Medicine

That is the topic of my latest Bloomberg column.  It does not focus on single payer, but that is the part I will pass along to you:

Another way to manage health-care subsidies would be a single-payer system, and some commentators suggest that is where the Democratic Party is headed. I wouldn’t be so sure. Obama made his (partially incorrect) “if you like your health care plan, you can keep it” promise for a reason. The Americans who get health insurance through their jobs often enjoy privileged access to doctors and benefit from superior reimbursement rates.

If the price of covering the sick is for millions of wealthier and more influential people to give up those advantages, I don’t see that happening. The health-insurance industry and other medical lobbies will be opposed, too, with doctors fearing that a single-payer system would bargain down their reimbursement rates. Even a relatively progressive state such as Vermont could not make a single-payer system happen.

You can think of current debates over health policy as a game of hot potato in which “who loses?” and “who pays?” are questions nobody finds easy to answer but also questions that no party can ultimately avoid. Obamacare didn’t come up with a sustainable answer; neither, so far, have the Republicans.

Do read the whole thing.

In my view, the Republicans have had a very weak hand to play on health care (not enough good ideas!), but over the last week they have played it brilliantly (which is not the same thing as having good policies).  Those House members who need to say “I voted to repeal Obamacare” can now do so.  The Republicans also have an option on proceeding further with reform, with everyone knowing the Senate will write its own bill.  The defects of what they voted for are not so significant for this reason, and the cavalier attitude of many House Republicans toward the contents of the bill makes perfect sense.

At the same time, the Republicans have the option of letting the bill die in the Senate, where it is far easier to blame the Democrats for inaction — how many American swing voters understand the fine points of the Byrd rule and filibuster anyway?  If you are what I call a “fulminating Democrat,” you are actually playing into Republican hands on this one (it would have been better to have spent the week saying abortion should be legal but rare, and talking about white people).

The big victory celebration pleased Trump, but more importantly all Republicans involved learned there is a way forward on many other issues: let Congress lead the way and pull Trump out of the bully role.  That lesson won’t soon be forgotten.  And from Trump’s point of view, he hasn’t given up the option of later working with the Democrats to pass a more centrist version of health care reform.

I don’t see the broader American public as so impressed with the Democrats’ arguments against the bill, mostly because they are not paying attention.  It doesn’t feel like it has the urgency of when Obamacare was passed, and in fact it doesn’t.  No one succeeded in showing it did, because it didn’t.

I still see the Republican House majority as extremely fragile, but on this one I believe the Democrats got pwned.

There is a new and very good paper on that question by Amy Finkelstein, Nathaniel Hendren, and Mark Shepard (pdf).  In reality, the price elasticity of demand for health insurance is quite high, at least among lower-income groups:

How much are low-income individuals willing to pay for health insurance, and what are the implications for insurance markets? Using administrative data from Massachusetts’ subsidized insurance exchange, we exploit discontinuities in the subsidy schedule to estimate willingness to pay and costs of insurance among low-income adults…For at least 70 percent of the low-income eligible population, we find that willingness to pay for insurance is far below the average cost curve – what it would cost insurers to provide coverage to all who would enroll if the premium were set equal to that WTP. Adverse selection exists, despite the presence of the coverage mandate, but is not the driving force behind low take up. We estimate that willingness to pay is only about one-third of own costs; thus even if insurers could offer actuarially fair, type-specific prices, at least 70 percent of the market would be uncovered.

That is from both the abstract and conclusion.  I do understand the ideal of universal coverage, but note this:

For example, we estimate that subsidizing insurer prices by 90% would lead only about three-quarters of potential enrollees to buy insurance.

The somewhat depressing and underexplored implication is that the beneficiaries do not love Obamacare as much as some of you do.  In fact you may remember a result from last year, from the research of Mark Pauly, indicating that “close to half” of households covered by the unsubsidized mandate, by the standards of their own preferences, would prefer not to purchase health insurance.  And that was before some of the recent rounds of premium increases, and overall these new results seem to imply even lower demands for health insurance relative to cash.

