Medicine

I was pleased to see their title for the column: “Go Wet, Young Man.”  Here is one of the claims:

Counterintuitively, I see the greatest promise for seasteading as a path toward more rather than less human companionship.

…some of the elderly have started living on cruise ships full-time. A good assisted-living facility might cost $80,000 a year in the U.S., more than many year-long cruises. (Cruising could also be cheaper than living in an expensive neighborhood.) Furthermore, the cruise offers regular contact with other passengers and also the crew, and the lower average age means that fewer of one’s friends and acquaintances are passing away. The weather may be better, and there is the option of going onshore to visit relatives and go shopping.

The cruise ship removes the elderly from full-service hospitals, but on the plus side, regular social contact is good for health, passengers are watched much of the time and there is a doctor minutes away. Better health and human companionship could be major motives for this form of seasteading. I could imagine many more of the elderly going this route in the future, and some cruise lines already are offering regular residences on board.

The goal of this seasteading enterprise is to pack people more tightly together rather than to open up broad new vistas for a Wild West kind of settlement. The proprietors make physical space more scarce, not less, to induce better clustering. So seasteading does have a future, but it is to join and build a new and crowded communitarian project, not to get away from one.

Do read the whole thing.

In an important paper in the latest AER, Das, Holla, Mohpal and the excellent Karthik Muralidharan compare private and public health care in India. (I once asked, “Is any economist doing more important work with greater potential for real improvement in the lives of millions than Karthik Muralidharan?” See previous posts on Karthik’s work for the answer.)

The AER paper examines health care in villages in Madhya Pradesh, one of the poorer states in India (GDP per capita of $1,500 PPP). In India, primary health care is ostensibly available for free from public health clinics and hospitals manned by professionally trained nurses and physicians. As with teachers at public schools, however, it’s very common for doctors at public clinics to be absent on any given day (40% were absent on a given day in 2010) and public clinics are not highly regarded. As a result, some 70% percent of primary care visits nationally–and an even higher percentage in Madhya Pradesh–are to private, fee-charging health-care providers. Most of the private providers do not have a license or medical degree although they may have some health-care training.

ruralhealthcareindiaThe authors sent trained actors, “standardized patients” to public and private clinics to evaluate provider effort and accuracy in response to the presentation of textbook symptoms of common illnesses (angina, asthma, and dysentery in a child at home). Standardized patients are used to train medical students in the United States and in India and the Indian SPs were trained by professionals including medical doctors, and a medical anthropologist familiar with local forms of presenting illnesses and symptoms.

The first result is that the provision of health care is uniformly and distressingly poor. Overall, only 2.6% of patients received a correct treatment (and nothing unnecessary or harmful). The private providers, however, exert much more effort than do the public providers. The private providers, for example, perform more items on a standard checklist and they spend more time with patients. But the private providers are no better than the public providers at giving a correct treatment. Why not?

Private providers exert more effort but are less knowledgeable. Loosely we might say that Quality=Effort*Knowledge. Private providers put in more effort but have less knowledge and public providers have more knowledge but put in less effort leading to similar quality levels overall.

There is one big difference, however, between the public and private regimes, the private regime is much less socially costly. Since costs are lower and the quality level is the same, the private system is much more productive. The authors note:

…our estimates suggest that the public health care system in India spends at least four times more per patient interaction but does not deliver better outcomes than the private sector

(FYI, this also holds true for public and private schooling in India and around the world. Private schooling is usually somewhat better or about as good as public schooling but much less costly so the productivity of private schooling is much higher.)

To focus on the issue of market incentives rather than knowledge the authors do a second set of remarkable tests. Indian doctors often work in a public and a private practice. Thus, the authors send standardized patients to the same doctors but in one case the patient is treated under the public regime and in other under the private, market regime. Once knowledge is controlled for the results are very clear, private, markets dominate the public regime.

