Category: Medicine

Overtreated

Eventually, Medicare should completely transform the way it pays physicians and hospitals.  Instead of paying doctors and hospitals separately and reimbursing them for how much care they deliver, it will want to begin paying them as a group on a per-capita basis, depending upon the number of patients they care for.  (Because outcomes of their patients will be monitored and eventually made public, these integrated systems will not want to attract more patients than they can handle simply to boost their incomes.)

That is from Shannon Brownlee’s new Overtreated: Why Too Much Medicine is Making Us Sicker and Poorer, which should be read by anyone interested in health care economics.  I have a few points:

1. The early chapters are too anecdotal for my tastes, but later the book becomes more analytical.

2. The author writes as if doctors can be steamrollered into submission and forced to adopt better compensation schemes; in this sense the public choice analysis is naive.  Yes maybe that is what "should happen" but I predict that greater government involvement will be geared toward protecting the rents of American doctors, not making them passive servants of the public interest.

3. The (favorable) discussion of VHA is more insightful and more subtle than the usual treatments.  For instance we learn that the much-heralded computerization of VA records was created in direct violation of government law.

4. The chapter on the rise and fall of managed care was excellent.  Yet the core problems with managed care also would plague the author’s proposal for compensating doctors and hospitals, quoted above.

5. The policy prescriptions focus on changing the bundle of health care, rather than just cutting back on health care, so the title is not strictly accurate.  The author is not a radical Hansonian but rather favors more "integrated care" and more primary physicians.

Robin Hanson, now there’s a guy who favors gross cutbacks in health care, he argues they won’t cost us actual health.  See the recent forum over at CatoUnbound.

Addendum: See also this NYT magazine article, "Do We Really Know What Makes Us Healthy?"

Sentences to ponder

Overall, a $1 increase in prescription drug spending is associated with a $2.06 reduction in Medicare spending.

Here is the paper.  I’m all for the view that the Bush Administration has been fiscally irresponsible, but I never thought the prescription drug bill was the ideal target.  If there is one category Medicare should be supporting, it is prescription drugs.

On a related note, Robin Hanson believes that half of all medical care spending is a waste (do read the whole thing).  I’m not sure what mechanism will get rid of the bad half, but Robin’s claim deserves to be taken very seriously.

Avian Flu – update

Avian Flu has been out of the news for a while but the threat remains.  We are just now learning how lucky we got last year.  It has been confirmed that H5N1 can transmit human to human.

A woman on the Indonesian island of Sumatra caught the H5N1 bird flu
virus from poultry in May last year [2006] and passed it to
relatives. A new study by a US university has apparently confirmed
for the first time that bird flu has been transmitted from human to
human. It is the nightmare possibility that health authorities have
been fearing ever since the disease first appeared.

It happened in Indonesia last year [2006] and reveals the world only
narrowly avoided a global bird flu pandemic….Of 8 family members who caught the disease, 7 were soon dead.

Is health care good for you after all?

This paper is very clever:

Health care spending varies widely across markets, yet there is little
evidence that higher spending translates into better health outcomes,
possibly due to endogeneity bias. The main innovation in this paper
compares outcomes of patients who are exposed to different health care
systems that were not designed for them: patients who are far from home
when a health emergency strikes. The universe of emergencies in Florida
from 1996-2003 is considered, and visitors who become ill in
high-spending areas have significantly lower mortality rates compared
to similar visitors in lower-spending areas. The results are robust
across different types of patients and within groups of destinations
that appear to be close demand substitutes.

Here are non-gated versions.

No right to save your life

A Federal court overturned last year’s shocking decision from the DC Circuit Court of Appeals saying that dying patients have
a due process right to access drugs once they have been through
FDA approved safety trials.  In January I wrote:

Unfortunately, I do not think that the Abigail Alliance can win the
case; recognizing the rights that the DC Circuit of Appeals recognized
would be too big a blow to our nanny state.

Thus I am a little disappointed but not surprised.  I am pleased that the brief prepared by Jack Calfee, Dan Klein, Sam Peltzman, Benjamin Zycher and myself was cited in the dissent.  The majority also avoided the sweeping policy generalizations that we wrote the brief to
discourage, thus I think we won a rear-guard victory and can keep up the battle on other fronts.

Thanks to Ted Frank for the pointer and his work behind the scenes.

Words of wisdom on preventive care

No one really knows whether preventive medicine will save money in the long run, let alone free up the billions of dollars a year needed to help pay for universal health insurance.  In fact, studies have shown that preventive care – be it cancer screening, smoking cessation or plain old checkups – usually ends up costing money.  It makes people healthier, but it’s not free.

