Marginal Utility

by Ken Houghton

Unfortunate E-Mail Headline from The New Yorker's weekly update on items in their current issue:

Sarah Palin, the obesity epidemic.

Place hasn't been the same since Jay McInerney stopped working there. Or at least Terry McGarry.

Labels: Health Care, Politics

by Ken Houghton

Yes, Youngest Daughter got to pick the movie for Father's Day/her birthday. Her review: "It was boring." Even worse: that was as compared to her sixth or seventh viewing of Hotel for Dogs.

So some random notes about it, and around the web:

(1) Lance Mannion did not warn me that the three cherubs are played by The Three Antichrists. Consider yourself so cautioned.*

(2) Ezra schools McMegan. Not that it will do any good.

(3) Did anyone else think Amy Adams at the end looks like a hennaed Erin O'Brien?

(4) The Hunting of the Snark did a two part post weeks ago on McMegan, bankruptcy, and health care that I'm still trying to digest. Which I mean in a good way. If rdan is reading this, yes, I think you should recruit Susan of Texas for Angry Bear; her latest post is a perfect summary of What's Wrong with Contemporary Conservative Thought. Though, as the Good Roger Ailes notes, she's developing a strong following for good reason.

(5) I assume it was the location of the theatre that got a laugh from the audience at the end of the film when Amelia Earhart leaves 77th Street and starts flying to "Canada." YMMV, but the film sorely needed laughs.

*However, since my version of H*ll would feature the "JoBros" performing "More than a Woman" and "This Song Must Drone On," their first appearance does qualify as an Adult Moment in a movie that has more of those than kid jokes.

Labels: Erin O'Brien, Health Care, just life, Mannion, movies

by Tom Bozzo

Brad DeLong blogs the train wreck at a clown show that is the McCain policy apparatus so I don't have to (big report due in a week, sorry remaining readers). He has a quite brilliant twofer.

First, there's the suckitude of the McCain health plan. Or, rather, the evolution from

We're phoning it in, to

OMG, people are looking at it and figuring out ways it might suck, so

Sweeten it, but...

That's too expensive for our small-government-conservative narrative, and voila,

Let's commit political suicide!!

You know, we have llike seen this before. On health care:

• McCain started with a tax credit that was equal in aggregate to the additional tax he levied on employer-sponsored health benefits in the first year--in later years the credit became much smaller than the tax.
• Then it was like ooops, that's not popular. We know--we never intended to subject employer-sponsored benefits to the FICA tax, only to the income tax.
• Then it was like ooops, now we're scared that the plan is fiscally irresponsible and will raise the deficit. We know--we will cut Medicare!
• Then it was like ooops, we have to carry Floria. We know--have Sarah Palin say that McCain will not cut but will protect your entitlements.

Can't anybody play this game? If we lose the election to these clowns, I am going to be really embarrassed. It seems as though nothing is competently staffed out--as if nobody in the McCain campaign cares about actually having policy proposals, but only about having something incoherent that an ignorant and lazy reporter can be deceived into thinking is a policy proposal.

Second, on the housing crisis, McCain pulls his new bailout plan out of his behind at the "debate." However:

But it soon develops that much of Senator McCain's proposal is not his but Barney Frank's, and that the differences make it not a homeowner relief bill but an imprudent banker profit and rescue bill.

And so our so-called conservatives want to nationalize negative home equity (that's some concern for the taxpayer, there):

[DeLong quoting the Politco] “Clearly we face the trade off that we would in fact be taking the negative equity position and putting it on the taxpayers books instead of putting it on the private lenders books or the homeowners books,” Holtz-Eakin told Politico. “We think the balance of risk has shifted to the point where this is the way to go.”

Does the McCain website say that? No.

But by the time I got to the website, it read differently:

JohnMcCain.com - McCain-Palin 2008: For those that cannot make payments, mortgages must be re-structured to put losses on the books and put homeowners in manageable mortgages. Lenders in these cases must recognize the loss that they’ve already suffered. [Apparently that last sentence was struck by a panicked editor -- ATB.]

Apparently the schmuck who was assigned the job of writing up the web description did not believe the plan could possibly be what he was told it was.

