Dizzying Health Care in America

Things I remember from ECON 230 [Economics & Politics] and ECON 332 [Advanced Health Econ].

Basic Facts:
Medicaid: means-tested program that provides health insurance for low-income individuals. Medicaid is federally funded.

Medicare: not means-tested, which means even Bill Gates will receive Medicare. And why shouldn't he? He seems like a lovely fellow. I'm sure he will also need help from the government when he turns 65!
Anyway, it's for people over 65 years old who have paid Medicare taxes.

Medicare funding:
40% payroll taxes, 39% general revenues, 12% beneficiary premiums [yeah, I know, these numbers don't add up to 100, but that's what they are in the Kaiser factsheet]

Part A [Hospital Insurance]: 85% funding comes from payroll taxes (2.9% from employers and employees, each paying 1.45%), the rest comes from general rev.

Part B [Supplementary Medical Insurance/Non-hospital]: 75% general rev, 25% beneficiary premiums.

Part C [Medicare Advantage Plans/private]

Part D [Drugs, but not the bad kind. The gov't will not fund your crackhead habits!]: 77% general rev, 13% state payments for dual eligibility, 11% beneficiary premiums. [again, these numbers do not add up to 100]

U.S. Health Care Spending [click images to enlarge]



From oecd.org, here.

Why Costs are Increasing
1. adverse selection/moral hazard: Unhealthy people are more likely to buy insurance. People with insurance are more likely to engage in dangerous/unhealthy activities, driving up health care spending.

2. malpractice insurance: Evs, I can't find the paper that we read about malpractice insurance for ECON 332, so correct me if I am wrong. I think this is what the paper said. I'll try to find it later...
Anyway, In rural areas, doctors have fewer patients per whatever unit of area you want to use than in cities. Therefore, when malpractice insurance costs increase, rural doctors pass these costs onto their patients. Since there are fewer rural patients per doctor, these patients feel increasing costs more acutely than do patients in the city. Overall, the impact of malpractice insurance premium increases is not very large...

3. defensive medicine/over-utilization: here

4. technological advances/improved quality of life: Clifford Asness of AQR Capital Management points this out (very avidly) in the paper linked in my previous post. (thanks, tina!) He says, "I’m reasonably certain the cost of 1950’s level health care has dropped in real terms over the last 60 years (and you can probably have a barber from the year 1500 bleed you for almost nothing nowadays). Of course, with 1950’s health care, lots of things will kill you that 2009 health care would prevent. Also, your quality of life, in many instances, would be far worse, but you will have a little bit more change in your pocket as the price will be lower. Want to take the deal?"

4. Americans are fat. When I was home, I saw a commercial protesting taxes on junk food and soda...has anyone seen it? I tried finding it on Youtube, but was unsuccessful. In the commercial, there's a family going camping, and they've packed chips and soda and stuff, and the voice in the background is like, "so many Americans are facing tough times, and now is not the time to tax simple pleasures like chips and blah blah blah. write to your congressman, etc, etc."

I'm sorry, simple pleasure of what? Being FAT? Is it much more difficult to pack baby carrot sticks and peanut butter than chips during a recession? Does the recession somehow make juice and water less appealing than soda? Does being FAT somehow make being poor more bearable? I don't get it...and this is coming from someone who also writes in a blog called Fat Kid Adventures.

Also, don't be like this. If someone asks you why HFCS is bad, you can respond with, "large quantities of fructose stimulate the liver to produce triglycerides, promotes glycation of proteins and induces insulin resistance." [wikipedia] in other words, it makes you FAT.

In one of my many classes with Prof. Johnson (I can't remember which), he pointed out that people who smoke around us are not just hurting our lungs, but they're stealing from us! His argument was as follows:
People who smoke are a negative externality because they are more likely to get lung cancer, throat cancer, etc. Health care spending will go up. As a result, health insurance premiums will go up. Of course, smokers pay more in premiums anyway, but I think the same logic can be applied to people who consume junk food excessively.

Health insurance companies have ways of attracting "good risks." Prof. McKnight told us about "3rd floor walk up" policies - policies that are meant to keep out those who wouldn't be able to walk up three flights of stairs without passing out. For example, some health insurance companies offer deals at ski resorts because they know that healthier people go skiing, spend more time working out, etc.

Sneaky, right? And you thought the health insurance companies just wanted you to have more fun...

Anyway, I need to go study for GRE. I finally registered for Sept. 24th!

But don't worry Tina, I'll post about other countries' health care systems. [South Korea, Singapore, etc] In ECON 332, different groups presented on different health care plans/countries. Those were fun...will post [soon!]

Health Care

The New Yorker had an article in which Atul Gawande attempts to explain the disparity in health care costs between McAllen and El Paso County, Texas. The culprit? "Defensive medicine." [Remember from Health Econ, Evelyne?!]

Anyway, here's an excerpt:
"...year after year, McAllen’s health costs have grown faster than any other market in the country, ultimately soaring by more than ten thousand dollars per person.

“Maybe the service is better here,” the cardiologist suggested. People can be seen faster and get their tests more readily, he said.

Others were skeptical. “I don’t think that explains the costs he’s talking about,” the general surgeon said.

“It’s malpractice,” a family physician who had practiced here for thirty-three years said.

