Category: Medicine

According to Thursday’s Shanghai Daily, a 17-year-old student in Huaishan City, China, gave up his right kidney to get his hands on Apple’s hottest-selling product.

That’s the iPad2, and for the pointer I thank Thomas Acox.

Kevin Drum reports:

Medicare stays roughly the same, but every time you receive medical care you also get a bill. You don’t have to pay it, though. It’s just there for accounting purposes. When you die, the bill gets paid out of your estate. If your estate is small or nonexistent, you’ve gotten lots of free medical care. If it’s large, you’ll pay for it all. If you’re somewhere in between, you’ll end up paying for part of the care you’ve received.

Obviously this gives people incentives to spend all their money before they die. That’s fine. I suspect they wouldn’t end up spending as much as you’d think. What it does mean, though, is that Medicare has first claim on their estate, not their kids. But that seems fair, doesn’t it?

There is more at the link.

Among workers who provide hands-on care to nursing home residents, one in four has no health insurance. Among those who provide care to people living at home, one in three is uninsured.

But here is the clincher:

The new health care law is supposed to fix the problem by guaranteeing access to affordable coverage for all. But many nursing homes and home care agencies, alarmed at the cost of providing health insurance to hundreds of thousands of health care workers, have started a lobbying effort seeking some kind of exemption or special treatment.

This is not a good sign for the future of the mandate.  The full story is here.

I never have, but some people have, see this post too.  I don’t care to guess at their motives (which are totally cynical), but let’s consider this as a question in pure logic.  It is harder to make a mandate work when a) health care costs are high, and b) income inequality is high.

a) The higher are health care costs, the more the mandate is forcing lower income consumers to buy an inefficiently high quantity of medical care.  (Forcing everyone to buy the same quality toothpicks is not a big deal, but forcing everyone to buy the same quality car, or house, is tougher to pull off.)  Of course subsidies offset this problem to some extent, but the poor person still may be worse off or only marginally better off, the subsidy is itself costly, the subsidy raises fairness questions, in a pluralistic health care system the subsidy may cause inefficient burden-shifting into the subsidized sector, and the subsidy involves higher implicit marginal tax rates as it is phased out for higher income classes.

b) The higher is income inequality, the more serious are the problems discussed in a).

Circa 2080, imagine a world with two classes, the very rich and the fairly poor.  The very rich pay thirty percent of their $1 million a year incomes on health care.  The fairly poor earn $100,000 a year.  How are we supposed to roughly equalize health care consumption?  Does it make sense to give the fairly poor 3/4 of their real income ($300,000 out of a total of $100,000 cash plus $300,000 health care benefits) in the form of health care benefits?  And could we enforce that with a mandate + subsidy?  Probably not.

Of course both health care costs and income inequality have been rising in this country.  It is a critical question — and one which remains unanswered — at which margins these problems kick in decisively.

Under “Medicaid for everybody plus private cash top-offs,” this same problem does not arise, but there is also less egalitarian redistribution.  I would favor that blend over a mandate.

Here is related commentary from Ezra Klein.  Here is related commentary from Andrew Sullivan.

Brad DeLong attempts a Theory of Mind task:

Tyler Cowan [Cowen] would probably say: tough. If you were born with a tendency toward high cholesterol you ought to have known that by age 20 and been busily saving all your life in order to pay the extra expected costs of treating your heart diseases. But I don’t think the rest of us are willing to say that a bad dice roll in the genetic lottery plus an absence of foresight should doom you to an early, untreated death.

Since I believe none of that, I will offer no grade.  Nor do I believe in privatizing Medicare, as another part of Brad’s post (“In Tyler Cowen’s world, those who want to buy Medicare almost surely cannot. The market to sell and buy medical risk is unlikely to exist.”) seems to suggest and it was only last week that I distinguished my view from this, endorsing the Yglesias-Krugman argument that privatized vouchers bring higher costs.

I do believe in a core set of Medicare services, topped off with the ability to choose how much of your extra benefit comes in the form of either Medicare or Social Security benefits (cash).  It is nonetheless an interesting question whether that system would encounter adverse selection as a major financial problem.  A few points:

1. When it comes to the elderly, adverse selection as a problem is overstated.  The real problem is usually a high degree of information about many conditions, so often insurance is difficult per se.  It’s not the asymmetry of information that is the core issue, it is the existence of lots of information, and that is one of Arrow’s subtler points.  That distinction matters a good deal for mechanism design.