…treatments provided in the private practice strictly dominate those provided in the public practice of the same doctor. The rate of correct treatment is 42 percent higher (16 percentage points on a base of 37 percent), the rate of providing a clinically non-indicated palliative treatment is 20 percent lower (12.7 percentage points on a base of 64 percent), and the rate of antibiotic provision is 28 percent lower (13.9 percentage points on a base of 49 percent) in the private practice relative to the public practice of the same doctor.

The bottom line is that the private market for health care is much bigger and less expensive than the public health regime in rural India and once we control for knowledge it’s of higher quality. These results have important implications for reform. In particular, much more effort should go into improving the knowledge of the private sector.

….the marginal returns to better training and credentialing may be higher for private health care providers who have stronger incentives for exerting effort. Current policy thinking often points in the opposite direction, with a focus on hiring, training, and capacity building in the public sector on one hand (without much attention to their incentives for effort), and considerable resistance to training and providing legitimacy to unqualified private providers on the other.

Probably not:

But here’s the problem: There would be huge real-world impact of a repeal vote, regardless of when it actually takes effect. A repeal vote would tell the insurers that sell on Obamacare’s marketplaces to get out of the marketplace as soon as possible.

“Insurers have got to put their products together this spring, and we’re right in the middle of killing Obamacare,” says Robert Laszewski, a longtime health insurance consultant. “Are they going to submit proposals to sell in 2018? Why would they stay in the pool?”

The experts I’ve talked to over the past few days argue that a repeal vote would give health insurers good reason to quit the marketplaces — and that could leave 10.4 million Obamacare marketplace enrollees in the lurch.

That is from Sarah Kliff at Vox.

New Zealand will now compensate live organ donors for all lost income:

Today’s unanimous cross-party support for the Compensation for Live Organ Donors Bill represents a critical step in reducing the burgeoning waiting list for kidney donations, according to Kidney Health New Zealand chief executive Max Reid.

“The Bill effectively removes what is known to be one of the single greatest barriers to live organ donation in NZ,” Mr Reid says. “Until now the level of financial assistance (based on the sickness benefit) has been insufficient to cover even an average mortgage repayment, and the process required to access that support both cumbersome and demeaning. The two major changes that this legislation introduces – increasing compensation to 100% of lost income, and transferring responsibility for the management of that financial assistance being moved from WINZ to the Ministry of Health – will unquestionably remove two major disincentives that exist within the current regime.”

Eric Crampton (former GMU student, now NZ economist who supported the bill) notes that a key move in generating political support was that New Zealand MP Chris Bishop framed the bill as compensating donors for lost wages rather than paying them. A decrease in the disincentive to donate–an increase in the incentive to donate. To an economist, potato, potato. But for people whose kidneys fail in New Zealand, the right framing may have been the difference between life and death.

This is also a good time to remind readers of Held, McCormick, Ojo and Roberts, A Cost-Benefit Analysis of Government Compensation of Kidney Donors published in the American Journal of Transplantation.

From 5000 to 10 000 kidney patients die prematurely in the United States each year, and about 100 000 more suffer the debilitating effects of dialysis, because of a shortage of transplant kidneys. To reduce this shortage, many advocate having the government compensate kidney donors. This paper presents a comprehensive cost-benefit analysis of such a change. It considers not only the substantial savings to society because kidney recipients would no longer need expensive dialysis treatments—$1.45 million per kidney recipient—but also estimates the monetary value of the longer and healthier lives that kidney recipients enjoy—about $1.3 million per recipient. These numbers dwarf the proposed $45 000-per-kidney compensation that might be needed to end the kidney shortage and eliminate the kidney transplant waiting list. From the viewpoint of society, the net benefit from saving thousands of lives each year and reducing the suffering of 100 000 more receiving dialysis would be about $46 billion per year, with the benefits exceeding the costs by a factor of 3. In addition, it would save taxpayers about $12 billion each year.

In Miami, health care providers spent about $14,423 per Medicare patient in 2010. But in Minneapolis, average spending on Medicare enrollees that year was $7,819, just over half as much. In fact, the U.S. is filled with regional disparities in medical spending. Why is this?

