Tuesday, July 27, 2010

Building the Case for Medicaid Reform

Cross-posted from The Agenda on National Review Online.

For those who haven’t had their fill of the Medicaid reform discussion, the full results of the UVa surgical outcomes study have been published in the online edition of Annals of Surgery. (I ask everyone who has had their fill for forgiveness.) There are a couple of points that keep coming up in the comments and in responses from other bloggers, so I want to spend at least one post addressing them.

Austin Frakt writes that, contrary to my expressions of concern, he is quite open-minded to the possibility that outcomes with Medicaid are poorer than those of the uninsured (and especially those with private insurance). He remains reasonably skeptical that studies like the Virginia one adequately control for the poor social and health status of the Medicaid population:
There are undoubtedly studies that consider Medicaid vs. uninsured outcomes using the random variations provided by the natural experiment that is Medicaid. Characteristics of the program vary by state and year, making it a perfect set-up for such an analysis of this issue. This second I can’t point to a study. But I know where to look. One place to start would be to examine the literature cited by Stan Dorn on Ezra Klein’s blog at the Washington Post (tinyurl.com/StanDorn), Harold Pollack on The New Republic’s The Treatment blog (tinyurl.com/HPollack), and by J. Michael McWilliams on this blog (tinyurl.com/JMMcWill).

That’s it. That’s my position, and it always has been. If you read carefully you ought to notice that I didn’t actually condemn or praise Medicaid. I didn’t actually say how it should be reformed. I just listed the possibilities.
It is certainly important, in any study comparing Medicaid to other insurance populations, to control for the kinds of things, like prior health status, that negatively skew Medicaid outcomes. In medicine-speak, these factors are called comorbidities. As I have written before, one must be careful with comorbidity analyses not to eliminate the ways in which Medicaid actually contributes to poor health status.

Having said that, the authors of the Virginia study did control for 30 different comorbidity measures, using a widely used, highly validated methodology first worked out by Anne Elixhauser and colleagues in 1998. Using 1992 data from 438 California hospitals, Elixhauser et al. identified those factors that most significantly contributed to “substantial increases in length of [hospital] stay, hospital charges, and mortality.”

Notably, the Elixhauser comorbidities include several factors that many associate with the Medicaid population: AIDS, alcohol abuse, depression, drug abuse, liver disease (such as hepatitis), obesity, and psychoses.

(The others are: deficiency anemia, arthritis/collagen vascular disorder, chronic blood loss anemia, congestive heart failure, chronic pulmonary disease, coagulopathy, uncomplicated and complicated diabetes, high blood pressure, hypothyroidism, lymphoma, fluid and electrolyte disorder, malignant cancer, neurologic disorders (other than stroke), paralysis, peripheral vascular disease, pulmonary circulation disorder, renal failure, solid tumors (non-malignant), peptic ulcer disease (without bleeding), heart valve disease, and weight loss.)

The Virginia study authors also controlled for income, age, and gender.

To me, this is a responsible, comprehensive, and quantitatively validated list of comorbidities and adjustments. To those who disagree: what other adjustments would you have preferred to see? Which, if any, of these additional adjustments would have had a significant impact on the results of the study? What data can you cite to support their importance, and to support that they are independent of the effects of Medicaid itself or of welfare dependency? Austin has written extensively about the general concept of controlling for extenuating factors, so his thoughts on this topic could be illuminating.

Austin also writes that a definitive study to measure the benefits of Medicaid against those with other forms of insurance (or uninsurance) would need to be prospective—that is to say, we take X number of people, put half on Medicaid and half on something else, and see what happens. While he’s right that prospective studies are, all else being equal, better than retrospective ones, they can also be misleading if they aren’t stratified properly by health status, social factors, etc. Another disadvantage of prospective studies is that they usually sample a much smaller number of people than retrospective studies can. Even if we could design a good prospective Medicaid study, actually conducting one would be very difficult and take several decades to play out. I hope we can all agree to use the best available evidence in the meantime.

I would also point out to Austin that exactly the same arguments could be applied to PPACA: i.e., let’s do some well-designed, prospectively-controlled studies before adding 16 million people to the Medicaid rolls at a cost of $100 billion a year.

Aaron Carroll points out that the UVa study focuses solely on surgical outcomes. Aaron, as a pediatrician, wonders whether its results are applicable to non-surgical situations. I have addressed this issue in part, but I will take a look at pediatric outcomes in a separate post.

