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108 Alan Goldhammer July 31, 2017 at 7:43 am

As some have already pointed out, it is difficult to do such a study given the potential lack of care for many years preceding going onto Medicare. A much better study in terms of “national healthcare” might be to examine health outcomes of ex-military personnel who were covered under Tricare. This would eliminate the ‘gap in coverage’ issue which is a confounding variable.

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109 Boonton July 31, 2017 at 11:00 am

But who would you compare them too? Medicare patients who didn’t previously have Tricare? Many people who get on Medicare had full or nearly full coverage leading up to it so you would need a sample of people who didn’t have good coverage leading into Medicare to compare with those who went into Medicare with Tricare.

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110 Bill July 31, 2017 at 8:05 am
111 Some Random Economist July 31, 2017 at 8:19 am

Dhaval Dave and Bob Kaestner have a relevant paper that finds evidence of moral hazard related to Medicare. They find that preventative care decreases and unhealthy behavior increases for men at the 65-year threshold.

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112 rayward July 31, 2017 at 11:27 am

Men don’t know what to do with themselves once they retire, and often adopt unhealthy habits as a result.

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113 Willitts July 31, 2017 at 8:28 am

No, they are not directly comparable because people enter the 65 and over bracket in very different states of health, at least some of which is irreversible.

It would be somewhat better to compare survival rates of specific conditions such as cancer, controlling for age. While people can enter a cancer diagnosis in various levels of health and fitness, more of these factors are controlled over looking at all people and all diseases. One confounding factor is detection. The system that detects cancer earlier has a much higher likelihood of success. To the extent a system leads to earlier positive diagnoses, I guess you could credit that system for access to routine examinations. But confounding the confounding factor is that different people have different propensities to have exams even when they are available. A culture might be doctor averse.

Measuring outcomes though is preferential to the abhorrent method of comparing life expectancy as an indicator of health system quality.

But for that matter, a command economy could have the worlds best health care system at the expense of other sectors and could be highly inefficient. For example, such a system could order a large battery of blood tests for every conceivable problem, but having no reasonable suspicion of those problems. All the negative tests are comforting, but are clearly wasteful.

When measuring health system quality, we must therefore consider foregone alternatives. Perhaps the European social welfare states haven’t been spending nearly enough on national defense, for example.

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114 Jonathan July 31, 2017 at 8:39 am
115 A Black Man July 31, 2017 at 8:57 am

“So to the extent health care improves health outcomes…”

The people who would study this already know that health care does not improve outcomes. Basic nutrition, sanitation and things like antibiotics account for 99% of the improvement in human health and life span. I’d also throw in reduction in violence, which has a far greater impact on average lifespan, than overall health.

The fact is, having plenty of food and someone around to set your broken leg counts for much more than cancer research.

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116 TMC July 31, 2017 at 12:20 pm

+1

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117 prior_test3 July 31, 2017 at 2:33 pm

‘and someone around to set your broken leg’

Since when is this not health care?

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118 Art Deco July 31, 2017 at 3:05 pm

The people who would study this already know that health care does not improve outcomes. Basic nutrition, sanitation and things like antibiotics account for 99% of the improvement in human health and life span.

Even Ivan Illich (using data current to 1965) never made a claim that extreme.

Life expectancy at birth has increased by 8 years since 1970; life expectancy at age 65 has increased by 4 years. I doubt you can attribute that to ‘sanitation, nutrition, and antibiotics’ (which were ample in 1970).

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119 A Black Man Redux July 31, 2017 at 3:14 pm

So instead of it being 99%, it is 90%. Thanks to your ceaseless pedantry, my point is now proved.

Thanks

Oh, the wimps who run this place banned my previous account.

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120 Art Deco July 31, 2017 at 4:48 pm

Illich contendent 90%. He was a good bibliographer, but I doubt he had analytical skills.

Again, I don’t think you can make any such claim for improvements in life expectancy in occidental countries since 1970. Typhoid and cholera were not a problem of any size in 1970. Neither was malnutrition. What share of improvements in life expectancy up to 1965 are attributable to sanitation & nutrition is irrelevant to our current problems, because the fruit on that tree’s been picked. You could go full Illich and claim that medical practice is useless. The improvement in old age mortality suggests that’s a foolish line of argument.

