Product labeling

An interesting article in the Baltimore Sun discusses the possibility of product labeling for caffeine--particularly for products to which caffeine is added.  As with any product labeling question, an issue that arises is how much it will cost manufacturers to include the information on their labeling, how much it will cost the government to enforce such labeling, and how much it will change consumers behavior.  Moreover, if consumers really demanded the information, why does it not emerge in the private market without government intervention?

Even if consumers would benefit, why hasn't this type of labeling emerged in a private market?  Each consumer would benefit a little.  It would cost the food and beverage manufacturers a lot.  Concentrated costs and diffuse benefits often lead to a lack of regulation as those facing costs have a much stronger incentive to lobby against a new regulation.

Why would consumers want the information?  The article does a good job of describing the facts that (1) some people are extra sensitive to the stimulant, (2) caffeine can accentuate attention deficit disorder, hyperactivity, and insomnia, (3) excessive caffeine may harm fetuses, and (4) a variety of other health effects may be related.

Do consumers understand all the effects?  There is no way to say, but given that at least some consumers seem to have a sufficiently difficult time with things like energy in and energy out needing to be similar so as not to gain weight, it is not clear that all consumers understand all implications.

Would it change consumers' behavior?  Again, there are lots of examples of when labeling has not seemed to change consumer behavior, but, for example, parents with children may be very interesting in limiting their caffeine intake and pay attention to the labeling and change their purchasing behavior.  That will affect the demand for some company's products.

Would educating consumers be enough?  Maybe.  Although that process could take a long time.  First, consumers would need to receive the information.  Then, consumers would need to incorporate the information into their decision making.  Then, consumers would need to demand the information on the labels.  Then, at least some companies would have to try it and find that it increases the demand for their products.  Then, other companies would have to follow.  From a decision maker's perspective, it would be important to assess how long this would take and how much consumers would eventually benefit with how much consumers would benefit if the information were available immediately and how much it would cost companies and the government to impose and comply with the regulation immediately.

Health Cuts (?) with LIttle Effect on Care (?)

I have lifted the title for today's blog entry directly from a New York TImes headline (except for the question marks that I have added for emphasis).  This interesting article focuses on the health care situation in Richmond, Virginia and links the changes in health care spending over time (particularly Medicare spending) to restrictions on how much capacity is allowed to be added to the system.  In general, I agree with the premise that there can be less care given than in the places with the most intense care in the United States without having seriously detrimental effects on health at a population level.

However, I would like to make a few comments on what the article points out.  First, a key part of what I describe as the premise of the article above is that the conclusion is drawn at a population level.  Why is that particularly relevant?  It is relevant because the article also mentions that when there is less care some people are likely to feel like they are not getting what they need.  The article suggests that's the point.  The question is whether people are just "feeling like" they are not getting enough or are truly missing out on care.  If the latter, then what?  For the one person who is missing out on care that may truly be necessary, the change to less care does not make them better off.  It is a reasonable fear that a person may be "the one" who has worse access and is adversely affected.  However, if we only make changes if everyone in the entire system is guaranteed to be better off, we will never make any changes.

Also, when the author of the article compares certificate of need (a regulation by which health care providers and organizations must get permission to expand or to purchase new equipment) to things like a tax on "Cadillac health insurance plans", I find this to be a faulty comparison.  Here is why.

Certificate of need regulations operate largely "behind the scenes".  In other words, people don't see their effects very much on a daily basis.  If individuals look into things they may still find it problematic that a governmental authority is dictating how much care will be available, but it doesn't affect their wallet every time they pay a premium.  The Cadillac insurance tax (i.e. a tax on the most expense health insurance plans) directly affects the wallet of some group of individuals every time they pay a premium.

So, the comparison between a certificate of need regulation that rations care one way and other forms of rationing may not work.

All of this is just to say that those who are planning for how to ration care to control costs of health care in the United States without harming health at the population level need to be very careful to affect the smallest proportion of the population negatively as possible and to use rationing methods that (whether they are the most effective or not) attract as little attention as possible.  The alternative is to education the American public about the relatively low chances that any individual will be harmed by the new policy and to convince people to accept that risk in order to enjoy the benefits of lower premiums and lower health care expenses if they are in the group that does not end up worse off as a result.  It is all a matter of how our society comes to grips with tradeoffs in the future.

More on resistance to antibiotics

I don't usually write two blog entries in one day, but when I saw today's JHBSPH news feed, I just couldn't resist (no pun intended given what I am writing about).  Today, I will refer readers to another article in the Washington Post (although since it is an Associated Press article you could probably find it other places).  Another reason to write about this article is that one of my JHBSPH colleagues, Ellen Silbergeld, is quoted.

In any case, this article is about the use of antibiotics on the farm rather than the use of antibiotics in humans.  The article's byline is from Frankenstein, MO.  I can only assume that the author was aiming for some type of humor.  We are certainly not talking about engineering organisms that cause disease, but we are talking about the effects of our engineering of antibiotics when they are use in ways that do not necessarily promote long-term public health.

In the article, one farmer is quote as saying that all the public cares about is safe foods at cheap prices.  Maybe.  There are any number of consumers these days who purchase eggs, milk, or meats raised with no antibiotics.  Some insist on only this type of product. Some do it as long as they can afford.  Some mix and match whether they look specifically for labels indicating no antibiotics depending on prices and other issues that affect their purchasing decisions.

The issue is this.  Antibiotics are given to some healthy animals.  They promote growth and keep the animals from getting diseases against which the antibiotics are effective.  One key issue is, as was pointed out in the article, that we would not "sprinkle antibiotics on healthy kids' cereal".  Giving antibiotics as a matter of course allows for the development of drug resistant disease causing organisms.  Notably, a member of the Union of Concerned scientists was quoted as pointing out that the drug resistant organisms that are found in the gut of a pig on a farm in Iowa (and it could have been any state) don't stay there.  

So what does this mean?  If using antibiotics keeps the price down now but threatens our health later what is the correct tradeoff?  Should everyone be forced to pay higher prices for meats and other products raised without antibiotics or should be leave it to the private market so that people who want to pay more can and those who do not can continue to buy products produced with antibiotics in the feed?  The ultimate answer will be made by our society as it struggles with the issues outlined in the article.  This may be another situation, however, in which only the coordination and regulation hat a government can bring will solve the problem.  Having a relatively small fraction of the population paying for antibiotic free produce because they are willing to is unlikely to solve the problem.

Back to blogging about health economics and infectious disease

Yesterday, while many of us in academia were "off" or working at a reduced level, the staff who prepare the Johns Hopkins Bloomberg School of Public Health news feed were still working hard.  One of the articles posted by the news feed yesterday was on drug resistant tuberculosis in the United States.  This is an important issue.

In one of the two classes I taught at the Johns Hopkins Bloomberg School of Public Health in the eight weeks between late October and mid-December, I had an entire lecture on the economics of infectious disease.  The issues raised by drug resistant TB are critical to understand.

First, they illustrate the importance of the economics of information.  There was a time at which the overall impression was that we had a handle on how to take care of infectious disease in general.  In the time since, we've seen the emergence of HIV and the emergence of an increasing number of drug resistant diseases in the time since then.

Second, the importance of the provision of public funding for certain things.  There are some markets that are difficult to make functional as private markets.  When individuals with limited resources are faced with something that doesn't  necessarily require immediate attention, they will use the resources they do have in favor of more immediate concerns.  Why?  The personal benefit does not outweigh the personal cost.  However, the social benefit may outweigh the social cost as others will benefit from individuals at risk of things like TB (and drug resistant TB in particular) taking care of themselves.  Sometimes, the only way to achieve this is through public funding.

Third, the importance of using resources for monitoring the use of drugs that are given as treatment.  When antibiotics are not used properly they can increase drug resistance. Thus, the proper use of antibiotics is a public good as ultimately everyone is at risk of being affected when drug resistant strains of disease causing organisms arise.

Some situations require regulation and coordination that only a government can provide.  Failing to regulate and coordinate can put many (some of whom understandably do not always see the need for their tax dollars to be used for 'public health') at risk.  

