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Category: Economics

The Facebook Model for Socialized Health Care

Screen Shot 2015-02-26 at 5.06.17 PMAs government involvement in U.S. health care deepens—through the Affordable Care Act, Meaningful Use, and the continued revisions and expansions of Medicaid and Medicare—the politically electric watchword is “socialism.”

Online, of course, social media is not a latent communist threat, but rather the most popular destination for internet users around the world.

People, whether out of fear for being left behind, or simply tickled by the ease with which they can publicize their lives, have been sharing every element of their public (and very often, their private) lives with ever-increasing zeal. Pictures, videos, by-the-minute commentary and updates, idle musings, blogs—the means by which people broadcast themselves are as numerous and diverse as sites on the web itself.

Even as the public decries government spying programs and panics at the news of the latest massive data-breach, the daily traffic to sites like Facebook and Twitter—especially through mobile devices—not only stays high, but continues to grow. These sites are designed around users volunteering personal information, from work and education information, to preferences in music, movies, politics, and even romantic partners.

So why not health data?

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Where Does the ACA Go From Here?

Craig GarthwaiteBarring a Republican landslide in 2016, it looks like the Affordable Care Act (ACA) is here to stay.  By and large, we think that is a good thing.  While there are many things in the ACA that we would like to see changed, the law has provided needed coverage for millions of Americans that found themselves (for a variety of reasons) shut out of the health insurance market.

That being said, since its passage the ACA has evolved and the rule makers in CMS continue to tinker around the edges.  We are especially encouraged by CMS’ willingness to relax some of the restrictions on insurance design, but remain concerned about some of the rules governing employers and the definition of what is “insurance.”  In the next few blogs we will examine some of the best, and worst, of the ongoing ACA saga.

We start with one of CMS’s best moves—encouraging reference pricing.  The term reference pricing was first used in conjunction with European central government pricing of pharmaceuticals.  Germany and other countries place drugs into therapeutic categories (such as statins or antipsychotics) and announce a “reference price” which insurers (either public or, in Germany, quasi-public) that insurers will reimburse for the drug.  Patients may purchase more expensive drugs, but they were financially responsible for all costs above the references price.  Research shows that reference pricing helps reduce drug spending both by encouraging price reductions (towards the reference price) and reducing purchases of higher priced drugs within a reference category.  Other research has found suggestive evidence of similar results for reference pricing for medical services.

While the ACA does little to govern pricing in the pharma market, the concept of reference pricing can and should be extended other medical products and services.  In particular, insurers can establish reference prices for bundled episodes of illness such as joint replacement surgery.  Under the original ACA rules set forth by CMS, insurers were free to establish a fixed price for bundled episodes.  They could even require enrollees to pay the full difference between the provider’s price and the reference price.  But there was a catch. It wasn’t clear if any spending above the reference price would count to the enrollees by enrollees out of pocket limits (currently $6,600 for individual plans and $13,200 for family plans).  Obviously, allowing the out of pocket limit to bind on reference pricing would limit the effectiveness of this cost control measure.

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You Owe Me a BMW

flying cadeuciiDuring a move necessitated 20+ years ago by my change from a “private practice of medicine” life to a “back to school” life, I decided to undertake the move on my own using a rented van. I also had to affix a small trailer packed with furniture to the van. As I lifted the not so heavy trailer to the hitch, one of my children ran toward the trailer. I stopped my child’s progress with a holler and an out-stretched hand. As I did that, a disc in my back popped and dropped me to the ground. I have had back pain every day since. I have managed my back pain on my own. But, I now think it is time to start using my medical insurance to pay for the care of my back pain. So, fellow insured, you owe me a BMW.

Yes, a BMW. I know that my back pain is a subjective complaint and you can’t prove or disprove that I have it. I also know that there is no measure of my back pain; I can grade it on a scale from 0-10, as some do, but that is such a difficult task that I can’t internally come up with a number. I am sure, though, that the number changes daily. Even if I could assign a number to my pain, there is no guarantee that you would assign the same number should you suffer the exact pain as me, or that you could assign a number to my complaint better than I could. The pain is there, though. I feel it and alter my activities to not exacerbate.

Recently, a friend gave me a ride in his BMW. The seats fit my back to a t and as I sat there, my pain abated. I asked him to turn on the heated seats. Even more remarkable pain relief followed. In fact, after the ride in his car, I had no back pain for over 3 weeks, the first 3-week, pain-free stretch of time in over 20 years. So, since insurance plans often pay for some types of interventions such as heaters, buzzers, or needles, as examples, to help people with their back pain, so, then, shouldn’t insurance pay for a BMW for me? I think so.

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Rethinking The Gruber Controversy: Americans Aren’t Stupid, But They’re Often Ignorant — And Why

flying cadeuciiM.I.T. economist Jonathan Gruber, whom his colleagues in the profession hold in very high esteem for his prowess in economic analysis, recently appeared before the House Committee on Oversight and Government Reform. Gruber was called to explain several caustic remarks he had offered on tortured language and provisions in the Affordable Care Act (the ACA) that allegedly were designed to fool American voters into accepting the ACA.

Many of these linguistic contortions, however, were designed not so much to fool voters, but to force the Congressional Budget Office into scoring taxes as something else. But Gruber did call the American public “stupid” enough to be misled by such linguistic tricks and by other measures in the ACA — for example, taxing health insurers knowing full well that insurers would pass the tax on to the insured.

