Blog of Birm

School Lunches: The only place where a tater tot is the equivalent of a green, leafy vegetable

2011-11-27T16:18:00.000-08:00

School lunches have never had a good reputation. Decrypting the true identity of "mystery meat", eating applesauce that is more reminiscent of paste than apples, or chewing green beans that have a questionably squishy texture... complaining about school lunches is a rite of passage for a lot of people. However, the complaint at this point in time isn't about texture or taste-- it's about nutritional content and the obesity epidemic that is occurring in the youngest populations.

Congress has been asked to make legislation that improves the quality of food that school children eat to make it more nutritious. Foods like pizza, french fries, and chicken nuggets appear regularly on school lunch menus and comprise a large part of the average American child's diet. This is problematic as these foods are correlated with higher body mass indexes (BMI)--which is also correlated with health problems in childhood, as well as in their later adult years. Cost has been the primary barrier to providing more healthful food--as it costs more to provide healthy foods than it does to provide less healthy foods (EX: fresh vegetables cost more than tater tots). Also- special interest groups (namely potato and salt industry) have a vested interest in making sure kids continue to eat their current school lunches which are often very high in white potatoes, white flour, and sugar (think: flavored milk). As of now, Congress has backed down on improving the quality of school lunches--and is remaining with the status quo.

The question is-- is this within the realm of what Congress should be doing? (Not that Congress always spends it's time on worthy things-- I remember them getting involved in some of the business with the baseball players who used steroids, and then lied about their usage...just saying). If the answer is yes-- then I think Congress should re-visit the cost-benefit analysis here.

What is the monetary benefit of improving the quality of school lunches? I'm not sure it's possible to determine how school lunches directly effect childhood obesity, but common sense tells me, if a child receives zero healthy meals per day, giving them 1 healthy meal per day at school would be an improvement. Also- this would expose them to healthy foods, which they may discover are actually pretty tasty--thus increasing the likelihood that the child will request mom or dad purchase these types of foods in the future.

Even if having more healthy foods results in very little weight loss in overweight or obese children-- it would still be a WIN on a population level. Imagine all children are on a standard deviation curve where the heaviest are in the right tail and the lowest weight children are in the left tail. If we shift those children in the right tail down the curve 1-2 pounds worth-- that results in less children in the overweight/ obese category (where there are well-known health risks that are very costly). Not having those kids suffer with the chronic conditions that occur due to excessive weight would obviously be good for the kids themselves--but would also be good for society from a cost perspective (and the reward would keep giving overtime--since overweight kids with health problems often turn into overweight adults with even more health problems).

In sum- it would be useful to know the relationship (or elasticity, in Economics-speak),between dollars spent on increasing healthy food for school lunches, and the percent reduction in children above the 85th BMI percentile (IE: the kids who are overweight or obese, by CDC standards). What an awesome experiment this would make! Obviously there would be lots of measurement challenges, and like any observational study, the results would show correlation-- not causation (if they show anything at all)... but it would still be a useful piece of information for Congress, schools, and the food industry to have.

Until then, if you have the resources, brown-bag lunches are looking like a pretty good option!

No cost birth control

2011-07-20T18:51:00.000-07:00

An expert panel for the Institute of Medicine has recommended a number of medical services be given at no cost-- one of which is birth control. This raised concern (outrage?) in the pro-life and Catholic communities. Women's right's groups are ecstatic.

What we do know is that about half of all pregnancies are unintended. Women who do not want to be pregnant are less likely to get proper prenatal care and are more likely to have complications later on (low birth weight, delayed development/ development problems). So, we can deduce that for some women who do not want to be pregnant, it can have a distinctly negative impact on the resulting child.

Many women choose not to use birth control due to cost. By the law of demand, lowering the cost (to zero) of birth control more women can afford to take birth control-- thus we can reduce the number of unplanned pregnancies (and unhealthy pregnancies/ births).

Cost-Effectiveness of Meningitis Vaccine

2011-07-20T18:17:00.000-07:00

Generally preventative medicines have a good shot at being cost-effective. They prevent hospitalizations, medical/ surgical procedures, additional medicines, etc. The trade-off is that vaccines need to be given to everyone who can get the vaccine for it to be effective. Like the flu vaccine ads say,"don't get it for you-- get it for ___ (insert name here)___" highlighting how getting a vaccine not only protects the person who gets it-- but also the all of the people who that person comes in comes in contact with.

What we don't want to see is the resources a vaccines saves in illness care for the small number of people who are infected, get made up for in the quantity of people having to get the vaccine (albeit, the vaccine is much less expensive than the medical treatment treating the disease). This is the case when the vaccine is very expensive and the disease the immunization protects against is relatively rare.

As a recent NPR piece highlighted, the bacterial meningitis may be in the position discussed. At first the vaccine was only given once and cost $100. Now ACIP (Advistory Committee on Immunization Practices) is recommending a booster-- which raises the cost to $189. NPR states that this would cost the government $387 million annually. All of this is estimated to prevent only 23 deaths per year. Is that okay? If all 23 deaths were people covered by government health care-- that would be more than $16 million per life saved. If you included what other non-government entities were spending on the vaccine- the cost would be even higher--since there are still only 23 deaths per year. Is that an acceptable amount to pay to save a life given the fact that there are budgetary constraints?