If you follow the link and read the article note one thing in particular: at the top of the second screen, it notes that drug resistant infection killed more people than all cases of breast and prostate cancer combined.  Think for a moment about which gets more attention in the news.  Think for a moment about which you may have been asked to make a donation for.  Then think about which one may be the biggest threat in the long run.  I don't have a definitive answer for the last question.  But it is quite possible that the answers to which you've heard about,  which you've been asked to make a donation for, and which is the biggest threat may not match up.

More on influenza vaccinations

The Johns Hopkins Bloomberg School of Public Health newsfeed for today had a link to an interesting site.  The site points out the seeming inconsistencies between what different parts of the United States government are telling us about the combination of mercury and the influenza vaccination, particularly when it comes to pregnant women.

If everything that is reported at the site is true, then it certainly raises some interesting questions about the tradeoffs that society is ready to make.

As importantly, reflects the difficulties or organizing the control disease within a large organization like the United States federal government.  Even within an organization, if there are not strong incentives, the outcomes will not necessarily be optimal.  As I told a class I teach last week, this is a great example of the concept of transaction costs, where individuals in an organization have a cost to interacting with each other and finding ways to minimize these costs is important to the organization's success at achieving its goal.  It is interesting intersection between economics and organizational studies.

Health care price information

An article in the New York Times gives us hope that tools may be available for consumers to "act like consumers"when it comes to health care.

What does this mean?

In other areas of the economy and in our day to day lives, we spend enormous amounts of time shopping around.  We travel from store to store.  We read advertisements in the newspaper.  We listen to commercials on the radio.  Many read magazines like Consumer Reports or other related magazines.

All of this is in an effort to understand the attributes of the products we are buying and to understand the prices that we are being asked to pay and how these relate to our individual and family budgets.

In health care, it may still be difficult to understand all attributes of care--particularly when it comes to quality of care and whether and how the care is supposed to help us get better.  However, the article mentioned above describes an increasing number of tools that consumers can use to obtain information about prices and how an increasing number of medical care providers are willing to discuss prices.

GIven confusing language about prices and procedures this is just a first step in the process of preparing to act more like consumers and there has been evidence in the past suggesting that consumers find it difficult to make "informed choices" about what care is and is not absolutely necessary.  However, there is hope that we may find ways to consume like consumers in health care in the future.

Mandating insurance coverage of mammograms

So, in the week since the new recommendations on breast cancer screening there has been a lot of discussion.  There is an article in the Baltimore Sun today in which one of my colleagues was quoted.   This article discusses a number of things ranging from some using the entire discussion as a political issue (is this the start of rationing?) to the mention of the fact that many people know someone who was diagnosed with breast cancer in her 40s.


What I want to comment on directly is the following quote by Sen Barbara Mikulski (from Maryland)


"We've fought to make sure women have access to early detection and screening for breast cancer to help save lives while we are working on a cure," she wrote. "I believe that where data is conflicting, it is better to be safe than sorry."


She has proposed an amendment to the health care reform legislation that would guarantee access to regular mammograms to all women at age 40.


First, let me remind everyone that the USPSTF which made the recommendation did not actually consider economics at all.  


Second, let me remind everyone that there are a lot of things that can save lives.  If we paid for everything that could save lives for every person it would possibly help we'd be spending a lot more money on health care than we are already.  


If we as a society are willing to spend every cent for every service that might help someone, then we have to be prepared to spend more money.


Otherwise, we need some criteria to allocate resources.  Particularly resources that are either public or mandated.


One alternative would be to mandate coverage for those at high risk or for whom there is a clear medical justification.  Otherwise leave women who want to obtain a mammogram to pay for it themselves.  


Could this create two-tiered medicine?  Well, it could certainly contribute to that and we really already have two-tiered MEdicine in so many ways that it would not be "creating it".  It would simply be "adding to it".


As my colleague, Lisa Dubay, said in the article I referenced at the top, these types of discussions of what we are willing and able to pay for will not be easy but are ultimately necessary.

New Recommendation for Breast Cancer Screening

A new recommendation for breast cancer screening is in the news today.  The key is that mammography is no longer recommended for a woman aged 40-49 who has an average risk of breast cancer.  And, while it has received fewer headlines, a recommendation against teaching women to perform breast self-examinations.

The key result received a grade "C".  This means that "The USPSTF recommends against routinely providing the service. There may be considerations that support providing the service in an individual patient. There is at least moderate certainty that the net benefit is small."  USPSTF stands for United States Preventive Serivces Task Force.  Definitions of the grades of recommendations can be found here.

So what might a small net benefit mean?  It might be economic, although the USPSTF rarely makes economics a major consideration.  More directly, the USPSTF weighs benefits versus harms.  And the harms are from the potential for overtreatment.  Overtreatment also has potential high monetary costs. 

The interesting thing is that a recommendation remains to allow individual women and providers to decide whether an individual woman needs it.  This decision is supposed to be driven by clinical considerations.  What will be interesting to watch is whether payers change the incentives to receive mammography covered by insurance.  If insurance coverage is withdrawn except when there is a strict clinical justification, will women continue to get mammograms they have to pay for out of pocket.  It depends on how risk averse they are and how tight their budgets are.  It will be important to observe the changes in utilization over the next several years and to analyze how this affect women's health.

Electronic Medical Records

An article in Sunday’s New York Times, noted that to date there has been little demonstration of improvement in care or decrease in costs associated with the implementation of electronic medical records. The article does a good job of making a point about why this may be the case.


Simply put, not all hospitals that have implemented the new records have used them to their full extent. Any policy that is going to pour money into additional implementation of electronic medical records will not necessarily solve this problem. It is suggested at the close of the article, that a policy to encourage the implementation of such records should focus on providing incentives to make full use of such records. A key question is how to provide such incentives and whether policies can be used to provide such incentives.

Another reason for a lack of change may be that making any change when care is already “pretty good” is going to require a significant amount of resources. For example, the article points out that “In the heart failure category, for example, the hospitals with advanced electronic records met best-practice standards 87.8 percent of the time; those with basic computer records, 86.7 percent; and those without, 85.9 percent”. In short, while we would certainly like everyone to be at the highest quality standards, if the hospitals using no electronic medical records are already meeting best practice standards 86% of the time, there is not that much room for improvement.

Perhaps without a wholesale, system-wide improvement in the use of electronic medical records throughout the system, any change will be only marginal.

ER Waiting Times

Here is an interesting Baltimore Sun web blog piece that picked up on an article in the Archives of Internal Medicine.  The key point is that ER waiting times are getting longer.  Many people who present to ERs are not seen in the recommended time from when the present.  People are receiving poor quality of care as a result.

Is this news?  Not particularly.

Is this all the fault of the hospitals?  No.  Many patients are using the ER for reasons that may not be truly emergency situations.  The incentives for them to go elsewhere (from limited medical care provider office hours, to a lack of insurance for medical care provider office visits, to a lack of time off from work) are limited.  Perhaps we could do things to change the incentives as part of health care reform--covering urgent care clinics would help.

However, let us also consider the supply side.  With a relatively fixed physical plant, what we may be seeing are diseconomies of scale.  In other words, as the output grows, the efficiency with which the visits are being produced decreases.  As the ER's operate within a fixed space to serve a growing number of patients, the providers who are attempting to provide the care find themselves unable to provide the care as efficiently.  Sometimes having more patients come through can actually be associated with a decreased average cost per patient.  At some levels this can lead to greater specialization and provide opportunities for useful coordination.  However, we are seeing the costs increase as the individuals stay longer and the coordination of skills and personnel needed is more difficult when the organization is basically at capacity.

We will likely continue to see the time for and cost of ER visits increase until we provide greater incentives for patients to obtain  non-emergency care elsewhere.

Medical spas

In yesterday's New York Times there was an article about medical spas.  The article is subtitled: "let the buyer beware".  This is a general premise in economics.  People should be responsible for their own choices (consumer sovereignty).  In other markets we let people make their own choices.  In medical care (particularly with respect to elective procedures outside traditional medical care settings) we may need more regulated markets than exist at present.