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121 Jonathan July 31, 2017 at 9:33 am

And a new study on Medicare Part D, the prescription benefit: http://www.sciencedirect.com/science/article/pii/S0167629617300577

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122 TMC July 31, 2017 at 12:23 pm

I’m not going to pay for the study, but in addition to lower mortality, did it reduce spending as much as earlier studies found? Basically $2 of hospital treatment for $1 in drug spending?

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123 Sandia July 31, 2017 at 10:09 am

I think we have to look at this like the minimum wage debate where the evidence is poor and use common sense. Clearly health insurance (financial insurance) for people isn’t bad and must have some postive benefits, even if modest, in peace of mind, financial stability and use of the health care system for preventive care. It also takes stress off the emergency room, which if you haven’t been to one recently is a generally a pretty busy place. So I would think we would look at health insurance (financial insurance) as something a wealthy society should provide to it’s citizens in one form or another. Doing tons of studies on this is not that productive.

That said, there are probably two larger issues. The first is the cost of the health care system, and the problems with the fee for service model. The high cost of this makes it more dificult to increase coverage more broadly where other countries don’t seem to have much trouble with this. Much of the spending on health care in the US probably has no impact on health outcomes. There are efforts underway to address this through payment bundling, ACOs, etc., but much more needs to be done.

The second is the widespread existence of poor health behaviors in the US. As is widely noted the importance of diet, exercise, etc is probably the largest driver of health outcomes. There seems to be a hope that poor lifestyle choices that can be fixed by pharmacological intervention or dramatic health care interventions later in life. This is insane.

There is an interesting question about how all of these interact and the moral hazard issues with providing insurance and how that affects behaviors, but I suspect those behavioral issues are more cultural than anyting else. It’s possible that there may be more positive behavior affirming ways to incentivize the health insurance (financial) part of the equation.

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124 Hazel Meade July 31, 2017 at 10:38 am


There is an interesting question about how all of these interact and the moral hazard issues with providing insurance and how that affects behaviors, but I suspect those behavioral issues are more cultural than anyting else.

You don’t think lack of financial incentives to change one’s behavior has any effect on behavior?
In that case, why the tobacco surcharge?

As a note, the hazard is not with providing insurance per se, but providing insurance where the premiums are not pegged to the the individuals health care spending behavior and risk factors. A lot of medically unnecessary spending occurs because people just want the peace of mind of doing the extra test, and if that doesn’t show up in premiums, why not do it? A lot of people don’t like the idea of people paying extra because they have high genetic risk factors for disease, but they also eliminated all price variation that’s based on voluntary choice made by the consumer.

Another point worth noting is that insurance is a way of translating future risk into present costs, which help get around discounting of future effects. If your unhealthy lifestyle might give you cancer in 30 years, you’re not going to worry about it too much right now, but if it is costing you money right now in insurance premiums, you will.

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125 Sandia July 31, 2017 at 11:06 am

I think for a working person making 80,000 per year these incentivize ideas mght work. But not for chronically unemployed, etc.

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126 Hazel Meade July 31, 2017 at 11:49 am

The chronically unemployed don’t pay their own insurance premiums. But most people are employed and pretty much anyone who is is likely to notice the effect of behavior on their insurance premiums. Even if they only make $30,000. After all, many people already do this with respect to auto insurance – people take defensive drivers training to cut their insurance premiums and/or may choose not to insure minor damages, or not insure cosmetic damage because they would rather just live with scratched paint than pay higher car insurance premiums.

Or they WOULD notice and care, if the ACA allowed for such price variation. Sadly, that sort of price discrimination is illegal under “community rating”.

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127 JonFraz July 31, 2017 at 4:50 pm

Long before the ACA group plans instituted community rating (within the group). And a functional market does seem to require some rationality and transparency about prices approaching the one-price-for-one-product ideal. Imagine the chaos if we tried pricing other goods and services on an individual basis.

128 Hazel Meade August 1, 2017 at 9:47 am

What, you mean like every other form of insurance?

129 JonFraz July 31, 2017 at 4:48 pm

Can the healthcare Calvinism (“Only sinners get sick”)

Only a small fraction of adverse healthcare events are due to lifestyle issues. Most illness and injury is due to unforeseeable events (chance encounters with pathogens, carcinogens, etc.; accidents which only someone with oracular powers could foresee), and often enough, to bad genes; or else to the inevitable decay that all complex physical systems, including human bodies, experience over time– that is, aging. These are inevitable in the general sense– only people who perish from sudden trauma at a young age avoid it.
The sensible thing to do so is to promote consumption smoothing over the course of a lifetime– paying an approximately constant fee into the system over the course of a life. If it’s considered important to reward healthy behaviors and penalize unhealthy behaviors we can find ways to do so outside the healthcare system itself since doing so there penalizes the innocent as well as the guilty. (As an example, we can impose higher excise taxes on unhealthy foods etc.– we already do this with tobacco, and with some success).