Most deliciously, someone couldn't stop from thinking out loud in naming the "program," such as it is: it's the "American Homeownership Resurgence Plan (McCain Resurgence Plan)." Apparently it's change someone can believe in.

(Cross-posted at Angry Bear.)

Labels: Health Care, Housing Bubble, John McCain

by Tom Bozzo

Over at Angry Bear, I have a long post up discussing whether McCain's health care tax credits are really a tax cut (and for whom), and whether the plan makes any sense otherwise. (Hint: I'm a small-e economist for Obama.)

Labels: Health Care, John McCain

by Ken Houghton

Via Susan, the current Grand Rounds has an article on inverted nipples, complete with a link to an 1866 British Medical Journal piece [PDF].

Labels: Health Care, just life, Total Drek

by Ken Houghton

Economic Logic always makes a point arguing that externalities should be taxed. (See, for instance, here.) The counterargument, of course, is that if you're going to try to discourage behavior, people have to know what behavior you are trying to discourage before they can stop it.

For instance, if you don't know the full calorie count of that Combo—10-piece Chicken McNuggets (420), Medium French Fries (380), Medium Coca-Cola(r) (210); total 1,010 calories, or more than half the calories of a "normal" (2,000 calorie) diet—the decision you make cannot be considered rational.

And how do we know that people don't have full information? Well, we know when divinecaroline (h/t Avram at Making Light) realizes that it's still necessary to publish an article such as Five Foods That Cause Anal Leakage.

Labels: asymmetrical information, Health Care

by Ken Houghton

This has been said better than I, ad nauseam, by others but it always bears repeating: blogs prove to people that You Are Not Alone.

Case in Point: Ann Wilmer's blog Cake for Breakfast, in which she talks about caring for her mother, who is in the later stages of her life, and Alzheimer's.

I too wish she had started the blog sooner, but the elegiac ending—not to mention the notes on sources for help with Alzheimer's and, especially, for information on how to get help keeping parents at home with you—are not to be missed.

Labels: blogging, Health Care, Meta

by Ken Houghton

While I just described giving money to move Gary Farber from a good city to an all-right city as a good idea, I can't get such enthusiasm for the latest mailing, which seems to be from one of those Nigerian businessmen, except it lacks their usual verve, charm, and, yes, even style:

Today, there are 47 million uninsured individuals in the U.S., and nearly a quarter of them are children. High costs and limited access are the underlying, fundamental problems in our healthcare system.

Separate thoughts in the same paragraph, not for the last time. This reveals that the writer is not a native English speaker.

As you know, both Senators Hillary Clinton and Barack Obama are touting outrageously expensive and unrealistic universal health care plans - a government monopoly over health care.

As is common knowledge, I wish that were so in the case of Obama. Again, confusing monopoly and monopsony gives away the game. Either Nigerian or a Friend of McMegan (link is not to a friend of McMegan, but rather to someone whose work you should be reading).

Unlike my opponents, I do not believe that all of our nation's problems can be solved by turning control over to our government, with all the tax increases, new mandates and government regulation that come with that idea.

Unlike the current system, where tax increases, new mandates, and government regulation that come with no idea. I'm starting to lean toward FoMcM, since no Nigerian ever talks about being regulated. Thought that "opponents" thing does imply some Civil War.

Today, our campaign began running a television ad focused on health care...to ensure all Americans hear the truth about how I plan to tackle the challenges facing our nation's health care system. To ensure this important ad is aired in as many markets as possible, I'm asking for your immediate financial assistance.

Ah! There it is! The pitch is just where the Nigerians put it.

I believe the key to real reform is to restore control over our health care system to the patients themselves. Americans need new choices beyond those offered in employment-based coverage.

The last time the "the patients themselves" had "control" over their part of the health care system was before Arizona was a state. Most "hospital" care was provided by charity wards run by churches.

This e-mail may not be from a Nigerian, but it's clearly from someone who wants to turn out health care system into the Nigerian one.

My friends, this is not my definition of real reform. I hope you will join me in my fight to tackle the real problems facing our nation's health care system by making a contribution of $50, $100, $250, $500, $1,000, or $2,300 to help fund this important ad.

There's the pitch again. But...$2,300??? That seems small for a Nigerian.

I hope to hear from you soon.

Sincerely,

John McCain

Oh, him.