From the article:

....experts can't solve the fundamental problem of how to put a dollar value on preventing death or disease, says Mark Pauly, a health economist at the University of Pennsylvania.

"You do have a rough idea that if it's $1.98 per life saved that sounds like a good thing to do and if it's $198 million per life saved, that sounds like not a good thing to do," he says. "But where to draw the line is the part that any sensible person will run away screaming from trying to answer that question."

Excess spending on end of life care

2011-07-19T19:17:00.001-07:00

Chris sent me this article- and it was pretty interesting!

This describes a problem well-known to those who know anything about health care expenditures. I remember a vague statistic from my Health Economics course-- it was something like a third of all personal health care expenditures are spent at the end of life, on average (don't quote me on that). While it may not be a third, I think we can safely say it's a disproportionate amount of money...

Given that I have a degree in the dismal science, I'm about to get all dismal on you-- but just think about this without thinking about the morbidity of it:

When you think about how you want to die, you probably don't envision your death dragging out over months and months while you whither away. However, by spending ourselves into the ground (or under it?) we do just that-- we pay for treatments that keep us alive for a marginal amount of time while we suffer.

As you're probably already thinking-- this is pretty tricky. Ideally you would know which disease would be your final, and you would know not to pursue any additional treatments that would prove to be fruitless-- as they would only drag out your suffering (which, it is assumed, is not your goal). Anyway- you would know to just stop, and enjoy your time on Earth doing the things you like to do and spending time with the people you love.

As far as spending goes-- yes, we'd like to reduce end-of-life expenditures (we'd like to reduce all types of expenditures really)... but the problem is that you never know when the "end" really is. This really just adds fuel to the cost-effectiveness fire- and makes it even more of an important and critical type of research. If we're not wasting time or resources of treatments that are just not effective or worth spending money on, we can theoretically give the best reasonable care, while still being fiscally responsible.

C-sections galore!

2011-07-19T18:45:00.000-07:00

NPR ran a story on the air today describing the increased rates of Caesarean section births in developing nations. It is relatively well-known that C-sections have increased in popularity in developed countries like the US due to their convenience (working moms can schedule the C-section and plan maternity leave more easily, avoid the pain associated with a vaginal birth, retain bladder control by preserving the pelvic floor, rates of inducing births have increased which can cause the need for a C-section birth, etc.) Now we're starting to see this trend in developing countries as well-- but this is causing something of a problem.

Now that more women are opting into C-sections they're taking up more space in operating rooms that were once used only for women who truly needed them for medical reasons. The concern that arises now is whether wealthier women who can afford to pay for an elective C-section are taking operating room space away from women (poor or wealthy) who really need it.

Obviously this also starts raising questions about cost-effectiveness.... why are we paying for unnecessary medical procedures? I wouldn't say that a C-section is unnecessary if a women just prefers it (she should be able to obtain it if she's willing to pay for it and understands the risks involved...not that she's bearing the full cost of the procedure at all due to insurance--but that's a different conversation altogether), but I would say that it's unnecessary if the woman has been unnecessarily pushed into a C-section either due to convenience or revenue considerations coming from the hospital. C-sections are revenue makers. They generate twice as much revenue as a vaginal delivery.

It seems that we're getting a little heavy-handed with the C-Section ordering pen, but are we really considering the Economic implications? With such a great deal of geographic variation in C-section births, it's hard to make the argument that C-sections are needed at the high rates seen in some hospital systems. These C-sections are coming at a much greater cost than the vaginal deliveries, and also are more risky, and result in more readmissions--and in some cases lock women into delivering via C-section for subsequent children. All of these factors add up to much larger expenses in the end. It may be time to re-examine what determines the need for a C-section, and what does not, so that we can avoid unnecessary surgical procedures.

Also of interest

Methods of effectiveness research: Intro

2010-07-17T12:04:00.000-07:00

I'm currently in the last semester of my Master's in Economics degree and am completing an independent study related to types of Economic analysis with respect to health care. Evidence-based medicine (EBM) is an "it" topic when discussing health care reform, or health care policy. While I'm not directly studying EBM this summer-- my topic is related as effectiveness research not only looks at which treatments are effective (like EBM), but also looks into quantifying and valuing the costs associated with the treatments--and attempting to make decisions related to which treatments/ procedures are worth their costs.

I'm looking at four types of analysis-- Cost of Illness studies, Cost-Benefit analysis, Cost-Effectiveness analysis, and Cost-Utility analysis. I'm also examining issues and practices that arise in the practice of these types of analysis--such as sensitivity analysis, discounting, and challenges associated with data collection and data interpretation.

