Topic: Health Care & Welfare

Crisis of Abundance in the New York Times

A number of reports purport to show that the U.S. health care sector lags behind those of other nations. I’d be the last to argue that our health care sector should be a model for the rest of the world. But those supposedly objective reports are often based on subjective value judgments about which people will differ. They also tend to overlook objective strengths of the U.S. health care sector.

For example, New York Times columnist Tyler Cowen writes today about how the United States leads the world in medical innovation. We spend far more on medical research than other nations, which increases our level of health expenditures. But the benefits of all that spending are not confined to our borders; they help keep the “ferriners” alive longer, too.

Cowen also draws a lesson from Arnold Kling’s book Crisis of Abundance:

The American system also produces benefits that are hard to find in the numbers. The economist Arnold Kling in his “Crisis of Abundance: Rethinking How We Pay for Health Care” (Cato Institute, 2006) argues that the expected life span need increase by only about half a year for the extra American health care spending to be cost-effective over a 20-year period. Given that many Americans walk less and eat less healthy food than most Europeans, the longevity boost from health care in the United States may be real but swamped by the results of poor lifestyle choices. In the meantime, the extra money Americans spend to treat allergy symptoms, pain, depression and discomfort contributes to personal happiness.

Those interested can purchase Crisis of Abundance here, or click here to watch the Cato book forum featuring the author, Sebastian Mallaby of The Washington Post, and Jason Furman of NYU.

Extremism in Defense of Liberty

Michael Cannon, Mike Tanner, and other libertarian health care gurus may appreciate this.  I recently came across an intriguing quote by Founding Father Benjamin Rush, surgeon general of the Continental Army and signer of the Declaration of Independence.  So I did what everyone does these days and went to Wikipedia.  There I learned that:

Rush believed that Americans should enshrine the right to medical freedom in their Constitution, much as the right to freedom of religion is expressly guaranteed in that document.

Rush is reported to have argued that “Unless we put Medical Freedom into the Constitution, the time will come when medicine will organize into an undercover dictatorship … to restrict the art of healing to one class of men, and deny equal privilege to others, will be to constitute the Bastille of Medical Science. All such laws are un-American and despotic and have no place in a Republic … The Constitution of this Republic should make special privilege for Medical Freedom as well as Religious Freedom.”

(Of course, if you read a little further, you learn that some of his medical theories were not so hot). 

Rush was also a rabid antimilitarist who proposed in 1792 that two captions be painted “over the portals of the Department of War”: “An office for butchering the human species” and “A Widow and Orphan making office”–though that’s an idea that would probably be even less popular today.    

Another Warning That Will Go Unheeded

In a speech to the Economic Club of Washington yesterday, Federal Reserve Chairman Ben Bernanke became the latest top policymaker to warn that we will face an economic crisis if Social Security and Medicare are not reformed. Unfortunately, Bernanke’s warning is unlikely to become part of the political debate. So far this election season, Democrats have been demagoguing the issue, while Republicans run away from it. Meanwhile, because Congress failed to act last year, Social Security’s unfunded liabilities increased by another $550 billion.

Health Care Innovation

Tyler Cowen does two nice things in today’s economic scene column on health care spending.  First, he makes the case that the U.S. system is the leader in innovation:

[T]he American health care system may be performing better than it seems at first glance. When it comes to medical innovation, the United States is the world leader. In the last 10 years, for instance, 12 Nobel Prizes in medicine have gone to American-born scientists working in the United States, 3 have gone to foreign-born scientists working in the United States, and just 7 have gone to researchers outside the country.

The other nice thing is that he cites Crisis of Abundance:

The economist Arnold Kling in his “Crisis of Abundance: Rethinking How We Pay for Health Care” (Cato Institute, 2006) argues that the expected life span need increase by only about half a year for the extra American health care spending to be cost-effective over a 20-year period. Given that many Americans walk less and eat less healthy food than most Europeans, the longevity boost from health care in the United States may be real but swamped by the results of poor lifestyle choices. In the meantime, the extra money Americans spend to treat allergy symptoms, pain, depression and discomfort contributes to personal happiness.