Just this morning, my wife asked my son to make sure that some DVDs he had ordered through my wife's eBay account were acceptable.  She was then going to post feedback for the seller.  With eBay everyone is expected to post good or bad feedback so that other potential buyers and sellers working with that individual in the future have all the information they need to determine whether they want to engage the person in a market transaction.  If a person takes the chance despite poor feedback and finds no way to get their money after a bad transaction, they are out some money.  But it is usually just money.

If a person makes a decision to undertake a medical procedure, he may be risking his life.  In the article it mentions a liposuction that lead to a death.  The key is whether consumers understand all the potential consequences of a procedure and judge how a particular provider's expertise (or lack of expertise) affects the likelihood of negative potential consequences.  Unless consumers learn more about the poor consequences and likelihood of these, the government should take at least some role in regulating the market and making more information available for consumer participants in the market.  This is what is being debated in several states as described by the article.

More on Obesity

So, there is a new report from some of my colleagues at the Johns Hopkins Bloomberg School of Public Health that suggests that teenagers overweight and obesity issues may not be due to a lack of physical activity.  Once again, detailed in the School's news feed.

The findings suggest that teens may actually be watching less TV rather than more.  It does not mean that they are spending less time in front of some kind of screen (computers and personal digital devices still offer many distractions).  The findings, however, suggest that there have not been huge changes in the amount of physical activity.

So, what does this mean?  Well, if we are assessing the cost-effectiveness of alternative ways of reducing overweight and obesity among teens, this does give us some insight.  While both increasing activity and reducing caloric intake are likely to be bring down weight, the key is that what has changed in recent years may have more to do with caloric intake than with activity.  It is not necessarily easy to change things "back to the way they were" but it may be easier (and require fewer resources) to change things back than to achieve new levels of activity or lower levels of caloric intake.  While I have made some comments in passing that encouraging physical activity may be a cost-effective way to achieve weight control among children, this may not be the case.  Or it is at least likely that efforts to control caloric intake would be more cost-effective.

What Does it All Mean?

In Sunday's New York Times, there was an article entitled, "Changing Numbers Make Meaning Even More Elusive".  One key take away message from this article is that when we are trying to understanding the health care reform efforts, simply looking at the numbers that are part of the headlines is probably no better than taking what you see in a television commercial about a product as all the information you need to make a decision about whether the purchase the product.  And, the numbers in the headlines don't seem to last very long.

Why?

First, there are many aspects of this discussion that are not part of the main discussion.  The article gives an example of higher Medicaid payments that were part of the stimulus package in the first year of the Obama administration being continued.  These are not part of the health care reform discussion directly but add over $20 billion and may help to ameliorate concerns about other aspects of the bill.

Second, as the proposals become more clear and people have a chance to assess all the incentives we come to a better understanding of what would happen.  The article describes the expected response to incentives.  The public plan that is under the most direct discussion at the moment will not be able to impose Medicare payment levels but will have to negotiate rates with providers.  This will not necessarily save any money and make the premiums lower as private insurers already do this.  And private insurers have an incentive to maximize profits rather than just to break even.  So, private insurers may actually be better at this.

Additionally, the public plan may attract people who have historically had difficulty getting private insurance.  These people tend to be sicker.  Maybe there will be savings in administrative costs.

So, of three possible differences: one may hold down premiums, one is likely to make no difference, and one is likely to increase premiums.  What may be apolitically viable plan that encourages market behavior will not likely help to achieve the goal of more affordable insurance for those who do not have insurance at present.      

Riders for Specific Procedures

Health insurance in the United States is shaped by many mandates . An interesting issue has arisen with respect to the debate over how abortion should be handled in health care reform. Now, this post is not intended to take a position one way or the other on abortion.  I have one--but that is not the issue here. Rather, this post is to prompt some thinking about what people should be required to buy.


Why do insurance policies have riders in general? When I purchase car insurance, I can purchase extra insurance to pay for a rental car while my car is in the shop or go without that coverage. When I purchase home owners insurance, I can purchase extra coverage against sewage from the city's water line backing up into my house or remain at risk for such an event. It is my choice whether to accept the risk or purchase insurance.

At present, there is discussion of whether abortion should be offered as a rider on health insurance policies. In other words, make the basic policy not cover abortion. Make insurers offer coverage for abortion as an "add on". We could apply the same logic to other procedures, but abortion is the current topic of debate.

Is this fair? The argument that this is not fair goes something like this. This is already covered without a rider. Making it a rider would make women have to anticipate an unexpected event. This would take away coverage they have. The argument that this is fair would go something like this. If it is already in most plans, then women are already paying for it. The whole point of insurance is to purchase protection against unplanned events (I certainly don't plan to have a car accident or have city sewer water back up into my basement). If someone has strict views that would preclude them ever having a demand for an abortion why should they have to pay for that possibility. If some women want to remain at risk, that is their prerogative. People who want the coverage can still buy it. It is just that their premium will then reflect the risk that they pose--in terms of the probability of the event and the cost of the event.  Just like any rider is priced in any insurance market.

It would be difficult to do this for every service because we don't buy health insurance "by the service". Suppose someone says they will never get a colonoscopy? Suppose someone says they will never get any specific procedure? Could they price their insurance accordingly? Probably not. So, the idea of riders may be impractical to apply broadly (beyond the abortion issue), but riders for insurance coverage that are left to the choice of the individual are not so different from the way that other insurance markets operate.

A major company drops the copayment for primary care physician visits

The Wall Street Journal reported this week that IBM was dropping the copayment for primary care visits.  In other words, employees (and their insured family members) who had to pay $20 to go to a primary care physician now have to pay nothing.  The goal is to save costs.  What is the logic here?

Step 1: Decreasing the cost of primary care visits will lead to greater use of primary care providers.  In some ways this is a "no brainer".  Make something less costly and people will use more.  One question is whether they will use it well.  Another question is just how much more.  From a back of the envelope calculation approach, we can take one estimate of physician visit elasticity (by what percentage the quantity of something changes relative to the change in price).  A 100% decrease in price could result in a 20% increase in utilization. 

Step 2: What does the increase in utilization mean for IBM?  Well, it now has 20% more visits and it (or its insurer, although it is likely self-insured) is paying for the entire visit rather than the visit cost less $20.  So far, this means that the company (or the employees through premiums) are paying more--not less.

Step 3: What happens to the demand for ER care and hospitalizations?  We hope that those are substitutes for primary care--in other words when the price of primary care goes down the demand for ER care and hospital care goes down.  Technically, this is just trying to keep people out of the hospital by getting them better primary care.  Economically, the question is what is the "cross price elasticity of demand".  In other words, when we change the price of one service (primary care) how does it affect the demand for others.  So, it all depends on how good primary care is as a substitute for ER and hospitalization.  That will depend on the quality of the primary care provider and the decision by the patients to use primary care.

Step 4: Assess overall economic effects.  Once we know something about how good primary care is as a substitute for other forms of care, we can project whether IBM will save money or whether paying $20 extra for all the visits that were happening already plus the entire cost for each extra visit as demands change will simply be too expensive to offset with the hoped for avoided hospital and ER care.

Step 4:

The Value of Prevention

I got The Nation's Health in the mail yesterday.  This is APHA's newspaper that I think has been mentioned in my blog before.  I read with interest the cover page article titled "Value of prevention debated as part of the U.S. health reform"  (This is in the November issue which may not be online yet.)  The entire article is basically an argument for communicating about the value of spending on prevention rather than trying to promote prevention as cost-saving.  I have no problem whatsoever with that argument.  It is a reasonable argument to make.  There is plenty of evidence suggesting that prevention saves money at a population level in a limited number of cases--the prevention certainly saves money for the person for whom a disease or its progression is prevented but the prevention is applied to many people who will never get the disease or suffer from its progression.  However, many preventions are still cost-effective in some sense.  So why the fuss in the article and why might I find the presentation in this article to be of concern?