Aaron also notes that Medicaid is voluntary: but this is weak support for the implication that Medicaid, in its current form, is the best we can do. In the Vietnam days, some conservatives used to tell liberals to “love [America] or leave it.” I don’t remember liberals being too happy about that. Nor does Medicaid’s voluntary nature mean, ipso facto, that it must be doing some good. Does the voluntary nature of Medicare overutilization mean that Medicare overutilization is a good thing? Most liberal health policy types that I know believe otherwise.

A number of people ask: “Ok, let’s suppose for a minute that the UVa study is accurate, and that those on Medicaid do fare worse than the uninsured. Are you suggesting that we abolish Medicaid and do nothing about the problem of the uninsured?” No—I am suggesting that we transition to something akin to the Swiss model, whereby we offer graduated subsidies with which the poor can buy consumer-driven private insurance. Simply sending them the cash would be far more efficient than what we do now.

I would ask those who ask these philosophical questions if they are happy with Medicaid as it is, or if they have their own ideas for reform. Hopefully we can get past this idea that criticizing Medicaid equals seeking to abolish assistance for the needy.

The evidence of Medicaid’s problems is, in my view, overwhelming. I encourage those who believe otherwise, or are simply agnostic, to spend some time going through the data. Medicaid reform is an issue that should unite those who are concerned with the plight of the poor, and those who are concerned about America’s fiscal condition. These are the two things, after all, that health care reform was supposed to be about.

The Shallow Drafts of Charles Hill

Cross-posted from League of Ordinary Gentlemen.

In my first post in this series, I claimed that Charles Hill, Yale’s “Diplomat in Residence,” had won “uncritical, almost fulsome praise.” You can strike the “almost.” According to Edward Luttwak’s review, Hill’s book Grand Strategies is not just “a truly masterful synthesis” (truly masterful, mind you) but also “a kaleidoscopic masterpiece that illuminates all it surveys.” Luttwak confesses to “exuberant enthusiasm generated by page after page of inspired writing.” But can a book be both kaleidoscopic (creating an endless series of different patterns) and a synthesis (fitting disparate phenomena into a single pattern) at the same time? I suspect that Luttwak doesn’t understand the concept of “grand strategy” anymore than Hill does, which explains why he cannot even find consistent grounds for praise.

In any case, I still demur from the consensus. In Chapter 3 of Hill’s appearance on Uncommon Knowledge, he unwittingly reveals the poverty of his concept of grand strategy. Discussing the Peloponnesian War, Hill relates how Pericles advised the Athenians not to fight Spartan soldiers on land but to withdraw behind Athens’ walls. An unforeseen event then undoes Pericles plan:
Hill: Then suddenly the plague strikes Athens. And that’s bad fortunate. Nobody foresaw it. What do you do about that? It’s not in your plan. How to deal with something that suddenly comes up that is just an absolute disaster. An oil spill. What do you do? Were you prepared? No. In fact, he told the Athenians to come into the city: The plague is worse because they’re all crammed together. And on down the line. It goes again and again with 3, 4, 5, 6, 7 – innumerable factors that the grand strategist has got to — you won’t know the answer, but you’ve got to at least have the sense that there’s something out there, there, there, there or behind you.
The plague in Athens is a quintessential example of the role of chance and contingency in history. A biological accident decimated the Athenians and thereby changed the course of history. Hill doesn’t see it, but the role of chance and probability undermines his whole concept of grand strategy. In Chapter 1, we saw that Hill laments that students no longer learn “the sweep, the meaning, the narrative of history.” But the plague in Athens shows that sweeping interpretations of history are invariably wrong. It is not just that they overplay some facts and overlook others, though that is certainly true. Rather, endemic to grand narratives is the “representativeness heuristic” — that is, if there is a large effect, then there must be a large cause. Athens lost the Peloponnesian War: a big event which must have a big cause, right? Wrong. The cause of Athens’ loss was a tiny virus.