Please, folks, send Gary your money instead.

Labels: 2008, Health Care, Republican Party

by Ken Houghton

I'm buried right now, even without working for direct pay, but want to make certain this gets mentioned.

Mark Duggan and Fiona Scott Morton have an NBER paper (#13917; gated link here*) examining the results of the first year of Medicare Part D. To no one's great surprise, they find that it wastes a lot of money compared to direct government purchases that it works well for the most common drugs,* not well at all for the "protected" class of drugs (basically expensive cancer/AIDS treatment that have few rivals and are therefore all required to be carried by Part D providers), whose prices may have increased by their inclusion.

But what is most (generally) interesting is the list of most common drugs prescribed under Part D:

Lipitor, Zocor, Prevacid, Nexium, Zoloft, Epogen, Celebrex, Zyprexa, Neurontin, Procrit, Effexor, Advair, Paxil, Norvasc, Pravachol, Plavix, Allegra, Wellbutrin, Oxycontin, Fosamax, Vioxx, Singulair, Protonix, Actos, Ortho, Aciphex

That's right; "hillbilly heroin" is #19 on the IMS Health list of prescribed drugs under Part D.

*If anyone finds a non-gated version, feel free to ref it in comments and I'll add it. (Tom, just edit appropriately if you find one.)

**Duggan and Scott Morton do note that "If a price is suboptimally high, there can be over-utilization of the treatment, with physicians and other health care providers potentially inducing the demand of consumers," but appear to assume that is not the case here.

Labels: Bushonomics, Economics, Health Care

by Ken Houghton

First she caught Tyler Cowen (and, through him, Brad DeLong's) attention with this paper (NBER; gated).

Today, Ben Muse looks two papers earlier and finds "The Economic Value of Teeth."

I haven't seen anyone go four papers forward to discuss this one yet, but I haven't hit the Health Care blogs yet today.

Labels: Economics, education, Health Care

by Ken Houghton

A marvelous post from Andrew at Statistical Modeling etc. which evolves in the comments into a discussion of Willingness to Pay (WTP) vs. QALYs.

For some reason, economists seems to prefer the former to the latter. Which is strange, because it is intuitively easier to build a realistic Health Economics model using QALYs and treating insurance premia as an investment than the current standard of treating insurance premia as a "sunk cost" and declaring Moral Hazard at all turns.

Labels: Economics, Health Care, QALYs, Statistics

by Ken Houghton

It had been a while since I looked at U.S. Food Policy, but the largest beef recall in U.S. history reminded me I might be missing something. Indeed, Parke Wilde first discussed animal abuse captured on video which, at its best, would be cruel, only a week ago.

Slaughtering cows that cannot otherwise stand increases the risk of BSE ("mad cow disease") in the food supply. Which is just one reason that bad treatment is also Bad Business Practice.

Another bad business practice is quoted at USFP:

The most ridiculous sentence in today's article comes from the Hallmark official who had the unpleasant job of reconciling the company's earlier untrue claims with the facts:

"We certainly wouldn't have failed to disclose that if we knew it was in the public record," he said.

I feel much better about domestic, let alone international, food processing standards now. In the nine months since Paul Krugman wrote "Yesterday I did something risky: I ate a salad," the stakes have only gotten higher.

Labels: governance, Health Care, principal/agent problems

by Tom Bozzo

Ken, you ignorant slut. [*]

In the post that riled Ken, Mark Kleiman wrote:

So we're back where we started: two plans, both with guaranteed availability of insurance regardless of health status, both with subsidies. One has a mandate with (as yet undefined) enforcement mechanisms. The other has no mandate but (as yet undefined) financial disincentives for free-riding. Until the two plans are better specified, there is no basis on which to estimate how many people will wind up not buying insurance under either plan, and therefore no basis for any firm estimate of costs to the taxpayer.

This is hardly justification for the holy war the Clinton campaign is waging on Obama on the mandate issue.

What's the big deal here? In evaluating would-be "mandates" to purchase health insurance, economists would be concerned mainly with the system of financial disincentives for free-riding, not with the directive per se. Clearly, a weakly-enforced commandment can be less effective than a set of incentives that isn't called a mandate but makes it pretty much worth everyone's while to act as the policymaker would like to dictate.

