Topic: Health Care & Welfare

Health Care Quality: Sharpening the Differences

Ezra Klein wants patients to receive the highest quality health care possible.  So do I.  Klein thinks that patients are “easily fooled” when it comes to health care quality.  So do I.  Klein thinks “panels of experts should watch over health care decisions.”  So do I. 

Klein thinks that politicians should empanel and watch over those experts.  I think that multiple panels should compete to provide patients with the best information, which patients could take or leave.

I worry that if politicians lead the pursuit of quality, the pursuit of quality will become infected by politics.  Klein kind of agrees.

Klein proposes to get around that sticky wicket by prohibiting Americans from contributing to politicians they like.  I think it’s an odd health care agenda whose success requires shredding the First Amendment.

Klein thinks patients are ignorant about quality, and thinks politicians should insulate patients from the costs of their medical decisions.  I think insulation from costs breeds ignorance about quality.

An elderly woman presents with abdominal pain from ingesting a spider.  Klein’s prescription: one bird and one cat, to be administered orally.  Cannon’s prescription: induce vomiting.

New England Journal of Medicine Reviews Crisis of Abundance

Arnold Relman reviews the Cato Institute’s latest health policy book, Crisis of Abundance by adjunct scholar Arnold Kling, in the latest issue of the New England Journal of Medicine. Dr. Relman is a former editor of the NEJM and an advocate of socialized medicine. Nonetheless, he compares Kling favorably to other economists who write about health care:

[Kling] has done a much better job than most of his colleagues. His book is clear, concise, and eminently readable; he writes in straightforward English prose, not economic jargon; he is modest, posing questions more often than he answers them; and he considers alternatives to most of the policy options he discusses.

Many readers will know that I am a longstanding critic of the economic approach to health care policy, but I liked this little book and can recommend it highly…

I was attracted by a certain freshness and directness in much of Kling’s argument, and I found myself agreeing with many of his observations…

[Kling] intends only to “raise the level of understanding of the realities, issues, and tradeoffs pertaining to health care policy.” I think he succeeds pretty well at that, so I warmly recommend his book to general readers who want to understand what economics has to say about health care.

NEJM subscribers can click to the full review from here. We expect to be able to link to the full review soon from http://www.cato-at-liberty.org/ and http://www.cato.org/.

Crisis of Abundance is available for purchase here.

GAO Report on HSAs

I just received an e-mail notice from the GAO about a report issued last month on health savings accounts. From my cursory read, the report doesn’t seem to contain anything unpredictable or earth-shattering. Corroborating that impression is the fact that I cannot find where Sen. Max Baucus (D-MT) — a longtime HSA opponent who commissioned the study from the GAO — has released any statement on it. (The GAO doesn’t release its reports until a couple of weeks after it delivers them to the congress-critter who made the request. That lets congress-critters be the first to spin release any GAO report.)

In all, the report brings to mind an observation by the Congressional Research Service that I included in a recent paper on HSAs:

Some less healthy people may find HSA plans attractive because they enable them to circumvent the restrictions of managed care plans. Conversely, some healthy people may find them unattractive because they are very risk-averse; they would prefer to pay more for comprehensive insurance with low deductibles. Older people may find HSA plans attractive because of the tax advantages: being in higher tax brackets (since average earnings increase with age until people are in their 50s), their tax savings from contributions would be greater. People who are 55 but not yet 65 years of age would also be attracted by the additional catch-up contributions they may make. By the same token, younger people with low incomes may consider the HSA tax advantages inconsequential.

The GAO seemed to find that HSAs worked for some people, and not for others. In their current incarnation, HSAs may not be for everyone. But the GAO’s findings hardly tracked the fear-mongering of HSA opponents. Some quotes from the report:

  • “HSA-eligible plans constitute a small but growing share of the private health insurance market.”
  • “[A] 2005 national employer health benefits survey reported HSA-eligible plan premiums that were, on average, 35 percent less than traditional plan premiums for single coverage and 29 percent less for family coverage.”
  • “[A] 2005 national employer health benefits survey reported HSA-eligible plan premiums that were, on average, 35 percent less than traditional plan premiums for single coverage and 29 percent less for family coverage.”
  • “The HSA-eligible plans offered by the three employers we reviewed covered the same broad categories of health care services as did traditional plans in 2005, including preventive, diagnostic, maternity, surgical, and emergency services, and also used similar provider networks.”
  • “HSA-eligible plan enrollees generally had higher incomes than comparison groups, but data on age differences were inconclusive.”
  • “IRS data…suggest that the average age of tax filers who reported HSA contributions was about 9 years higher than the average age of all tax filers under age 65 in 2004…. In contrast, data from several employer groups indicate that the average age of HSA-eligible plan enrollees, excluding retirees, was 2 to 6 years lower than that of other groups of enrollees.”
  • “While focus group participants enrolled in HSA-eligible plans understood the key attributes of their plan, such as low premiums, high deductibles, and the mechanics of using the HSA, they were confused about certain other features. For example, many participants were unsure what medical expenses qualified for payment using their HSA.”
  • “Few participants researched the cost of hospital or physician services before obtaining care, although many participants researched the cost of prescription drugs.”
  • “Most participants reported satisfaction with their HSA-eligible plan, but said they would not recommend these plans to everyone. Participants said they would recommend HSA-eligible plans to healthy consumers, but not to people who use maintenance medication, have a chronic condition, have children, or may not have the funds to meet the high deductible.”