“It’s a nice thing to think, and it seems like it should be true, but I don’t know of any evidence that preventive care actually saves money,” said Jonathan Gruber, an M.I.T. economist who helped design the universal-coverage plan in Massachusetts.

Here is the article by David Leonhardt.

Move south to live longer

Cold kills you more than does heat:

These longevity gains associated with long term trends in geographical
mobility account for 8%-15% of the total gains in life expectancy
experienced by the US population over the past 30 years.  Thus mobility
is an important but previously overlooked determinant of increased
longevity in the United States.

Here is the paper.  Here are non-gated versions.

Medicare for everyone, part II

Here is an excellent NYT column on health care, by Alex Berenson.  The bottom line is this: U.S. medical care costs are so high for (at least) two key reasons: a) personnel costs are much higher than in Europe, and b) U.S. doctors usually are paid fee for service, rather than fixed salaries.  That leads to much more spending, for obvious reasons.

Keep this in mind next time someone tells you that America can cover everyone through a single payer system at lower expense.  Berenson continues:

Medicare, especially, does not like to second-guess doctors’
clinical decisions, said Dr. Stephen Zuckerman, a health economist at
the Urban Institute. “There’s not a lot of utilization review or prior
authorization in Medicare,” he said. “If you’re doing the work, you can
expect to get paid.”

As a result, doctors have steadily increased
the number of procedures they perform on Medicare beneficiaries – and
thus have increased their income from Medicare, Dr. Zuckerman said. But
the extra procedures have not helped patients’ health much, he said. “I
don’t think there’s any real strong evidence of improvements in health
status.”

This same incentive is weaker when doctors are paid fixed salaries.  One key question for single payer advocates is the following:

Through what mechanism will you replace doctors’ fee for service with fixed salaries?

In closing, let me quote the always-worth-reading Matt Yglesias:

…when it comes to defending the interests of powerful, entrenched local groups, Democrats are usually about as bad as Republicans.

Medicare for everyone?

In general, an actuarial comparison to other health insurance plans shows that Medicare provides significantly fewer benefits than coverage for federal employees, small employers, or Medicaid.

That is from Medicare Matters: What Geriatric Medicine Can Teach American Health Care, by Christine K. Cassel.  It should be noted that a) Cassel is much more positive about Medicare than that quotation alone would indicate, and b) this is an honest book which recognizes the weight behind many different points of view.

What percentage of the federal budget is Medicare?  Will Medicare be?  How many books on Medicare have you read?

Get the hint?

Addendum: I like supplying contrarian material; this article (registration but free) is an excellent critique of the usual libertarian defense of pharmaceutical companies.

How long should the wait be to see a doctor?

Matt Yglesias notes that seeing a doctor in the U.S. involves waiting.  I’ve never had this experience (not going to the doctor is my trick) but I’ve heard the same from other people.  My question is a simple one: in market equilibrium, should we expect two- or three month-long waits to see a doctor?  Or is this somehow an artifact of government intervention?

I understand why I might have to wait to get an iPhone (though I didn’t) or Harry Potter (though Yana didn’t).  I understand why I can’t just call up El Bulli and get a reservation; they want the highest status people eating there, plus the air of exclusivity creates positive publicity for spin-off products.  But I wouldn’t expect those mechanisms to matter for medicine, at least not at the GP level ("he won’t transplant a heart for just anyone, he’s promoting his personal line of stents", etc.).

Why might one have to wait for a doctor?

1. There are big gains to sticking with your previous doctor, and demand is uncertain each period so the lines add up.  But I would expect the law of large numbers to kick in, plus sometimes the wait should be very short.

2. Waiting lists are a form of price discrimination.  Some patients "hoard time" (just as dept. chairs in a university "hoard space") by making lots of appointments, many of which are unnecessary ex post.  Indirectly they are charged for this privilege but they get immediacy when they need it.  Matt (maybe) didn’t need immediacy and wasn’t willing to pay for it.

3. The President is always the last person to enter the room and that policy maximizes the value of his time.  Maybe doctors have lots of "drop out" appointments (patients get better or perhaps they die), and so doctors maximize the value of their time by keeping a long queue.  But for this to maximize profits, must the queue be longer than a week or so?

4. Some constraint — legal or otherwise — prevents doctors from raising their prices.  (This hypothesis, by the way, suggests that American medical care is even more expensive than it looks.)

