Category: Medicine

Jagadeesh Gokhale writes:

Jobs lost during the recent recession caused a deluge of applications to the Social Security Disability Insurance program – more than 6 million each year in 2009 and 2010 – and threw into relief the fact that the SSDI program is structurally unsound.

The current applications surge will accelerate the exhaustion of SSDI's trust fund and will force Congress to have to choose among two unpalatable options – increase SSDI payroll taxes or reduce benefit allowance rates.

But that is not enough. If the particularly vulnerable population the SSDI is designed to serve is to be protected, while preserving incentives to work, the program has to be radically restructured.

Even in normal economic times, those with marginally physical or mental impairments apply in the hope of acquiring disabled status under SSDI. Among those already receiving SSDI benefits, the incentive to return to the work force is very poor.

Revealing one's ability to work, especially if it's in a low-paid occupation, could cause permanent loss of SSDI benefits. Strong work disincentives under SSDI result from its eligibility standard that guides benefit awards: an inability to engage in substantial gainful activity for 12 months or more.

Is this an underreported story?  What's the success rate on coming out of disability and finding a decent job?  What percent of the disabled, permanently unemployed are truly unable to engage in productive work?  I was put onto this question by a tip from Larry Katz.

Jon Chait has a column on the doc fix and he complains about some of the other policy analysts.  I understand that the doc fix is not a net cost of ACA, since we have been doing it anyway, and I understand that the Republicans are being hypocrites on the issue.  But I have a broader question.  Should we be doing the doc fix at current levels?  If I were a supporter of single payer, I would wish to cut the doc fix.  That is, after all, how single payer systems save so much money, compared to the U.S. system.  They use monopsony to lower reimbursement rates and the quality of outcomes does not always suffer much, if at all.

So are the single payer advocates in fact advocating an end or limit to the doc fix?  That is a literal and naive question — I am not pretending I have caught anyone in a contradiction.  Is Krugman here endorsing the doc fix?  I am not sure, but he does call it "necessary."

One might argue "cutting reimbursement rates works only when you can do it to all rates."  Otherwise doctors flock to the privately insured patients and ration the rest.  Maybe so, but Medicare covers a lot of health care in this country and it's hard to see most doctors giving up on covering old people.  Medicare ought to give the government some monopsony levers and even if supply is a constraint, pushing some elderly further back in the queue does not have to be a bad thing, all constraints considered.  Furthermore we are often told that cutting reimbursement rates will work when it comes to pharmaceuticals, so why not doctors?

Why don't I hear more about this issue?  I would consider joining a liberaltarian alliance to lower the doc fix.  Is there one to be had?

Addendum: Here is Levin's response to Chait.

That's the title of a new paper by Craig Garthwaite of Northwestern.  The abstract is this:

In the United States, public health insurance programs cover over 90 million individuals. Changes in the scope of these programs potentially can have large effects on physician behavior. This study finds that following the implementation of the State Children’s Health Insurance program, physicians decreased the number of hours spent with patients, but increased participation in the expanded program. Suggestive evidence is found that this decrease in hours was achieved through shorter office visits. These results are consistent with the predictions from a mixed economy model and provide evidence of the potential effects of recently passed public insurance expansions.

In other words, whether you favor ACA or not, the supply side constraints are starting to bite.

More or less, Ezra says:

The Ryan-Rivlin plan basically turns Medicare into Obamacare. And in that context, Republicans love the idea behind ObamaCare and think it'll save lots of money.

Under the Ryan-Rivlin plan, the current Medicare program is completely dissolved and replaced by a new Medicare program that "would provide a payment – based on what the average annual per-capita expenditure is in 2021 – to purchase health insurance." You'd get the health insurance from a "Medicare Exchange", and "health plans which choose to participate in the Medicare Exchange must agree to offer insurance to all Medicare beneficiaries, thereby preventing cherry picking and ensuring that Medicare’s sickest and highest cost beneficiaries receive coverage."

File under "True, True, True."  My view is that when it comes to health care economics, just about everyone should have egg on their faces.

If in a calendar year a person has in excess of $100,000 in medical expense they are transferred over to Medicare, regardless of age.

The remainder of the citizenry is able to choose from a competitive insurance market, which is essentially selling $100,000 “Term” health insurance policies.

That is from Kim Meyers of Northwestern.  As she notes in an email to me, this can be combined with health savings accounts and various kinds of deregulation for the coverage of the lesser expenses.  You also can raise the Medicare eligiblity age and I would say you could raise it to a very high level indeed. 

I view this as the most plausible way of bringing a Singapore-like health care system to the United States.