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130 Hazel Meade August 1, 2017 at 9:50 am

Only a small fraction of adverse healthcare events are due to lifestyle issues.

This is demonstrably false from the testimony of just about everything anyone with any knowledge of health care spending has to say. We’re dying of obesity and diabetes and sedentary lifestyles.
Our healthcare expenses would be vastly lower if people ate healthier and got more exercise.

Yeah, most people want to deny this and say it’s all just random, because that’s easier than going to the gym 3 times a week.

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131 JonFraz August 1, 2017 at 3:57 pm

It IS true as anyone with any knowledge of their own life can testify. When was the last time you went to the doctor (or urgent care or ER) and was it due to a bad lifestyle choice or random mischance/bad genes/aging?
Last year I had three visits to urgent care: I had pneumonia, I broke a bone in my foot in a biking mishap (yes, I was sober), and I had a severe case of the flu despite getting a flu shot. You could blame the broken bone on a lifestyle choice– hey, I bike!– but do we really want to “blame” people for healthy habits that can, on rare occasion, lead to injury?

Like I said, can the healthcare Calvinism– it’s foul and it reeks. To the extent there are such instances we can handle them with “sin taxes” on unhealthy products (as we already do with cigarettes)– there is no near to penalize people via the healthcare system.

132 Todd K July 31, 2017 at 10:46 am

“There seems to be a hope that poor lifestyle choices that can be fixed by pharmacological intervention or dramatic health care interventions later in life. This is insane.”

Why insane? Pharmaceuticals have been working on these health pills for more than a decade and will help with metabolic conditions, inflammation, heart disease and lower the risk of cancer. This is bad? Much of the world works with little physical activity so the health pills can’t come soon enough.

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133 JFA July 31, 2017 at 10:22 am

In addition to Carden, I would also recommend Finkelstein. This paper http://www.sciencedirect.com/science/article/pii/S0047272707001764 suggest no discernible decrease in mortality after introduction of Medicare. No comparisons to other universal systems.

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134 Tyler Cowen July 31, 2017 at 10:44 am
135 hoonose July 31, 2017 at 1:32 pm

Thank you, as I was looking for that reference.

As a practicing internist I can tell you that many of my patients delay all sorts of testing and treatments until age 65. But I can’t recall anything untoward happening as a result of the delay. Most all of my patients however have had HC insurance prior to age 65. Either a private policy or Medicaid. So although it seems obvious that those uninsured will have poorer health entering Medicare and then higher Medicare costs, I cannot know for sure.

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136 JWatts July 31, 2017 at 2:36 pm

“As a practicing internist I can tell you that many of my patients delay all sorts of testing and treatments until age 65. … Most all of my patients however have had HC insurance prior to age 65.”

In most cases, it’s more about the time required. Without work as a precondition, there is re-prioritization and work > doctor visit > watching soap opera

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137 byomtov July 31, 2017 at 11:02 am

You would have to very careful in evaluating the results of such a study. Bear in mind that a large percentage of those going on Medicare have in fact had quite good healthcare before turning 65. Their trajectory won’t change, so if you look at the entire population the average trajectory change will be badly diluted, lowering the power of your statistical tests.

If you want to measure the effect of a treatment – an improvement in access to healthcare – you have to be careful to identify the group being treated accurately. I believe there was a similar flaw in the Oregon Medicaid study.

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138 Lord July 31, 2017 at 11:56 am

There was a jump in life expectancy after medicare was enacted which had stagnated before that. As people age at different rates, you wouldn’t expect a sudden shift on turning 65 though.

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139 David Tufte July 31, 2017 at 11:57 am

An interesting paper, thanks for the link. The methods are basic, but not seminal.

Without impugning the authors or results, I think it is worth pointing out that the study was published in a medical policy journal, and that the authors are all medical professionals, some employed by medical policy groups. And yet the topic is fundamentally an economic one.

Check your privilege: would a team of economists publishing in an economic policy journal be of interest if the question was fundamentally medical? It’s been a long time since I read a paper that raised so many red flags for me.