Evidence from Thee, but Not from Me

Via the Healthcare Economist and Health Care Renewal, I was led to a recent editorial in the BMJ (formerly the British Medical Journal):

[In the National Health Service,] something important is quietly dying. I don’t think it is too fanciful to call it the spirit of medical professionalism. And we, the medical profession, are watching it die….

[F]ar from being privatised, medicine in England has become ever more a creature of the state….

[A]lthough medicine has embraced the need for evidence-based medicine, policy making remains largely an evidence-free zone.

Politicians consolidating and centralizing power…government sucking the soul out of a profession…ho-hum. It was the last line that really caught my attention. 

I’ve noticed the same tendency on this side of the pond. For example, policymakers such as Sen. Chuck Grassley, Rep. Nancy Johnson, and the Institute of Medicine want Medicare to cook up “pay-for-performance” financial incentives that reward providers who deliver what the evidence suggests is “quality” care. You know, pay them to follow the evidence. As Forrest Gump might say, that’s a fine idea. The only problem is, private insurers have been trying that idea for 10 years, and there’s scant evidence to show that it actually works. 

Personally, I think “P4P” has the potential to do a lot of good. But in a recent paper on the topic, I had to note the irony:

The P4P movement proceeds from two premises: first, that clinicians tend to underuse evidence from randomized clinical trials and, second, that financial incentives can increase such use and improve the quality of care. Yet whatever enthusiasm exists for P4P is not derived from the type of evidence of effectiveness that P4P enthusiasts believe should guide clinical practice. Third-party financial incentives remain an unproven tool for improving health care quality at all, let alone in a cost-effective manner.

Costs vs. Spending

In yesterday’s New York Times, David Leonhardt writes:

Mr. Wagoner’s argument has become the accepted wisdom about the [health care] crisis: the solution lies in restraining costs. Yet it’s wrong.

In fact, the solution does lie in restraining costs.  Leonhardt is wrong because he conflates costs and spending

Spending is the amount of money we devote to medical care.  Costs are different.  The money devoted to medical care represents a cost, because we give up the next-highest value use of that money (e.g., a skiing trip).  But we also bear costs due to illness, including pain, limited mobility, and shortened lifespans.  We spend money on medical care to reduce the total costs that we bear.  Spending a lot of money on medical care is therefore desirable – so long as the benefits (reduced pain, enhanced mobility, longer lifespan) exceed the costs for each increment of spending.  The solution to every economic problem undeniably lies in restraining costs. 

Leonhardt probably meant to shoot down the idea that the solution to America’s health care crisis is in restraining spending.  Indeed the thesis of his article seems to be that even though there are many wasteful medical expenditures, a lot of what America spends on health care is very worthwhile.  But he repeatedly confuses the two concepts:

But the No. 1 cause of the cost increases is still the one you can see at the hospital and in your medicine cabinet — defibrillators, chemotherapy, cholesterol drugs, neonatal care and other treatments that are both expensive and effective.  

But if those treatments are expensive and cost-effective, then they would reduce costs. 

The confusion keeps Leonhardt from reaching the $64,000 question: How can we eliminate waste while preserving what works?  Or to put it another way, How can we reduce spending without increasing costs?

It’s Getting Better All the Time (contd.)

The Washington Post has a 12-inch story on Tuesday with this headline:

Freshman from Arlington

Comes Down With Mumps 

Is that news? When I was a kid back in the benighted 60s, everyone got mumps. Why is it news today? Because now we have vaccines, and kids don’t get mumps any more. So it’s actually news when somebody gets “the mumps, a highly contagious viral disease.” Sounds bad when you put it that like that, but it seemed a standard part of growing up a generation ago.

According to this timeline, a vaccine was licensed in 1967, and an improved one in 1971. And since then, I guess, nobody gets mumps. Another reminder of why paying a high percentage of our income for medical care is not exactly a bad thing.