Category: Medicine

Henry Niman, worrying

Thus, of the 13 confirmed and 5 excluded [recent Indonesian] cases, 13 or over 72% of these [avian flu] cases were in familial clusters.

In contrast, only about 1/3 of the cases in southeast Asia were from familial clusters through the spring of this year.  This dramatic increase in cases from clusters shows that H5N1 is being more efficiently transmitted and this efficiency can also be seen in recent cases from China, Thailand, and Vietnam.

Here is the longer discussion.  Now "more efficient transmission" need not mean human-to-human transmission.  It could mean you catch avian flu more readily from the family collection of birds.  Still, in expected value terms, this is not good news.  (You can ask whether the familial clusters all get sick at the same time, or whether there are lags; the latter implies a greater likelihood of human-to-human transmission.  I have not seen a formal treatment of this issue, although Henry has made various worrying remarks on this score.)

Niman is pessimistic, and often makes controversial claims, but his credentials are strong.  Here is an expert assessment of Niman.  Here are Henry’s periodic updates.

Here is Indonesia, closing a U.S.-run bird flu lab, just after the U.S. promised $10 million more in funding for the lab.  Good idea.

Here is a Chinese report:

Although human cases of bird flu are mounting in China, the virus here
is currently stable, not mutating toward a form readily transmissible
among humans, a top Chinese government scientist said.

Not as reassuring as they wanted it to sound.  Here is a story on the extreme trustworthiness of China.

If you missed it the first time around, here is my policy paper on what we should be doing about avian flu.

Austan Goolsbee is smart

Try this:

The evidence shows that companies are particularly likely to raise
prices when the government is footing the bill. Economists Mark Duggan
at the University of Maryland and Fiona Scott Morton at Yale studied
the prices of the top 200 drugs in the United States from 1997 to 2002.
They found that drug makers gamed the government procurement rules that
forbid companies from billing Medicaid more for a drug than they bill
private consumers. When private-sector demand for a drug is small
compared with the demand of Medicaid patients (as is the case, for
example, with antipsychotics), drug companies massively inflate the
price of the drug for private buyers. Sure, they lose some business
from that part of the market. But they more than make up for that loss
by being able to bill the government at a vastly higher price for the
Medicaid patients.

And this:

As the moral-hazard problem for medical expenses becomes a corporate
rather than individual matter, the solution that economists currently
favor–Health Savings Accounts–will fail to rein in costs. The HSAs
won’t fix things because they change the incentives of individuals, not
companies. Indeed, as more people get HSAs, we may very well see the
companies raise prices even further to capture the tax-free savings in
people’s accounts. That would be exactly analogous to what has happened
with "529" college savings programs. In 2001, Congress passed a tax
break for college savings accounts. As I wrote three years ago,
the plans were "supposed to be an enormous federal tax subsidy for
education." But the small number of financial firms that are approved
to manage the 529 accounts have basically captured that subsidy by
raising their investment fees to levels well above those in the regular
investment market.

I believe the argument, although it remains a puzzle why these markets do not behave in a more competitive fashion…

How about health care vouchers?

Many of you favor vouchers for primary education so why not for health care?  Ezekiel Emanuel and Victor Fuchs write:

We propose a system of universal health-care voucher that would provide every American under 65 a voucher for basic health services from a qualified insurance company or health plan. Participating health plans would have to guarantee enrollment and renewal for the risk-adjusted value of the voucher regardless of medical history. Those who enrolled would be free to choose among several basic insurance programs and health plans; those who failed to enroll would be assigned one.

People who wanted to purchase additional services or amenities, such as a wider choice of hospitals and specialists or more-comprehensive mental-health or dental services, could do so with their own after-tax dollars.

Where would the funding for the vouchers come from? From an earmarked VAT, or value-added tax. Earmarking creates a direct connection between benefit levels and the tax level: if the public wants more services to be covered, they must be willing to support a tax increase. A VAT is administratively efficient, cannot be easily evaded, and creates an approximate link between taxation and personal wealth.

Government itself would not administer medical services; the current private delivery system would be maintained. Health-insurance companies and health plans would continue to contract with physicians, hospitals, rehabilitation facilities, pharmacies, and other providers for services to the individuals who enroll in their plans.

With universal health-care vouchers, employment-based insurance would probably fade away, and with it the lower wages, higher prices, and reduced employment that it brings. Critics across the political spectrum have noted the many shortcomings of employment-based insurance; few would mourn its passing. Medicaid and other means-tested programs would also become virtually obsolete as those covered were integrated into the mainstream health-care system. (Funding for long-term care such as nursing care would need to be continued.) As for Medicare, it could be phased out over time without forcing any existing beneficiary to switch to the voucher system. Importantly, current Medicare benefits would be supplemented by a tiered pharmacy benefit modeled on the one provided as part of the voucher program’s basic benefits package.

