Health Care and Complexity

Aaron Carroll:

That said, if you want to have a discussion on the merits of making the American Health Care system look like Singapore’s, I’m on board. Let’s do it. But what I’ll fight against – and call out – are the people who do that with lots of “buts”. You want Singapore, but you don’t want the mandated savings accounts. You want Singapore, but you don’t like government involved in purchasing decisions. You want Singapore, but you oppose centralized budgets. You want Singapore, but you oppose government subsidies.

This was partially in response to Tyler Cowen:

Now enter Aaron Carroll, who tries to argue Singapore is moving in an ACA-like direction.  His post has been cited numerous times, but it is not insightful nor does it show much curiosity about the new changes in Singapore.  It is mostly a polemic against Republicans.  In any case the new Singaporean emphasis on taking care of the elderly isn’t well understood by a comparison with ACA.

 In some ways I think they are both making very good points, albeit very different ones.  In Cowen's defense, health care has become so tightly bound to partisan politics in the United States that a strong pro-ACA line is going to look like an attack on Republicans, even if it is modeled on a Republican plan.  That's rather unfortunate but true. 

On the other hand, one of the ways to argue for a system is to find historical (or, even better, contemporary) examples of a particular approach working.  Innovation is likely to be tried by smaller groups first.  So Democracy works out so-so in Athens and people begin to tweak it.  Eventually you get the UK model and the US model of democracy, neither of which look like the original.

The problem with this approach is that it requires one to be extremely clear about what the effects of these tweaks will be.  The United States appears to be in an equilibrium where, at a population level, it costs a lot and delivers middle of the road outcomes.  Moving further into that space (and away from programs that are cheaper and deliver better results) requires a very clear argument for why we think there is a local (or perhaps even the global) maxima out there. 

So the problem with Singapore is that there seems to be real disagreement over whether specific pieces are essential or not.  You also have a very different economy -- only 5 million people with an unemployment rate running in the 2-3% range.  While they have no minimum wage, the government tends to be the largest shareholder in Singapore companies and thus excessive wage inequality can be handled at the ballot box.  These design features can make a mandated savings program work really well.  But we also have what looks a lot like a command economy (just one that is small enough and distributes decision-making enough that they are not overwhelmed by complexity).  In any case, much of the US problems would be well handled by a 2% unemployment rate where people would be able to reliably save against disaster and have a decent chance to get a new job (and notice that Singapore is a single city, so there are no relocation frictions if you lose your job in a part of it with few opportunities -- you just commute longer as a result). 

So the problem is trying to reduce the number of moving parts.  I suspect that, despite its huge flaws, this is why the Canadian system keeps coming up.  It is based in a nearby country with a similar type of economy, lots of immigrants, lots of regionalism, and delivers equivalent outcomes (overall) for less overall cost.  It also encourages economic risk taking by making the risk of being uninsured negligible which can also be a benefit. 

But trying to import external health care systems is tough -- they are complex and have lots of points where it is unclear if the piece is essential or merely nice to have. 

Today's required reading

On this blog, we have been talking about budget deficits on the blog recently and I thought that some perspective on the factors driving the US debt would be worth considering.  Aaron Carroll goes into the real drivers of the debt: increased interest on the debt (due to tax cuts) and increased health care costs.  It is well worth reviewing in detail.

Added Sugars

From Aaron Carroll:

As we talk about how hard it is to combat obesity, it’s worth thinking about numbers like this once in a while. If we could get kids to give up half, not even all, of the added sugar in their diet, their overall calorie consumption would drop by 8%. They’d be dropping about 140-180 calories a day from their diet. And those calories are totally empty – they’re from added sugars they don’t need, and that won’t satiate them. When other research shows that reducing your caloric intake by 20 (yes, twenty) calories per day for three years could lead to an average weight loss of 2 pounds, making this small change could be a big deal.

Okay, there is a good point here and a really bad point here.  The good point is that added sugar seems to be a bad thing.  It promotes tooth decay (with 2 root canals, I can say that this is a big deal), it seems to be efficiently absorbed, it is associated with diabetes (a disease you really do not want), and it's nutrient value is null.

But the idea that a 20 calorie a day change will mechanically lead to a 2 pound weight loss in 3 years is kind of odd.  I mean it works, mathematically.  But it ignores all sorts of issues: like how does the body adapt to less intake, what foods are eaten (is it the same composition with portions shrunk by 1%?), and how this may alter activity levels.  The claim makes something that we know is hard sound very, very easy.

Programs like Weight Watchers seem to partially get good results by restriction, but they also seem to have incentives to change the composition of the diet.  Just look at how fruits and vegetables can be zero points in the current diet.

So, in an odd sort of way, the last point detracts from the main issue here: added sugars are bad and trying to expose your children to less of them is unlikely to be a bad thing.

MedicAid

MedicAid is extremely cost-effective (at least by the standards of US medicine) and protects some of the most vulnerable citizens of the republic. Aaron Caroll goes into just how difficult it would be to make further cuts in MedicAid. But I wonder if the real direction of the debate shouldn't be about expanding coverage for more citizens. After all, the low rate of reimbursements mean that getting treatment under the program will be difficult. This means that people will seek better forms of coverage if they have any options at all. Would it really be terrible to have a public/private hybrid system? Needless to say, I find the idea of MedicAid cuts to be pushing the discussion in the wrong direction.