The first sentence of this article is "Prevention, a touchstone of public health, has landed in the crosshairs of the national health reform debate, with cost-effectiveness pitted against the sometimes incalculable value of a healthy life."  That is an interesting sentence.  I don't see the science of cost-effectiveness as being pitted against the value of  human life.  And, the value of human life (from a policy perspective) is not incalculable.  While we may not be able to express a value, we ultimately decide that there are some things we are not willing to do to protect our lives.  That implies that the value may be difficult to calculate but is certainly finite.  And understanding that incalculable is not synonymous with infinite is the first step in sorting out this discussion.

One difficulty in this debate is that some people interpret cost-effective as meaning cost-saving.  That is not what people who "practice" the science of cost-effectiveness ever mean.  This is an important distinction between the casual use of terminology and the academic (or jargon-based) use of terminology.  It is why part of the argument on which we must focus is the communication issue so that we are all talking about the same thing.

And, if we switch the conversation to "value", I can't figure out why that is any different from cost-effectiveness--or at least one interpretation of the cost-effectiveness science called cost-consequence analysis.  Cost-effectiveness ultimately asks "how much more health are we getting for more spending".  And, just as we would in a grocery store, hardware store, shoe store, or book store, we then ask "is that too much to pay for that amount of health."  How is assessing "value" any different?  Maybe we don't come up with a measure like quality adjusted life years and put the outcomes of care for all conditions on the same scale.  Maybe we just describe the extra costs and the health benefits.

Even if we don't want to place a value directly on human life, we still place an implicit value on human life.  We still will choose to implement some activities related to prevention and not implement others.  Even if everything seems like a relatively good buy there is a limit to our resources.  What I ask is whether we want to talk about value in terms of numerous outcomes and leave the decision about whether it is worthwhile to spend the money to decision makers who don't have to explain the choices in a systematic way or whether we want to try to achieve some measure that helps us to compare the efforts aimed at different programs to use as the basis of comparison, while acknowledging that there may still be things that are difficult to capture.

Value is a good concept.  But even if we agree to look at value we will ultimately have to decide how to measure that value.  And we can spend as much time debating the appropriate measure of value as we are now spending debating whether cost savings or being a good value should be the right criterion.  The key is that we have to realize that not everyone comes at this from the same perspective and respect those differences in the debate.

Consumer Electronics Can Help Improve Patient Health

The Johns Hopkins Bloomberg School of Public Health news center today publicized a journal article by a team of individuals that includes many with whom I've worked.  Figured I should say that to start, so that if anyone questions my incentives to be easy or hard on this article, they will know how I relate to the authors.  In any case, the team reviewed evidence related to whether consumer electronics help to improve patient health.  You can find the news center story  here.


In any case, what these researchers found was that personal informatics tools can be helpful and there is no evidence that they are harmful.  While I do not often pull full paragraphs from the sources I am citing here are some definitions that will help:


"Consumer health informatics applications are defined as any electronic tool, technology or electronic application designed to interact directly with consumers, with or without the presence of a health care professional, and that provides or uses individualized (personal) information to help a patient better manage his or her health or health care." 


"Personalized informatics tools can include applications such as online health calculators, interactive computer programs to aid decision making, SMS text and email messages, which can be applied to a variety of clinical conditions, including cancer, smoking, diabetes mellitus, physical activity and mental health disorders."


The authors clearly indicated that there is no evidence of economic benefit or harm, and it all seems quite harmless.  So, why write about this?


I have a concern.  These tools seem to be able to make a difference now.  However, I wonder about the future.  Why?  I can think of any number of times that I have been fascinated with a new tool (of any sort) and eventually found it to be overwhelming (perhaps Facebook?), or not as useful as it originally was, or simply no longer novel.  It seems like human nature sometimes just to move on to the next thing.  Think of the number of people now who complain about how much email they get when it was supposed to make our lives easier.


So, what seems like a good thing now because it makes it easier and quicker to get the information (thereby reducing the cost of getting information and thereby reducing the constraints on staying healthy) may turn out to be a fleeting change.  This may be particularly true if in the process of using a tool that does not require the presence of a health care professional, the involved professionals lose site of the inherently hands on nature of patient care.  If that happens, once a person tires of a new technology, the need for continued information may be there but the competing demands may grow, the tools may no longer seem as interesting, and the long term consequences may be unclear.


Don't get me wrong.  As a fan of email, my iPhone, electronic music production, Facebook, and blogging, I love technology.  I just worry about too much reliance on a set of tools that may not live up to expectations once they are treated as "been there--done that" kind of technologies.

Interesting link with obesity

In the October 26 Baltimore Sun, there is a very short article on the link between childhood neglect and obesity.   While there is nothing particularly economic about the article, I would draw your attention to this as it illustrates how difficult it can be to determine where to "draw the boundary" when we are conducting a cost-benefit or cost-effectiveness analysis.

The article comments on a study in the journal Obesity shows that children who are subject to various types of abuse and neglect are more likely to be obese as adults.

So, if we were to do a cost-effectiveness analysis or cost-benefit analysis of a program to reduce childhood abuse and neglect, we could think of a whole bunch of things that would be offset by a successful program of this sort.  We'd have less use of child social services, we'd have less use of criminal justice departments, we'd have less use of a few other types of services.  These are all important and are much more short run than the problem with obesity as adults.

However, given the quality and length of of life impact of obesity, a team trying to demonstrate the cost-effectiveness of an abuse and neglect prevention program would do well to include the obesity relationship.  Of course, this only works if the relationship that has been shown in one study generalizes.

Why did I not mention the costs of obesity?  At least one study has shown that over a lifetime healthy adults may spend as much as obese adults.  Why?  In any given year that both individuals are alive, it is probably the case that the health adult will spend less.  However, healthy adults are likely to live longer and accumulate expenditures that are as great over a lifetime.

All of this goes to show how complicated an analysis of abuse and neglect prevention is when we try to extend beyond the simplest relationships and associations with the most directly affected outcomes.

The Ongoing Saga of H1N1 Vaccinations

The Washington Post reported on the "scramble to parcel out the H1N1 vaccine". This is an interesting article about how people have been affected by the lack of availability of H1N1 vaccine at this point.


Interesting observations:

(1) Some people are making a lot of calls looking for the vaccination. The plan, of course, was to have people getting vaccinated at this time. Plans were made for what the article calls a massive vaccination campaign. The resources that could have been used for such a massive campaign now must wait to be used while other people are handling far more phone calls than expected. Not a very efficient use of resources, although not totally within anyone's control and certainly not by choice. Points to the difficulty of planning under uncertainty--a key facet of economics.

(2) The article also notes "incomplete or conflicting information on state and local government Web sites". This would be viewed as bad in general. It is viewed as particularly disadvantageous from an economics perspective where choices are supposed to be made with full and accurate information. So, even if people want to make rational choices, it is made difficulty by the failure to provide all the information necessary.

(3) A note that confidence in the government's ability to respond is down. This may or may not affect this influenza issue much but is bound to affect how people plan for future infectious disease issues or disasters. If people do not feel they can rely on central planners, they will need to plan for themselves. To a degree, this is fine and probably appropriate. However, if high levels of coordination are needed for future responses and people are acting in their own interests and feel averse toward listening to authorities they do not trust, this could affect the ability to respond efficiently.

(4) The demand for the vaccination is varying around the country--at least in part correlated with the spread of the virus. This demonstrates the basic response to take more preventive steps when the perceived threat is higher.

Just a few examples of basic economic concepts being demonstrated by people's behavior with respect to H1N1 vaccinations.

Tradeoffs with Formaldehyde

A Wall Street Journal article highlights how regulations that can improve health can also increase costs.  There is a law under discussion that would put a maximum on the amount of formaldehyde emissions in the home.  This would affect the production of materials like "particleboard, plywood and medium-density fiberboard, all commonly used materials in household furniture."  The key is that producing these products with less formaldehyde will make them more expensive.  The key question is how much safer are we with lower emissions (manufacturers say that we are already quite safe) and how much more it will cost.  We must essentially ask what individuals are willing to pay and what the market will bear as a price to know that one's furniture poses less of a risk.  Not a simple question--particularly considering the importance of furniture in our lives and the relatively low risks from formaldehyde.