Many of these topics have recently received a lot of attention from medical and academic communities--especially cost-effectiveness research. To understand why this has become so popular you have to understand where this type of research has come from. Cost-Benefit analysis is largely considered to be the gold standard form of analysis as far as Economists and other professionals are concerned. It's a very simple concept-- you subtract the benefits from the costs (in a common unit-- like dollars) and if the result is positive (ie: benefits > costs) then the decision is considered to be favorable. We do this everyday without noticing. For example, do the added calories from an extra Oreo outweigh how happy eating the extra Oreo is going to make you? If so, you will likely choose to put down the Oreo because the net benefit is going to be negative.

As far as health care is concerned, do the benefits of a twice yearly pap smear outweigh the costs associated with going to the OB-GYN for a pap? Maybe--maybe not. It depends on who you are (do you have a history of cervical cancer? how old are you? have you ever had an irregular pap?). What are the costs of going to the OB-GYN for a pap? Obviously the cost you pay to the office is a cost-- but what about what the insurance company pays? What about your lost productivity or wages at work due to the office visit? What about the emotional stress of receiving a pap twice a year? These are the types of problem you run into with Cost-Benefit analysis when you start trying to analyze these types of procedures. It's difficult to quantify costs-- but even more difficult to quantify benefits (ie: how much money is it worth to prevent cervical cancer?) For this reason, there has been a movement towards Cost-effectiveness analysis.

Cost-effectiveness analysis tries to get around the issue of having to put a dollar amount on benefits. Rather, benefits are measured in another form-- such as the number of cases of cervical cancer reduced due to an increase in screenings, or days of regular blood sugar when taking a new Diabetes medicine, or the % reduction in the size of tumor due to a new cancer treatment. Once the benefits are quantified in this form you can take the cost (which, granted, is still hard to quantify completely) and divide it by the measured benefits (ie: the number of cervical cancer cases avoided). This gives you what is known as an ICER-- incremental cost effectiveness ratio. When other ICERs are calculated (using the same units and same measures) they can be compared.

Cost-utility analysis, which is a form of cost-effectivenss analysis-- an is often just called cost-effectiveness analysis, takes the analysis one step further. Cost-utility analysis uses QALYs (quality adjusted life years) to value benefits rather than trying to directly measure an outcome.

Simply put:

As you can see, the numerator stays the same in all forms, but the denominator changes. Often times people prefer to avoid Cost-benefit analysis because of the difficulties associated with valuing benefits. Cost-effectiveness analysis and the ICER are useful, but sometimes ICERs can not be compared if the denominator isn't being measured in the same way (ie: for a Diabetes treatment: one researcher may measure days within a range of healthy blood sugar levels for a non-Diabetic person, while another researcher may measure days within a healthy blood sugar range for people are are healthy, or pre-Diabetic.) Another benefit associated with using QALY's is that QALYs take into account, not only mortality avoided, but also morbidity avoided due to a treatment. Researchers often like QALYs because of their ability to account for the increased quality of life people achieve after going through a treatment--something not accounted for when measuring a specific health outcome like days of healthy blood sugar. QALY's are, of course, not without their own problems as is described in "Cost-Utility anaysis: Use QALY's only with great caution". In this article, McGregor describes how mis-measuring (or not understanding what is being measured ) with regard to QALY's can limit how powerful the explanatory or comparative power of results of a Cost-Utility Analysis are.

So why does any of this even matter? It matters because no one is able to spend infinite dollars on health care. When there are scare resources, decisions have to be made. Using these forms of analysis we can make more informed decisions--which desperately needed by the federal and state governments as more and more of their money is going towards health care expenditures. We need to make purchasing health care more like purchasing a refrigerator. If you were going to purchase a fridge, you would research the models you were interested and determine which bells and whistles you wanted, and then research how much each model cost in one present day currency (as in 2010 dollars). From there you'd pick which one best fit your needs and your budget. We need to approach health care the same way-- determine what the costs are and which benefits we desire-- and then weigh each one in a standardized way to determine which treatments and procedures we want to (and can feasibly) support.

Information Problems

2009-07-23T14:23:00.000-07:00

Asymmetric information is a topic discussed in introductory Economics courses that describes a situation where one party has more information than another. For example, if you are selling your car to a passerby on the street, you have more information about the car than the passerby does. You know that you took your car to your trusty mechanic every 4,000 miles for an oil change, and that whenever anything seemed remotely wrong with your car you got it checked out immediately. Perhaps you’re charging $ 8,000 for you 8 year old car. The passerby is thinking “that’s a pretty steep price for this car… it looks good, but how do I know if something isn’t wrong with it… there MUST be a reason (s)he’s getting rid of it”.

Alas—we have an information asymmetry.

There is no way the buyer can be certain of the quality of the car until they purchase it and drive it around for a few months. The seller can attempt to tell the buyer what a good car it is, but how can the buyer be sure they aren’t just getting scammed?