I have argued that requiring people to have a rigidly defined high-deductible health plan in order to qualify for an HSA is unnecessary, and probably does more than anything to make HSAs unattractive to many consumers. 

I have also recommended expanding HSAs to give workers control over every one of their health care dollars, and to allow workers to purchase any type of health insurance they wish.

Silly Patient, Power Is for Experts!

Yesterday, I lamented that market critics simultaneously (1) argue that information asymmetries mean that patients are too ignorant to control their health care dollars and decisions, and (2) argue for policies that keep patients ignorant.

As if on cue, Ezra Klein pounced on the same hook I used: a column by David Wessel that cited a study showing that elderly patients are often highly satisfied with their care even when the technical quality is sub-par. Klein argues the study is proof that “consumer-directed health care is a silly idea.” 

Or, perhaps, those findings show that the policies Klein supports (e.g., government-provided coverage) are keeping patients ignorant.

Klein writes, “patients have no capability to separate good medicine from bad…for all their good intentions, [they] are easily fooled by a firm handshake, a pleasant nurse, and a well-decorated waiting room.” Klein continues, “If doctors need watchdogs, then we need to empower institutions or individuals with the education and ability to actually watch over them.” 

Presumably, Klein thinks a free market would not do so. But if that means the government should monitor quality, how would Klein insulate that effort from the political influence of providers, whose incomes would depend on what the watchdogs decide? Are politicians never fooled by a ($2,000) handshake? Which is easier: to fool all of the people all of the time, or to fool 535 people at any given time?

Baby Steps

Yesterday, the DEA announced that it would allow doctors to write multiple, post-dated painkiller prescriptions for chronic pain patients. This is good news. The prior restrictions were odious, and heartlessly required people suffering from chronic pain to make multiple trips to doctors and pharmacists to get their medication.

This problem is worse than it sounds. Because the DEA’s witchhunt has scared physicians away from palliative therapy, many of these patients have to drive several hours to find a doctor who is willing to treat them. Doctors willing to administer the most promising chronic pain treatment — high-dose opioid therapy — are even harder to find.

But yesterday’s decision doesn’t go nearly far enough. And the DEA seems to be trying to use this one concession to show its “reasonableness,” thus heading off criticism over the larger, more important issue — it’s overly aggressive pursuit of doctors.

Here’s what won’t change: The agency will continue to substitute its own judgment for the medical opinions of doctors. It will continue to define some high-dose treatments as off-limits, and it will continue to use malpractice standards, meant for civil litigation, in criminal court. The DEA also still refuses to give doctors a set of guidelines they can follow to guarantee they won’t be prosecuted, thus giving the agency a great deal of leeway and leaving doctors who engage in the experimental high-dosage treatments in legal ambiguity. The agency will also continue to deny doctors a “good faith” defense to prosecution.

DEA administrator Karen Tandy, who has a history duplicity on this issue, made some misleading and downright false comments in a USA Today story yesterday on her agency’s change in policy:

The new policy statement does not include a specific list of do’s and don’ts, but the DEA Administrator Karen Tandy says doctors should be able to glean from the listing of prosecutions on the agency’s website what it takes to violate the law. 

This is ridiculous. Instead of actual guidelines to see if they’re complying with the law, doctors are instead being instructed to read up on a “rogue’s gallery” of DEA trophies to determine if their own prescription habits are potentially criminal. That would be like the IRS refusing to give any real guidelines on how much money we owe the government, but instead refering us to a list of the “20 biggest tax cheats of all time” for guidance.

More Tandy:

Out of more than 1 million doctors who are registered with the DEA to prescribe such narcotics, the agency prosecuted 67 last year for prescription abuse. Tandy says the DEA has targeted doctors who have strayed far outside accepted medical practice, including some who have prescribed medically unnecessary drugs for cash or sex, some who have demanded kickbacks, and invented patients or fed their own addictions. 

Tandy is hyperbolizing. Included among those she says “have strayed far outside the accepted medical practice” are William Hurwitz and Bernard Rotschaeffer. The case against each of these men is far from conclusive. Pain activists like Siobhan Reynolds and Dr. Frank Fisher regularly send out new examples of doctors prosecuted by the DEA. In a few cases, it looks like the doctors were clearly unethical. In most, the evidence is far from conclusive and appears to be more attributable to the DEA’s ignorance of how high-dose therapy works, or that its own policies are chasing doctors away from this treatment, causing the few doctors left in the field to have no choice but to see more patients and write more prescriptions.