If people knew the risks and the options, the market could in theory solve this problem itself.  Just like some people like cherry and others by much less expensive woods for their furtniture based on appearance and durability, we could see a new line of "health safe" furniture that those who could afford could pay more for while leaving those who find the risk of little consequence to purchase less expensive furniture.

Cancer Screening

In yesterday's New York Times, there is an article that discusses just what is gained from screening for prostate cancer and breast cancer. This is an interesting topic, because I have (honestly) been puzzled by the term overdiagnosis of cancer in the past.

What does this article tell us? It tells us (reporting on a recent study in the Journal of the American Medical Association) that screening for prostate cancer has led to a lot more diagnosis of early stage cancer but not so much less diagnosis of late stage cancer and not so much of a decrease in deaths due to prostate cancer. While there has been some debate about prostate cancer screening that has made it to the popular press for years, the fact that questions are also being raised about breast cancer screening is a relatively new point in the general popular press.

What does this mean? We spend a lot on screening as a society. We spend a lot on treating early storage cancers. We have changed late stage outcomes less than might be expected. We create risks for people by treating them early.

Does this mean that screening is not cost-effective? Not necessarily. It only means that some cancer screenings are not the ultimate solution for the relevant cancers. And it suggests the need for more research that will help medical care practitioners to identify which cancers are more likely to be dangerous to the patients and which cancers are less likely to be dangerous. If this could be figured out and the treatments could then be directed only to those most at risk for adverse consequences of rapidly growing cancers, the cost-effectiveness of the combination of screening and treatment could be greatly increased.

It will be interesting to see how this discussion continues to develop and what medical care practitioners and the general public make of the changes in the tradeoffs that this implies in the future.

Health Care Costs and History

There is an editorial in today's Wall Street Journal that focuses on health care costs and history. The main take away message is related to a mentor's comment to me that I have blogged about before--health economics is the study of unintended consequences. The key here is not so much that the consequences were unintended but more unanticipated and a demonstration of just how tenuous economic projections are. The figures given show the original projections for different programs (including Medicare and Medicaid in general, specific aspects of these, and the state children's health insurance program). The key findings--projections consistently underestimate the actual expenditures. Does that mean that anyone else has done better? Not necessarily. It just means that we should be very cautious when interpreting any projections (government, congress, or otherwise) on how much money we will spend under any health care reform.

Gardasil won regulators' approval for use in males

The Wall Street Journal reported that Gardasil (the vaccine against HPV which can lead to cervical cancer in women) has been approved for regular use in males. The choice of what to do with this information represents an interesting study in economics.


What do males get from HPV? Well, they can get genital warts--those are not as life threatening as cervical cancer. There has been an increase in cancers of the neck and throat. And, most importantly, a male with multiple partners would have the chance to pass the HPV on to another female placing her at risk for complications of the infection including cervical cancer.

Is there any harm in allowing Gardasil to be given to males? Not really as far as this economist's read goes.

Are parents of boys likely to decide to give their boys a vaccine that will have much more benefit for the women they may eventually have sexual relationships with? Perhaps, but it does not seem likely. Why not? First, most parents don't like imagining their children with multiple sex partners. (At least not most parents I know.) If two individuals are completely monogamous for their lifetimes, this is a non-issue. Maybe that is unrealistic, but it is a possibility and some/many parents like to maintain the idea that could describe their children. Second, the risks for the women are much higher than the risks for the men. This is an example of an externality. The boys (and the parents on behalf of the boys) do not necessarily see the benefit of such a vaccination.

Should we mandate that boys get the shot? That seems a bit overly paternalistic and like a boon for the manufacturer of Gardasil.

Would a voluntary program for boys be more cost effective than trying harder to get girls to get the vaccination? Not according to the latest research in the area.

So, the FDA's decision is probably clinically acceptable but a lot more thinking needs to be done before the opportunity to vaccinate boys is turned into any sort of policy.

Choosing a Medigap Plan

In the United States, Medicare is the nearly universal plan for adults over the age of 65.  However, it does not cover all costs.  As a result many older adults also buy Medigap plans.

There are twelve plans to choose form--already a difficult choice.  Some older adults purchase right away when they become eligible at age 65.  Others wait.

For those who choose to wait over the next several years, the choice may become more difficult in the next few years as indicated in a New York Times article.

The health care bill that is under continuing discussion in the Senate would change the copayments for visits in the year 2015.  If that were to come to pass, an older adult deciding whether to buy into this program in the years between now and 2015 would not only need to compare the potential savings on out of pocket costs from buying a plan now with the savings on premiums from not buying a plan now, but also look at the tradeoffs from facing higher copayments on new policies bought in the future.  Definitely an incentive to purchase now.  However, this is an information subtlety that many older adults may not understand.

The question the government must address is whether this is an appropriate incentive for older adults and how to provide the information in ways that will make decision making as rational and as well grounded as possible.

Prostate Surgery

An article in yesterday's New York Times talks about an article that describes different results from different types of prostate surgery. A key finding is that minimally invasive surgery is associated with similar outcomes with respect to cancer, fewer short-term side effects, but more long-term side effects.


Why is this "economics"? Quite simply it demonstrates tradeoffs. A main short-term risk that is referred to is pneumonia. Main long-term risks are impotence and incontinence. This is something that society in general might have opinions about and is certainly something that individual men who are undergoing prostate cancer treatment have opinions about. This can be analyzed using a cost-effectiveness analysis to describe average results within a population and can also be analyzed at the individual level looking at a "decision support system" which is intended to provide information for an individual to make decisions What are the costs and risks associated with pneumonia? What are the costs and risks associated with incontinence and impotence? Is there specific information about these risks for men just like the patient in question?

It is also economics because a key question is why there is the demand for a service that has not been shown to be clearly superior. This is an interesting question about technology diffusion, marketing, and how hospitals make decisions about the expected return on investment from the acquisition of new technology. Hospitals that calculated a favorable return on investment invested in new technologies and now need to achieve the return on investment.


As a result, the more expensive and less invasive technology may continue to penetrate the market despite mixed clinical evidence. This is another point at which some additional regulation or oversight of investment and coverage decisions may help the market for medical care.

More on the tax on high cost health insurance plans

An article in Monday's New York Times provides a thorough discussion of the potential effects of the tax on high premium plans.

A few interesting observations:

1. If employers and employees look for cheaper plans to avoid paying premiums that are so high and the related tax, then employees could end up paying more for care and employees might get raises.  If the employees get raises, they will pay more income and payroll taxes.  It is important to recognize that the money they would get back to replace the high premium insurance plans would be taxed even though their benefits are not taxed now.  So, even if there is shopping for cheaper health insurance plans, the individuals may still end up paying more taxes.  In other words, don't think that avoiding taxes on health insurance will necessarily mean avoiding all new taxes.
2. The article suggested that employees will blame employers rather than the government for the increased taxes or decreased benefits.  That shows an unintended consequence and the importance of using economic incentive studies to follow all the consequences of an action when doing an economic analysis and when just trying to figure out things in life in general.  This unintended consequence of a negative relationship between employers and employees would be a failure to trace all consequences.

So, two key points from the article (and there are others if you choose to look at the entire article) are that avoiding taxes on insurance does not necessarily mean avoiding all new taxes and that there may be important impacts on the perception of who is to blame that are misoplaced because of an inability to trace all consequences.

An Economist, An Ethicist, and An Internist

No, this is not the start of some bad joke.  Instead, this is a short story about a panel presentation in a class on health policy yesterday.  I was asked to participate in this discussion yesterday with the main focus of attention being obesity. 

What was interesting about this presentation?  Well, the three of us on the panel really didn't have all that different views of what causes obesity.  A combination of factors that include the food environment, other parts of the market economy (like people's jobs), the "built" environment (like a lack of sidewalks for walking to school and exercise).  We all agreed that is was partly a matter of social factors and partly a matter of individual choice.