Management and oversight of the voucher program would be the responsibility of a federal health board modeled after the Federal Reserve Board, with multiple regional boards to facilitate implementation. It would define and periodically modify the basic benefits package, inform Americans about their health-care options, reimburse health plans, and collect data on patient satisfaction, quality of care, risk, and geographic adjustments for payments. It would also regularly report to Congress on the health-care system. The success of the voucher program would also be assessed by an independent institute, funded by a dedicated portion of the VAT, that would research the effectiveness and value of different interventions and treatments.

Here is the full argument, and another explanation, try here too.  Here is the write-up for RandDaniel Akst has put forward related ideas in The New York Times.  Here is another version of the plan

What is the main problem with this idea?  Is it that insurance companies would have to be so stringently regulated (otherwise they cut benefits for high-risk buyers) that this amounts to single-payer insurance with the companies as an extra shell and thus an extra cost layer on top?

Comments are open.

A free lunch for Medicare?

At present, Medicare, as the system is called, cannot be claimed abroad.  So American pensioners tend to travel back to the United States to get treatment.  The possibility of making Medicare "portable" has been talked about for years.  But, apart from the introduction of a small pilot project, it has never got much further than just an idea.  Yet the advantages are clear: expatriate pensioners would find it easier to get health care; the costs for the crisis-ridden Medicare would be lessened; and Mexico and other Central American countries with American pensioners would benefit not only from a rise in their health-care expenditure, but also from the big increase in their numbers that such a change would certainly bring.

That is from The Economist, "Go South, Old Man," 26 November issue.  Comments are open, in case you know more about this.  Here is more information, which includes a brief discussion of fraudulent claims. 

Why doesn’t the health care market work so well?

I see a few candidate hypotheses:

1. Adverse selection in insurance markets.  In this view, outside of the corporate employment context, mostly the unhealthy — the "lemons" — show up to buy health insurance.

2. Poor information about the cost and benefit of different medical procedures and providers.  I am puzzled why we don’t have better institutions for evaluating providers and spreading this information to consumers.  Part of the problem is legal, part of the problem is measurement (doctors could dump near-hopeless patients to get better ratings), and part of the problem is that many people don’t want to know how good (read: bad) their doctor is.

3. Time consistency.  Ex ante, we are most worried about catastrophic health risk.  Ex post, most of the overinvestment in health care comes for victims of catastrophic health risk.  No set of institutions can square these dual perspectives satisfactorily.

4. Showing that you care.  This is Robin Hanson’s hypothesis.  You spend money senselessly on health care, mostly to show your wife you love her and the kids.

Believers in national health insurance tend to emphasize number one, which might be alleviated by forced mass pooling.  In contrast, I am skeptical that adverse selection is the significant problem. 

It is less clear that national health insurance could improve performance on number two.  People would remain underinformed.  Government might have less incentive to rip them off, but the implication would be that government provision is "lazier" in general.  Not a comforting thought.

National health insurance does address numbers three and four, albeit in backhanded fashion.  Ex ante, people feel protected and the program is popular.  Ex post, such systems spend less money on the last six months of life than does the U.S. system.  The relevant denial of treatment is often invisible rather than a stern hand pulling the plug.   

The bottom line: Defenders of NHI place great stock on #1.  If #1 were significant, we could, at least in principle, use national health care to both lower costs and improve treatment. 

If #3 and #4 are the major problems, national health insurance provides benefits by restricting overinvestments in health care.  This is consistent with Europeans living longer and spending less on health care.  The U.S. maybe could replicate these benefits if a) we push out private insurance companies, b) we ration or abandon expensive procedures which don’t extend lives very much, and c) we adopt healthier lifestyles.

I am skeptical of #1, and I am not ready to bet on a), b), or c), much less all three at once.

Taiwanese national health insurance

Paul Krugman, in a recent column, cited Taiwanese national health insurance as a success.  I have been unable to form a clear picture of how the Taiwanese reforms are working (albeit using only Google).  Nonetheless Tzuhao Huang, one of my Taiwanese Ph.d. students, sent me the following article:

Once the cornerstone of social development, Taiwan’s National Health Insurance (NHI) will teeter on the brink of demise if public resistance to premium hikes continues, foreign health experts observed at an international symposium to celebrate the NHI’s 10th anniversary in Taipei yesterday.

