Category: Medicine

The Wall Street Journal has a front-page article and a debate between Julio Elias and Alvin Roth on alleviating the shortage of transplant organs.  This interactive graphic was good at explaining the idea of kidney swaps.  Elias and Roth should have discussed no-give, no-take rules and Lifesharers. 

I will be speaking to Congressional and agency staff about the organ shortage this Thursday at noon (this event is not open to the public.)

Addendum: Transplant surgeon Arthur Matas, mentioned in the WSJ article, is no
libertarian but argues for live kidney sales in a new Cato Policy
Report.

No, say Jonathan Gruber and David Rodriguez:

We measure uncompensated care as the net amount that physicians lose by
lower payments from the uninsured than from the insured. Our best
estimate is that physicians provide negative uncompensated care to the
uninsured, earning more on uninsured patients than on insured patients
with comparable treatments. Even our most conservative estimates
suggest that uncompensated care amounts to only 0.8% of revenues, or at
most $3.2 billion nationally.

Can any of you find an ungated copy of this paper?

Looks and height matter for economic outcomes, so why not teeth?

Healthy teeth are a vital and visible component of general well-being, but there is little systematic evidence to demonstrate any impact on the labor market.  In this paper, we examine the effect of oral health on labor market outcomes by exploiting variation in access to fluoridated water during childhood.  The politics surrounding the adoption of water fluoridation by local water districts suggests exposure to fluoride during childhood is exogenous to other factors affecting earnings. We find that children who grew up in communities with fluoridated water earn approximately 3% more as adults than children who did not.  The effect is larger for women than men, and is almost exclusively concentrated amongst those from families of low socioeconomic status.  Of the channels explored, we find that occupational sorting explains 14-23% of the effect, suggesting consumer and employer discrimination are the likely driving factors.

That is by Sherry Glied and Matthew Neidell; here is the paper on-line, note their findings are preliminary not final.  Teeth seem to matter less for rich people because they have later chances to cover up — using money of course — for bad childhood teeth.  The poor apparently remain stuck with their teeth problems.  You might think that childhood exposure to fluoride is just proxying for quality of county and thus county human capital in some way, but the fluoride/earnings correlation seems to hold up even when variables are used to adjust for county quality.  Can you dissent from a paper that writes:

…the anecdotes described above suggest that people who lack teeth may have trouble finding jobs.

I thank a loyal MR reader for the pointer.

Addendum: Here is Caplan (and Blinder) on the economics of teeth.

…[compared to the United States] income plays a larger role in buffering children’s health from the
effects of chronic conditions in England.  We find no evidence that the
British National Health Service, with its focus on free services and
equal access, prevents the association between health and income from
becoming more pronounced as children grow older.

Here is the paper.  Of course equity is not the only argument for single payer systems.  Here is part I of the series, concerning Canada and the (possible) continuation of the health-income gradient there.  Many of you were skeptical about the reported result, but here is further evidence.  Most of all, the determinants of health are not well understood; that is itself a sobering fact no matter what your policy point of view.

The Medicare prescription drug benefit was, from the beginning, flawed in the details of its execution.  But in general terms it is turning out to be one of the best health care investments our government is making:

Rewarding inventors with inefficient monopoly power has long been
regarded as the price of encouraging innovation.  Public prescription
drug insurance escapes that trade-off and achieves an elusive goal:
lowering static deadweight loss, while simultaneously encouraging
dynamic investments in innovation.  As a result of this feature, the
public provision of drug insurance can be welfare-improving, even for
risk-neutral and purely self-interested consumers.  In spite of its
relatively low benefit levels, the Medicare Part D benefit generate
$3.5 billion of annual static deadweight loss reduction, and at least
$2.8 billion of annual value from extra innovation.  These two
components alone cover 87% of the social cost of publicly financing the
benefit.  The analysis of static and dynamic efficiency also has
implications for policies complementary to a drug benefit: in the
context of public monopsony power, some degree of price-negotiation by
the government is always strictly welfare-improving, but this should
often be coupled with extensions in patent length.

In other words, the optimal ex post incentive scheme involves some market power for drug makers.  To some extent the subsidy counteracts the deadweight loss resulting from that monopoly by lowering real prices to consumers.

Here is my previous post on the topic, also indicating that the Medicare prescription drug benefit is not nearly as costly as has been charged.  Of course subsidizing the pharmaceutical companies does not always sit so well with the left, so I am curious whether progressives will accept this result.  And I am curious whether they envision single-payer programs as continuing this subsidy, or confiscating pharmaceutical company rents instead.

As a side remark, Martin Feldstein was the one who saw, way back when, that health care economics would become such a major field; kudos to him.

Addendum: Sorry for the omission, here is the paper itself.

According to a study that even the New Republic’s Jon Cohn admitted he
thought was probably exaggerated, being uninsured killed 18,000 people
a year this decade.  Methicillin-resistant Staphylococcus aureus, on the
other hand, apparently kills 19,000 a year.

That’s from Megan McArdle, who continues:

Non libertarians can, of course, go along wishing that we would have
national health care and a War on Infection.  But it’s worth asking
yourself: in a world of scarce resources, where you could only have
one, which would you choose?  And by what principle?

The fact that I have read very few sentences today does not diminish the stellar quality of these thoughts.