Did we disagree?  I think only on emphasis in terms of the policy solutions.  As an economist, I tend to rank consumer sovereignty and market efficiency as the top two considerations.  Not that I don't consider other things, but this is really what neoclassical economics is designed to focus on.  My ethicist colleague is interested in "respect for the individual" (this sounds a little more gentle than consumer sovereignty) but then asks how the least well off in society are affected.  Can an economist ask the question about the least well off?  Sure, it is just not easy to quantifiably rank the least well of in comparison with others. 

The discussion was interesting. Students gave it positive reviews.  We'll probably do it again.

New rules for food sold in schools

An article in yesterday's New York Times discussed new rules about the types of snacks that can be sold in schools. They have to be healthier. A key set of issues were raised:

(1) Would schools receive less revenue as the demand for less healthy snacks is assumed to be lower than the demand for healthy snacks?

(2) If schools have a choice oaf how to promote children's health, why not require a daily physical education class?
On the first, with the right marketing, there might even be more demand for healthy snacks than for less healthy snacks. Seems reasonable to assume a lower demand but this is not guaranteed and is an empirical question.
On the second point, the incentives just don't line up. Schools are asked to put things like "No Child Left Behind" and other standardized testing first. Changing the rules about what food can be sold may be much less effective than physical education. But physical education requires a teacher and takes time away from other activities. In short, the incentives to say you are doing something are pretty strong and this can be done much less expensively by changing the food rules and claiming progress than by really reforming the children's educational process and how health is related to that process.

When a little regulation can make a market much more efficient

Usually, we don't think of economists mentioning regulation and efficiency in the same sentence--unless one is arguing that regulation will lead to inefficiency. However, there is a front page story in today's Wall Street Journal entitled "Hospitals Find Way to Make Care Cheaper -- Make It Better". (Unfortunately, for this one you'll need to either have an electronic subscription or get the paper copy to see it, so I won't provide a link.) This article focuses on experience in Pennsylvania with the Pennsylvania Health Care Cost Containment Council.

This council has required hospitals to report "death and complication rates...from more than 50 types of treatments and surgery at hospitals." Key finding: when these data are available to consumers—and to the employers of consumers—the care gets better and costs often go down.

Why is high quality care less expensive? Fewer complications and readmissions.

Why does this type of information lead to better care? Hospitals realize that if their quality is poor they will lose business.

Why are employers as important as consumers?  Employers are often the ones who choose which health plans to make available for their employees and the employers can work directly with health plans in ways that individuals cannot to make sure that patients are directed to higher quality hospitals?

Why does this information not come out of a free market on its own? Quality of medical care is hard to judge and the producers don't have to make as much effort if their quality level remains a mystery.

So, does this mean that all regulation is good? No. But in a situation in which there is a product with quality that is difficult to identify and prices that are not easily apparent to consumers, forcing producers to be as transparent as possible with quality data (and, arguably, there still are some shortcoming in the system) and prices can make the system operate more efficiently.

Reducing payments to physicians

In today's Wall Street Journal there is a commentary piece about a provision of the Baucus bill that would cut payments to any physician in the top 10% of costs to the program by 5%. What type of incentive would this set up?


Well, interestingly, even if every physician cut their costs, 1 in 10 doctors would still be in the top 10%. So, this starts off as a bit of an odd idea when it comes to potential implications. While a more complicated rule might be difficult to interpret, a more complicated rule might also be more fair. For example, why not penalize the top 10% of physicians based on costs it they exceed some level of cost growth over the previous year but not otherwise. That way, on the outside change that all physicians cut their patients' utilization by 5% in the same year, the top group would not be penalized for already having been very expensive when their own behaviors made such a difference.

The other problem with a system like this is that it is not clear which services would go unused when physicians (in concert with their patients, hopefully) try to reduce health care utilization. In short, previous studies suggest that when there is a cost-based pressure to control expenditures, a mixture of care that would not be considered essential as well as care that might be deemed necessary are cut. So, in physicians' rush to control costs to avoid the penalty, in the end the physicians who remain the highest sources of expenditures will still be penalized and in the process of reducing care they may forego some very important and necessary services.

Consider: Research shows children whose mothers stay home have healthier lifestyles

Here is a link to a commentary in the Baltimore Sun about a professional journal article from the Journal of Epidemiology and Community Health.  The main point of the article as interpreted in the Baltimore Sun headline: "Mommy Wars: Working mothers have fatter kids, study says".

Main findings in terms of "strikes against children of working mothers":

• more sugary beverages between meals
• used the television or computer more frequently 
• driven to school more
• ate fewer fruits and vegetables

The economic questions are twofold: (1) what does this do to kids?   (2) is there an economic interpretation for these results?

First, and let me be clear about this, the research seems to focus only on lifestyle.  So the headline (about fatter kids) may or may not be right.  If it is, these kids will probably have higher medical care spending in the long run.   However, with those four "strikes" against them, the kids with working moms (on average) are likely to be heavier.  It is always important to remember that this is just 'on average".  There are  plenty of healthy kids of working moms--and plenty of not so healthy kids of stay at home moms.  And, if the differences are "statistically significant" but not necessarily clinically meaningful, it may not result in much heavier kids.

Second, there is a simple economic logic.  The thought is that working moms have less time to monitor, occupy, and prepare healthy food for their children.  This does not mean that if they were not working they would do any of these any less than moms who are not working now--they care about their kids just as much.  It only means the constraints they face because of work lead to different choices.  The Baltimore Sun commentary raises a point about what role dads play in this equation.  Speaking from personal experience, I agree that it is unfair to place the whole burden on moms.  The key is how parents or the combination of all those who care for a child's well being use their information and allocate their time, money, and effort to care for their children.

People with different information facing different constraints are likely to make different decisions.  The piece in the Baltimore Sun reminds us of how this can affect the children.

Overheard in the grocery story checkout line

On my way home from work today, I found myself at the grocery store that is affiliated with the chain at which we shop the most but that is the slowest of the three stores I go to most often when it comes to getting checked out. So, I had a long time to stand in the checkout line at 5:55 this evening. The lines were ten people deep. The woman in front of me had a blue tooth phone in her ear. I overheard her saying something to the effect of "they tried to give my sister's boy the flu shot, but why should he get it. It is just like giving him the virus. Why not just wait and see?" Using a killed virus, it is not just like "giving the child the virus". I thought that the press in general has done a good job of trying to convince people that the flu shot will not give them the flu.

Why is this economics rather than just an interesting observation of human nature to believe what we want to believe rather than information that is put forward? It is an economic question because you could ask "Why did not you try to set here straight? You are a public health economist after all.

That is an interesting question. If the disease were not a contagious disease, what she or her sister chooses to believe and chooses to do would not affect me. However, since we are discussing an infectious disease, her actions and her sisters actions and how these actions affect their kids has the potential to affect my kids or me. We call this an externality.
Why was I not concerned enough about the externality to "set her straight". First, I could perceive that the cost associated with this particular person not getting her son a flu shot would have a limited chance of affecting me. Why? Unless I shop at that grocery store again in the near future (and after the 10 deep checkout line I do not expect to do so), I probably won't come across her and I have the preconceived notion that my kids won't come across hers or her sister's?

Second, I could perceive that even if I do cross paths with the woman, her sister, or their kids I am not likely to be affected. I've had a few bad colds but never really the flu. I am generally healthy. Haven’t had anything yet this fall. So, perhaps I just think there is no need to worry.

Third, I could perceive that even if I change one person's behavior there are so many others out their whose behavior I will not change that one person's behavior change will make little difference in population level outcomes.

Finally, I may perceive the cost of changing a person's behavior to be too high. In other words, even if I could see a tangible potential benefit for myself, the effort it would take from me to help her change her behavior was "too much" to be worth it or at least more than the value of possible prevention.

So, while the decision not to vaccinate that I heard being discussed was not necessarily economically rational (given the misinformation), my decision not to do anything could be considered rational and could suggest how I view the world working. And, just for the sake of argument, even with all the right information about the vaccine, choosing not to get one still could be an economically rational choice.

Higher speed limits

Today, I received my copy of The Nation's Health, a newspaper put out by the American Public Health Association.  In one section of the "paper", articles from the American Journal of Public Health are highlighted.  A recent article focused on the changes in speed limits that date back to 1995.  In that year, the federal regulations that had kept urban speed limits at 55 MPH and rural  speed limits at 65 MPH were lifted and states were allowed to set their own rates.  There are some states with rural area speed limits that are now 70 or 75 MPH.