Agendas

I think that this is correct:

Less honest single-payer advocates ignore the issue entirely. More honest and thoughtful single-payer advocates sometimes address it by talking about central planning, global budgets, and transition away from any fee-for-service care. They also talk about moving to an all-non-profit-facility delivery system. And if you think single-payer is unpopular now, wait until people start hearing about those things.

I get why many on the right are uncomfortable with this. There are days I am, too. But I’ll concede one point: if Medicare is so awesome for people age 65 and up, why is it socialism for someone who’s 64?

I, of course, like the plan of going for central planning, global budgets with competitions between treatments based on QALY's, reducing or eliminating fee for service, and see all non-profits in medicine as a great idea. It would do wonders for efficiency and make medical care widely available. It would also do very bad things to people currently invested in health care.

Trying to find a way to compromise on this front is a hard issue. Unlike Dr. Carroll, I think a discussion of end state is important even if it is not a politically feasible option (as it is good to have the end state out and in the public debate). We could lose the debate, but better to lose a debate (this is a democracy and not all policy ideas are going to be implemented) than to try (or appear to try) to sneak an long term agenda in under the radar.

That way there can be an evidence based debate on the issues. So I think that this is a good focus point for those of us thinking single payer -- we need to really lay our cards on the table and explain the totality of why we think that it would be an objective improvement. That way we present a hypothesis against which evidence can be applied and political will gauged.

Why aren't you reading the incidental economist?

Because if you care about health care, they are one of the most informative blogs around for those of us in the medical research community.

Consider this statistic:

By 2010, more than 60% of people lived in areas where insurance premiums cost at least 20% of their income. And that’s just premiums; it doesn’t include deductibles, it doesn’t include co-pays, and it doesn’t include co-insurance.

This is likely unsustainable. The growth rate of insurance is far above that of wages, meaning that health care costs are going to consume a higher and higher percent of people’s incomes in the future. Moreover, this is a problem of the non-elderly. Because of Medicare, few elderly have premiums which consume this level of income.

This statistic very nicely frames the entire underlying issue with the explosion in medical costs. Placed in such stark terms, the question shifts from "can we reduce medical costs" to "how are we going to reduce medical costs".

One of the risks of living is dying

From the incidental economist:

I can hear the howls of protest already. But here’s the example I always go to: the number one killer of children in the US is car accidents. But we don’t ever consider stopping driving. I know that every time I put my kids in a car, I’m significantly increasing the chance that they could die. But I (and pretty much all of you) believe that the benefit to our lives from cars outweighs the increased risk of death in our children. Let me put it another way. We all accept that it’s worth a number of children dying so that we can all get around more easily.

One of the great challenges that we face as a society is how to balance risks and benefits. I am becoming increasingly convinced that people are simply poor at making these trade-offs. This is especially true given that the risk of death is 100%. In a real sense we all end up dying. The goal, instead, seems to be to make the time that we have as good as possible. A theory of the joint maximization of lifespan and happiness seems to be the best way to go.

Given that, I think Dr Carroll's point is quite sound: we take risks all of the time in order to make life worth living. The trick is to quantify which risks are worthwhile, conditional on the absolute level of risk.

More on Health Care Efficiency

An update here on medical insurance with an inventory problem.

Depending on the condition being discussed, this can be a pretty serious matter and remedies are unclear. At the very least we are seeing the following as the solution:

1) Make a visit to an MD to get a prescription (cost of MD)

2) Visit a pharmacy and argue about insurance coverage (cost of administration)

3) Take much of a day off work (this is a cost to the employer via sick days or employee via needing to work longer hours to make up for this)

If these issues are frequent then the inventory control system is imposing a lot of costs on the system. Now, if this was a store (say Amazon) then it would be fighting to remedy these issues before it went bankrupt. But the lack of customer mobility is another area where Health Care is an unusual market.

Health Care

We haven't talked as much about Health Care lately, because I have been slammed by my first year of teaching. But I did want to highlight this post by Aaron Carroll:

You ready for this? They didn’t ship the medication. Why? It’s on back-order.

So explain this to me, awesome insurance system. You will only allow me to get my medication from one pharmacy, which is not local, and which you own and run. And you won’t send the medication early, which would provide a safe buffer. And then you run out of the medication. And then you don’t tell me until the day I run out. And then you don’t really tell me, you leave me a cryptic message on my voice mail that I would usually not be able to get until I arrive home and you are closed.

Will you allow me to go to another pharmacy? Sure. But you won’t cover it. Will you have the medication soon? Yeah, you hope to have it tomorrow.

I don’t believe you.

Do you have any concern – whatsoever – that I am without my medication for a period of time? That it’s entirely your fault?

I’m a model patient. I pay all my bills. I go to the doctor. I get the labs done. I refill the meds on time with a weeks’ advance. I follow the rules. And you screw me.

Are we really sure that the health care system in the United States meets the requirements for market efficiency*? Really?


* And, if you have not read the classic post by Mark Thoma then now is as good a time as any. Well worth the ten minutes to breeze through it and it is a very good way of evaluating whether a particular market is likely to be efficient.