Now, I think it is an open question how much “non-paternalism” is the correct moral stance here.  Maybe we should force upon people more health insurance than they would purchase in an adverse selection-free market, because a) they are ill-informed, b) they have children, or c) ex post we still need to take care of them in some way, if indeed their gamble to not purchase insurance turns out badly.

Do, however, note the words of the authors: “We conclude that the size of uncompensated care for low-income populations provides a plausible explanation for their low WTP.”  In other words, many of the poor do not value health insurance nearly as much as many planners feel they ought to, in large part because they are already getting some health care.

In any case, consider a political economy point if nothing else.  If you institute a policy that forces on people more health insurance than they think they wish to buy, do not be shocked if a huckster comes along offering them a supposedly better deal, and gets away with it.

Along related lines, consider also this result:

From the perspective of social welfare, to justify connecting the 5% least dense areas of North Carolina would require each adopting household value high speed wired broadband access at more than $1519 per month.

For the pointers I thank Peter Metrinko and Kevin Lewis.

I will be doing a Conversations with Tyler with him, though podcast only, not a public event.  What should I ask him?

I thank you in advance for your suggestions.

That is one of the debates swirling around the resuscitated Republican health care plan (NYT summary), which now seems to have some chance of passing.  Sarah Kliff writes:

The Republican solution to sick people who need health insurance in a post-Obamacare world is increasingly coming to center on three words: high-risk pools.

The White House has reportedly secured the support of Rep. Fred Upton (R-MI), a longtime legislator, by promising an additional $8 billion to fund these programs. That would mean the Republican plan has nearly $115 billion that states could use, if they wanted to, for high-risk pools.

…There were 35 state high-risk pools before the Affordable Care Act passed. To control costs, they would often do things like charge higher premiums than the individual market. Most had waiting periods before they would pay claims on members’ preexisting conditions, meaning a cancer patient would need to pay premiums for six months or a year before the high-risk pool would cover her chemotherapy treatments.

Kliff then notes those pools have proved quite expensive.  And:

The Republican bill doesn’t require states to build high-risk pools — it just gives them the option. And it has little to say about how states should build them if they decide to do so. It is possible they would also have lifetime limits and preexisting condition waiting periods. Those details are hugely important, but are unlikely to get sorted out until after the bill passes and the Trump administration begins to write regulations.

I don’t favor ACHA, which I see as bringing no benefit and also as involving a cynical desire to repeal Obamacare simply to fulfill a campaign promise (and it needs a CBO score).  Still, I see many people fulminating about this change toward high risk pools, yet without defending their position much beyond a hand wave.  Should all requests for emergency medical care receive additional government funding?  Obamacare itself does not embody anything remotely like that principle, for instance consider all the medical conditions not covered under the mandate, or covered only imperfectly.  Not to mention the rare diseases that receive only limited R&D dollars.  And we’re about to run out of yellow fever vaccine — nasty!  The list goes on and on.  How are those pandemic preparations coming?

If the federal government is asked to pick up the tab for high-risk pools or some rough equivalent, it probably visualizes the cost in terms of either additional borrowing or as a common pool problem.  It is close to a free lunch in political terms, arguably even a political benefit, now that Obamacare is more popular.

If balanced-budget state governments are asked to pick up the tab, they will wonder whether that money should better be spent on schools, roads, and prisons.  Many of them will be reluctant.  Maybe that is right or wrong, but is “let’s have a democratically elected state government decide how much to subsidize medical care for those with preexisting conditions” such a morally outrageous view?  I guess it is these days.  The simple but underemphasized truth is that under the new bill state governments can spend as much as they want on high-risk pools.

(Is it not sobering to think that if the high-risk patients are put into a separate pool, and have to ask for state-level but taxpayer-sourced money in a direct and transparent manner, the political support for that funding is not so strong?  That is perhaps the real lesson here.  In this debate, both sides are the enemies of transparency.)

Which is the better perspective?  Federal or local?  The answer is obvious if you believe all requests for emergency medical care should receive additional government funding.  But, as I’ve mentioned, no one believes that.  I do see people who cite that principle when it is convenient in one part of a debate, and who forget about the same principle for other policy choices.