2. An old person might know better his health care condition, but not know better his expected health care costs.  That is a critical distinction.  You can’t reach age 60 and credibly say: “I’ve been healthy so far, I guess my lifetime health care costs will be low.”  It’s not even clear whether the healthy or the unhealthy will have lower health care costs in their later years; the unhealthy might die rather quickly and decisively.  Adverse selection on the grounds of health care costs need not be high and arguably actuaries can estimate those as well as the individual himself.

3. Perhaps most importantly, adverse selection in this context doesn’t have to be a problem; if low cost people take some cash it could be that the system is working well (if only on grounds of equity), not badly, and remember this is all tax-financed.

4. You can imagine patients visiting a combined doctor/financial analyst service at age sixty and asking for the best information and whether they should take the cash or the fuller Medicare package, possibly leading to adverse selection in terms of program finances.  But a lot of people don’t listen to their retirement planners either.

5. When choosing a future benefits package, if impatience for cash (one cognitive bias) outweighs overestimation of the value of medical care (another cognitive bias), my preferred system will work not so well.  If the net bias is runs the other way, the system will capture some but not all available gains from trade.

6. The general approach of “give everyone some basic benefits for free, and then allow everyone to top off at some opportunity cost” applies to food (food stamps), education (free K-12), housing, and now, with ACA, to health coverage for the non-elderly, among other areas.  And yet many people think the approach is morally outrageous.  The correct way to proceed is not to lash out, but to start by admitting in which spheres the approach makes sense, and then seeing how far outwards those arguments can radiate.

You will find it here (pdf), and the broader set of links is here, some of the key material starts at p.10.  There is some general background here.  You can’t get your “money back,” but you can have the payments transferred to a qualified Christian Science care facility.  In other words, Medicare will pay for prayer.  A few points:

1. It would be easy to generalize this idea, and also easy to give people — whether or not they are Christian Scientists — some of their money back in return for forgoing higher levels of care.

2. American society recognizes the right of Christian Scientists not to pursue traditional forms of Medicare.  Can not that principle be extended, and in a way which saves money?

3. There is no public outcry about the horrible life outcomes, and endings, suffered by older Christian Scientists (there is a justified outcry about foregone treatments for the children).  It is not obvious that they have worse or less dignified deaths.  Here is a JAMA paper showing higher death rates for Christian Scientists, although presumably some of that effect is due to withholding care from younger people.  There is more information on the young here.   A Washington State study, cited in the JAMA piece, suggests the overall life expectancy effect of being a Christian Scientist is negative but small.

4. In any case I see no obvious moral repugnance, or public unacceptability, to giving people more money, in return for the equivalent of Christian Scientist health outcomes at later ages.

5. That said, taking the money instead of the Medicare does not (at all) require you to consume zero subsequent health care.

6. Large numbers of American retirees in Mexico and Costa Rica receive a lot or all of their health care without Medicare intervention.  Again, this is not considered scandalous nor are these horrible lives with horrible ends.  I am simply proposing that we pay people to be willing to do this.

7. The Medicare Advisory Board will be able to find only so much “pure fat” in its spending cuts.  And fiscal considerations will require a relatively modest federal mandate, in terms of the number of conditions it covers.  One way or another, letting some people do without massively subsidized care will become a reality (in fact it already is a reality), we are simply debating its scope and the fairness and efficiency principles for its implementation.

8. In the German system, if you don’t sign up at the right time you can be left uninsured.  A German may face this issue when living in the United States, but perhaps returning to Germany, namely when to let coverage lapse.  Again, this does not make for major scandals or unacceptable outcomes.  Some Germans choose to take that chance and of course they save some on the premium, with some risk at the back end.

9. If some individuals take the cash and secede from full Medicare, that frees up medical services, and lowers prices, for others.  The net decline in medical services isn’t as large as it appears at first.

10.  In the comments I read so much about choice biases and hyperbolic discounting, but no one mentions that most people significantly overrate the effectiveness of medical care, relative to the results in the RCT and refereed literature.  The comments themselves are evidence for this proposition.

11. There is nothing sacrosanct about the current division of benefits between Social Security and Medicare.  And no matter how you chop that one up, some important marginal needs are left unsatisfied.

12. Here are comments from Ezra Klein and Kevin Drum and Karl Smith.  Here is my last post on the topic.