Although the rest of the world envies Taiwan for its success in providing easy, affordable and universal healthcare, Taiwan’s NHI is suffering from a recurrent financial crisis that also besets other nations like the UK, US, Germany and South Korea. As in these countries, health insurance is a highly politicized issue in Taiwan.

"Taiwan NHI’s financial problems stem from two factors: people’s mindset and politicians’ intervention," said William Hsiao, a professor of economics at Harvard University who helped design the NHI a decade ago.

In Hsiao’s opinion, the government failed to incorporate public participation at the launch of the NHI a decade ago. Deprived of adequate information, Hsiao said, people soon developed "free-lunch syndrome" and go doctor-shopping. "Taiwanese people think that they don’t need to pay more since they’ve got NHI. In fact, the rise of insurance rates is an inevitable trend as the society grows older, richer and demands more medical care," Hsiao said.

As Taiwan matures from a one-party state to a vibrant democracy, the insurance rate has increasingly become a bargaining chip in party politics, according to Hsiao. When the financing of the NHI was legislated under an authoritarian system, the executive branch was empowered to raise the premium rate whenever the program faces a deficit. But when faced with the opposition-dominated Legislative Yuan that now exists, the executive branch has lost its power and political conflicts flare up.

Here is information on the origins of the system.  Uwe Reinhardt suggests that premium hikes will keep the system solvent, so file this under "Developing…"  But keep in mind:

a) these strains are arising while Taiwanese health care is only 4.6 percent of gdp, and,

b) politicians are resisting necessary premium hikes

My worry is that U.S. national health insurance will be used to win votes, and not to correct micro-imperfections in the insurance market.  Let’s say that you are a left-wing blogger, and, for purposes of argument, that your entire critique of the Bush Administration is correct.  Remember, this guy was re-elected.  You are relying on these very same voters, and this very same "policy correction mechanism" to make politicians accountable for a well-functioning health care system.  You should hear my in-laws or my mother complain about the Medicare prescription drug bill, and that was supposed to help them.  Scary, no?

Comments are open, especially if you know more about Taiwan.

My avian flu policy paper

The piece is about forty pages, here is the pdf link.  Your comments are welcome, either below or by email.  You already have heard bits and pieces of this: pro-intellectual property, pro-decentralization, and skeptical of quarantine and centralized stockpiles.  A good plan also should prove useful for catastrophes other than avian flu.  Here is the Executive Summary of the piece:

To combat a possible avian flu pandemic, we should consider the following:

1. The single most important thing we can do for a pandemic–whether
avian flu or not–is to have well-prepared local health care systems. We
should prepare for pandemics in ways that are politically sustainable
and remain useful even if an avian flu pandemic does not occur.

2. Prepare social norms and emergency procedures which would limit
or delay the spread of a pandemic. Regular hand washing, and other
beneficial public customs, may save more lives than a Tamiflu stockpile.

3. Decentralize our supplies of anti-virals and treat timely distribution as more important than simply creating a stockpile.

4. Institute prizes for effective vaccines and relax liability laws
for vaccine makers. Our government has been discouraging what it should
be encouraging.

5. Respect intellectual property by buying the relevant drugs and
vaccines at fair prices. Confiscating property rights would reduce the
incentive for innovation the next time around.

6. Make economic preparations to ensure the continuity of food and
power supplies. The relevant “choke points” may include the check
clearing system and the use of mass transit to deliver food supply
workers to their jobs.

7. Realize that the federal government will be largely powerless in
the worst stages of a pandemic and make appropriate local plans.

8. Encourage the formation of prediction markets in an avian flu
pandemic. This will give us a better idea of the probability of
widespread human-to-human transmission.

9. Provide incentives for Asian countries to improve their
surveillance. Tie foreign aid to the receipt of useful information
about the progress of avian flu.

10. Reform the World Health Organization and give it greater autonomy from its government funders.

We should not do the following:

1. Tamiflu and vaccine stockpiling have their roles but they should
not form the centerpiece of a plan. In addition to the medical
limitations of these investments,  institutional factors will restrict
our ability to allocate these supplies promptly to their proper uses.

2. We should not rely on quarantines and mass isolations. Both tend
to be counterproductive and could spread rather than limit a pandemic.

3. We should not expect the Army or Armed Forces to be part of a useful response plan.

4. We should not expect to choke off a pandemic in its country of
origin. Once a pandemic has started abroad, we should shut schools and
many public places immediately.