And please, don’t compare these marginal health care expenditures to “tax cuts for the rich” — instead advocate for where you most want to see the money spent!  Don’t let the silly Republicans bail out your analytical apparatus once again; any program is easy to justify in your own mind if you put it up against what you consider to be a very weak alternative use of the funds.  It is fine to say “bigger subsidies for high-risk pools are better than tax cuts for the rich, but they are still only my 17th most preferred use for the funds.”

Along related lines, while I favor taking in many more refugees, I also understand that any feasible migration policy involves leaving many refugees and potential migrants to their possible deaths, and with a relatively high probability in some cases.  So if your moral argument is “we should let in person x, or person x will die,” you need to provide a limiting principle once again.

Most generally, beware of moral arguments that a) lower the status of some other group of people, and b) do not state and justify their limiting principles.  They are ways of substituting in pleasurable moralizing in lieu of dealing with the really tough questions.

Addendum: Here are some new and relevant results cited by David Leonhardt, I haven’t had time yet to read through them.

That is a new project by Jonathan Haidt and the Heterodox Academy, here is a partial summary:

Heterodox Academy announces a simpler, easier, and cheaper alternative: The Viewpoint Diversity Experience. It is a resource created by the members of Heterodox Academy that takes students on a six-step journey, at the end of which they will be better able to live alongside—and learn from—fellow students who do not share their politics.

It’s a very flexible resource that can be completed by individuals before they arrive on campus, presented in an orientation-week workshop, or expanded into a full semester course that students can take during their first year. (It could also be helpful in high schools, companies, religious congregations, and any other organizations that are experiencing sharp political divisions and conflicts.)

…The site is still under development: we welcome feedback and criticism. We particularly seek out professors, high school teachers, and diversity trainers who will partner with us to develop detailed teaching plans and activities. We will have a larger public launch of the project in August, complete with assessment materials that will allow you to measure whether the curriculum actually increased political knowledge and cross-partisan understanding.

Do click on the site itself for a fuller explanation, and please help out if you can.

Four of New York’s five medical marijuana companies have filed suit against the state Department of Health to stop it from licensing additional operators to take part in the tightly run state program. The companies argue that the expansion could tank the nascent industry and potentially harm thousands of patients who rely on medical marijuana to treat their ailments.

Here is the article, via Peter Metrinko.

Hedging FDA Risk?

by on April 19, 2017 at 6:09 am in Economics, Law, Medicine | Permalink

In the words of a recent article, the FDA’s rejection of a recent drug application was a stunning setback. Stunning setbacks are by definition unpredictable and unpredictable risks aren’t correlated with other risks which means that they can be easily priced and bought and sold. The all-star team of Adam Jørring, Andrew W. Lo, Tomas J. Philipson, Manita Singh and Richard T. Thakor propose just this in Sharing R&D Risk in Healthcare via FDA Hedges.

The idea is to create FDA Hedges that pay out a fixed fee if a drug fails to be approved and zero otherwise. Pharmaceutical firms could then buy some of these contracts and reduce their risk exposure which in turn would increase their incentive to invest in R&D.

The idea is clever but firms and even more so firm owners already have many ways to diversify and its not clear what the value of an additional source of diversification is, even one that is more closely tuned to the firm’s profits. It’s also not clear how much additional R&D would be driven by offloading these risks. Pharmaceutical R&D is valuable, however, so even small increases in R&D are welcome even if more fundamental changes would be better. Prices in these markets would also provide useful information.

I also worry that we are asking a lot of FDA reviewers and firm insiders to keep their inside information private. Information about FDA approval decisions is already very valuable and there have been a few cases where insiders trade on their information or leak it to make millions. FDA Hedges might make this problem worse which should be balanced against the possible gains.

Soon I will be doing a conversation with Dave Barry, podcast only, no public event (alas).  In case you somehow do not know, that is Dave Barry the humorist.  So what should I ask him?

Label this not The Department of Why Not but rather The Department of Why?