“McAllen is legal hell,” the cardiologist agreed. Doctors order unnecessary tests just to protect themselves, he said. Everyone thought the lawyers here were worse than elsewhere.

That explanation puzzled me. Several years ago, Texas passed a tough malpractice law that capped pain-and-suffering awards at two hundred and fifty thousand dollars. Didn’t lawsuits go down?

“Practically to zero,” the cardiologist admitted.

“Come on,” the general surgeon finally said. “We all know these arguments are bullshit. There is overutilization here, pure and simple.” Doctors, he said, were racking up charges with extra tests, services, and procedures."

Things I've come across in the blogosphere:

Some people have argued that health care reform is necessary for the U.S. to maintain international competitiveness. Greg Mankiw, Paul Krugman, and the CBO think that's bullshit.

From the CBO: "Even though changes to the health care system could have various effects on the supply of labor, the underlying amount of labor supplied at any given level of compensation would hardly be affected by a change in the health care system. As a result, cash wages and other forms of compensation would have to rise by roughly the amount of the reduction in health benefits for firms to be able to attract the same number and types of workers."

In Health Care Overhaul, Language Matters - NYT

For Health Econ [great class, take it], my group presented on the Health Security Act [Hillary 1993]. We pointed out that President Obama was careful to avoid phrases like "universal." Instead, he opted for "accessible to all." I'm sure he didn't want to evoke such memories as these...

Mankiw thinks a public plan is a bad idea...

Alternative plans here.

Also, because we love him: How to Cure Health Care by Milton Friedman.

Random notes:
Evs, this reminded me of glorious nights spent as college seniors at the pub...

How much is one more year of life [of spending time with friends at the pub] worth? "A rough consensus from this literature is that an additional year of life is worth about $100,000 per year
(Viscusi, 1993; Tolley et al., 1994)" -Walking the Tightrope on Medicare Reform, David Cutler

Also, someone, play this with me.

Goodbye Pediatrician, Hello Real World.

Last week I went to see my pediatrician and it was perhaps my last visit to her office. Apparently, once I graduate from college, I am no longer eligible to see my pediatrician. I am a little sad because I think, "what general practitioner can possibly care as much about me as my pediatrician?!"

On that note, I have decided to post some things from Health Econ that I thought might be helpful for those of you who will be entering the real world.

Fee-for-service is pretty obsolete now, but it's what your parents might be familiar with. The U.S. has moved towards managed care to contain costs. Thus, we have HMOs and PPOs.

Story: Professor McKnight's friend cut his finger once and went to the emergency room that was closest to him. However, the ER told him that it was not life threatening and that he would have to go to an ER about 40 minutes away to be covered by his Staff HMO. He took a cab to that ER, and they said, "well, you needed stitches, but it's been so long now, that you might as well come back tomorrow."

If you think you would be really upset in this sort of situation, go with the PPO.
But don't worry, HMOs cannot deny emergency care in life-threatening situations.

For network and staff HMOs, you must receive referrals in order to see specialists. For example, you can't see a cardiologist unless your primary care physician gives you a referral.
Also, certain HMOs only cover you in a specific state or region, so you might have to switch to a PPO if you end up moving or traveling.

The difference between network and staff HMOs:
Network HMOs pay physicians through "capitated reimbursement" - fixed fee per patient over a certain period of time.
Staff HMOs pay their physicians a set salary regardless of the number of patients they receive.
Staff HMOs also have their own physicians, clinics and facilities.

Looking at all of this makes me wish I could just see my pediatrician forever, like Ross Geller on FRIENDS...

In other news: Jason Kubel of the Minnesota Twins hit for the cycle. And I got to see it with Evs while eating sushi in Boston last night!

Health Economics.

As I sat in Pendleton Atrium reading about the difference in death rates for white males vs. black males for heart disease, lung cancer and DIABETES, I finished an entire box of Girl Scout Caramel Delight Cookies. Fail.
[reading: "Healthy Bodies and Thick Wallets: The Dual Relation between Health and Economic Status" by James P. Smith.]

Anyway, before I came to college, I remember feeling sorry for my dad whenever his beeper would go off in the middle of the night. (He's an anesthesiologist) I haven't had that feeling in a while b/c I've been away from home, but immediately after his b'day dinner two weeks ago, his beeper made that stupid broken up G flat chord noise and I felt so bad for him. I had always thought my dad's life sucked, so when he was diagnosed with cancer 6 years ago, I wasn't all that surprised when he said he just wanted to die. However, he seems to have beaten some very impressive statistics.

For example, the probability of an individual staying at work after being affected by a major disease is -0.06 during the first two years of the disease's onset, and has a t-stat of 2.24. The probability of that individual staying at work the following two years is -0.16 with a t-stat of 7.67! Not gonna lie. I'm pretty impressed by my dad.

Thus, as I look for jobs, I am resigned to thinking that maybe I will have to get someone coffee everyday. Maybe I won't get paid as much as I feel I deserve. But if my dad could do med school twice (once in S.Korea and once in the States) and has continued to stick to this job that he hates, then I can suck it up and deal with picking up phones for a year or two. Besides, beggars can't be choosers. Unemployment hit 7.6% (its highest in 16 years).