5. We should not obsess over avian flu at the expense of other
medical issues. The next pandemic or public health crisis could come
from any number of sources. By focusing on local preparedness and
decentralized responses, this plan is robust to surprise and will also
prove useful for responding to terrorism or natural catastrophes.

Bad Statistics Lead to False Hope

Newspapers around the world are all agog with the story of a British Man, 25, ‘cured of HIV’; that headline from the normally reserved BBC.  Scot is first in world to beat HIV says, (can you guess?), the Glasgow Sunday Mail.  The more cosmopolitan, but doubly wrong, Medical News Today says, Man is Cured of AIDS.  Other newspapers are reporting that doctors are "stunned," "mystified" and wondering whether this man holds the key to curing AIDS.

The story is pathetically simple once one gets past the headlines.  A man tested positive for HIV, he took a lot of vitamins and just over a year later tested negative (several times).  Now what are you going to believe that he cured himself of HIV or that the first test was wrong?  HIV tests have high accuracy but when millions of people take these tests it’s an easy bet that there will be significant numbers of false positives.

It is even possible that in low-risk populations there will be more incorrect diagnoses than correct ones!  Doctors may be stunned but to a statistician results like this are banal.  Unfortunately, in about a dozen articles that I took a look at, many doctors were quoted (sadly, even the skeptical doctors were skeptical for the wrong reasons – they think the guy must still have HIV!) but not a single statistician.  For the correct statistics see here or my earlier post, Why Most Published Research Findings are False, which analyzes a different application of the same idea.

Can we take care of everyone?

Here is one reader (first quoting me) from the comments section of my post on health care:

"I would admit that we cannot take care of everyone and that we face tough trade-offs."


Here is another:

"I would admit that we cannot take care of everyone and that we face tough trade-offs."

Why can’t we? Other industrialized countries do it. We’d have to raise taxes by a nontrivial amount, to be sure, but we certainly could do it if we wanted to. You don’t get points for intellectual honesty by ruling some policy options out of bounds a priori without explaining why.

Every day about 155,000 people die.  They die in Europe too.  People die from heart attacks and they die from flu.  Children drown in buckets and people die in car crashes.  We don’t call these health care problems but they still kill you.  We could spend the Laffer-health-maximizing percent of our gdp on health care and these people still would die, sooner or later.  Most would still die sooner.  We could repeal the Bush "tax cuts" and they still would die.  The world also has several billion very poor people, and other billions of moderate but not wealthy means.  They count too. 

We can take some limited group of these people and make them better off by selective health interventions.  But we should choose the targets of our benevolence carefully, and we should remain cost effective.  No matter how good a job we do, many more people will slip through our fingers.  Those who are "taken care of" receive only marginal improvements for temporary periods.

The liberal tendency is to want to feel that you are taking care of everybody.  Policies, such as national health insurance, maximize this feeling.  In the process the idea of margin is often forgotten.

Philosophical observations: Conservatives, liberals, and libertarians all exhibit different attitudes toward death.  Conservatives are obsessed with death; look at their emphasis on abortion, capital punishment, and the need to kill people in our foreign policy.  In their view death is everywhere, and we must make hard decisions to limit it (banning abortion and invading other countries, for a start).  Liberals promote an ethic of caring, and prefer not to let death enter the political calculus too much.  Most of all, they will tell us death is to be avoided.  But thinking too closely about death leads us to feel we are not taking care of everybody; furthermore it shows this ethic to be ill-defined or impossible.  Libertarians are closer to the liberal attitude, although a liberty ethic replaces a caring ethic.  If libertarians thought too much about death, they would have to admit that it is the greatest loss of liberty possible (even worse than taxes), which might lead to government intervention.  At the very least it would imply an emphasis on positive rather than negative liberties.

The conservative attitude toward death — at least in general terms — is the most accurate and realistic of the bunch, but also the most dangerous.  By rubbing death in our faces, it can inure us to the horrors of killing people or letting them die. 

Tyler Cowen pretends he is a Democrat

If I were a Democrat…

First, I would not cite evidence about how Western European countries spend less on health and are healthier than U.S. citizens.  This data set, if you take it seriously, also implies that the marginal product of more health care, adjusting for income and a few other variables, is zero.  Expanding health care would not be important.  Now I believe this is an incorrect conclusion, but that is what shows up in this data.  We should not invoke this data selectively.

Second, I would recognize that American policy generally works (or doesn’t work) by building upon existing institutions.  The most likely form of national health care — for better or worse — would extend a version of Medicare to more people.  This would not lower health care costs, whether in gross or quality-adjusted terms.  Keep in mind that negotiating price reductions does not per se lower real resource costs at all. 