This story is applicable to the heath care industry as well. Let’s say you go to the doctor with a persistent sore throat and the doctor diagnoses you with some condition--something you can't even pronounce with confidence. “Oh no” you think to yourself, “that sounds serious". The doctor goes on to prescribe you an antibiotic and perhaps some other medicines that will make you more comfortable. The doctor is giving you directions on how to take your medications and what the side effects are, etc. You’re starting to feel a little out of the loop and you’re getting blown away by all of the foreign terminology and directions. At the end of the appointment the doctor asks “do you have any questions”? You think to yourself quietly for a moment… you’re not even sure you could come up with an educated question if you had to. Despite feeling overwhelmed you respond, “no”.

You’ve just been a victim of asymmetric information (and if this situation has never happened to you, surely you’ve taken your car to the shop before and have agreed to all sorts of repairs you weren’t really quite sure about). Doctors go through an intense amount of education—both in the books and in practice. We can’t expect for them to convey all of that knowledge to us when we visit their offices, but we really ought to be better consumers. You wouldn’t buy a new dishwasher without doing at least a little bit of research (at least you’ll compare Home Depot and Lowe’s). However, when you go to the doctor, often times you go in with very limited knowledge about prescription drugs or treatments your doctor may prescribe. If your doctor tells you that you need a test that will cost you (or your insurance company) $4000 at the hospital that you usually go to, are you going to call the other local hospitals to see if you can get the same test for less money? Maybe you think that the test will cost the same everywhere—surely these things have to be standardized—right?

Wrong. The variation in cost between hospitals can be astronomical. We’ll wait for another blog post before we discuss this in full—so for right now you’ll just have to believe me when I say that procedures don’t always cost the same at every hospital.

So, what is the problem here? The problem is simple—you don’t understand that product(s) you’re consuming, and you’re likely paying too much. The bigger problem is that, if you have health insurance, you (and your doctor) probably don’t care too much since you won’t be picking up the bill yourself. This results in overtreatment at increased costs. What’s worse is that, if you’re taking unnecessary medications (perhaps you get prescribed an antibiotic for a common cold) you may actually end up hurting yourself in the long run. I hypothesize, that if we were better, more informed, consumers of medicines we would save money, but more importantly we could be healthier. Every day people are harmed by drug interactions that could have been avoided. Doctors are people too—so they will make mistakes. The informed consumer can safeguard themselves from medical mistakes by asking questions and attempting to learn more about the medications and treatments their doctors prescribe.

What can you do? Next time you’re at the doctor try and think of questions to ask—even if they’re simple. Your doctor has a lot of knowledge—you just need to finagle it out of them.

Here are some questions to ask that I found on about.com:

What is the name of my medication?
What does my medication do?
How/ when should I take my medication?
How long should I take my medication for? (this is important—sometimes doctors are not inclined to remove you from medications, even when you may no longer need them)
What should I do if I feel better and I don’t want to finish my medication?
Does this medicine contain anything I’m allergic to—or will it react with any of my other medications and/or supplements or vitamins?
What food, drinks, or activities should I avoid when I take this medicine?
What are the side effects? Are they common?
Is there a generic version of this medicine?
Is it safe to use this medicine if I am pregnant or breastfeeding?
How soon will this medicine start working?
Will any tests be necessary while I’m taking this medication?
Most importantly (arguably): What risks are associated with this medicine and do they outweigh the benefits?

Patents

2009-07-18T09:17:00.000-07:00

I am no legal expert, but today I thought I would examine another one of the reasons why medical care is so expensive in the U.S.--the practice of "evergreening" patents in prescription drug. This is a tactic pharmaceutical companies use to extend the life of patents of money-making prescription drugs.

A patent on a prescription drug typically lasts 20 years. However, this can be extended for various reasons. Congress allowed for a 6-month extension of patents if the drug was one that needed to be tested in children. While child testing is important since children sometimes react differently to medicines than adults, this is a very costly provision. According to an article by Robert Weissman (called The evergreen patent system: pharmaceutical company tactics to extend patent protections (Patently Abusive)) It cost pharmaceuticals a bit less than $800 million to do these tests in children on selected drugs, but it resulted in an extra $30 billion dollars in sales. (That's right $800 million in costs, $30 billion (with a B) in extra revenue). I think there is something fishy about this situation. A patent lasts for 20 years-- why can't they do research on the affect of the drug on children in those 20 years? Why do they need an extra 6 months? Six months doesn't seem like much time to do substantial research--especially with medical testing where a lot of the testing revolves around affects from drugs on the body over time. It seems to me that enough research could be completed in 20 years, and that extending the amount of time to do research by 2.5% doesn't add much except excessive profits at the expense of those who are ill.

Again from Weissman:

Led by Public Citizen, consumer groups say the pediatric exclusivity has conferred a windfall on the drug companies. Public Citizen estimates AstraZeneca will earn more than $1.4 billion in added revenue for Prilosec, thanks to the pediatric exclusivity provision, with Pfizer also crossing the $1 billion threshold for Lipitor. Drugs such as Prozac, Celebrex, Zoloft, Claritin and Cipro will bring their makers more than $300 million in added revenue, due to the provision.

