Category: Medicine

The Economist on Organ Transplants

The Economist has cogent things to say on setting up a market for organs including the fact that organ sales are legal in, of all places, Iran and the shortage in that country has been eliminated.  Here’s another interesting point:

America already lets people buy babies from surrogate mothers, and the
risk of dying from renting out your womb is six times higher than from
selling your kidney.

Hat tip to Harold Kyriazi.

Scream this from the rooftops

We can’t just bargain down the prices of pharmaceutical drugs without adverse consequences.  It is hard to measure the effects here, but yesterday I came across this piece of serious empirical work:

EU countries closely regulate pharmaceutical prices whereas the U.S. does not.  This paper shows how price constraints affect the profitability, stock returns, and R&D spending of EU and U.S. firms.  Compared to EU firms, U.S. firms are more profitable, earn higher stock returns, and spend more on research and development (R&D).  Some differences have increased over time.  In 1986, EU pharmaceutical R&D exceeded U.S. R&D by about 24 percent, but by 2004, EU R&D trailed U.S. R&D by about 15 percent.  During these 19 years, U.S. R&D spending grew at a real annual compound rate of 8.8 percent, while EU R&D spending grew at a real 5.4 percent rate.  Results show that EU consumers enjoyed much lower pharmaceutical price inflation, however, at a cost of 46 fewer new medicines introduced by EU firms and 1680 fewer EU research jobs.

Here is the paper.  Here is a non-gated copy.  Here is my column on medical R&D.  Here is a previous installment in the series "Scream this from the rooftops."

Ideas worth pondering

From Mark Kleiman, via Matt Yglesias:

Since the Veterans Administration, since its reform under Bill Clinton,
now has the best medical-records system going and produces high-quality
health care at a reasonable cost, could we move a baby step toward
national health insurance by allowing non-veterans to buy into the VA
system at a price equal to whatever the VA figures is its marginal
cost?

I find this idea appealing: this is a market test of whether the federal government could take better care of most of us.  (In case you are wondering, I wouldn’t buy in.)  In any case, a reform like this could deflect the pressure for trying a related idea on a non-experimental basis.  But if you think more government involvement in health care is desirable, well, this change should suffice to get us where we need to go.  And if you don’t think the VA could handle the extra demand, for whatever reasons, let’s set up a copycat institution.  If you are too worried about adverse selection, read Alex’s earlier post.

Means-testing for Medicare

I’ve several times advocated the means-testing as a way out of our current and forthcoming fiscal problems.  Greg Mankiw (see also knzn) offers the classic criticism:

…from the standpoint of incentives, means-testing is equivalent to a tax
increase.  As a result, economists worried about the adverse incentive
effects of taxes (like me) should be also worried about the adverse
incentive effects of means-testing.

The point, of course, is well-taken.  But something must be taxed, and Medicare benefits for the well-off are a logical candidate.  They represent the spending of relatively wealthy people, rather than savings.  In behavioral terms, I suspect the negative incentive effects of means-testing are relatively weak.  A person might say "If I get too rich, I’ll get less Medicare when I am old," and work less.  Dollar-for-dollar I expect this effect is weaker than "They’ll take out another few percent this year from my paycheck, maybe I’ll work less."

I’ll stick with means-testing as the least bad way of raising (implicit) marginal tax rates.  Means-testing also gets people away from the seductive but dangerous idea that government should take care of everyone, all the time.

Incentives for Organ Donation

In an important editorial the Washington Post advocates giving points in the current organ allocation system to people who have previously signed their organ donor cards.  I have long argued for such a system (see Entrepreneurial Economics and here) and am an advisor to Lifesharers an organization that is implementing a similar system privately.

The decision to pledge organs could be linked to the chance of
receiving one: People who check the box on the driver’s-license
application when they are healthy would, if they later fell sick, get
extra points in the system used to assign their position on the
transplant waiting list (other factors include how long you have waited
and how well an available organ would match your blood type and immune
system).

Thanks to Dave Undis for the pointer.

Why is Medicine so Primitive?

The practice of modern medicine is surprisingly primitive.  My doctor only recently started to provide printed prescriptions instead of the usual scrawl.  Incorrectly filled prescriptions can be serious and computer printed prescriptions are an obvious response yet even today only one in four physicians use some form of electronic health records and only one in ten really use electronic records to follow a patient’s entire history.  My credit card company knows far more about my shopping history than my physician knows about my medical history.