During the hearing, Gruber apologized profusely and on multiple occasions for his remarks. Although at least some economists apparently see no warrant for such an apology, I believe it was appropriate, as in hindsight Gruber does as well. “Stupid” is entirely the wrong word in this context; Gruber should have said “ignorant” instead.Continue reading…

We Spend More on Health Care Than Other Rich Countries but Have Worse Outcomes?

flying cadeuciiHere it’s argued that we need to retire the health care fallacy, “We spend more on health care than other rich countries but have worse outcomes.” The fallacy implies U.S. health care is deficient in spite of being costly. Indeed our health care costs too much, but there is little evidence that our care is less effective than care in other countries. On the other hand, there’s plenty of evidence that our social determinants of health are worse.

The argument segues off a recent article by Victor Fuchs. The case is presented by using a simple linear model to explore how life expectancy might change when we substitute the numbers of other countries’ determinants of health for U.S. numbers. After making these substitutions and holding health care spending constant the model predicts U.S. life expectancy is right there with the other OECD countries, 81.6 years compared to their average 81.4 years. This what-if modelling makes clear what should be obvious but the fallacy hides, that health care is only one part of population health.

The Fuchs Essay 
Victor Fuchs’s recent essay1 impressed me. He wrote of the lack of a positive relationship between life expectancy and health care expenditures (HCE) in OECD countries. A chart was included for empirical support. I liked the idea behind the chart which demonstrated his point using data from select countries and our 50 states. Professor Fuchs has written on this topic for years (e.g., in his 1974 book “Who Shall Live?”). I posted on the fallacy in March 2013 but was not as nuanced.2

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An Open Letter to Ezekiel Emanuel on Life and Death

Ezekiel Emanuel

In the October issue of The Atlantic, physician and medical ethicist Ezekiel (Zeke) Emanuel, brother of Rahm Emanuel (former official in the Clinton White House, then Congressman, then Chief of Staff for President Barack Obama, now Mayor of Chicago) published an article why he thinks we should all forgo advanced age and die at 75. As a 69-year-old moving toward 75, my response to that article is this blog post requesting a stay of execution from our newly appointed Czar of American longevity.

An Open Letter to Ezekiel Emmanuel.

Dear Ezekiel Emmanuel:

Please forgive me for taking so long to comment on your article in The Atlantic arguing that we should declare our lives to have reached their productive limit at age 75 and therefore gracefully exit this world before we move into an inexorable decline. Your article – “Why I Hope to Die at 75″ –– appeared in The Atlantic in October and here it is December and I have not joined the 3000 plus people who commented on it earlier. First, I confess, I did not read it until almost a month ago, and then, I had to stew in some juices before figuring out how to reply. You make many good points in your article. Americans do indeed consider themselves to be “immortals,” do prolong death rather than extend life when they push for futile treatments or agree when their physicians who too often recommend them (if they were not so enthusiastically recommended, would so many American patients so heartily sacrifice themselves on the altar of science?) But does the solution to the out of control medicine lie in declaring that 75 should be the age of exit?  See, for example, Shannon Brownlee’s Overtreated.

In your article, you carefully explain why you have picked 75 as the human sell by date.Continue reading…

The Anti-Hypocrisy Rule

Martin SamuelsPundits abound when it comes to health care plans. They come from many different backgrounds: conservatives, liberals, academics, business people, doctors, politicians and more often all the time various combinations of these. But they all have one characteristic in common. They all want a different kind of health care for themselves and their families than they profess for everyone else.

I am acutely aware of this as I am in a position that demands that I find special appointments for them. A day virtually never passes when I don’t receive requests (often many in a single day) for me to either see these people myself or arrange for their special care elsewhere, including other parts of the county and the world. My own personal ethical code of conduct prevents me from mentioning their names or anything that could identify them. Suffice it to say that I have yet to see a single exception to this principle.

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Grubernomics

Gruber OptimizedIn the giddy days after the passage of ACA, I was chatting to a PhD student in health economics. He was in love with the ACA. He kept repeating that it would reduce costs, increase quality and increase access. Nothing original. You know the sort of stuff you heard at keynotes of medical meetings; ‘Healthcare post Obamacare’ or ‘Radiology in the new era.’ Talks warning us that we were exiting the Cretaceous period.

He spoke about variation in healthcare, six sigma, fee-for-value and ‘paying doctors to do the right thing.’

‘How?’ I asked.

‘I just told you, we need to pay doctors for value and outcomes.’ He smugly replied.

‘How?’ I asked again.

He did not answer. Instead he gave me the look that one gives an utter imbecile who doesn’t know the difference between a polygon and a triangle.Continue reading…

The Cadillac Tax Attack

1959 Cadillac El Dorado Biarritz

“You think healthcare is expensive now? Wait until it is for free…” PJ O’Rourke

In early 2011, The Boston Globe shared the findings of a 20-page report from the Boston Foundation and Massachusetts Taxpayers Foundation, a report that somberly concluded that cities and towns must substantially increase the amounts their employees are required to pay in out-of-pocket expenses for services and to significantly increase their deductibles. Jeffrey D. Nutting,  Franklin, MA. town manager, complained his town was still facing costs that wildly outpaced declining tax revenues or even the CPI. “Every dollar we spend on health care insurance is a dollar we don’t spend on jobs,’’ he said. “This is all about saving jobs. When insurance costs go up I have cut police, firefighters, or teachers.’’

Nutting said about 10 percent of the town’s $88 million budget now goes to health care costs, and he was facing a double-digit increase for next year. That was 2011.

In 2014, the healthcare conundrum is worsening. Despite the passage of the Affordable Care Act, the average per capita cost to provide health benefits for public employees is averaging as much as $ 20,000 per worker. This is almost twice the national average of most health plans – even higher than private sector bargained plans. The mounting evidence is irrefutable – low co-pay plans with maximum amounts of reimbursement do little to improve health or mitigate chronic illness — and often times lead to overconsumption of services, poor consumerism and limited accountability for personal responsibility around healthcare.Continue reading…

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