Another way pharmaceuticals can extend the life of a patent is by tweaking the ingredients in medications, or by claiming that the drug can actually cure or treat other conditions than originally advertised. For example, a depression medicine may be able to be re-billed as treating anxiety which will extend the life of the patent. Sometimes when a patent does expire, pharmaceuticals can again, tweak the ingredients, and then market the drug as a "new and improved" version of the drug. Since consumers don't know whether the new ingredients are really necessary or not, they may choose to take the new medicine (with the new patent), rather than staying on the old drug which has lost its patent protection.

I don't want to totally demonize pharmaceutical companies since they do a lot of good. I also firmly believe that we do need monetary rewards to help pharmaceuticals recoup the costs of research and development. We can't expect people to be extremely inventive if we're not willing to compensate them handsomely. However, the line needs to be drawn somewhere. The cost of prescription drugs is rising much faster than the value of our incomes and health benefits. At some point the cost will be more than we car bear, and we will have to either reform the way prescription drugs are priced, or we will have to do without prescription drugs; and for many people, the latter is not an option.

WSJ: Does a slower economy increase athleticism?

2009-07-11T06:21:00.000-07:00

Slow Economy, Faster Marathons?

The Wall Street Journal online edition had an article that presented evidence of laid-off workers running faster road races. Overall, marathon times in the U.S. have gotten faster this year after slumping a bit in 2007 and 2008. The author suggests that this is because, during 2007-2008 people were trying to hold onto their jobs as the economy started to contract--which in turn meant that they sacrificed their early morning run for an even earlier arrival to the office. In 2009 when massive layoffs really started adding up more people had time to train for major athletic events, like marathons.

Is this a spurious relationship or not?

At first the economist in me said, this is probably just a fluke in the data. The evidence the author provides is really just aggregate level stuff that says marathon times have gotten faster this year. Then the author proceeds to say that this is because a lot of those unemployed people are actually competitive marathon runners... seems a little far-fetched. I could believe once people are laid off they take up running as a hobby--hence why marathon registration has increased, but I don't know about their times being significantly faster statistically. Wouldn't once ''regular Joe's'' have to be training a more than 6-9 months to get really, really fast? I would think so.

I can more easily believe the student athlete story that goes like this: Athletes who graduated recently are more likely to try and run competitively this year than in the past because they know that the job market is so unfavorable. The cost-benefit calculation has really changed for new grads. The cost of pursuing a hobby like competitive running is less costly because you're probably not giving up a salary at some high-paying job (however you are giving up health insurance, potentially). The benefit, is that you don't have to go through the pain of searching for a job during a recession, and you get to do what you love--run races (and potentially get paid for it)! I can see how this would skew the data towards faster times, if all of a sudden you have a huge pool of competitive runners being dumped into the marathon pool.

In the article, the author interviews a few recently laid off workers-turned competitive marathon runners. Their anecdotes fit his story about the evidence. I thought to myself, maybe this isn't completely spurious. I even thought about my own situation. This summer I'm taking enough summer classes to keep me busy, so I'm not working a part-time job like I usually would. I've always been a recreational runner-- but my pace has always been very, well, recreational--at around 10 minutes per mile for longer races. This summer I'm training for my third marathon this fall (which, first of all, may only be happening because I have enough time to train for it since I'm not working). I've been running a few fun runs around town--and strangely--my times are substantially lower than they usually are. I'm down to about 9:00 minutes per mile now for longer runs. I'm not sure if this is because I have all of a sudden developed some fast twitching muscle fibers, or if it's due to the fact that I have time to do quality runs. Last summer when I was taking 6 credit hours and working 40 hours a week, my running really suffered and I ended up missing out on the Fall marathons. Even when I would get out for a run in the morning it would be rushed--and if I waited until after work and school I was too exhausted to do anything but jog around the block a few times before crashing into bed. I think a lot of people probably have the same experiences-- it's tough to come home from work and find the energy to go outside for a speed workout on the track. However, when you're not working you have ample time to pursue your hobbies. So maybe the effect of laid-off workers on marathon times is really there-- at least a little bit.

Pay for Perfomance

2009-06-23T19:48:00.000-07:00

I’ve had a businessweek article marked to read in my browser for days now, and finally tonight I got around to reading it. It discusses how President Obama spoke to the AMA (American Medical Association) and discussed some of the changes he believes should be made in the current health care system. Many of the changes would result in lower incomes for doctors—so the president was not exactly “preaching to the choir”. Doctors likely see the effects of high medical costs every day, but surely don’t want the cost reductions coming out of their paychecks.

A lot of health insurance policies in the United States are structured in a fee-for-service fashion. This means that as a doctor performs more services he/she receives more money. It’s not hard to see the effect this would have on the number of services provided by doctors. Obama noted that this fee-for-service changed the way medicine has been practiced—and it needs to change.

"It is a model that has taken the pursuit of medicine from a profession—a calling—to a business," said Obama. (taken from businessweek article)

This incentive structure provides another reason health care costs are higher in the United States than in other countries. How much higher--now that is a good question. According to the BusinessWeek article"it is doctor payments that consume one-third of the nation's $2.4 trillion in health-care spending." I think we would need to verify this with more data, but if it's even remotely true, this topic ought to be at the top of the list of necessary health care reforms.