Here’s what this economist noticed. If I unravel the math in, say, your Figure 3, and maintain the standard assumption that the variable you’ve put on the horizontal axis is causal — your results imply that economic growth leads to less medical innovation. That’s implausible, and suggests your results are a statistical artifact.

How does this bizarre mechanism work? In your model, you have ratios that are displayed as linear when both are logged. GDP is in the denominator of one of these logs. That’s equivalent to subtracting its log. Since approximate growth rates are differences of logs, the slope of your line is the negative of the elasticity of new molecular entity creation with respect to GDP growth.

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140 CM July 31, 2017 at 12:06 pm

This elides the differences between Medicare and a single payer system, which are significant. Medicare is more like a system of subsidies with a very important single-payer component (hospitalizations / acute care). Other than hospitalizations / acute care, however, Medicare beneficiaries have to purchase supplemental insurance policies which are subject to deductibles and co-pays. As a result, the Federal Government only pays for roughly 2/3 of the cost of medical expenses for the elderly (see http://www.nber.org/aginghealth/2015no2/w21270.html) and seniors spend about 20% of their income on healthcare expenses (see http://www.benefitspro.com/2015/02/23/elderly-spend-20-of-incomes-on-health-care).

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141 rtd July 31, 2017 at 12:32 pm

You claim “we should see a noticeable uptick in results as people reach 65, at least relative to the trajectory of aging they otherwise would experience”… i think this is flawed. While this is the age when (some) people begin receiving Medicare, this is also the age (some) people continue health care but switch from a better (employer-provided program) to a lower quality program (Medicare). Need to discern between these populations.

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142 byomtov July 31, 2017 at 5:48 pm

Correct, except for the assumption that employer-based programs are better in terms of health outcomes than Medicare. Some may be, but hardly all.

Regardless, if you want to know if getting Medicare helps it is important to identify and analyze only those for whom Medicare is a better plan than whatever they had before, which may be nothing.

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143 rtd July 31, 2017 at 7:30 pm

Or: “Most may be, but hardly all.”

Your second point is valid and seems to be missing in Tyler’s calculus.

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144 Study July 31, 2017 at 1:37 pm

Am J Hosp Palliat Care. 2015 Nov, Marik PE:
“Elderly patients patients (older than 65 years) account for only 11% of the US population yet they account for 34% of health care expenditure. The disproportionate usage of health care costs by elderly patients is in striking contrast with that of other Western Nations. It is likely that these differences are largely due to variances in hospitalization and the use of high technology health care resources at the end of life. The United States has 8 times as many intensive care unit (ICU) beds per capita when compared to other Western Nations. In the United States, elderly patients currently account for 42% to 52% of ICU admissions and for almost 60% of all ICU days. A disproportionate number of these ICU days are spent by elderly patients before their death. In many instances, aggressive life supportive measures serve only to prolong the patient’s death. Such treatment inflicts pain and suffering on the patient (with little prospects of gain) and incurs enormous financial costs to the health care system. We present the case of an 86-year-old female who spent almost 3 months in our ICU prior to her death. The fully allocated hospital costs for this patient were estimated to be US$254 945 (US$5100/d).”
https://www.ncbi.nlm.nih.gov/pubmed/24907121

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145 Bryan Willman July 31, 2017 at 2:08 pm

As implied by various parties above – what you are really asking about is:

People who were not on medicaid before 65, whose health insurance was inadequate or non-existent, AND as a result of that had inadequate medical care. When those people go on medicare, and their insurance presumably improves, does their access to and effective use of healthcare improve? And what is the result?

I personally have (very costly) private insurance (pre ACA) which is manifestly better than medicare in what it covers. When I turn 65 and am forced off this policy onto medicare, my health *insurance* will at least on paper be worse not better (but will be much cheaper, even with medigap and deductibles.) So in my case, the incentive is for care *before* 65 rather than after, and the “medicare boundary” doesn’t really inform the policy question.

(I tried to understand how medicaid interacts with medicare when the person turns 65, but I can only stand so much inscrutable text in one day…)

Note that the “ICU for people who are surely going to die” think that @Study points out largely affects … medicare patients – and has a lot more to do with social and political pressures than health insurance policy. There is no particular reason to think that a single payer system (or even a single provider system) in the US would actually perform better on this.

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146 Tim July 31, 2017 at 2:15 pm

In addition to the Card and McWilliams papers, there’s also Song and Wallace who show how Medical spending drops discontinuously at age 65 for people with employer coverage pre-65: http://content.healthaffairs.org/content/35/5/864.abstract

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147 Millian July 31, 2017 at 3:17 pm

Part of the point of single-payer is that monopsony grabs suppliers by the Trump.