As it happens, I don't find mandates to buy something in the private market to be very progressive (see also Brian Weatherson with some useful gloss from the late Howard years in Australia), and HRC doesn't sell Hillarycare II to me by underscoring the mandate part of the plan. To the extent I'm mollified, it's by the presence of a public plan as an alternative.

Meanwhile, I find commentators who would criticize Obama for being all rhetoric, no substance should actually read the plan. (Indeed, actual attendees of Obama events have reported to me no dissatisfaction over a lack of policy specifics.) Among other things, the Obama campaign took the effort to include important if unsexy policy initiatives such as a federal reinsurance program. [**] The importance of this initiative was covered by Kash at Angry Bear 3-1/2 years ago, when this was an important but underheralded part of the Kerry health plan. A good bit of the premium-spiral problem can be laid at mostly missing markets for health care reinsurance, as plans otherwise are pushed to try to recoup their losses after the fact — making health "insurance" rather less insurance-like.

It looks like the narrative that will fulfill Lance Mannion's prediction should Obama be nominated is that those of us who support him are a bunch of cultish crazies who are blinded to his lack of substance. Let me point here and here (added: and especially here) by way of calling bullshit on that, and I hereby announce my intention do deal as harshly as I can with anyone who knows better and propagates the meme.


[*] See here in case you don't get the reference (I assume Ken does); for the record, I disapprove of rhetoric that questions the brains of those who might be our blog-allies and, except in extreme cases, even those who are not.

[**] I.e., the government would reimburse health plans for catastrophic losses.

Labels: Health Care, Politics

by Ken Houghton

Mark Kleiman blew some smoke a couple of days ago, catching, among others, the normally-brilliant Battlepanda with his "I'm a pundit, I don't have to know anything" post.

More on that one later, but let's do a high-level comparison. Kleiman lets Harold Pollack attack the Gruber paper. Why? Because of this (inane and unworthy of even a Huffington Post contributor; see later post) quote:

In particular I assume that 95% of those who would not voluntarily choose to insure are forced to insure through the mandate.

So we are left to wonder whether he will now attack the Obama campaign and David Cutler in the same manner, after Cutler declared (via Brad DeLong):

Our estimates, based on studies in the literature, is that we can get 98% or 99% coverage without a mandate for adults. There may be some small pockets of people who choose not to buy it.

I'll wait patiently for Kleiman to realise that Cutler's estimate has the same basis as Gruber's, with much less empirical data to support it.

UPDATE: Let's put the best spin possible on this. Cutler assumes a 98-99% adoption rate wihtout mandates. In the discussion, he declares:

If there are free riders, Obama is open to mandates....

Richard Eskow: Would mandates be considered at that point?

David Cutler: He hasn't ruled anything out. It's a matter of priorities. The fact is, the policy differences on the mandate issue aren't that large at all. Sen. Obama believes they're an option down the road, if other approaches don't work.

Let us leave aside that what Senator Obama believes doesn't match with his advertisements or his public statements (Krugman's point here and here), which implies either Cutler isn't as deeply in the loop as he appears to be, or Obama isn't so good a politician as the world believes he is.*

Cutler is essentially saying, "Yes, mandates would increase the participation rate, but we would prefer not to use them." Gruber is saying, "Mandates should improve the participation rate—especially given that the enforcement mechanisms are already in place—so I'll make a reasonable assumption that, even with them, there will still be a small fraction of the populace that will remain uninsured.**"

But the former assumes a significantly higher adoption rate than the latter, even though both agree that a Mandate would insure more people.

*And, yes, I do fit in that world.

**Indeed, if we assume sufficiently high income and a sufficiently safe lifestyle, insurance could become an unnecessary expense. Bill Gates, for instance, could pay for all the health care he needs out of petty cash.

Labels: Health Care, Journamalism, Politics

by Ken Houghton

The normally-astute James Galbraith and other members of Economists for Edwards are expected to endorse ObamaNation. Barkley Rosser, at Econospeak, presents the positive-spin version:

A condition of this, which I insisted on as a condition for signing on, was that it be made clear in our statement that we would be working to change some of Obama's policy positions, particularly on health care and social security, to become more like those supported by Edwards.

and notes the "sausage-making" amongst the group:

There was considerable debate in the group on all this, and about half are not signing on. However, none of those not signing on expressed that they favored Hillary instead, even though some favored some of her policy positions.