Medicine is primitive in another way.  The number of treatment regimes supported only by tradition and authority is very high.  Here’s a recent example:

For the past 30 years or so, doctors have routinely given pregnant
women intravenous infusions of magnesium sulfate to halt contractions
that can lead to premature labor.

…[a] team reviewed 23 clinical trials worldwide involving 2,000 women who
had received the drug to quell contractions. They found that it did not
reduce preterm labor and that more babies died when their mothers took
the drug than in a control group where the mothers had not been given
it.

…Grimes and Nanda estimate that about 120,000 American women receive mag
sulfate each year for premature contractions, and they say some
evidence suggests it may be associated with 1,900 to 4,800 fetal deaths
annually in the United States.

This would be a shocker except for the fact that stories like this are common – by some accounts a majority of medical procedures are not supported by serious scientific evidence.  Indeed, what are we to make of a profession where evidence-based medicine is only a recent and still far from accepted movement?

Why is medicine so primitive?  One reason is that medicine is the largest area of the economy still dominated by artisanal production.  I will be blunt: We need assembly line medicine, medicine that is routinized, marked and measured. As I have argued before I would much prefer to be diagnosed by a computerized expert system than by a physician. The HMOs, Kaiser in particular, have done good work on measuring the effectiveness of different procedures but much more needs to be done to bring medicine into the twentieth century let alone the twenty first.   

Rent Seeking Kills

It’s illegal to offer compensation for a transplantable human organ.  As a result of the price control there is a shortage of organs and thousands of unnecessary deaths.  None of this is news to readers of this blog.  The price control on organs, however, kills in another less well recognized manner.  The reduced supply of organs raises their value.  Organ donors can’t capture that value so who does?  Transplant centers.

    Transplant centers are artificially high profit centers because they capture some of the rents generated by the shortage of organs.  As a result, there are too many transplant centers in the United States and each center performs too few transplants.  Practice makes perfect so when a transplant center performs only a few operations a year lives are lost.

Medicare requires that transplant centers perform 12 transplants a year to be certified but many programs are in violation of that standard with little consequence.  Medicare is even thinking of reducing the standard from 12 per year to 9 in 30 months.  As one specialist says "I wouldn’t take my car to be serviced by someone who repaired nine cars over the past three years.  Would anyone do that?"

This Washington Post article has more on the excess number of centers although it doesn’t draw the connection between the organ shortage and the incentive to build a center.  Here’s some data, from the article, on centers local to Washington.

Transplants

Poor U.S. scores in health care don’t measure Nobels and innovation

Here is my column on that topic.  Excerpt:

In real terms, spending on American biomedical research has doubled
since 1994.  By 2003, spending was up to $94.3 billion (there is no
comparable number for Europe), with 57 percent of that coming from
private industry.  The National Institutes of Health‘s current annual research budget is $28 billion.  All European Union
governments, in contrast, spent $3.7 billion in 2000, and since that
time, Europe has not narrowed the research and development gap.  America
spends more on research and development over all and on drugs in
particular, even though the United States has a smaller population than
the core European Union countries.  From 1989 to 2002, four times as
much money was invested in private biotechnology companies in America
than in Europe.

Dr. Thomas Boehm of Jerini, a biomedical
research company in Berlin, titled his article in The Journal of
Medical Marketing in 2005 “How Can We Explain the American Dominance in
Biomedical Research and Development?” (ostina.org/downloads/pdfs/bridgesvol7_BoehmArticle.pdf)
Dr. Boehm argues that the research environment in the United States,
compared with Europe, is wealthier, more competitive, more meritocratic
and more tolerant of waste and chaos.  He argues that these features
lead to more medical discoveries.  About 400,000 European researchers
are living in the United States, usually for superior financial
compensation and research facilities.

This innovation-rich environment stems from the money spent on
American health care and also from the richer and more competitive
American universities.  The American government could use its size, or
use the law, to bargain down health care prices, as many European
governments have done.  In the short run, this would save money but in
the longer run it would cost lives.

Medical innovations improve
health and life expectancy in all wealthy countries, not just in the
United States.  That is one reason American citizens do not live longer. 
Furthermore, the lucrative United States health care market enhances
research and development abroad and not just at home.

In other words, the case for national health insurance is far from clear.  In terms of other reforms, one key question is how much waste could be reformed while keeping incentives for innovation intact.  I am optimistic about the prospects for change, but this does mean that eliminating "waste" can have negative secondary consequences.