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148 Denmark Discontinuity July 31, 2017 at 5:01 pm

This is a great question, just as the Denmark employment study shows the discontinuity at age 18, is there a discontinuity in outcomes at the age 65? Even a change in slope of death rate would be enough here, but if that isn’t there, is that not an indictment of medicare?

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149 Virginia Postrel July 31, 2017 at 6:23 pm
150 David August 2, 2017 at 9:27 am

A broader list of papers on Medicare eligibility and healthcare usage and outcomes. Of various quality and relevance to the question:

Card, D., Dobkin, C. and Maestas, N., 2004. The impact of nearly universal insurance coverage on health care utilization and health: evidence from Medicare (No. w10365). National Bureau of Economic Research.

Finkelstein, A., 2007. The aggregate effects of health insurance: Evidence from the introduction of Medicare. The quarterly journal of economics, 122(1), pp.1-37.

Card, D., Dobkin, C. and Maestas, N., 2009. Does Medicare save lives?. The quarterly journal of economics, 124(2), pp.597-636.

Anderson, M., Dobkin, C. and Gross, T., 2012. The effect of health insurance coverage on the use of medical services. American Economic Journal: Economic Policy, 4(1), pp.1-27.

Finkelstein, A. and McKnight, R., 2008. What did Medicare do? The initial impact of Medicare on mortality and out of pocket medical spending. Journal of public economics, 92(7), pp.1644-1668.

McWilliams, J.M., Meara, E., Zaslavsky, A.M. and Ayanian, J.Z., 2007. Health of previously uninsured adults after acquiring Medicare coverage. Jama, 298(24), pp.2886-2894.

McWilliams, J.M., Meara, E., Zaslavsky, A.M. and Ayanian, J.Z., 2009. Medicare spending for previously uninsured adults. Annals of internal medicine, 151(11), pp.757-766.

McWilliams, J.M., Meara, E., Zaslavsky, A.M. and Ayanian, J.Z., 2009. Differences in control of cardiovascular disease and diabetes by race, ethnicity, and education: US trends from 1999 to 2006 and effects of Medicare coverage. Annals of Internal Medicine, 150(8), pp.505-515.

Dave, D. and Kaestner, R., 2009. Health insurance and ex ante moral hazard: evidence from Medicare. International journal of health care finance and economics, 9(4), p.367.

Lichtenberg, F.R., 2002. The Effects of Medicare on Health Care Utilization and Outcomes. NBER Chapters, pp.27-52.

Hadley, J. and Waidmann, T., 2006. Health insurance and health at age 65: implications for medical care spending on new Medicare beneficiaries. Health services research, 41(2), pp.429-451.

Finkelstein, A. and McKnight, R., 2005. What did Medicare do (and was it worth it)? (No. w11609). National Bureau of Economic Research.

Polsky, D., Doshi, J.A., Escarce, J., Manning, W., Paddock, S.M., Cen, L. and Rogowski, J., 2009. The health effects of medicare for the near‐elderly uninsured. Health services research, 44(3), pp.926-945.

Decker, S.L., 2005. Medicare and the health of women with breast cancer. Journal of Human Resources, 40(4), pp.948-968.

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151 sweetfancymoses August 3, 2017 at 11:59 pm

speculative?
1) a large amount of health care costs in this age group are spent managing chronic diseases where change in
outcome positive/or negative over a year or two might be hard to measure accurately.
2) at this age aren’t there a lot of screening tests that become more numerous and more often.
this could skew outcome measurement
3. when people go from having no insurance to medicare at age 65
don’t they often put things off for a couple years and start getting more care at age 65?
wouldn’t that make it difficult to measure outcomes because outcomes are somewhat dependent
on early diagnoses of the serious sorta stuff you get into at this age.
my health question is
if inflation rate is 2 percent and health care insurance is up around these parts 28% this year
-the trump effect is supposedly 10 percent of that?
– so 18 percent inflation in one year if trump were out of the picture
how did we get to 18 percent?
how much did actual health care prices go up vs more cost shifting because more people are
getting more health care ?

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153 bill August 18, 2017 at 6:34 pm

Just anecdotes, but I knew two people who chose to postpone getting care at 64 to get it under Medicare. One died at 64 from stomach cancer. The other got diagnosed at 65 with lung cancer and lived 8 or 9 more years.

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