Health care policy should be debated through micro-facts.  Let’s consider a few:

1. American health care outcomes look much better once we adjust for race and other demographic factors, including violence and car crashes.  Some groups — such as Asian-American women — have remarkably good health care outcomes.

2. Some of the health care savings of other systems occur through price effects (e.g., doctors are paid an average of $60,000 in France) and do not involve real resource savings.

3. American’s high expenditures, however wasteful they may be, nonetheless drive much of the world’s medical innovation.  Medical innovation is also a public good to some extent and no the pharmaceutical companies are not simply parasites on the NIH and universities.

4. America has a different structure of interest groups. and therefore a single payer system in the United States would not operate as does a single payer system in other countries.  It would more likely favor the interests of doctors and insurance companies, for a start.

5. If we take the international health results/expenditures data at face value (and we shouldn’t), they imply that greater access to medical care does not itself improve health outcomes.  So we should be careful in how we use and cite such results.

6. Health care outcomes improve with income even under single-payer systems.  Our best estimates suggest that this gradient is no steeper in the United States than it is in Canada.

7. Having health insurance does improve your health care outcomes, but not to an amazing degree.  The largest benefits are arguably the alleviation of financial risk, and no I am not meaning to slight that factor.

8. Pharmaceuticals, unlike many forms of health care, have large and noticeably positive effects on individual health.

9. The major Democratic health care plans on the table all, one way or another, admit they will spend more money on health care.  The fact that other countries spend less therefore does not help predict the change in spending that would result from these plans.

(Sorry for the lack of links, I am on the road, google back to previous MR posts for documentations.)

Now here is how to debate health care policy.  Ask a defender of single payer systems (or other possible reforms) how many of these points he or she accepts.  Settle on that list, noting that residual disagreements may well remain.  Then debate what the list means for what America should do about health care policy today.

Here’s how not to debate health care policy.  When you hear one point on that list, bring up in response that other countries spend less and produce better health care outcomes and that therefore we should copy the systems of those countries.

But libertarians, I am not letting you off the hook either: Isn’t there some form of further government intervention into health care that could help somebody?  And if your basic model is that governments steal as much money as they can, and then waste it all, shouldn’t we then jump at the chance to institute health care subsidies of this at least partially helpful nature?  The alternative is simply that the money gets wasted some other and worse way.

Megan McArdle writes:

Tyler wonders what will be done
with people who are required to by health insurance, but don’t. The
answer, I think, is "they’ll get treated". The object is not to play
chicken with people; we can’t make a credible committment not to treat
people without insurance (and thank god for that.) The object, as I see
it, is to force the people who care about things like legality to get
insurance rather than rolling the dice. The people who don’t care about
such things will continue costing us some fraction of the small amount
that caring for the uninsured currently costs us now. It may only be a
slight improvement, but it’s still an improvement.

"Improvement over what?" is my query.  I prefer taking the needy (some would say more than the needy, not I) and having the government directly provide health insurance for them.  I imagine a better and no-real-role-for-the-states version of Medicaid, at the expense of Medicare (lots of old people are wealthy) if it fiscally must be.  If it’s worth forcing X to buy health insurance and then subsidizing X, it is worth giving X health insurance directly.

Avoiding the mandate keeps the private insurance market relatively "clean," as it were.  Mandating private insurance means that the government has to regulate the content of that coverage and that private insurance will likely become more cumbersome and more contested and more expensive for everyone.  It means we will never have true insurance deregulation; private plans should be free to compete, innovate, offer catastrophic-only plans, sniffles-only plans, and so on.

The benefits of the health insurance mandate are otherwise small.  Many people care about "being legal" (the parents of uninsured 20 somethings?) but those people are probably the least likely to need the insurance.  And I am leery of having a law that we know in advance we are not going to enforce.  (It’s not as if you post a 25 mph speed limit knowing you will only pull over the young people who look like criminals; in this case we’re simply deciding on no enforcement or using some dubious bureaucratic tactic of differentiation across citizens.) 

And aren’t mandates more generally a dangerous and over-used practice?

So I say no, let’s not do it.  It might be better than doing nothing, but doing nothing is not the only alternative before us.  Doing nothing is not even the likely alternative at this point.  The mandates limit chances for better long-run reforms, though Matt and Brad will tell you this is single-payer, I will look toward insurance market deregulation.  Only one of us has to be right.

Addendum: Here is Ezra Klein on same.

Glen Whitman reports:

1. According to an Urban Institute study, uncompensated care for the uninsured accounts for only three percent of U.S. health care costs.

2. 47 states require drivers to buy automobile insurance, yet the median percentage of uninsured drivers in these states is 12%.

3. States should eliminate required benefits from insurance policies and allow the poor to buy policies for (relatively) cheap catastrophic care.

Here is the full piece, from Business Week; this is a topic deserving of more attention.  I’m still wondering what — de facto — will be done against those poor people who are required to buy health insurance but don’t do so.

Here is Glen’s post on Joel Waldfogel, and here is Glen attacking restroom hand dryers.

Indeed, the health-income gradient is slightly steeper in Canada than it is in the U.S.

Here is the paper (can anyone find a non-gated version?), which offers many other interesting points of comparison between the two systems.  Here are previous installments in the series.