A new survey of the FDAs impact on medical technology innovation reports that the FDA is slow, inefficient and costly.  The survey is from the Medical Device Manufacturers Association so take it with a grain of salt (but see below). What is most telling, however, is how manufacturers rate the FDA compared to its European counterpart(s).

Overall Experience: 75 percent of respondents rated their regulatory experience in the EU excellent or very good. Only 16 percent gave the same ratings to the FDA…

Respondents also cite specific concerns with the FDA process (not just a general complaint of slowness which could be efficient) such as:

…44 percent of participants indicated that part-way through the regulatory process they experienced untimely changes in key personnel, including the lead reviewer and/or branch chief responsible for the product’s evaluation.

As a result:

On average, the products represented in the survey were available to patients in the U.S. a full two years after they were available to patients in Europe (range = 3 to 70 months later).

In some cases, respondents said they initiated their regulatory processes within and outside the U.S. at the same time, but received clearance/approval in the U.S. much later. In anticipation of long, expensive FDA reviews, others said they decided to seek or obtain European approval first in an effort to generate sales overseas that could help fund their U.S. regulatory efforts.

The survey has a good discussion of potential biases. To those not familiar with the industry it might seem obvious that the MDMA would want to bash the FDA but my experience is that companies in the business don't like to complain. Indeed, the survey notes:

A number of companies indicated that they would not respond due to fear of retribution from the FDA (despite assurances we would maintain their confidentiality).

See FDAReview for more on the FDA. Hat tip: Mike Mandel.

Addendum: Loyal reader Josh Turnage has produced a video plea to the FDA on behalf of his mother to leave Avastin approved for breast cancer.

That is the theme of my current New York Times column.  Since the non-high-technology supply side of medicine is so restricted and unresponsive to market incentives, the health care market is out of balance.  A large number of doctors, for instance, do not accept Medicaid patients and that is because the Medicaid reimbursement rate is lower than Medicare or private insurance.  It's a key question how the queueing of Medicaid patients (and to some extent Medicare patients) will proceed as the demand for health care rises.

The new health care bill will on net make this problem worse, even though it has some offsetting incentives for more GPs.  Most Republican Party proposals will make this problem worse, by bolstering reimbursement rates for Medicare and perhaps also by worsening Medicaid.  In Massachusetts the number of emergency room visits has gone up rather than down, even as near-universal coverage was achieved.  And so where do we stand?

The American system of federalism, with its checks and balances and slow policy evolution, has many strengths, but it has also helped create this crazy quilt of health care reimbursement rates. The more demand-side pressure is placed on medical supply, the more Medicaid and Medicare reimbursements rates will determine who and what is rationed.

One option is to simply allow budget pressures to dominate, forcing down even private insurance reimbursements. Most people would end up with low, Medicaid-like reimbursement rates, and would endure long waits and low-quality service. But wealthier people could jump the line by paying more. Think of “Medicaid for everyone” but the rich.

An alternative is giving most people means-tested vouchers for a fixed amount of insurance coverage – which can run out or face up-front caps – making Medicaid and Medicare less of a blank check. The cost explosion would be checked by shifting more of the burden onto consumers. We would have better incentives for consumer-oriented care, and cost control, but we would be making an explicit public decision, at some point or another, to let some people do without medical care.

Recently the Arizona state government restricted transplant coverage for Medicaid patients, but it remains to be seen whether such measures can be applied to Medicare recipients. President Obama already has reversed some of the planned, budget-saving cuts to Medicare.

An entirely different approach is suggested by the system in Singapore, where the government requires savings (say 10 percent to 12 percent of income), patients pay for medical care from those savings, and the government takes care of additional catastrophic expenses. That system has a good record for cost control and access, but would Americans accept so much required saving?

The default course is to maintain or extend Medicare reimbursement rates, raise taxes considerably and accept that Medicaid recipients will face worsening health care access. If you hear of a new solution to the health care puzzle, put aside the politics and instead think through the endgame. Ask not about the rhetoric, but rather about the reimbursement rates.

Here is a good post on Medicare reimbursement rates.  Ezra Klein recently had a good post on how the coexistence of private insurance and Medicare messes around with both, but I cannot find it through Google; please leave the link if you know it (update: link is here).

One general problem is that Medicaid is crushing state budgets, but diminishing Medicaid — overall the cheapest form of coverage currently available — would likely impose greater health care costs on some other part of the system.  One big question, which I did not have space to consider, is whether cheap private insurance could be much better in the absence of coverage mandates.

Addendum: Arnold Kling comments.