There is no question regarding the power of incentives. Perhaps the solution here is to align incentives with both our financial and health goals, rather than having them compete. For example, what if doctors were paid bonuses when a patient quit smoking—I’m not aware of any policy like this currently in the U.S. Currently doctors get paid to advise people to stop smoking, and they treat the illnesses that occur because of smoking—cancer, emphysema—both very costly (physically, emotionally, and financially) illnesses. If we could persuade doctors to get patients to quit smoking with additional income, rather than just the happiness a doctor gets from getting a patient to quit, I think we would see a decrease in smokers, and eventually a decrease in diseases caused by smoking

Pay for performance. It’s not a new concept—but it is an effective one.

A good talk on Health Economics in the United States

2009-06-22T12:11:00.000-07:00

Here is a link to the former CBO Director, Peter Orszag's blog. This post links to an interesting talk on the problems with Health Care costs in the U.S. as well as the slides from the talk. Currently Orszag is the Director for the Office of Management and Budget. He is the youngest member of the Obama cabinet.

This lecture describes some of the health care challenges the U.S. will face in terms of costs. Orszag discusses how medicare and medicaid costs are projected to grow rapidly in the future, and how costs vary geographically.. Run time is a little over 30 minutes.

2009-06-08T10:14:00.000-07:00

The Economics of Health Care is one of the areas of Economics that I find most interesting not only because some type of reform is exigent, but also because everyone interfaces with the health care system at some point in their life.

Some may not agree that reform is necessary, and that the system works fine just the way it is. However, I would suggest they do a bit of research before drawing such a conclusion. According to the Economic Report for the President (2009 http://www.gpoaccess.gov/eop/2009/2009_erp.pdf see CH 7), Americans spend about $8000 per person on health care per year. This is expected to grow rapidly as technology advances.

The chart below illustrates approximations of spending as a percent of gross domestic product (GDP) in the U.S., Canada, Japan, and France. Canada, France, and Japan all have universal health insurance—which one would think would be more expensive. As you can see, the U.S. spends the most as a percent of GDP, in 2000 it was around 13%-- now it is closer to 15% I believe.

Some would stop here and say—“okay—yes we spend more than other countries on health care, but we have the best health care in the world, so the extra expense is worth it.” Sadly, as with everything else in life, more is not always better. Our life expectancy is lower than the other countries in the above chart and out infant mortality rate is higher—two leading indicators of aggregate health status. So now it looks like we’re spending more, but not getting more—which, anyone can tell you—that’s not a good thing.

(This thought also assumes that you have health insurance as a means to battle health costs, which is not true for about 16% of Americans. More on this at a later date…) Economists call this phenomena diminishing returns—meaning that with each additional dollar invested in health care, at some point less health is received. It’s really best to illustrate this one with a handy graph. Part of the health care debate is really between the two (poorly drawn) icons below.

The question is: Are we on the star or the circle?

If we’re on the star, this means that as we spend more on health care we get a positive increase in our health status—a good thing! If we’re on the circle it means that as we spend more money on health care we don’t get an additional health from that spending (like trying to ride your bike to the grocery store, except your bike happens to be a stationary bike). Worse, if we’re at a point beyond the circle it means that as we spend more money on health care our health status actually gets worse—yikes.

Obviously we know there are big gains to some basic health care spending—immunizations, annual exams like paps, breast exams, prostate, etc. However, are there the same gains when a patient undergoes every MRI, X-Ray, and other expensive test necessary in the name of “just in case”? This is where people get divided because the answer to that question usually depends on whether or not anything useful results from the battery of tests. It probably isn’t worth it to give someone an MRI for a stress headache, but it is certainly worthwhile to give someone an MRI for a headache that is caused by a brain tumor.

This brings us to our first point of discussion in this series of things that contribute to the high cost of health care in the United States: Defensive Medicine.

Doctors are supposed to only run tests that they believe are likely to produce useful results. However, doctors often practice what is known as defensive medicine to protect themselves from expensive lawsuits. The JAMA noted that 90% of doctors say they have practiced defensive medicine—and who would blame them given the costs of a malpractice case—both financial costs, but also costs to his/her reputation.

Clearly defensive medicine raises medical costs as patients are subjected to more tests than are necessary. This is costly not only due to the money it costs patients, but takes time away from work/family, adds stress to the life of the patient undergoing the test, and adds to the crowding of hospitals with test equipment.

Sometimes the tests themselves can be lead to health problems for patients. More on all of this at KevinMD—a physician’s blog: http://www.kevinmd.com/blog/2007/04/defensive-medicine.html

What are some solutions to this? How do other countries get around the costs of defensive medicine? This is perhaps a topic for a future post, but what are your thoughts?

