Topic: General

As the Supply Curve Shifts…

Today’s New York Times runs an oped on the supply of physicians by David C. Goodman, an investigator with the Dartmouth Atlas of Health Care. The Dartmouth Atlas does invaluable work documenting the waste that exists in Medicare and other parts of the U.S. health care sector. Goodman critiques a recommendation by the Association of American Medical Colleges that the United States increase its output of doctors by 30 percent to meet the needs of the growing number of elderly Americans. That critique is excellent as far as it goes, but it seems to miss half the picture.

Goodman argues that increasing the number of physicians will do nothing to improve the quality of health care. He cites the sort of data for which the Dartmouth Atlas is famous:

Many studies have demonstrated that quality of care does not rise along with the number of doctors. Compare Miami and Minneapolis, for example. Miami has 40 percent more doctors per capita than Minneapolis has, and 50 percent more specialists…

The elderly in Miami are subjected to more medical interventions — more echocardiograms and mechanical ventilation in their last six months of life, for example — than elderly patients in Minneapolis are. This also means more hospitalizations, more days in intensive care units, more visits to specialists and more diagnostic tests for the elderly in Miami. It certainly leads to many more doctors employed in Florida. But does this expensive additional medical activity benefit patients?

Apparently not. The elderly in places like Miami do not live longer than those in cities like Minneapolis. According to the Medicare Current Beneficiary Survey, which polls some 12,000 elderly Americans about their health care three times a year, residents of regions with relatively large numbers of doctors are no more satisfied with their care than the elderly who live in places with fewer doctors. And various studies have demonstrated that the essential quality of care in places like Miami — whether you are talking about the treatment of colon cancer, heart attacks or any other specific ailment — is no higher than in cities like Minneapolis.

In other words, doctors in some areas of the country order up a lot of health care that seems to benefit no one but the doctors themselves. All that apparently value-less health care costs workers and taxpayers tens of billions of dollars per year.

But Goodman does not address an equally important question: whether an increase in physician supply could make health care more affordable. In the standard supply and demand model, loosening a constraint on supply shifts the supply curve to the right, which reduces prices. With third-party payers, the process gets pretty attenuated – probably more so when the government is paying than when a private insurer is paying. But that’s not the same thing as saying it breaks down. In fact, it’s hard to believe that increasing the supply of anything by 30 percent over time wouldn’t have an effect on prices.

Goodman might have noted that (1) the persistence of expensive, low-quality care and (2) a relatively unresponsive price mechanism are both enabled by the same same feature of the America’s health care sector: our over-reliance on third-party payment. As Mike Tanner and I noted in Healthy Competition, we even nose out Canada in terms of the share of medical care purchased by third parties.

Fixing that problem could address both cost and quality problems. Miami patients would be less likely to let their doctors order up useless tests if those patients are paying, say, 5 percent or 10 percent of the cost. And price is much more likely to respond to supply shifts if you have 200 million price-sensitive purchasers as opposed to a few hundred third-party payers, not all of which are price-sensitive.

Goodman’s Dartmouth colleague John Wennberg has recommended using medical savings accounts to cut out some of the waste in Medicare. Here’s an idea for getting rid of even more useless medical care: just give Medicare beneficiaries a lump-sum payment, adjusted for their individual health risk, and let them purchase medical care and coverage until it stops providing them value.

That might even change the political dynamics enough that we could eventually put to bed these wasteful political discussions about whether we should allow 30 percent more people to become doctors each year.

New at Cato Unbound: What to Do about Iran?

In this month’s Cato Unbound, “What to Do about Iran,” Reuel Marc Gerecht, resident fellow of the American Enterprise Institute and author of The Islamic Paradox, argues in a provocative new essay that diplomatic attempts keep Iran’s clerical regime from getting nuclear weapons will fail, so the U.S. must choose between preemptively bombing Iran’s nuclear facilities or allowing the mullahs to have the bomb. Arguing that the latter option “would empower its worst enemies in Tehran and spiritually invigorate all Muslim radicals who live on American weakness,” Gerecht advises the former: a policy of preemptively bombing Iran’s nuclear sites.

This week and next, a panel of defense strategy and foreign policy experts will challenge Gerecht’s argument, starting with Ted Galen Carpenter, vice president of defense and foreign policy studies at the Cato Institute, and followed by Edward N. Luttwak, senior fellow of the Center for Strategic and International Studies and author of widely discussed recent article in Commentary, “Three Reasons Not to Bomb Iran — Yet,” and Anthony H. Cordesman, Arleigh A. Burke Chair in Strategy at the Center for Strategic and International Studies and author of Iran’s Developing Military Capabilities.

Is Gerecht right? Are all non-military approaches to the Iranian nuke bound to fail? If so, should the U.S. resign itself to a nuclear Iran and rely on deterrence as it did during the Cold War? Or is deterrence ill-suited to a regime run by religious extremists?

Stay tuned for incisive commentary and criticism by some of America’s leading defense policy thinkers.

Crocko

Filmmaker Michael Moore is not doing much to inspire confidence in Sicko, his upcoming film on the U.S. health care sector. According to Variety.com, Moore wrote the following in an email to supporters:

If people ask, we tell them Sicko is a comedy about the 45 million people with no health care in the richest country on Earth.