Readers, why is the wait often as long as it is?  I’m not interested in debating health care policy today, I’d just like an answer to this question.

Addendum: Jane Galt adds commentary and analysis.

Netherlands fact of the day

Some 12,000 more people have registered as organ
donors in the Netherlands since a Dutch TV hoax that featured a
"competition" for a kidney.

The Big Donor Show was revealed to be a hoax as the fake donor was apparently about to reveal her choice of patient.

But Dutch media say the number of people registering as
organ donors has jumped since the hoax. The usual monthly figure is
just 3-4,000.

Will this greater interest in organ donation last?  Here is the link and story.

FDA Delay

Last year the Abigail Alliance won a stunning decision from the DC Circuit Court of Appeals that dying patients have
a due process right to access drugs once they have been through
FDA approved safety trials.  Here’s a sad update from Kerry Howley writing in the Aug/Sept. issue of Reason Magazine (not yet online):

After last year’s ruling in the alliance’s favor, the FDA argued that the group no longer had legal standing to sue it, since none of the patients who had signed the original affidavits were still members.  They were all dead.

See FDAReview.org for more on the FDA.

An exchange about health care

Charles W. Tidd, Jr., Newtown, Conn.: Your column today
continues to avoid a central issue: a great number of Americans do not
trust the government with their health care. This mistrust is not the
result of television ads by insurance companies but follows from
increasingly frequent routine encounters with the government: waiting
for a passport, figuring out the tax law, having an intelligent
conversation with someone at the DMV, listening to the news – Hurricane
Katrina, the federal prosecutors, the pardons by both Clinton and Bush,
immigration. The list goes on and on.

Why in the world do you want to trust the nation’s health care to the government?  He who pays the piper calls the tune.

I write you because there is no question that our health system
needs to be fixed, but until the issue of public mistrust of government
is addressed, any sort of universal health care will be shunned by many
people.

Paul Krugman:: Do people really distrust the government? I
think we have this program called Medicare, which most people seem to
like. On the other hand, maybe people don’t know that it’s the
government: former Sen. John Breaux was famously accosted by a
constituent demanding that he not let the government get its hands on
Medicare.

Here is the link

People like Medicare because it pays some of the bill, while keeping interference in the medical process to an apparent minimum; admittedly non-interference is in part illusory because the indirect effects of Medicare (e.g., it drives up prices) have become enormous.  Almost all government payments of this kind are popular, whether or not the programs are a good use of scarce resources.  People are looking to get something from their costly government, and not necessarily because they trust it.

As Medicare expenditures rise, this illusion of non-interference will become much harder to maintain and indeed Medicare itself may become less popular.  I am always curious to hear — from single-payer proponents — which interest groups they think will have a decisive say over the system, and how those interest groups differ in America vs. Western Europe.  That is one reason why we cannot simply replicate the VA approach writ large, or for that matter the French system.  For a sobering wake-up call, compare the flood defense policies of the Netherlands to, say, Louisiana.

Should all patients be treated the same?

If a woman is a lawyer, or the wife of a lawyer, does she get better treatment?  Lawyers seem to be regarded by doctors as especially litigious patients who should be treated with caution when it comes to risky procedures such as surgery.  The rate of hysterectomy in the general population in Switzerland was 16 percent, whereas among lawyers’ wives it was only 8 percent — among female doctors it was 10 percent.  In general, the less well educated a woman is and the better private insurance she has, the more likely it is that she’ll get a hysterectomy.  Similarly, children in the general population had significantly more tonsillectomies than the children of physicians and lawyers.  Lawyers and their children apparently get better treatment, but here, better means less.

That is from Gerd Gigerenzer’s Gut Feelings: the Intelligence of the Unconscious.  It is a good microeconomics question to ponder the conditions under which a) this is efficient, and b) you would rather be the poorer patient or the non-lawyer than the lawyer. 

Live, or Die Free

Johnson & Johnson has proposed that Britain’s national health service pay for the cancer drug Velcade, but only for people who benefit from the medicine, which can cost $48,000 a patient. The company would refund any money spent on patients whose tumors do not shrink sufficiently after a trial treatment.

The groundbreaking proposal, along with less radical pricing experiments in this country and overseas, may signal the pharmaceutical industry’s willingness to edge toward a new pay-for-performance paradigm – in which a drug’s price would be based on how well it worked, and might be adjusted up or down as new evidence came in.

More here.  Contingency fees for doctors and pharmaceutical companies are a very good idea (one I have long supported).  For more see Hyman and Silver’s excellent paper.