Something Not Unlike Research

Another way to look at the mandate

post by Paul Kelleher

In two recent posts I've considered two arguments for how to view the individual mandate. Some view it as a personal responsibility requirement that offsets the uncompensated care that un- or under-insured individuals receive at hospitals. Others view it as implementing a conception of social justice on which it is everyone's duty to pitch in to ensure everyone can have decent health care.

It now seems to me best to view the mandate in both of these ways. Perhaps that's the (intended?) genius of the mandate: it lets people decide for themselves which of these perspectives to adopt. This stems from the following fact that I noted yesterday:

Absolutely no one is forced by the mandate to have health insurance. Rather, the mandate is a "pay or play" provision: people can just pay the penalty instead of getting insurance. 

The mandate forces citizens to make a choice. Either they pay the penalty, or they acquire "minimum creditable" insurance coverage. This choice could be further described as the choice between paying a "nonrefundable emergency room deposit" or paying for a decent level of health care. Viewed in this way, the mandate is a downright bargain, since the annual cost of uncompensated hosptial care is $39 billion, while the annual revenue generated by mandate penalties is expected to be only $2.8 billion. 

So the choice imposed upon citizens by the mandate is simple: Do you want to avoid being a complete free-rider, or do you want to pay for decent coverage that also promotes social justice by helping others acquire decent coverage? And here's ingenious part: It's really up to each citizen to decide!

The Mandate is about Social Justice

post by Paul Kelleher

As a follow-up to my post yesterday, I want to note that I'm fairly hesitant to say that this or that argument/consideration can or cannot "support" the mandate. I think Austin Frakt gets it right that several reasons can and do work jointly to justify it. If pressed, however, I'd say that the the central consideration that justifies the mandate is simply that it's necessarily if we want to achieve universal coverage without banishing private insurance companies. I've discussed this before, but if you want a refresher on the logic, Uwe Reinhardt explains it masterfully in just 881 words.

I think the lesson from the Supreme Court oral arguments is that legal folks want a much more direct and individualist route to the mandate, one that explains why features of this person's situation justify this particular duty to purchase this much insurance. That line of questioning distracts from bigger picture that many fans of the ACA (like me) think about when we say the mandate is one of three legs of the universal coverage stool. It also distracts from the fact that, ultimately, absolutely no one is forced by the mandate to have health insurance. Rather, the mandate is a "pay or play" provision: people can just pay the penalty instead of getting insurance. If cost-shifting really were the only consideration on the table, then a penalty in the form of a "non-refundable emergency room deposit" (or whatever) may be the best policy. 

I think we are where we are in part because cost-shifting isn't the only consideration on the table, yet many ACA defenders don't want to admit that the ACA is at bottom about social justice and the general welfare, and that the mandate is part of a scheme that asks everyone to pitch in to ensure that everyone gets decent coverage. Instead, the mandate is portrayed as a plank that ensures personal responsibility, and it is this sort of claim that opens the door to the questions Alito was raising about whether the mandate solution is commensurate with the cost-shifting problem.

(Thanks to Austin Frakt for further discussion of these issues via email.)

Frakt, Aaron, and Alito on Externalities and the Mandate

post by Paul Kelleher

In anticipation of yesterday's Supreme Court oral arguments on the Affordable Care Act's individual mandate, Austin Frakt wrote:

The purpose of the mandate is to address some of the externalities of health insurance coverage decisions made by individuals. (“Externalities” is handy economics jargon for any effects a decision—like buying or not buying health insurance—has on those not directly involved in the decision.) [...]

[W]ithout a mandate (but maintaining the provisions of the law that prohibit insurers from denying coverage or from charging higher premiums because of an individual’s medical history), it’s likelier that relatively sicker individuals will purchase coverage than relatively healthy individuals. [...]

This type of behavior causes premiums to be higher than they otherwise would be, because the pool of people being covered includes more individuals who are sicker and more expensive to cover than would be the case with a mandate. [...]

Frakt reiterated this point yesterday in response to several Justices wanting to know what could be the difference between mandating the purchase of health insurance and mandating the purchase of broccoli:

There is a very clear difference between mandating broccoli purchase and mandating health insurance. I doubt it could be turned into a limiting principle suitable for court, but I’ll offer it anyway. First, if the government mandated purchase of broccoli, average broccoli price would rise. That follows from supply and demand, and I hope it is intuitive.

However, if the government mandates purchase of health insurance, average price of health insurance falls.

