Non-subscribers may now read the full New England Journal of Medicine review of Arnold Kling’s Crisis of Abundance at this link.
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Health Care
Beggar Thy Neighbor
This item is a month old, but worth taking the time to read — especially if you work on health policy in the states. Paul Gessing is the president of New Mexico’s Rio Grande Foundation. That state’s governor, Bill Richardson, is planning a run for the presidency and recently proposed expanding New Mexico’s Medicaid program. In an article for National Review Online, Gessing does a superb job of explaining why that is the wrong approach. Other state think tanks should take note.
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Medicare, Only More Fun
On Thursday, Cato will host a book forum for Medicare Meets Mephistopheles, a new book by Cato adjunct scholar David Hyman. Medicare Meets Mephistopheles takes a satirical look at the crown jewel of President Lyndon Johnson’s Great Society.
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Hyman is a rising star in the field of health law and policy. A lawyer and a doctor, he is professor of law and medicine at the University of Illinois Urbana-Champaign. In 2004, he was the lead author of Improving Health Care: A Dose of Competition, the first joint report by the Federal Trade Commission and the Department of Justice. This year, he guest-edited an issue of the Journal of Health Policy, Politics and Law devoted to that report. Prof. Hyman also has a habit of quoting Austin Powers in his law review articles.
Ted Marmor, one of Medicare’s leading advocates, will comment, as will Robin Wilson, a visiting professor of law at Washington & Lee University.
The forum will be held at noon this Thursday at the Cato Institute, and will be followed by a luncheon. Other details, including how to preregister, are available here.
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Public Health & Economic Literacy
My former research assistant is now pursuing a master’s degree in public health at Harvard. She recently blogged about her economics course:
During econ class today, the professor explained in great detail the ways in which the federal government tinkers with agricultural output, like price floors and crop restriction and so forth. A lot of my classmates were genuinely surprised at the extent to which government messes with food production to placate the farm lobby, and that, in turn, surprised me. I thought most people — or most well-educated grad students and medical residents, who make up my class — knew all about concentrated benefits/diffuse costs, and why we probably pay more for milk than we should. At one point, a student from India, astonished, said, “You mean the government actually sets aside these funds every year for this purpose?” Professor: “Of course not. We run deficits.”
Again, these students made it all the way to Harvard without any exposure to such things. Makes me wonder if any research has been done on the economic literacy of the public health profession. (E‑mail me here if you’re aware of any.)
Let’s just hope that Adrienne’s econ class is a required course.
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Furmanology
CHICAGO—The only nice thing about being stuck on an airplane (aside from free soda) is the chance to catch up on one’s reading. On this trip, I (finally) turned to Jason Furman’s article “Our Unhealthy Tax Code” from the premiere issue of Democracy. I address Furman’s objections to health savings accounts in a recent paper. (Refreshingly, we actually agree on one or two things.) But Furman also commits what I think is an important error when discussing tax deductions for health care.
Congress exempts employer-provided health benefits from income and payroll taxes, which costs the federal government an estimated $200 billion per year in lost tax revenue. Furman describes this as the federal government “spending approximately $200 billion annually in subsidizing employer-provided insurance.” But that is flat incorrect. A tax deduction allows workers to keep more of their own income, provided they engage in a desired behavior — in this case, obtaining employer-sponsored health insurance. It is not government spending because the government cannot spend money that it never possesses. Nor is it a subsidy, because to subsidize means to transfer resources, and again the government never possesses those resources. The tax deduction may have the same effect on government revenues (and the economy) as government spending for the same activity. But that still doesn’t make it spending.
Suppose I robbed Peter and gave his money to Paul. Suppose alternatively that Peter gave his money to Paul because I threatened to punch him in the nose unless he did. In the first scenario, I would be spending Peter’s money on Paul. But in the second, Peter would be spending his money on Paul. I wouldn’t be spending anything. I merely would be threatening to assault Peter unless he did what I said.
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More Evidence on Coinsurance and ‘Skimping’
PHOENIX—In a recent paper on common criticisms of health savings accounts (HSAs), I discussed the concern that, since HSAs encourage greater price-sensitivity, they will encourage patients to forgo necessary medical care. I found that most of the evidence points to the opposite conclusion: Price-sensitive patients do not seem to “skimp” on necessary care.
The latest issue of Health Affairs includes an article that adds more weight to that conclusion. Dana Goldman and colleagues examined the effect of different levels of cost-sharing on privately insured patients with at least two of the following diagnoses: cancer, kidney disease, rheumatoid arthritis, and multiple sclerosis. The out-of-pocket costs for specialty drugs that treat these diseases can be quite high. For example, median out-of-pocket drug spending for cancer patients was $336 dollars (in 2004), but ran as high as $12,000 for some cancer patients.
What was striking about this study was that greater cost-sharing did not cause those patients to cut back on their drug expenditures. According to the authors:
Read the rest of this post →[C]oinsurance did not significantly affect the level of spending at all once a patient initiated specialty drug use. What is most striking about these results is how inelastic demand is — that is, how insensitive patients are to price — in comparison to traditional pharmaceuticals, for which it is not uncommon to see responses of 30–50 percent when copayments double.
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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.