Why is this of interest and why was it studied?  The article in The Nation's Health suggests that 12,500 deaths and 36,600 injuries were associated with the higher speed limits.  The deaths alone have been assigned a dollar value of $12 billion.  That translates into just under $1 million per death.

This brings us to the economic questions of the day.

• What is a life worth? 
• What does accepting $12 billion in lost life for faster speeds mean about our society.  

The value of life is often estimated at more than $1 million.  So, it is interesting that the researchers used such a conservative figure.  This is based in part on lifetime earnings and in part on estimates of how society has made tradeoffs between money and life in the past.  Interestingly, while the estimates are often over $1 million, the range of estimates is wide.

As for the second question, to the degree that we understand the $12 billion loss and agree that that is a reasonable valuation of lives lost, it means that we accept this in order to gain something from getting  where we need to go more quickly.  The study did not present an estimate of the value of getting places more quickly.  It is not clear that most people understand what $12 billion means or think that their own behavior will affect this.  The assumption is that society feels that the value of faster transportation outweighs the $12 billion loss (as well as the higher gasoline consumption associated with higher speeds).  It is quite possible that this is a rational choice at a societal level--even though for each family with a member who dies as a result of faster speeds it is an awful experience.

The researchers or the original article stated that "policy decisions that appear harmless can have long-term repercussions" and recommended reducing speed limits again.  I am not convinced that this policy was expected to be harmless in the first place or that society as a whole is not willing to accept the tradeoffs.  We cannot reduce the risk to zero.  We must decide what risk at what cost in return for what convenience is appropriate.

More on H1N1

The economics of H1N1 and influenza in general have been things that I have commented on multiple times.  Today on the Marc Steiner show, I heard a physician/vaccination researcher being interviewed who made a really good comment.  The H1N1 infection does seem to be any worse for complications than the general flu--in other words of every 10000 people who are infected the same number will have cases that are bad enough to land them in the hospital and/or die.  The key is that more people are getting the flu (the guest described the "attack rate"  as four times higher) because no one under age 50 has been exposed to anything like this version of the flu virus before.

How does this relate to economics?  Well, consider someone who had not gotten an influenza vaccination in past years.  If this person recognizes that hospital beds are likely to be more crowded with H1N1 cases, the person might be more likely to get a seasonal influenza vaccination.  In addition, an otherwise healthy young to early middle age adult might reach the conclusion that the risk of H1N1 is sufficiently high to warrant getting a vaccination even though he or she had not in the past.  Again, this is the overall risk of complications and death which is made up of the two parts and the one part (getting influenza) has changed considerably.

In summary, a lot more people will probably get flu shots this year.  Even me.  Is it because of public health officials' exhortations?  Perhaps in part.  But it is also a simple economic reaction to a change in risks.    

Kids' reactions to medications

In today's Washington Post, there is an article about kids reactions to medications.  The article's headline is "bad drug reactions".  I have chosen to use the term medications to emphasize that we are talking about legal prescriptions rather than "drugs" in the sense of illegal drugs. 

The article describes a professional manuscript published in the journal Pediatrics that indicates:

• "It's [the results are] based on national statistics on patients' visits to clinics and emergency rooms between 1995 and 2005. The number of children treated for bad drug reactions each year was mostly stable during that time, averaging 585,922"

What does this mean? It may mean that physicians and pharmacists don't communicate well with parents. It may mean that parents don't implement well drug administration, regardless of what has been communicated to them. It is not meant to say that the pharmaceutical companies purposefully put dangerous products on the market. It is worth thinking about the economics.


Why is there not better communication? It may be a matter of time and what the physicians and pharmacists are paid for (and ARE NOT paid for).

Why do parents not administer better? It may be a matter of rushed time, also an economic issue.

As 5% of the children needed hospitalizations, this represents over 25,000 hospitalizations per year that result from giving things to try to keep our kids healthy. Given that this is 25,000 out of millions of children, the chance that this will happen to any one child is small. However, it is worth thinking about how much could be spent on better research, better incentives for communication, and better incentives for parents to understand the communication and monitor their children closely when they are given medications. Even at only $4000 per admission for a two day admission, avoiding just the hospitalized cases could save $100 million. This is a drop in the bucket in terms of overall health care spending, but may be well worth the investment to help our children avoid the side effects of trying to keep them healthy.

Incentives for better food

Today's New York Times contains an article about incentives for full service supermarkets in neighborhoods characterized by little fresh produce, high rates of obesity, and accompanying high rates of chronic disease.  The solution--new zoning laws and tax incentives.  Will it work?  Maybe.

Why don't consumers eat healthy foods?  Price is one reason.  Time required to get the healthy foods is another.  If the supermarkets that locate in the targeted neighborhoods offer healthy foods (including fresh produce) at a reasonable price this will take care of the two issue mentioned--price and access.  However, I think there are still other things.

Healthier foods often take longer to prepare.  Does the proposed solution solve that problem?  No.

Healthier foods may not be preferred for taste.  Does the proposed solution solve that problem?  No.

Are there ways to solve those problems.  Of course, but that takes more investment by the stores.  They need to spend money to market healthy foods.

So the question of whether this policy will improve health in New York City (and other locales that may try it) comes down to a two part question:

(1) Are the incentives strong enough with existing demand in the neighborhoods  such that the businesses can be profitable if they just set themselves up there with a little help on incentives?

(2) If the answer to #1 is no, is it profitable to locate in new neighborhoods and market healthy foods?  In other words, can the demand for the foods that full service markets carry that corner stores don't be shifted enough with inexpensive marketing efforts to make the stores profitable.

I don't know.  It will be interesting to see how well this works.  Perhaps the stores can work with local community leaders so that the local communities "invest in themselves" and use some of their own effort to encourage community members to purchase and use healthier foods.  In short, I'm a little skeptical of the "build it and they will come" approach to providing only supply side incentives.

Grants from the NIH

It is interesting that as I prepare for the end of a meeting at NIH, the Johns Hopkins Bloomberg School of Public Health newsfeed yesterday highlighted an article on how the NIH has been awarding grants  The key message from this article is that 19 percent of grants awarded were 'not in rank order' assigned by the scientific review committee and that half of the exceptions to the ordering that would be suggested by the scientific review committee were made for "new investigators".

What does this mean?  The NIH has finite funds for research.  These have to be allocated in some way.  Scientists write proposals for research.  Review committees of experts in the field review proposals and assign scores. The scores are not like in school where if you get a 90 or above you have an A.  The scores are all relative.  With grants, it is still the case that a 99 is better than a 98, but the key is how the studies "line up" rather than having an "absolute cutoff" for funding.  So, a 90 or higher would not guarantee funding.  Some years you'd need a 92--other years an 88.  It depends on the budget the NIH has, the budget for each grant, and the number of grants submitted.

The public policy question is whether all grants should be awarded based on their rank order, assuming that rank order implies how meritorious the proposals are, or whether there should be room for exceptions.  Then, if there is room for exceptions, should there be rules for making those exceptions?

There are few rules for the exceptions at the moment, other than the notion that the grants should still represent good science.  The question is whether the scores that are given really tell us anything about the science.  Having served on a scientific review committee, I can say that the scores are only partly about the science.  They also reflect the quality of the research team and that is inherently subjective.  A new investigator could "work the system" by making sure that he or she knows likely reviewers and knows those within NIH to be considered more favorably.  In some ways that is just human nature on the part of the reviewers and decision makers within NIH.  The question is whether human nature or something more objective should guide resource allocation.  Even if we'd desire something "more objective" it is not clear how we'd arrange that.

Questioning assumptions

The hotel at which I am staying for a 1 1/2 day NIH meeting provided either USA Today or the Wall Street Journal as a complementary paper. I chose the WSJ. Probably no surprise there. So, today I had the opportunity to see not only the news feed from the Johns Hopkins Bloomberg School of Public Health, but all the articles in the paper. One caught my attention (as I am a "winter baby"): "New Light on the Plight of Winter Babies" by Justin Lahart.