Thoughts on Globalization

2009-06-06T17:13:00.000-07:00

I’m currently reading The Travels of a T-Shirt in the Global Economy by Dr. Pietra Rivoli. I’m about half-way through and the author just discussed her trip to Shanghai and her visits to various mills where cotton thread and fabric are produced. Growing up I remember the scandal with the sub-par conditions in mills that got tied to Nike and the public outrage that ensued. Everyone is familiar with the stories of mills outside U.S. borders where OSHA and minimum wage laws aren’t present. Men, women, and children work 12-14 hour days for cents on the hour in unsanitary conditions. By our standards it’s disgraceful.

The book quotes a young woman working in one of the mills and, surprisingly she says “it’s not that bad” and “it beats the hell out of life on the farm”.

In a lot of my classes, and surely at dinner tables around the world, the topic of third world factory life comes up. The conversation usually includes descriptions (not first-hand, of course) of how hard third world factory life is. We hear about 12 year old boys working 12 hour days with only 1 meal break, and being paid only 10 cents at the end of the day. The obvious conclusion is always “we need to shut down those factories—they’re not humane!”

I wouldn’t argue that we should allow children to work such hours without breaks, but I also would not argue that we take their job away from them. It’s all a matter of perspective. It would be unheard of for a 12 year old boy to work that type of job in America. A 12 year old boy here should be in school during the day and going to baseball practice after school—not working to support his family at the factory. However, in many other countries, there isn’t mandatory schooling (or even the option of public schooling), so when the opportunity to work to support your family arises, the best choice may be to take it—besides, what’s the alternative? Being able to work gives people a bit of autonomy and the ability to not only help their families—but they can help themselves. In the book, one girl leaves her family farm to work in a cotton factory so that she can gain some freedom. Despite the sub-par conditions of the mill, she is able to earn a steady income every month and purchase things that she wants like a variety of food, clothes, movie tickets, etc. She was even able to pay back her family for the money they gave to her (arranged marriage) husband so that he would agree to wed her. Now she gets to date who she wants, and she can even afford to spend a night on the town with the girls—which she could not do when she worked on the farm. Even though the factory life, by Western standards, is unacceptable it was able to give this woman, and many others, autonomy she had never dreamed of. Had someone gone in to shutdown her factory in the name of humanity, she would have lost her job and likely would have had to go back to the farm where there was no autonomy, and less (if any) pay. What I’m saying is—although the factory isn’t great, the alternatives are worse.

Next time this factory life conversation comes up I think it would be smart to remember that we need to examine the situation from the perspective of the person who is in the factory—not from our own. We ought to take into account cultural norms, as well as what alternatives for income exist for people in factories. Obviously some situations are not acceptable—there are child labor laws, etc. But I think we need to not be so quick to criticize the hardships that people are willing to endure to gain a little freedom.

What do you think?

GDP Tanks

2009-01-31T20:49:00.000-08:00

While walking out of a delicious local lunch spot this afternoon I was shocked to find this headline on USA Today: "GDP down 3.8% in Q4, biggest drop since '82". I grabbed the newspaper stand and yelled "what?!"

I know there is a recession going on. I know that unemployment is at 7.2% (and is probably much higher when you account for the discouraged worker population). I know last quarter had negative GDP growth-- but it wasn't even down by a full percent. I admit, I've been on vacation from school and enjoyed a very relaxing winter break without newspapers, so I'm out of the loop--but this just seemed crazy. I paused for a second and it really hit me-- this is... bad.

It's funny what it takes to make you realize that times are really tough. A day barely goes by now where you don't hear about somebody's cousin, dad, sister, or whomever has been laid off. There are record numbers of people signing up to receive unemployment benefits. "About 588,000 workers applied for jobless benefits last week, up 3,000 from the prior week and 61% higher than a year ago..." It appears we all might need a bailout.

The media loves to blow things out of proportion. If you check out the stats a little bit, you'll find that our current situation isn't that close to the situation in 1982. As you will find in this very useful graph, the quarter USA Today referred to in 1982 had -6.2% GDP growth. That's quite a bit different than -3.8%. Clearly -3.8 is no picnic, but it's not exactly the Great Depression either.

You've really got to wonder when this is all going to end. It's like a bad dream you can't wake up from. I've heard mixed reports about the housing market-- MSNBC says local markets are stabilizing, while Business Week is still forecasting doom for housing in 2009 with a turnaround coming in 2010. The housing market is part of what got us into this mess in the first place, and I think a lot of people are looking to it to get us out of it. However, I'm afraid it's going to take a lot more than the bottoming out of housing prices. People need to be able to not live in fear of losing their job at any moment. Credit needs to become available not only for individuals, but also for businesses. We need to stave off deflation, as that would make this situation downright dismal. We've got a lot on our plate.

In some sense, I feel like the current economic situation isn't worth worrying about because there is nothing that any one normal person can really do about it. Make lemonade-- as my boyfriend Chris always says when I get stuck in a less than desirable situation. This could be a good time to stop and savor what is really good in life-- family, friends, laughter, etc. Even on your worst day, there is always something to thankful for.

So you think you're good at math...