One can only assume Moore is talking about “the” 45 million Americans who lack health insurance. Never mind that a lot of them will not be among those who lack health insurance tomorrow. Never mind either that government eggheads believe “that the estimate is inflated due to poor reporting of Medicaid coverage and perhaps other coverage types as well.”

No, what’s really interesting is that Moore says the uninsured receive no health care. He might be surprised to know that people have actually researched this topic. In 2003, the journal Health Affairs published an article titled, “How Much Medical Care Do The Uninsured Use, And Who Pays For It?” Turns out the uninsured received $99 billion of health care in 2001. The uninsured probably receive even more health care today.

Now, you might think $99 billion is not enough. You might even think $99 billion is too much. But if you think $99 billion equals $0, you might be Michael Moore.

I’m actually looking forward to agreeing with Sicko about how the U.S. health care sector is bloated and inefficient, and how health care providers routinely rip off taxpayers. But I can’t help this feeling that Moore is going to recommend that we turn that mess over to a sector of the economy that is even larger, even less efficient, and an even bigger rip off.

I’m hoping for a surprise ending.

Ron Paul in the Post

The Washington Post profiles libertarian congressman Ron Paul (R-Tex.) – in its Sunday Style section, which is sort of a throwaway placement.

It’s one of those 1970s-style laundry list stories:

The amiable Texas congressman would do away with the CIA and the Federal Reserve. He’d reinstate the gold standard. He’d get rid of the Department of Education.

Rather than really try to present the argument for individual rights and limited constitutional government, drawing on public choice economics and the failures of government programs, the reporter just lists one out-of-the-mainstream position after another. Still, she does make it clear that he’s philosophically principled and not your typical Bush-supporting JFK-lookalike 21st-century congressman.

Here’s an interesting point about Ron Paul that I haven’t seen anyone make: As far as I know, Ron Paul is the only member of Congress who has been elected three times as a non-incumbent. Two of those times he beat an incumbent.

He first won a special election in 1976, then lost that fall. Two years later he came back and defeated incumbent Bob Gammage. After three terms he ran for the Senate, losing the Republican nomination to Phil Gramm. The really bad news was that he was replaced by Tom DeLay. In 1988 Paul was the Libertarian Party nominee for president. Then in 1996, 20 years after his first election and 12 years after he had last won election to the House, he ran again in a differently configured district. He had to beat Democrat-turned-Republican incumbent Greg Laughlin in the primary – against the opposition of the National Republican Congressional Committee, the National Federation of Independent Business, the National Rifle Association, former attorney general Ed Meese, Senators Gramm and Kay Bailey Hutchison, and Gov. George W. Bush.

Given that kind of firepower and the incumbent reelection rate of about 99 percent these days, Ron Paul has a remarkable political record. He must be doing something right back in Texas.

Remembering Japanese Internment

Over the 4th of July, I headed out West to a family reunion in a very remote part of the U.S.: Minidoka County, Idaho–an apocalyptically stark stretch of mile-high lava rock and sagebrush in the heart of the Snake River basin, unfolding like a moonscape from the base of the Albion mountain range at the Utah-Idaho border.

I’d grown up on my dad’s stories about his Idaho childhood. One story that intrigued was his very early memory of working my grandfather’s fields alongside Italian and German World War II POWs, who were held in a prisoner-of-war camp near Twin Falls, Idaho. POWs were used to remedy a shortage of farmhands in agricultural areas throughout the U.S.

Not long ago, I asked my dad if any World War II Japanese internment camps had operated in the Minidoka area. He wasn’t aware of any. Imagine my surprise then when I learned of this memorial service, held today, for the Minidoka internment camp–one of the larger Japanese internment camps operated during World War II.

Its no surprise my dad–otherwise an encyclopedia of information about southern Idaho–was caught short on this question. Virtually nothing of substance remains to memorialize the camp today, although a more substantial memorial is planned.

Minidoka residents–fond of calling their region the “Magic Valley“–shouldn’t get off so easily. Just as the government loaned Axis POWs to some local farmers, it loaned Japanese-Americans to others. Some 2,300 “Nisei” camp residents worked area sugar beet farms on “agricultural leave” from the Minidoka camp–hard, backbreaking work at a time when local farming was undertaken without modern tractors or modern irrigtation technology. To be sure, the camp residents weren’t technically forced to work, as this bit of outrageously upbeat 1943 government propaganda notes–but the Japanese internees had little other choice of employment.

This shameful episode–part of the darker history of communities throughout the West and a telling example of the worst that can happen when courts abdicate oversight of the political branches during wartime–deserves substantial local recognition in Minidoka and other host communities. For more about the location of internment camps, see here and here.

Tom Delay Is a Virginian

One of the best arguments for term limits is that we have reached the point where members of Congress are no longer “representatives” of their districts. The latest evidence of that came in this morning’s newspaper, which says Tom Delay will be on a Texas ballot in an upcoming election even though he has now declared himself to be a Virginian. Whether Delay wants to participate in that election or not, it is interesting that he has announced his status as a “Virginian” so fast. Or perhaps it’s not fast by modern standards.

Let’s see: Bob Dole returned to Russell, Kansas, to announce his candidacy for president. When he lost, he decided to live at the Watergate here in D.C. A few years later, his wife Elizabeth went to North Carolina to become a senator. The Clintons left Arkansas and are now New Yorkers. William Weld was governor of Massachusetts, but came down to New York to run for governor there. And there’s plenty more.

We need term limits before the next generation simply assumes that this is all perfectly normal and appropriate.