One explanation focuses on providers: In some regions, they may be more likely to use expensive tests or procedures. Another account focuses on patients: If the underlying health or the care preferences of regional populations varies enough, that may cause differences in spending. In recent years, public discussion of this issue has largely highlighted providers, with the implication that reducing apparently excessive treatments could trim overall health care costs.

But now a unique study co-authored by MIT economists provides a new answer to the medical cost mystery: By scrutinizing millions of Medicare patients who have moved from one place to another, the researchers have found that patients and providers account for virtually equal shares of the differences in regional spending.

“We find it is about 50/50, half due to patients and half due to places,” says Heidi Williams, the Class of 1957 Career Development Associate Professor in MIT’s Department of Economics, and a co-author of a new paper detailing the study’s findings.

That’s MIT News ably summarizing the new Finkelstein, Gentzkow, and Williams paper, Sources of Geographic Variation in Health Care: Evidence From Patient Migration (ungated).

If the half of the variation that is due to place is inefficient (which could mean too low or too high but probably means too high given that the medical care curve is flat) then this puts an upper limit on the gains from standardization but still a quite high limit.

By the way, Finkelstein and Gentzkow are both recent John Bates Clark Medal awardees and Williams is a MacArthur “genius award” winner. Perhaps I should have titled this post, assortative co-authoring.

Is it a kind of Flynn effect for the elderly?:

Dementia is actually on the wane. And when people do get dementia, they get it at older and older ages.

Previous studies found the same trend but involved much smaller and less diverse populations like the mostly white population of Framingham, Mass., and residents of a few areas in England and Wales.

The new study found that the dementia rate in Americans 65 and older fell by 24 percent over 12 years, to 8.8 percent in 2012 from 11.6 percent in 2000. That trend that is “statistically significant and impressive,” said Samuel Preston, a demographer at the University of Pennsylvania who was not associated with the study.

In 2000, people received a diagnosis of dementia at an average age of 80.7; in 2012, the average age was 82.

“The dementia rate is not immutable,” said Dr. Richard Hodes, director of the National Institute on Aging. “It can change.”

And that “is very good news,” said John Haaga, director of the institute’s division of behavioral and social research. It means, he said, that “roughly a million and a half people aged 65 and older who do not have dementia now would have had it if the rate in 2000 had been in place.”

That is from Gina Kolata from the NYT.  The piece has many other points of interest.

Does Donald Trump want to streamline the FDA and speed new drugs to patients? The Washington Post thinks that it can read the tea leaves:

A single sentence in President-elect Donald Trump’s health-care platform sends a strong hint to the drug and medical device industry that they may have an easier time getting their products on the market under his administration.

“Reform the Food and Drug Administration, to put greater focus on the need of patients for new and innovative medical products,” his health plan states.

On the face of it, the bullet point may seem almost bland, but efforts to integrate patients’ preferences and encourage innovation often result in proposals aimed at speeding up the process for getting new medicines on the market by easing regulations. Critics argue that such efforts can erode standards that are in place to protect patients from drugs that don’t work and might even be harmful.

“The language … is industry code for deregulation and reducing of safety standards,” said Robert Weissman, president of Public Citizen, a consumer watchdog.

There is plenty of evidence that the FDA is too slow (see, for example, here, here, here and here) so I would support such a move. Senators Cruz and Lee proposed a reciprocity bill last term under which drugs approved in other developed countries would quickly be approved here; perhaps such a bill could find renewed interest in a Trump administration (Economists also support the idea of reciprocity.)

On the other hand, Trump has expressed support for Medicare being allowed to negotiate drug prices which is tantamount to price controls given the size of Medicare and that is potentially a disaster. Price controls could significantly reduce research and development in the pharmaceutical industry and end up greatly adding to the invisible graveyard. Trump’s advisers would seem to lean towards streamlining the FDA process rather than imposing price controls but it’s difficult to be certain.

The FDA is Also Slow at Hiring

by on November 3, 2016 at 11:30 am in Economics, Medicine | Permalink

One of the reason’s the FDA is too slow to approve new drugs is that as a branch of the Federal government they are tied to slow and inefficient hiring rules.