2008-06-08T05:48:00.000-07:00

This morning I read an article in the Economist entitled Education and Sex: Vital Statistics. The article discussed how the gap in math scores is closing between males and females. The article cited a study that showed how, especially in countries where the sexes are treated more equally, the gap has pretty much vanished. Females still score higher than males on reading tests, indicting that females may be on their way towards having an absolute advantage in both math and reading skills (perhaps?).

One interesting thing in the article was that, while more women are going into highly mathematical fields like engineering and such, they're not entering in the numbers that one might expect. I assume this may be due to social reasons rather than an actual lack in skill or competency.

If you were a young girl who was naturally good at math, you would likely attribute your skills to your intelligence and hard work (attribution theory). If you're a boy and good at math you may do the same and attribute your skills to intelligence, but you may also conclude that you're good at math because you're a boy--and well--boys are just good at math! The difference here is that girls will use internal attribution to determine their intelligence and boys will use both internal and external attribution to determine theirs. This isn't the way the theory is usually applied, but I think this shows something important and may help explain why females are not totally comfortable with natural skills they may have. Girls are lacking that external reason for why they are good at math, which may cause some discomfort. Their female peers may struggle with math and may indirectly pressure the mathematically-gifted girl to say she loathes math just as much as they do. For the girl who is good at math this could be quite a conundrum. Does she choose to side with her peers and talk about how hard math is and how much she struggles, or does she choose to defy social norms and play with her calculator instead of Barbie?

Enter Leon Festinger. Cognitive Dissonance is a theory that says that when people perceive dissonant signals they change their behavior to reduce the dissonance. When our math-whiz girl perceives that she is good at math, but her female peers are not, she experiences some amount of cognitive dissonance and will inevitably work to reduce it somehow. She may do this by becoming more like her female peers and adapt an anti-math attitude, or if she really likes math she may choose to hold out and continue her ''mathiness''. Her choice depends on a number of things--interests, age, maturity level, level of acceptance or non-acceptance by peers, etc.

I always say I was terrible at math in school. I would tell people that it was by far my worst subject and that I just stunk at math-- end of story. However, I never got anything less than a B in math in high school or college and even that only happened in few semesters. I was far worse at things like French where I ALWAYS got B's... and I had to work very hard for those B's. In math I never tried too hard and got by with mostly A's. Was this because I was hard-wired to not be good at math, or was this because somewhere along the line I was socialized to believe that women weren't supposed to be good at math? Most likely it was both, and probably some other things that are unknown. I have a feeling when my peers would talk about how hard that last math test was I'm sure I didn't chime in with "oh come on-- it wasn't that hard" (in middle school that's called social suicide)-- more likely I just nodded and rolled my eyes with everyone else in a sort of spiral of silence-esque manner.

Socialization is a complicated process that even the most highly educated psychologists and others probably do not fully understand. We do know that understanding one's gender and what it means happens very early and that perceptions of your gender are difficult to change once you become older. While gender is an ever changing definition, making fundamental changes to your beliefs about who you are as a male/female is extremely difficult--maybe impossible. How many generations did it take for people to accept working moms? (or has it even happened yet?)

So while our girls may be more talented in math, I don't think it's because all of a sudden women are just getting smarter, I think it's because they're allowing themselves to be smarter. This jives with the article--surely in countries where there is more equality between the sexes women feel more inclined to pursue once male-dominated subjects than those countries where women are still suppressed. I bet it will be another couple generations before we see equal amounts of men and women in highly math-oriented careers.

An interested aside--boys are still better at geometry. "This seems to have no relation to sexual equality, and may allow men to cling on to their famed claim to be better at navigating than women are".

Media Effects on Consumer Sentiment about the Economy

2008-05-04T15:13:00.000-07:00

I recently turned in a literature review about media effects on consumer sentiments regarding economic conditions for my Senior Thesis. My general findings were that, when people are exposed to increased amounts of negative economic news, they believe that poor economic times will continue (not really an earth-shattering discovery I guess). However, when economic times are positive, people generally do not assume that prosperous times will continue. Why is that?

I believe part of the reason is because of the disproportionate amount of negative news on television--causing people to not comfortably accept positive news. Even when there are positive economic news stories, they can be framed in negative ways that makes even good news seem bad. Basically I think people hear the rare positive economic news story and think that such a story is rare, and not likely to happen again anytime soon. The fact that the media influences people, even on the smallest of levels, is evidence of the power the media has to set the agenda (see McCombs and Shaw's Agenda-Setting Theory).

Awhile ago The Economist ran a series of articles about the "r-word" (recession), and proposed that talking about recession may actually cause one. As people hear more about the economy in a negative light they start to believe that economic times are getting tougher, and they may constrain their spending, which in turn could lower GDP. In the research I did, (which granted, is that of an undergraduate college student) I did not find any studies that talked about direct connections between media effects and consumer spending behaviors. Does anyone think such a connection exists?

I feel like this is such an interesting area of research and needs a much larger bank of literature before any serious conclusions or solutions can be made.

Hester & Gibson (2003)
Wu et al (2002)

Testing...

2008-04-20T18:55:00.001-07:00

Just doing a test!