I could be wrong, but Henry Aaron seems much less comfortable with this particular externality-argument. In his recap of yesterday's oral arguments on the mandate, he writes (my emphasis):

Several of the justices, notably Scalia and Alito, responded to the externalities argument by saying that every economic transaction creates similar externalities. "If I don't buy a Volt, I raise the price of Volts," said Scalia. Alito said much the same thing. So did Paul Clement's brief for the plaintiffs.

This response was and is bad economics. It is true that every commodity is produced along what economists call a "cost curve"—raising output may lower average or marginal unit costs by spreading overhead or achieving economies of scale, but it may also raise costs by forcing up the cost of inputs or incurring diseconomies of scale. None of this occasions concerns about fairness or free-loading or, to use the economist's term, "externalities." But the cost shifting that occurs when uninsured patients fail to pay their bills does; it causes one group—the insured—to have to pay part of the cost of services others use. 

Although Aaron almost surely agrees that a mandate will lower average insurance costs, he notes that it may also raise prices elsewhere in the economy. For example, a mandate may increase the wages that non-insurance firms will have to offer to compete with the wages offered by insurance companies. Strictly speaking, this also seems to be a kind of externality. I assume, however, that many economists would argue that every policy "imposes" price-related externalities of some sort or other, and that it is very hard to determine whether one policy's price-related externalities are worse than another's. I suspect this is why Aaron chose to focus exclusively on a specific externality that strikes many as specially unfair. This is what Aaron refers to as "the cost shifting that occurs when uninsured patients fail to pay their bills does; it causes one group—the insured—to have to pay part of the cost of services others use."

A potential problem with this defense of the mandate, however, is that the ACA does not eliminate forces that "cause one group to have to pay part of the cost of services others use." Consider:

Cost of uncompensated hospital care in 2009: $39.1 billion. [1]

Annual ACA revenues from new taxes/fees/penalties on the wealthy, the insured, & industry: $38.4 billion. [2]

Even if we assume that all uncompensated costs are currently shifted to the insured and that the ACA would eliminate this, the ACA appears to create virtually the same degree of cost-shifting by imposing new taxes, fees, and penalties on industry, the wealthy, and the already insured. Just like much of the cost-shifting that currently stems from uncompensated care, the ACA's new revenues are to be used to provide care to those who cannot afford it. At the very least, this suggests that the mandate cannot be defended simply by pointing to the existence of cost-shifting externalities. For the ACA replaces one form of cost-shifting externality with others. What is needed is a rationale for shifting costs to one group rather than another. 

In addition to the new revenues cited above, the ACA clearly hopes that the threat of the mandate's penalty will induce young, relatively healthy individuals into the insurance market, where they will be required to purchase insurance coverage they are unlikely to use, thereby providing premium dollars that can be devoted to the care of others. This is clearly what Justice Alito was getting at in comments that Aaron called "the most glaring instance of the failure to appreciate what an externality really is." Aaron seems to think that Alito was trying to make the point that the uninsured are not in fact shifting costs to the insured:

[Alito] at one point challenged the solicitor general by positing that the cost of all of the care currently used by those who are uninsured is less than would be the cost of the insurance they would be forced to carry. That being the case, Alito asked, how can one say that the uninsured are shifting costs to the insured? This query is painfully detached from an understanding of what an externality really is, how insurance works, or what the impact of insurance would be on service use.

It seems to me, however, that Alito was making a much different point. Here's what Alito said (pp. 33-4, pdf):

If you took the group of people who are subject to the mandate and you calculated the amount of health care services this whole group would consume and figured out the cost of an insurance policy to cover the services  that group would consume, the cost of that policy would be much, much less than the kind of policy that these people are now going to be required to purchase under the Affordable Care Act?  [...]

The point is -- no, you take into account that some people in that group are going to be hit by a bus, some people in that group are going to unexpectedly contract or be diagnosed with a disease that -- that is very expensive to treat. But if you take their costs and you calculate that, that's a lot less than the amount that they are going to be required to pay.  So that you can't just justify this on the basis of their trying to shift their costs off to other people, can you? 

Alito is arguing that, in complying with the mandate, many previously uninsured folks will be paying much more than they need to pay to cover the expected costs that would be shifted to the insured in the absence of the ACA. In other words, he's noting that the cost-shifting argument is not sufficient justification for the specific kind of mandate the ACA includes. This strikes me as correct, and it raises additional questions about whether the externality/cost-shift argument can do the work that some of its proponents ask of it.

[1] American Hosptial Association, pdf.