Tandy’s “67 of one million” statistic is also misleading. The one million number is the total number of physicians, in any line of practice, who are licensed to prescribe narcotics. The number who specialize in pain treatment is far, far lower. And the number willing to engage in high-dose therapy — the only therapy that seems to work on chronic pain — is much lower still. That 67 comes from an already small and dwindling pool of doctors willing to administer this promising line of treatment. Given that the DEA makes a big deal out of each arrest, including holding press conferences and putting out statements to the media, it isn’t difficult to see how each arrest would make it yet more difficult for pain patients to get adequate treatment.

More Tandy:

The DEA investigates doctors “who knowingly and egregiously put drugs into the hands of traffickers and abusers,” Tandy says. “This isn’t just questionable behavior. There is no gray area here.” 

There most certainly is. See the case of Dr. William Hurwitz, one of the DEA’s most sought-after and hard-won trophies. An appeals court recently set Dr. Hurwtiz’s conviction aside, finding that the government was wrong to deny Dr. Hurwitz to mount a “good faith” defense against charges that he prescribed painkillers to drug addicts.

More Tandy:

Tandy says she doesn’t want to tell doctors how to treat patients. “The DEA does not belong in the practice of medicine. We want doctors to be able to prescribe drugs when people are in pain. We’re trying to give them a comfort level.” 

But if the DEA has its own definition of what is and isn’t “accepted medical practice,” and — worse — won’t tell doctors what that definition is when it comes to prescribing painkillers, thus leading doctors to err on the side of undertreatment, we have most certainly entered the realm of drug cops dictating medical practice.

The DEA has taken a lot of heat from pain activists, academics, media critics, and civil libertarians on this issue. Yesterday’s minor shift in policy should by no means be the end of the debate.

For more on this issue, see here and here.

Health Policy Straw Man

In today’s Wall Street Journal, David Wessel writes:

It’s fashionable these days, particularly in Washington, to argue that the best way to improve the quality and restrain the cost of health care is to make the market for health care more like the market for everything else.

It’s also fashionable for opponents of free-market health care to caricature the case for market-based reform. 

I don’t know where Wessel comes down in that debate.  But he does employ a favorite straw man of those who oppose market-based reforms: that the case for markets “rests on the belief that health care is – in most respects – like any other product.” In fact, the case for markets does not rest on that assumption. 

That assumption is obviously false.  As Charles Phelps writes in his leading textbook Health Economics, health care markets face challenges such as extensive government intervention, uncertainty, asymmetries of information, and externalities.  Also, health care is scary, involving life-and-death decisions.  Of course, each of these dynamics is present in many markets.  What makes health care unique is how many of these factors converge in one place.

The case for markets is that markets do the best job of dealing with all those sticky wickets.  Take asymmetric information.  Critics say that the knowledge gap between doctor and patient is so great that consumers cannot be assured of quality.  But information asymmetries occur everywhere; every day, I am positively besieged by them.  I don’t know how to sew, much less build a car or a computer.  But those information asymmetries between me and a seamstress or Subaru or IBM do not prevent me from driving to work fully clothed and blogging about health policy.  Markets thrive on informational asymmetries, which are an essential part of specialization. 

So why is it that when consumers need to close that knowledge gap, or at least obtain assurance that they’re getting a quality product, they have an easier time doing so when it comes to Subaru than their doctor? 

Part of the reason is probably medical professionals’ traditional reluctance to compete with one another on the basis of price and quality.  But the larger problem is that government has insulated patients from the costs of their medical decisions.  With patients asking fewer questions about cost and cost-effectiveness (i.e., value), the rewards for generating that information are smaller.  (And herein lies an irony:  Opponents of market-based reforms argue that information asymmetries are an enormous problem, and then turn around and support further cost insulation, which exacerbates that problem.) 

That largely explains the interesting study Wessel cites, which found that patient satisfaction does not necessarily correlate with what the experts deem high-quality medical care.  It should be noted that measures of patient satisfaction and recommended care should not correlate perfectly; patients often have good reasons for not wanting what the experts consider “the best” care.  But excessive insulation at once contributes both to patient ignorance and to providers being able to get away with delivering sub-optimal care.

Federalism This Ain’t

According to Kaisernetwork.org:

Reps. Tom Price (R-Ga.) and Tammy Baldwin (D-Wis.) on Wednesday at a joint event by the Brookings Institution and Heritage Foundation encouraged lawmakers to back a bill (HR 5864) that would “allow states to act as laboratories where lawmakers could test methods to reduce the number of uninsured Americans,” CQ HealthBeat reports.

In an online debate with Stuart Butler of the Heritage Foundation (here, here, and here), I argued that this approach would favor government-expanding health care proposals.

Those in search of a free-market health care agenda should look elsewhere.