The Food and Drug Administration has more than 700 job vacancies in its division that approves new drugs, and top officials say the agency is struggling to hire and retain staff because pharmaceutical companies lure them away.

“They can pay them roughly twice as much as we can,” Janet Woodcock, who directs the FDA’s Center for Drug Evaluation and Research (CDER), said at a rare-diseases summit recently in Arlington, Va.

High-value, potentially life-saving drugs are being delayed because the FDA is constrained from paying market rates. Absurd. Moreover, it’s not just about the wage rate.

[Janet] Woodcock [Director of FDA’s Center for Drug Evaluation and Research] wrote in December that staffing was a priority in 2016 because the center had “more than 600 staff vacancies.” At the Arlington event, she called the federal hiring system “challenging,” adding that prospective candidates often take other jobs while waiting for the FDA to make an offer.

“We move rather slowly — like a snail might be a better analogy,” agreed Peter Marks, director of the FDA’s Center for Biologics Evaluation and Research. “A young person with a family can’t wait four months for us to get through some of the federal hiring process. So if they have something else that’s more . . . expedient, they will take that.”

Sadly, slow and bureaucratic describes not just the hiring process but the drug approval process. The only difference is that patients don’t have an option to take the expedient alternative.

This seems like one of many under-reported stories of this year, and I think that holds no matter what is your point of view on abortion:

Although many limitations remain, innovative dispensing efforts in some states, restricted access to surgical abortions in others and greater awareness boosted medication abortions to 43 percent of pregnancy terminations at Planned Parenthood clinics, the nation’s single largest provider, in 2014, up from 35 percent in 2010, according to previously unreported figures from the nonprofit.

The national rate is likely even higher now because of new federal prescribing guidelines that took effect in March. In three states most impacted by that change – Ohio, Texas and North Dakota – demand for medication abortions tripled in the last several months to as much as 30 percent of all procedures in some clinics, according to data gathered by Reuters from clinics, state health departments and Planned Parenthood affiliates.

Among states with few or no restrictions, medication abortions comprise a greater share, up to 55 percent in Michigan and 64 percent in Iowa.

…Studies have shown medical abortions are effective up to 95 percent of the time.

Approved in France in 1988, the abortion pill was supposed to be a game changer, a convenient and private way to end pregnancy. In Western Europe, medication abortion is more common, accounting for 91 percent of pregnancy terminations in Finland, the highest rate, followed by Scotland at 80 percent, according to the Guttmacher Institute, a nonprofit research organization that supports abortion rights.

Here is the full account, via a loyal MR reader.

According to the most recent Statistics Canada data, in 2012, women over 40 gave birth to 13,395 children, while teenagers produced 12,915. Demographers have been expecting this tipping point for decades. In 1974, the older age group gave birth to just 3,550 children while teenagers produced 38,650—and the numbers have shifted each year since. The transition has just been confirmed in the U.K. and Australia as well, while data show that men are also fathering children later in life: the average age of Canadian fathers at birth of their children was 41 in 2011, compared to 39 in 1995.

That is from Meagan Campbell.  On another issue, Ian Bremmer calls this the best Canada fact he’s seen all year.

Even though William Baumol didn’t win the Nobel prize this year it got me to thinking about the cost disease, as did the death last week of William Bowen, the co-author of Performing Arts – The Economic Dilemma which brought the cost disease to public attention. The cost disease says that if two sectors have unequal levels of productivity growth then the sector with lower growth will increase in relative price. If in 1900, for example, it took 1 day of labor to produce one A good and 1 day of labor to produce one B good then the goods will trade 1:1. Now suppose that by 2000 1 unit of labor can produce 10 units of A but still only one unit of B. Now the goods trade 10:1. In other words, in 1900 the price or opportunity cost of one B was one A but in 2000 to get one B you must give up 10 A. B goods have become much more expensive.

The cost disease says only that the relative price of the low productivity good increases, it doesn’t say that the low productivity good becomes absolutely more expensive. The economy in 2000 is much wealthier than in 1900 so relative to income B has become cheaper. Anyone who could consume x units of B in 1900 can still consume x units of B in 2000, the only difference is that in 2000 they will be giving up more A than in 1900 so the tradeoff has become steeper even though still affordable.