[2] Maggie Mahar. This figure reflects: increased Medicare taxes on the wealthy; new fees on industry; the "Cadillac tax" on expensive insurance policies; reduced tax exemptions for health savings accounts; reducing deductions for itemized medical expenses.

Continuous medical monitoring: Do you want to be tethered to your doctor?

post by Bill Gardner

Paul Graham is a software engineer, venture capitalist, and an exceptional writer. Every one of his essays is worth reading. Here is a long excerpt from his most recent piece:

But wait, here's another [proposal for a startup] that could face even greater resistance: ongoing, automatic medical diagnosis.

One of my tricks for generating startup ideas is to imagine the ways in which we'll seem backward to future generations. And I'm pretty sure that to people 50 or 100 years in the future, it will seem barbaric that people in our era waited till they had symptoms to be diagnosed with conditions like heart disease and cancer.

For example, in 2004 Bill Clinton found he was feeling short of breath. Doctors discovered that several of his arteries were over 90% blocked and 3 days later he had a quadruple bypass. It seems reasonable to assume Bill Clinton has the best medical care available. And yet even he had to wait till his arteries were over 90% blocked to learn that the number was over 90%. Surely at some point in the future we'll know these numbers the way we now know something like our weight. Ditto for cancer. It will seem preposterous to future generations that we wait till patients have physical symptoms to be diagnosed with cancer. Cancer will show up on some sort of radar screen immediately.

(Of course, what shows up on the radar screen may be different from what we think of now as cancer. I wouldn't be surprised if at any given time we have ten or even hundreds of microcancers going at once, none of which normally amount to anything.)

A lot of the obstacles to ongoing diagnosis will come from the fact that it's going against the grain of the medical profession. The way medicine has always worked is that patients come to doctors with problems, and the doctors figure out what's wrong. A lot of doctors don't like the idea of going on the medical equivalent of what lawyers call a "fishing expedition," where you go looking for problems without knowing what you're looking for. They call the things that get discovered this way "incidentalomas," and they are something of a nuisance.

For example, a friend of mine once had her brain scanned as part of a study. She was horrified when the doctors running the study discovered what appeared to be a large tumor. After further testing, it turned out to be a harmless cyst. But it cost her a few days of terror. A lot of doctors worry that if you start scanning people with no symptoms, you'll get this on a giant scale: a huge number of false alarms that make patients panic and require expensive and perhaps even dangerous tests to resolve. But I think that's just an artifact of current limitations. If people were scanned all the time and we got better at deciding what was a real problem, my friend would have known about this cyst her whole life and known it was harmless, just as we do a birthmark.

There is room for a lot of startups here. In addition to the technical obstacles all startups face, and the bureaucratic obstacles all medical startups face, they'll be going against thousands of years of medical tradition. But it will happen, and it will be a great thing—so great that people in the future will feel as sorry for us as we do for the generations that lived before anaesthesia and antibiotics.

This captures a lot of what mobile health developers are trying to do. And it is a profound idea.

But do you want to be continuously wirelessly tethered to your doctor?

I do, but I am not you. I have a congenital heart condition that needs to be monitored. I am willing to say No to what I do not want and I know how to push for what I feel I need. But I am an insider: A medical school professor married to a senior physician / executive (but for god's sake don't tell her that I used the word 'senior'!). The system better work for me, because if it doesn't it is unlikely to work for anyone.

Continuous ongoing medical monitoring and diagnosis will medicalize every moment and situation of your life. If, unlike me, you are not already there, is this  where you want to be?

(h/t Alex Madrigal)

Reduce medical training!

Zeke Emanuel and Victor Fuchs have a great suggestion in JAMA:

there is substantial waste in the education and training of US physicians. Years of training have been added without evidence that they enhance clinical skills or the quality of care. This waste adds to the financial burden of young physicians and increases health care costs. The average length of medical training could be reduced by about 30% without compromising physician competence or quality of care.

YES. This problem is particularly severe in post-graduate medical education. A case in point is the triple boarded child psychiatrist. These doctors do an extended residency/fellowship program after completing standard medical training,

Triple Board residents spend 5 years in an integrated training program focused on pediatrics, general psychiatry, and child and adolescent psychiatry. At the end of the training, residents are board-eligible in all three disciplines.

'Board-eligible' means that graduates of a triple board program can take board examinations examinations in pediatrics, general (i.e., adult) psychiatry, and child psychiatry. Studying for and passing these exams may require several additional years. 