The Howsers are far from the only regulars at the Castle Creek Cafe, located inside Aspen Valley Hospital. It’s a popular breakfast spot for city workers. It also feeds people on both sides of the law; police officers visit daily, and the cafe delivers to inmates at the local jail 7 days a week. The cafe makes a point of welcoming community members with no hospital affiliation. And its menus, made available to view a month at a time, include items like herbed farro pilaf, corn soufflé, and panko crusted cod. We’re a long way away from institutional slop. [TC: speak for yourself, buster!]

The Howsers discovered the cafe, which Mary calls “the best kept secret in Aspen,” after having some tests done in the hospital. She says, “Never in my wildest dreams did I think hospital food could be tasty!” The experience has even inspired them to check out restaurants at other hospitals.

One Colorado hospital restaurant that should be next on their list is Manna, within Castle Rock Adventist Hospital.

I am sorry people, but I am going to stick with theory on this one.  No data will be sampled, unless you count this enthusiastic description from Tim Davis as evidence of sorts:

“Their menu has real gourmet style food you would expect from a high priced restaurant, but sold to you at a much more affordable price,” he says. One dish is maple glazed duck confit, consisting of a maple glazed duck leg served with swiss chard and spätzle, for $9. The grilled Thai cabbage steak, with marinated cabbage, spicy lime dressing, and shishito pepper, is even cheaper. Their burger buns even come adorned with a monogrammed M.

A further advantage is that the staff don’t push you out the door to leave, in addition the dining rooms are spacious and somber.

Mises was right about the a priori!

Here is the article, with further testimonials, and for the hat tip I thank Steve Rossi.

The Chinese government have set up a special economic zone for medical tourism.

Hainan Boao Lecheng international medical tourism pilot zone, the first of its kind in the country, was approved by the State Council in 2013. It enjoys nine preferential polices, including special permission for medical talent, technology, devices and drugs, and an allowance for entrance of foreign capital and international communications.

The pilot zone also has permission to carry out leading-edge medical technology research, such as stem cell clinical research.

The zone, for example, offers a way to skirt the slow Chinese FDA (and presumably the slow US FDA as well).

Established in 2013, the Hainan program will open up new treatments–including Keytruda–to affluent Chinese residents who can afford the travel and medical costs, while other patients will have to wait for regulators to approve them. In recent years, mainland Chinese patients have increasingly traveled to Hong Kong or elsewhere in the face of lagging drug approvals by the China FDA and high treatment costs.

The zone is too small to have a significant impact on worldwide R&D but China’s original SEZs soon expanded. The SEZ could also encourage some interesting experiments. Keep an eye out for billionaires who travel to the island for a holiday and emerging looking younger and healthier.

We fight over health care policy because we focus on demand and redistribution. We could reach greater agreement if we focused on supply and innovation. What are the key areas where agreement is likely?

1) Cancer kills both Republicans and Democrats so more spending on medical research is likely to reach broad agreement.  As I said in Launching:

Looking at the future, if medical research could reduce cancer mortality by just 10 percent, that would be worth $5 trillion to U.S. citizens (and even more taking into account the rest of the world). The net gain would be especially large if we could reduce cancer mortality with new drugs, which are typically cheap to make once discovered. A reduction in cancer mortality of this size does not seem beyond reach, and the value of such a reduction in mortality far exceeds that of spending more on medical care today. Yet because the innovation vision is not central to our thinking, we overlook potentially huge improvements in human welfare.

By greater spending on medical research, I mean not only greater spending through the NIH but also a commitment to innovation policy more broadly. We know, for example, that price controls kill medical research so no price controls. We can also improve the FDA. I would favor less regulation but there are other methods to speed up the approval process which could command bipartisan support such as greater funding of the FDA. The FDA is also not monolithic, some departments are better than others, so we can reform the FDA by making it more like the better parts of itself.

In thinking about pharmaceutical regulation we also need to remember that 80-90% of prescriptions are for generic drugs and due to intense competition, generic drug prices are low and falling–so lets build on the parts of the US health care system that work well by keeping the entry barriers to entry in the generics market low.