I would disaggregate health care systems and see where we could do the most good:

1. Step up R&D subsidies through the NIH and our university system, both high quality institutions.  Their autonomy and micro-fiefdoms provide a good framework for risk-taking and innovation.  The returns to medical R&D are extremely high.  Furthermore the case for market failure, based on the inability to capture the full social gains from a new idea, is simple. 

2. Redo the Medicare drug bill so that people can understand it (even I can’t, nor does my mother), and so more people benefit.  If need be, we can do this in budget-neutral fashion.  The Bush plan is a mess.

3. Invest in local public health systems.  Preventive care is important, especially for the poor.  Price can be an obstacle but often the relevant constraints are behavioral in nature.  Public health care systems should be easy and inviting, and they have to become part of life routines.  Government can be part of the solution.  Strong local public health care also will improve surveillance and later surge capacity if a pandemic comes along; this added benefit is significant.

4. Borrow a page from the libertarian litany about the FDA.

5. Institute prizes for successful vaccines.  We have been discouraging vaccine production when we should be encouraging it; Michael Kremer has some intriguing proposals.

All those options are doable.  All would save lives.  None are fiscal disasters.  They offer something for both rich and poor.  They lay out a positive and constructive role for government, while keeping room for the private sector.  None raise the prospect of excess bureaucracy or discourage innovation.  None rest on the questionable belief that government as single supplier or payer would improve efficiency.  And they are all areas where the Republicans are dropping the ball.

I would cut talk of national health insurance.  I would cease obsessing over the number of "40 million uninsured," however good a debating point it may be.  Many of these people are either linked to immigration or get decent medical coverage in any case.  I would admit that we cannot take care of everyone and that we face tough trade-offs.

Hmmm…these counterfactuals are fun.  What should I try next?  Pretending I am a Republican?  But for now, it is back to normal life…and so we return to your regularly scheduled programming.  But comments are open, in case Kevin Drum’s readers wish to pretend they are libertarians…

Kevin Drum leaves out the words “single payer”

Read him here.  Canada, North Korea, and Cuba have single-payer governmental systems.  If you know of others (I believe there are some), please leave them in the comments.  The successes, or supposed successes, of most West European systems do not constitute evidence that a single payer system is a good idea.  This is one of the most commonly overlooked points in the debate over health care.

Sex on the Margin

Sexual preferences are primarily biological in origin.  But sexual choice is about preferences and constraints.  Raise the price of sex with women and more men will choose to have sex with other men – that’s what happens in prisons.

In a remarkable paper, Andrew Francis (a graduate student at the University of Chicago) examines how AIDS has changed sexual choice.  With admirable precision, Francis lays out the price of sex:

…it is thousands of times more likely that a male would get HIV having sex with a man than having sex with a woman.  In terms of AIDS-related mortality, the expected cost of having unprotected sex once with a man is almost $2000, while the expected cost of having unprotected sex once with a woman is less than a dollar.

Thus AIDS changes the price of sex, do we observe changes in choice?  Francis wants to be careful about causality so he uses a clever instrumental variables approach.  He reasons that knowledge of AIDS and thus responsiveness to price is correlated with knowing someone who has AIDS and that knowing someone who has AIDS is exogeneous to other factors influencing sexuality.  Unfortunately, it appears that he only has information on whether a relative has AIDS and genetic factors mean exogeneity is unlikely to hold.  In fact, we would probably expect that simply knowing someone with AIDS is positively correlated with being homosexual (especially in 1992 when the survey was taken).   

Indeed, Francis finds, as expected, that women who have a relative with AIDS are more likely to be engage in homosexual acts and identify as being homosexual.  But Francis finds that men who have a relative with AIDS are significantly less likely to:

…have had sex with a man during the last sexual event…have had a male sexual partner in the last year… say they are sexually attracted to men…rate having sex with someone of the same gender as appealing…[or] think of themselves as homosexual or bisexual.

The tendency to greater homosexuality among women and less among men is exactly what the economic theory predicts given how AIDS affects the price of sex.  Genetic and social factors will have greater difficulty resolving this bifurcation so I think Francis has the upper-hand on the argument, although there may be counter-arguments based on the gay-uncle theory).

Importantly, note also that Francis finds that not only is sexual choice malleable, as the prison story I opened with suggests, but so are sexual desire and identity.  At least on the margin!  (A point that non-economists are likely to miss.)

Thanks to Emily Oster for the pointer.