To my knowledge, however, there are no interventions that can only be delivered by triple-boarded psychiatrists, and I am unaware of a clinical function that can only be carried out by a such a specialist. I am not aware of any evidence that triple-boarded child psychiatrists are 'better' at child mental health care than ordinary child psychiatrists, but it wouldn't surprise me at all if there was a slight advantage. I count several triple-boarded child psychiatrists among my close friends, and they are impressive individuals. They would have to be to get through all of this, no? What I question is whether the extra training is what makes them better. Similar examples can be found throughout specialty medicine.

(h/t Sarah Kliff)

 

 

Canadian health care and information technology

post by Bill Gardner

There is one more difference between US and Canadian health care that may explain why Canadian care costs less:

There is a lot more health information technology in America. 

Again, I could be overgeneralizing from Atlantic Canada. But there is substantially less computerization of health information. Much is still done on paper, or using obsolete programs running on obsolete hardware. Often comically obsolete: I've found applications running on floppy disks and VAXen. (Youngsters: Follow the links to find out how your pioneer ancestors broke the sod of data to bring you the information cornucopia of today). Fully functional electronic health records are not so common in the US, but they seem truly rare here.

This suprised me. I assumed that a single payer system committed to population health goals would take full advantage of information technology to marshall its data to improve care. Why has this not happened?

1. There isn't a Canadian single payer system, there are 10 provincial systems. Most provinces have small populations and cannot easily afford the fixed costs entailed by a system-wide EHR. 
2. Canadian health care is funded out of general revenues. Therefore, possible health IT investments compete against money for roads, schools, lighthouses (well, maybe not so much in Saskatchewan), and so on.
3. A lot of US health care information technology investments are devoted to managing the pathologies of billing multiple insurers for care. Billing is simple here.

If the last point is correct, it's possible that not spending money on health IT is another reason why Canadian health care is less expensive. They are not spending money on a problem they do not have.

I believe that the right kind of health IT will eventually help us deliver better care at lower cost. Eventually.

Why is Canadian medicine less expensive?

post by Bill Gardner

Canada spends less on health care than America does (see the chart to the right, from Aaron Carroll at The Incidental Economist). Brendan Saloner asks,

Where are the big areas where Canadian hospitals are saving money? Medical billing is one obvious area where they spend less (and I've seen the research on that), but where else are savings coming from?

Here are my impressions, with the warning that it is based on working in Nova Scotia, rather than expertise in the literature or experience with the rest of Canada. In no particular order:

• Canadians get drugs and services at lower prices (see Kevin Outterson here).
• Canadians spend less on the amenities of health care. The orthopedic specialty hospital that worked on my wife's foot last year had an atrium with a waterfall that descended three floors, and rooms that could have served well in a high-end business hotel. Canadian hospitals feel more like VA hospitals in the US.
• Canadian medicine is leaner. There are, I believe but cannot document, fewer images taken per hospital stay. There is more discussion about the cost of treatments.
• Canadians themselves are also leaner: they have a (worrisome) 24% obesity rate, compared to 34% in the US.
• There are longer wait times for many services and procedures in Canada. This means, for example, you see more elderly people using canes and walkers in Canada. Presumably, some of their US counterparts are rocking artificial hips and knees.
• Canadian physicians are paid less than American physicians. Canadian docs may, however, work fewer hours. 
• Canadian care may be better integrated than US care, leading to efficiencies, but I am not sure how to document that.

Thanks to The Incidental Economist bloggers, who more or less wrote this post for me.

Perhaps spending more on health care can result in better health

post by Bill Gardner

From JAMA, a group of researchers from the University of Toronto and Dartmouth report that in a group of Ontario hospitals, "higher spending intensity was associated with lower mortality, readmissions, and cardiac event rates." 

As noted in an accompanying editorial, this finding appears to contradict some previous research by the same group suggesting that large differences in US spending on health care had little effect on medical outcomes. In many cases, it seems that the intensity of medical spending reflects the interest of the provider more than the patient. 

In large data sets of Ontarian patients, however, it appears that patients did benefit from more intensive medical services. The Figure plots mortality rates as a function of the End of Life Expenditure Index (EoL-EI), which is the amount that a hospital typical spent on patients in their last years of life, adjusted for the age and sex of the patient. Being to the left in this plot meant that patients were more likely to survive. What the results showed was that across several important conditions, Ontario hospitals that typically spent more on patients at the end of life had better survival rates. The authors are carefully to note that the observational design of the study means that one cannot infer that spending more money actual causes better health outcomes.

So why do we find this association in Canada, but not the US?