2) Increase the supply of physicians. Despite an aging population and greater demand, the number of MDs per person has been trending downwards! Increasing physician supply could involve a combination of increased immigration of foreign physicians (skilled immigration is really a non-brainer that receives widespread support), increased slots at medical schools and in residency programs (via Medicaid), increased support for allowing nurse practitioners, dental hygienists and so forth and making occupational licenses portable across states. (In addition to making it easier for foreign physicians to come to US patients we should also make it easier for US patients to travel to foreign physicians–patients without borders). None of these things are easy to do, of course, but neither are they riven by ideological differences.

3) Demand price transparency from hospitals and other health care providers. In real markets, a price is a signal wrapped up in an incentive. With few exceptions, we don’t have real markets in health care and so “prices” neither signal nor incentivize. Thus, I don’t expect miracles from “price” transparency and this is a policy that could go wrong but transparency would still allow for some standardization, comparison, and computation of tradeoffs. Price transparency would also limit some of the worst forms of bill abuse. Even the Soviets found prices to be useful for these purposes.

Other supply side reforms that could find bipartisan support?

Mostly yes, that is a result for cosmetic surgeons, and that may be one reason why online evaluation of medical services has been relatively slow to evolve in an effective manner.  Here is part of the abstract of a new paper:

I argue that surgeons see reviews overwhelmingly as a threat to their reputation, even as actual review content often positively reinforces physician expertise and enhances physician reputation. I show that most online reviews linked to interview participants are positive, according considerable deference to surgeons. Reviews add patients’ embodied and consumer expertise as a circumscribed supplement to surgeons’ technical expertise. Moreover, reviews change the doctor-patient relationship by putting it on display for a larger audience of prospective patients, enabling patients and review platforms to affect physician reputation. Surgeons report changing how they practice to establish and maintain their reputations. This research demonstrates how physician authority in medical consumerist contexts is a product of reputation as well as expertise. Consumerism changes the doctor-patient relationship and makes surgeons feel diminished authority by dint of their reputational vulnerability to online reviews.

Here is the paper, by Alka V. Menon, and the pointer is from the excellent Kevin Lewis.

But it is also a question of history and, more specifically, of how welfare states in the rest of the world developed alongside warfare. European welfare states began in Prussia at the end of the 19th century, when war with France required the mobilisation of a large number of civilians. Britain’s welfare state has its origins in the discovery that many of the men who presented themselves to recruiting offices during the Boer war were not healthy enough to fight. Before the second world war, British liberals would have seen the creation of a government-run national health service as an unwarranted intrusion of government into private life. After 1945 it seemed a just reward for a population that had suffered.

In America this relationship between warfare and health care has evolved differently. The moment when the highest proportion of men of fighting age were at war, during the civil war (when 13% of the population was mobilised), came too early to spur the creation of a national health system. Instead, the federal government broke the putative link between war and universal health care by treating ex-servicemen differently from everyone else. In 1930 the Veterans Administration was set up to care for those who had served in the first world war. It has since become a single-payer system of government-run hospitals of the kind that many Americans associate with socialised medicine in Europe. America did come close to introducing something like universal health care during the Vietnam war, when once again large numbers of men were being drafted. Richard Nixon proposed a comprehensive health-insurance plan to Congress in 1974. But for Watergate, he might have succeeded.

That is from The Economist.

One of Beijing’s busiest public toilets is fighting the scourge of toilet paper theft through the use technology – giving out loo roll only to patrons who use a face scanner.

The automated facial recognition dispenser comes as a response to elderly residents removing large amounts of toilet paper for use at home.

Now, those in need of paper must stand in front of a high-definition camera for three seconds, after removing hats and glasses, before a 60cm ration is released.

Those who come too often will be denied, and everyone must wait nine minutes before they can use the machine again.

But there have already been reports of software malfunctions, forcing users to wait over a minute in some cases, a difficult situation for those in desperate need of a toilet.

The camera and its software have also raised privacy concerns, with some users on social media uneasy about a record of their bathroom use.

Here is the full story, via Michelle Dawson.