Stated generically the cost disease is indisputable. But it becomes more contentious when we try to identify the A and B good. Baumol and Baumol and Bowen initially pointed to labor intensive goods, the service sector, as the low-productivity B sector. The performing arts were the key example–it took four quartet players 40 minutes to perform a Mozart composition in 1900 (or 1800) and it took four quartet players 40 minutes to perform a Mozart composition in 2000, hence no productivity improvements in Mozart performances, hence a rising cost over time since those four players could produce many more goods in say the manufacturing sector in 2000 than 1900. Health care and education are other stock examples.

Tyler offers one response to the cost disease namely that it’s true if you define the good narrowly (listening to a live performance of a 40 minute Mozart composition) but why should we define the good narrowly? If instead we define the good as “listen to music for 40 minutes” then it’s clear that costs have fallen dramatically. Not only has the cost of listening fallen, variety has increased. Costs have fallen even further since Tyler wrote. In a similar way, Tyler and I have argued that online education greater lowers costs and increases quality.

robot-playerHere, however, I offer a different and more fundamental response. Baumol pointed to labor and the service sector as the low productivity, low growth, sector. But robots and artificial intelligence mean that there is no longer a pure “labor” sector. Robots are labor made of capital. Whether we are talking about robot vacuum cleaners, AI answering machines or Dr. Watson there is much more capital in the service sector than ever before. K has become L. And when K becomes L, the productivity of L increases with the productivity of K. If manufacturing productivity improves and we are manufacturing robots then any sector that uses robots increases in productivity. If software productivity improves–if AI becomes more intelligent, for example–then any sector that uses AI increases in productivity. Any service that uses information technology inherits all the productivity growth of information technology.

At any moment there will always be some sectors that are increasing in productivity at a faster rate than other sectors–that is the nature of progress, uneven and episodic–but the time when one could distinguish a manufacturing sector and a service sector and argue that as a general rule the latter increases in productivity at a slower rate than the former is rapidly coming to a close. K has become L.

Addendum: Timothy Lee also has a piece today on the cost-disease.

Democrats are already looking beyond ObamaCare’s slow-motion failure, and Colorado is showing where many want to go next: Premiums across the state are set to rise 20.4% on average next year, and some have concluded that the solution is more central planning and taxation. Voters will decide on Nov. 8 whether to try the single-payer scheme that blew up in Vermont.

Amendment 69 would alter the state’s constitution to create a single-payer health system known as ColoradoCare. The idea is to replace premiums with tax dollars, and coverage for residents will allegedly include prescription drugs, hospitalization and more. Paying for this entitlement requires a cool $25 billion tax increase, which is about equal to the state’s $27 billion budget. Colorado would introduce a 10% payroll tax and also hit investment income, and that’s for starters.

So far the ballot initiative is not popular, and it is also opposed by the state’s Democratic governor.  Still, it would write ColoradoCare into the state’s constitution, and if you run referenda enough times, etc.  The broader point is that single-payer plans, whatever their virtues and flaws in toto, cannot work at the state level in the United States.  The single state is not big enough to bargain down health care prices very much, and furthermore the state government has to run a balanced budget and, because of competition with other states, has only highly imperfect control over its own feasible level of taxation and expenditure.  A single state cannot simply decide to “go Denmark,” for instance.

Here are further details on ColoradoCare, eventually the link will become noisy.  Here is a Denver Post Op-Ed against ColoradoCare, again a noisy link.

Hat tip goes to Christopher Balding.

Narrow networks in Obamacare

by on October 18, 2016 at 1:33 pm in Economics, Law, Medicine | Permalink

That’s why the results of a recent study of new plans offered in California are especially troubling. Simon Haeder, a West Virginia University political scientist, and colleagues at the University of Wisconsin-Madison and the University of California, Irvine, found that access to primary care physicians was relatively poor for a sample of plans offered through California’s Affordable Care Act Marketplace in 2015. Most Obamacare marketplace plans in California, as well as in other states, are narrow network plans.