Canadian hospitals, with fewer specialized resources, selective access to medical technology, and global budgets, are using these resources more efficiently, especially during the inpatient episode for care-sensitive conditions. Canada's health care expenditures per capita are about 57% of those in the United States. At this spending level, there might still be a positive association between spending and outcomes.

That is, US hospitals spend more intensively, to a point where additional spending in the US no longer brings additional patient benefit. Canadian hospitals spend much less, and are at a point where an additional loonie is associated with additional benefit for patients. There is no evidence here about whether Canadian care is better than US care, but it is almost certainly more cost-effective.

The dream -- or nightmare? -- of the < $1000 genome

post by Bill Gardner

There are great hopes that the rapidly falling costs of gene sequencing will lead to a revolution in medical care.

“For all of human history, humans have not had the readout of the software that makes them alive,” said Larry Smarr, director of the California Institute of Telecommunications and Information Technology, a research center that is jointly operated by the University of California, San Diego, and the University of California, Irvine, who is a member of the Complete Genomics scientific advisory board. “Once you make the transition from a data poor to data rich environment, everything changes.”

The idea is that with truly inexpensive gene sequencing technology, we could conduct a lot of epidemiological studies that would greatly enhance our ability to identify persons at risk of disease, so that gene sequencing becomes the foundational technology for truly personalized medicine.  Each of us can afford to have the data on our own genome to guide our health care decision making. As a bi-product, our greatly increased ability to measure disease risk would greatly change, if not destroy, the health insurance system.

These things may eventually happen, but do not hold your breath. First, it turns out that information from gene sequences that strongly predicts human disease is less common than many imagine. Looking at the genetics of height is informative. Height is highly heritable and can be measured very accurately. So one would expect gene sequencing would enable us to find the key determinants of height. But extensive research with tens of thousands of persons and scanning more than half a million SNPs led to the identification of a few tens of factors that were replicable across studies, each of which contributed (on average) about 0.5 cm to height. If this result is typical, it suggests that your gene sequence will provide only limited information about your health. 

Second, the cost of gene sequencing may be falling rapidly, but the other costs of doing genetic epidemiology are not. You also have to follow patients over a considerable period of time, and measure their health outcomes. Hence genetic epidemiological studies will continue to cost millions of dollars, and be based on limited samples of data. Nor can you come to a conclusion about a health risk based on just a single study -- you have to replicate the finding in one or more additional studies. Therefore, very cheap sequencing may not produce as much genetic epidemiology data as some predict.

Instead, we may be in a situation where we have millions of elements of a gene sequence that may be related to a disease, but only a few that actually are, and those latter have only small effects on whether you have the disease. Moreover, we will have only tens of thousands of persons about whom we know the disease outcome for a given disorder. The combination of many potential risk factors, small effect sizes for these factors, and few cases relative to the number of potential risk factors leads to a large chance that an association between a genetic factor and a disease reported in a single study will prove to be false.

This is a chronic problem in epidemiology. What's new, however, is that there will be many people who have sequenced their genes and own that data. So imagine you learn that a Dr. Jones holds a press conference to announce that she has found that factor X is associated with Fulminant Necrotic Something or Other (FNSOO). You consult their genome and discover that you have factor X. What you have gotten for your trouble is the fear that you could get FNSNOO. Maybe Dr. Smith will find, next year, that in his data factor X is not associated with FNSNOO. Will you get the update? Failures to replicate are notoriously hard to publish, and Smith's non-finding may never reach the literature.

We should do the research, because there may be important risk genes out there. Moreover, everyone has a right to their data. I'm just saying that until we really understand the fundamental biology of how genes affect disease, the gene sequencing enterprise has the chance of doing more harm than good.

Qualification for military service: A benchmark for the (lack of) well-being of American youth

This is old, but it is important and truly depressing. From the Army Times:

only 4.7 million of the 31.2 million 17- to 24-year-olds in a 2007 survey are eligible to enlist, according to a periodic survey commissioned by the Pentagon. This group includes those who have scored in the top four categories on the Armed Forces Qualification Test, or AQFT; eligible college graduates; and qualified college students.

According to the Pentagon, the ineligible population breaks down this way:

•Medical/physical problems, 35 percent.

•Illegal drug use, 18 percent.

•Mental Category V (the lowest 10 percent of the population), 9 percent.

•Too many dependents under age 18, 6 percent.

•Criminal record, 5 percent.

In summary, 85% of American youths are disqualified for military service, primarily by obesity, lack of cognitive skills, drug use, or criminal records. Do we get it that there is a problem here?