Is this supposed to be a positive statement?

PGL, in comments, is more cautious, while Paul Krugman notes that California voters are not such optimists, preferring to vote on issues.

Labels: 2008, Economics, Econospeak, Health Care, Politics

by Ken Houghton

UPDATED BELOW, 2 Feb 2008, ca. 6:22pm CST.

He doesn't mean his title, and spreading lies and kneecapping your future is a good way to get me to vote for Crazy John.

(via Dr. Black)

Reg at Beautiful Horizons, on the other hand, believes Jon Chait:http://krugman.blogs.nytimes.com/
Paul Krugman - Op-Ed Columnist - New York Times Blog

In recent years, "bipartisanship" and "national unity" have usually meant meeting the GOP halfway, regardless of how far right it veers, with agreement an end in itself.

But this is not Obama's meaning of national unity. Substantively, he has not embraced many conservative ideas. And he has explicitly repudiated the notion that unity is an end in and of itself--the purpose is to bring in non-Democrats to enact liberal goals. "If you know who you are, if you know what you believe in, if you know what you are fighting for," Obama says, "then you can afford to listen to folks who don't agree with you, you can afford to reach across the aisle every once in a while."

UDATE: Paul Krugman notes, to no one's great surprise, that Chait is an idiot. Even the Sainted Battlepanda is horrified, though it appears she may hold her nose and still send in an absentee ballot for the ObamaNation, whose plan as presented raised average costs by about $1,700 per person per year without providing an iota of additional utility* (unless you're Tyler Cowen [h/t DeLong]).

*I have a copy of the Gruber paper. More on it maybe next week. E-mail if you need a copy.

Labels: 2008, Health Care, ObamaNation, Politics

by Ken Houghton

Via the Social Science Statistics Blog, a flyswatter for the happy Milanophile.

As a bonus, the same post leads to (and features a picture of) a graphic-laden representation of What Georgie Wanted the US Budget to Be.

Which, given my recent obsession, leads to the obvious question (zoom in on the penny in the lower right corner): If "the cost growth per beneficiary in the Medicare and Medicaid programs has tracked cost trends in private-sector health-care markets" (h/t DeLong; the original is WSJ subscriber-only, though it was probably Digged), why was the Medicare budget only projected for a 5% (nominal) increase? Or does that question answer itself?

Labels: Brad DeLong, Bushonomics, Econometrics, Economists View, Health Care, Janelle, Politics, Statistics

by Tom Bozzo

I might have responded to Ken's current titling by calling this "Another Shitty Day" after the great song by the Sneetches, but kept this clean out of respect to the bloggers who let us lower the tone of the discourse via RSS on their sidebars.

Short background:

• Last Wednesday, John had an unscheduled doctor visit for a nasty upper respiratory virus, leading to lots of coughing.
• Thursday, he was feeling a little better.
• Friday, he was feeling worse again.
• Saturday, he had a fever and was complaining that his tummy hurt; both responded to NSAIDs.
• Sunday evening, the fever picked up and his tummy hurt a lot.
• Very early Monday morning, he was inconsolable. Off to the ER!
• 9 P.M. Monday-now, he's recovering from an appendectomy at the UW Children's Hospital.

If you have to be in the hospital, the American Family Children's Hospital is just about as good as it gets, befitting a brand-new facility; I've certainly been in less nice (though certainly far cheaper [**]) hotels. The chief of surgery just happened to be on call for the operation, the staff is very attentive, and John is recovering as well as can be expected. It gives the impression that the health care system in general is humane.

The teases.

A recurring theme of Paul Krugman's is that the health insurance system runs an expensive and officious bureaucracy for the purpose of making money by denying care (or payments for it, often effectively the same thing). We are fortunate only to be screwed by our insurer in the form of large backward-looking premium increases that make our insurance seem less insurance-like.