The argument has another angle, explored only briefly.  The National Institutes of Health is one of the best governmental programs we have in the United States.  Part of its success stems from its relative autonomy.  It is harder to find worthwhile governmental R&D initiatives when Congress is pulling the strings on the specific allocations.  We should do more along the lines of NIH, and lack of autonomy is one big reason why R&D programs such as synfuels did not turn out well.

And no, I don’t think the U.S. system is close to ideal:

American health care has many problems.  Health insurance is linked too
tightly to employment, and too many people cannot afford insurance.
Insurance companies put too much energy into avoiding payments.
Personal medical records are kept on paper rather than in accessible
electronic fashion.  Emergency rooms are not always well suited to serve
as last-resort health care for the poor.  Most fundamentally, the lack
of good measures of health care quality makes it hard to identify and
eliminate waste.

Markets in deaf embryos

What do you think of this?  Consumer sovereignty anyone?

Several U.S. fertility clinics admit they’ve helped couples deliberately select defective embryos.  According to a new survey report, "Some prospective parents have sought [preimplantation genetic diagnosis] to select an embryo for the presence of a particular disease or disability, such as deafness, in order that the child would share that characteristic with the parents.  Three percent of IVF-PGD clinics report having provided PGD to couples who seek to use PGD in this manner."  Since 1) the United States has more than 400 fertility clinics, 2) more than two-thirds that answered the survey offer PGD, and 3) some clinics that have done it may not have admitted it, the best guess is that at least eight U.S. clinics have done it.  Old fear: designer babies.  New fear: deformer babies.

Of course Nick Bostrom will push us one step further and ask why the status quo bias?  Aren’t we all "deformed" compared to the Uebermensch of the future?

New Jersey fact of the day

Life expectancy for an Asian female living in Bergen County, New Jersey: 91 years.

Here is the source, via Jason Kottke.  Yes, lifestyle and attitude matter.  This is one indication that the American health care system isn’t as bad as it is sometimes made out to be.

Addendum: From a different direction, here is Levitt and Dubner on paying doctors to wash their hands.

China clinic of the day

The first clinic for internet addiction opened up in China last year, but now internet-addicted teens can take advantage of an improved facility, the Shanghai Sunshine Community Youth Affairs Center, an actual halfway house set up to soothe and detox the internet-riddled souls of young Chinese addicts.

According to the BBC, "internet addiction is reaching epidemic proportions in China". Internet addiction, like most of the so-called addictions, is usually diagnosed as a compulsion which requires intervention.

That is from Alina Stefanescu.

An important paper on health care economics

Amy N. Finkelstein offers up a juicy abstract and paper:

Abstract: This paper investigates the effects of market-wide changes in health insurance by examining the single largest change in health insurance coverage in American history: the introduction of Medicare in 1965. I estimate that the impact of Medicare on hospital spending is over six times larger than what the evidence from individual-level changes in health insurance would have predicted. This disproportionately larger effect may arise if market-wide changes in demand alter the incentives of hospitals to incur the fixed costs of entering the market or of adopting new practice styles. I present some evidence of these types of effects. A back of the envelope calculation based on the estimated impact of Medicare suggests that the overall spread of health insurance between 1950 and 1990 may be able to explain about half of the increase in real per capita health spending over this time period.

Amy is an assistant professor at MIT; this week’s Business Week has an article claiming she is revolutionizing health care economics.  Perhaps that is an exaggeration, but her home page is worth a look.

Avian flu and social science

Yana and I are now in Vienna, as I will be attending a conference on the social science aspects of pandemics.  If you are a new MR reader, here my paper on the policy implications of avian flu.  Here is an executive summary of the piece.

And what is the latest on avian flu?  The Thais had pretended to solve the problem but they were lying.  The Vietnamese have made real progress.  The Indonesians still refuse to release much of the sequencing information from their samples.  One study suggests that the cases of human-to-human mutation show significant mutation of the virus.  (Here is a more optimistic take.)  For the first time, one of the reported vaccines — from GlaxoSmithKline — seems to have significant potential.  It is unknown how much the virus is spreading in Africa.  Except for Indonesia there is more good news than bad, but of course it is not the average which matters.  The badness of the worst news will determine how the world fares.  It is hard to imagine how a serious pandemic would play itself out in crowded and infrastructure-dysfunctional China or India.

For more information on all these points, see the new version of EffectMeasure blog.