Using a “secret shopper” approach, the study found that only about 30 percent of attempts for appointments with specific primary care doctors were successful. In this approach, an individual pretending to be a patient seeking an appointment called the offices of over 700 primary care doctors listed in marketplace plan directories.

In about 15 percent of cases, the doctor did not accept the caller’s plan, despite being listed in its directory. In nearly 20 percent of cases, the directory included the wrong phone number or the number was busy in two calls on consecutive days. Ten percent of doctors called were not accepting new patients. And about 30 percent of doctors called were not primary care physicians, despite being listed as such in the directory.

When callers were able to make an appointment, the average waiting time for a physical exam was about three weeks. In cases for which the caller pretended to have acute symptoms, the average time until an appointment was about one and a half weeks.

That is from Austin Frakt (NYT).  It seems to be an example of the kind of rationing many of us predicted for Obamacare, although I would like to see the comparable numbers for the pre-ACA years.  The piece has other points of interest, mostly about cost savings, which seem to be real.

A large share of American men between the ages of 25 and 54 who aren’t in the labor force may suffer from serious health conditions that are “a barrier to work” and suffer physical pain, sadness, and stress in their daily lives, according to research being presented next week by Princeton University labor economist Alan Krueger.

“Nearly half of prime age NLF [not-in-the-labor-force] men take pain medication on a daily basis, and in two-thirds of cases, they take prescription pain medication,” according to Krueger’s paper, Where Have All the Workers Gone?

Here is more from Peter Coy.  Here is the paper.

The very beginning is a little slow, but I thought Ezra was one of the very best guests.  The topics include the nature and future of media, including virtual reality, the nature of leadership (including Ezra’s own), how running a project shapes your political views, a wee bit on health care, what he thinks are the Obama and Clinton models of the world, Robert Putnam’s research on the costs of diversity, the proper role of shame in society, animal welfare, and of course Ezra’s underrated and overrated, with takes on Bob Dylan, The Matrix, William F. Buckley, Joe Biden, and more.  There is no video but here is the podcast and transcript.  Here is one excerpt:

COWEN: …Now Putman, let me ask you about Putnam, and how Putnam relates to Donald Trump. As you know, Robert Putnam at Harvard, he has some work showing that when ethnic diversity goes up that there’s less trust, less cooperation, less social capital.

If you think of yourself in the role of an editor, so you have an American society, diversity has gone up, and a lot of people have reacted to this I would say rather badly — and I think you would agree with me they’ve reacted rather badly — but there’s still a way in which the issue could be framed that while diversity is actually a problem, we can’t handle diversity.

Putnam almost says as such, and do you think there’s currently a language in the media where you have readers who are themselves diverse, where it’s possible not to just be blaming the bigots, but to actually present the positive view, “Look, people are imperfect. A society can only handle so much diversity, and we need to learn this.” What’s your take on that?

KLEIN: I strongly agree. We do not have a language for demographic anxiety that is not a language that is about racism. And we need one. I really believe this, and I believe it’s been a problem, particularly this year. It is clear, the evidence is clear. Donald Trump is not about “economic anxiety.”

COWEN: A bit, but not mainly, I agree.

KLEIN: That said, I think that the way it’s presented is a choice between economic anxiety and racism. And one I don’t think that’s quite right, and two I don’t think that’s a productive way of having that conversation.

COWEN: Why don’t we have that language? Where did it go, or did we ever have it?

And:

COWEN: You see this with Medicaid. A lot of people don’t sign up. They don’t have addresses. You can’t even get them, whatever.

KLEIN: They don’t like doctors. They’re afraid of doctors.

COWEN: This is me.

KLEIN: You’re afraid of doctors?

COWEN: “Afraid” isn’t the word.

KLEIN: Averse. [laughs]

COWEN: Maybe dislike. Averse. [laughs] They should be afraid of me, perhaps.

Definitely recommended.  The same dialogue, with a different introduction, is included in The Ezra Klein Show podcast.