What is the issue here? Past studies have consistently found that, on average, babies born in January have lower educational attainment and earnings than babies born in other months. This puzzled economists for a while. Almost two decades ago, a pair of economists put forward the hypothesis that because of when it is legal for kids to drop out of school, being born early in the year made it possible to drop out at an earlier grade. As a result, the average January baby would earn less, although many January babies do not drop out. Other economists have suggested other reasons, but the best known is the early drop out presumption.

The reason that this blog entry is titled "questioning assumptions" is that the assumption throughout is that the babies born in different months are otherwise similar. In other words, birth month is relatively random and all mothers are just as likely to have a baby in any month. A recent working paper has suggested that the mothers of babies born in different months are quite different. Each year, mothers of children born in January were less likely to be married, more likely to be teenagers, and had a lower average level of education. In contrast, mothers of babies born in May had the opposite characteristics. What this suggests is that the babies (or at least the families of the babies who may have a large role in determining educational attainment) are not all the same. As a result, we can't say whether the effect of month is actually a time effect or is an effect of family background.

I imagine that economists will debate for some time how important this alternative explanation is, but the fact is that a basic assumption driving the old analysis is now questioned.  Economists will also have to explain why there are differences in mothers associated with the month of their child's birth.

How could this be applied to analyses in health care? There are two examples I thin of immediately:

(1) Not all babies who are breastfed have mothers who are the same. Thus, any findings about the effects of breastfeeding are shaped by the differences in the babies' families.

(2) Not all infants are expected to be as healthy by their mothers when they are fetuses. The expected health of the baby may affect the mother's choice of when to initiate prenatal care and how much to get.

The key is that when we are not using a randomized study design, we have to carefully consider all our assumptions. Sometimes we have no way of assessing the validity of our assumptions. However, when we are given an opportunity to do so, we should take it and reassess conclusions as necessary. That way we can make more informed (and hopefully better) policy.

Unintended Consequences

I think I have mentioned before that one of my graduate school mentors (Richard Hirth who is now a full professor at the University of Michigan) sometimes  referred to health economics as the study of unintended consequences.  On so many occasions in the history of health economics in the United States, a policy was made without fully anticipating how stakeholders in the health care system would respond to the change.  After a policy changed, people changed behavior in ways that were not expected and more research was needed to understand what went wrong.

On Friday of last week, I commented on the idea of taxing generous health insurance plans.  I want to spend a little more time on that topic.  There was a New York Times article published yesterday on the issues around the idea of taxing generous health insurance plans.  Since this information is out there, if the bill passes as is (unlikely) we will not be able to say we were unaware of the consequences.  They may even be fully intended.  The key is that they are not unknown or unanticipated and that is usually part of how we would define unintended consequences.

Since employer-provided health insurance plans receive favorable tax treatment, one way of thinking of the plan to tax generous insurance policies is that this would simply represent realigning the tax incentives so that the are less favorable and there will be less distortion of the system than there is at this time.

While that is a legitimate economic argument, people are used to having the favorable tax treatment.  What the article points out is that while the plan is labeled as "targeting the most generous plans" it may capture any number of those who consider themselves middle class and who are getting only "good" plans rather than really excellent plans.  There are three reasons:

(1) A "one price fits all" policy across the nation is often a problem.  Some people face higher prices for medical care and live in areas where medical care is practiced more aggressively.  Both of these will result in higher insurance premiums.  An interesting distributional question is whether everyone  should face identical thresholds or whether they should be adjusted for local circumstances.  We do some of each in public policy.

(2) The possibility that the threshold for premiums for policies that will be taxed may not keep up with inflation and, over time, more people will end up paying the tax.  This is similar to the alternative minimum tax that was originally intended to affect only those with high (often non-wage) income.  However, because of a lack of adjusting the threshold for this tax over time, this tax now affects more people.

(3) From the description in the New York Times piece, it appears that anyone with a cafeteria style flexible spending account may have the entire value of their flexible spending account  rather than only their health insurance included in the calculation of whether the premium is high enough for the individual to be taxed.  Robert Hansen was quoted on the second screen of the article.  I had not seen that anywhere else.

In short, while my economic logic may favor making people who spend the most face the true cost of their choices, this type of policy must carefully consider not who is the intended target but who actually ends up paying more as a result of policy change.  This policy would affect a lot more people than I'd considered when commenting on Friday.  That does not change the theory or the rational response.  Just the distributional implications.  And that is a political question.

Why tax the insurers who provide generous health insurance plans?

The bill introduced by Senator Baucus earlier this week suggests placing a tax on the most expensive health insurance plans. The approach is to place a tax on only he most expensive plans. Below a given value per enrollee there is no tax. Above a certain value per enrollee the plans would be taxed. The claim by insurers (and by those with the most generous plans like unions) is that this would be passed on to the enrollees. Does this make sense?

In fact, it does. If all insurers who offer generous plans have to charge the tax, then there is no distinction between insurers offering generous plans. Typically “more insurance” costs more to provide. In this case there would be a distinct break in the supply curve. The demand for some groups would suggest that they would still buy a generous plan that is taxed, but a slightly less generous plan. They’d end up paying more overall and get a less generous plan. There are others, however, whose demand would not be consistent with paying a higher premium for a less generous plan. This group would actually save money compared with their original plan but would have a much less generous plan.


So, would the tax hit enrollees? Yes. Over time, it would not necessarily be the full tax on the original premium. But it would either cost them more for a slightly less generous plan or cost them less but for a substantially less generous plan. It would mostly depend on how response demand is to the premiums that people pay. If it is more responsive, the actual tax from the more generous plans would be small but a lot of people would end up with substantially less generous plans. If it is less responsive, the tax collected would be substantial.

Will the insurers pay for this?  Only to the degree that they lose profits on the most generous plans.  So taxing insurers may really just be a way to make it less obvious to the population who is bearing the tax.

Can it be rational to be uninsured when there is a mandate?

In yesterday's Wall Street Journal, there was an article titled, "Mandated Health Insurance Squeezes Those in the Middle" by Vanessa Fuhrmans. Based on the stories in this article, the response to the question posed in the title of this post is "yes".

Why would it be rational? And, assuming that we agree on the argument that it is rational, what does this suggest about any attempt to mandate coverage through a system that is at least partially private at a national level?

Economists have made the argument for years that it can be rational for some to remain uninsured. Who are these people for whom it is rational? They are relatively healthy, relatively young people who have too high an income to receive assistance yet enough other expenses that the purchase of insurance is unaffordable. Why does it remain rational even when there is a mandate?

The mandate (at least in Massachusetts which is the only state to have the mandate so far and the one featured in the article) is for purchase but does not provide a very inexpensive option. Why not an inexpensive option? Well, without subsidies the policies are expensive in general. If a state has a substantial number of mandates for what has to be covered that pushes up premiums. And in some cases, the deductible prior to when coverage kicks in is so high that it seems like a bad value to pay a substantial premium while getting only very limited coverage. The mandate also provides a financial penalty if the individuals don't buy. It is large, but smaller than the premium by far. And, people will still receive emergency care regardless. This interesting situation means that even with a mandate it makes sense for people not to purchase insurance. In fact, only 2/3 of those who were previously uninsured in Massachusetts have become insured in the three years since the mandate was passed. They still have the lowest rate of uninsurance in the country—but it is not zero.

What does this tell us about attempts to mandate coverage nationally? First, if the system is similar to Massachusetts, there will continue to be a group of middle income individuals and families who simply cannot afford the mandates insurance given other expenses. Perhaps they could shift some expenses, but most policies are hundred of dollars per month. Second, on the way to trying to get this passed—especially now that people have seen what happened in Massachusetts—there is likely to be a lot of political opposition. In this case, it is not necessarily because the opposition doesn't think that everyone should have insurance—although there may be people in that group. Rather, it is because the opposition can't figure out how some people would ever pay for it given other financial constraints. In that case, we need a better solution for subsidizing or bringing down premiums and making care more accessible. For that, there are no easy answers.