A related problem with more direct bearing on our situation is that Our Wonderful System tends to reward doctors for (or maybe requires [***]) spending as little time as possible with patients. Those of you who have worked in consulting, law, or other fields where one's time is sold may recognize that clients who are very persnickety about timekeeping get to pay (directly or via overheads included in the billing rates) for record-keeping that may or may not be more useful than actual work. Throw in the Murphy's Law of Children's Health, i.e., when your kid gets really sick, it will happen after 5 P.M. on Friday, and you have the makings for some big insurance claims.


[*] Readers with small children of certain inclinations may recall that in Madeline, the other girls cry boo-hoo because they want their appendixes out, too. Fat chance.

[**] As you might guess, business travel rarely brings me to Manhattan. At least the Wi-Fi here is free.

[***] I don't have direct medical back-office knowledge, and am too sleep deprived to go and learn more about it.

Labels: Health Care, just life

by Ken Houghton

The argument that government-provided health insurance "crowds out" the private sector actually has two components: (1) is this happening and (2) if so, is it worse than the alternatives?

The second part is often seriously overlooked by some economists, who only use Pareto-optimal in one direction. Jonathan Gruber is one of those who has argued most vehemently that there is crowding out. But his recent NBER paper with Kosali Simon*, an update of Gruber's 1996 AER paper with David Cutler*, notes what we have always known about the model of private health insurance, that its preference to insure declines with the need for that insurance**:

We also find that recent anti-crowd-out provisions in public expansions may have had the opposite effect, lowering take-up by the uninsured faster than they lower crowd-out of private insurance.

The graphic of this is left as an exercise to the reader, but the English version is that the Administration argument against S-CHIP will (as Jason Furman notes at Greg Mankiw's blog) help children in poorer families more than it will provide any subsidy to higher-income families. (UPDATE, appropriate quote, which I missed last night, but which was highlight by Brad DeLong, quoting from Mankiw's blog:

The Democrats and a substantial number of Senate Republicans support a proposal whose principal focus is covering low-income children who are currently eligible (3.2 million according to CBO) plus expanding coverage modestly to new children (600,000 according to CBO). In total 85 percent of the coverage expansion is for those who are already eligible but are not getting coverage either because the funding limits assumed in the baseline are projected to be reached leading states to turn away currently eligible children or because families simply do not sign up for the coverage that is available to them. [emphasis mine]

If economists (or Class of 1975 HBS MBAs) really believed in Pareto-optimal solutions, expanding S-CHIP would be acknowledged as a clear winner.

*Anyone know of a free version for either of these papers? Perfectly willing to add a link.
**This is an intuitive corollary of The Market for Lemons argument.

Labels: Brad DeLong, Economics, Health Care, Optimal Resources, policy wonk, Politics

by Tom Bozzo

The Cap Times has a story of another area business that got socked with a 30 percent health insurance premium hike — we'd been there last year. Here's what an executive for the insurer has to say:

Kathryne McGowan, vice president of sales and marketing Physicians Plus, declined to speak specifically about the Park Printing situation, citing client confidentiality rules. But she said companies getting hit with "above market" premium increases are either offering too much in employee benefits or have failed to embrace a wellness culture in the workplace.

"When employees think an office visit only costs them $10 they have no incentive to ask the right kind of questions about their own situation," said McGowan, who counts over 25 years in the health insurance arena.

Well f**k you too, lady.

Maybe it would help if the answer at least made sense. Normally, you'd expect better coverage to be reflected in higher premium levels, but not so much higher growth rates. Among the factors that would lead you to expect otherwise is something that should warm the hearts of (some) hedonic pricing skeptics. If the quality of the typical policy in the market is declining, as by shifting costs and risks from insurers and employers to the insured, then the "market" premium increases represent implicit discounts for the quality degradations. [*] However, "why of course you've been paying more for less" may not be the slogan that private health insurance marketers will want on the tips of their tongues when the revolution comes.

I'd like to see their "wellness culture" metrics. It sure sounds like a buzzword justifying premium increases after the fact of payout events. "Insurance" is a lot less insurance-like when the insurer operates on a heads-I-win, tails-you-lose model.

The glibertarian appeal to incentives and customer involvement in care is just icing on the cake. Medicine is yet another complicated area where there are gains from trade with specialists. At the risk of paternalism, should people who, say, need paid tax preparers to fill out the 1040EZ be encouraged to rely less on experts?

[*] As far as I'm aware, this is not corrected in measured inflation.

Labels: Health Care