Hill ignores the implications of the Athenian plague, namely, that grand narrative is specious. No sooner is he finished with Ancient Greece in Chapter 3, but he is making sweeping claims about America in Chapter 4.
Robinson: [Discussing the Declaration of Independence] So it is no accident, it is no mere rhetorical flourish that they are endowed by their creator with certain inalienable rights.
Hill: Exactly. Exactly. And here is where America becomes universal. Because everybody in the world, no matter what ethnicity, or what color or what gender or what religion, they’ve all got souls. And America is for that universal purpose. It also means freedom. Because the soul is independent and has rights. And so America stands for that. It’s a very simple idea but it’s huge.
America, in other words, is the embodiment of a Big Idea, namely, human equality (an idea that Hill attributes to the School of Salamanca rather than, say, Locke). Hill ignores everything else that makes America America, from the mores of the settlers who happened to come here to the vast quantities of land that made equality of condition possible. Instead, Hill’s interpretation of America is quasi-metaphysical. America, he says, is “for the universal purpose” of freedom. Even in 1776, of course, freedom could be enjoyed in any number of countries. Nor has America ever offered the blessings of American freedom to everybody. America, therefore, is not “universal.” It is just one country among many. What is Hill even talking about?

We find out later in the chapter:
Hill: You can see in one section [of Grand Strategies] after another that America is really distinctive. The debate that’s been going on: “Is America exceptional”? Certainly the faculties and the intellectuals say no it’s not, the president says no it’s not.
Robinson: Let me quote you. President Obama speaking in France last year: “I believe in American exceptionalism. Just as I suspect that the Brits believe in British exceptionalism and the Greeks believe in Greek exceptionalism.” That’s the president of the United States.
Hill: Then he doesn’t understand America. And may be what John Bolton was driving at when he says “this is the first post-American president.”
But President Obama admitted that America is exceptional! Evidently that’s not enough for Hill. America, you see, has to be exceptionally exceptional: that is, American “exceptionalism” must consist in denying (contrary to, you know, actual fact) that other nations are “exceptional” too. Anything else would be un-American! All this jejune talk about “American exceptionalism” –whatever that means — simply amounts in the end to an ideological rationalization for American hegemony. Put aside whether American hegemony is a good thing or not. The mush-mindedness of all this – America stands for an Idea and is divinely appointed to spread this Idea to the remotest regions of the globe – is stupefying. Yet this is what passes for intellectual discourse at Yale.

Just as a counterpoint to Hill, I can’t help but quote William Graham Sumner:
There is not a civilized nation which does not talk about its civilizing mission just as grandly as we do. . . . Now each nation laughs at all the others when it observes these manifestations of national vanity. You may rely upon it that they are all ridiculous by virtue of these pretensions, including ourselves. The point is that each of them repudiates the standards of the others, and the outlying nations, which are to be civilized, hate all the standards of civilized men.
We assume that what we like and practice, and what we think better, must come as a welcome blessing to Spanish-Americans and Filipinos. This is grossly and obviously untrue. They hate our ways. They are hostile to our ideas. Our religion, language, institutions, and manners offend them. They like their own ways, and if we appear amongst them as rulers, there will be social discord in all the great departments of social interest. The most important thing which we shall inherit from the Spaniards will be the task of suppressing rebellions. If the United States takes out of the hands of Spain her mission, on the ground that Spain is not executing it well, and if this nation in its turn attempts to be school-mistress to others, it will shrivel up into the same vanity and self-conceit of which Spain now presents an example.
Sober, clear-headed, analytic: a refreshing contrast to Hill. In chapter 5, Hill finally applies his concept of “grand strategy” to recent events:

Hill: [describing the Reagan foreign policy team] They saw things in the larger, in the entirety or close to it. They saw that – it used to be the case that when the alarm bell rang in the operating center of the state department it might be a coup d’etat in the Seychelles. So you might say “who cares about that?” But everything matters. They saw the connections. but at the end of the cold war it became partial, it became demarcated. [For Clinton and Bush 41 by contrast] You do things on one side of an issue. You don’t think of the whole thing because the tensions aren’t there. The feeling was not there that there’s a real danger out there that is of great magnitude.

Hmm, yes, the “feeling” of real danger was not there. Maybe that’s because…. there was no danger! The Cold War had ended. In the Cold War, for geo-strategic and ideological reasons, every corner of the globe became just another theater of the Soviet-U.S. conflict. That’s why “everything mattered”: it wasn’t the superior wisdom of American statesmen then but the circumstances that they faced. Hill seems to think it was a good thing that, until the end of the Cold War, every matter of policy had to be considered in light of some over-arching objective, never mind the costs to the U.S. or others. To less fevered minds, however, the “demarcation” of issues after the Cold War was a blessing.

Hill: Only in the last decade or seven or eight years have we begun or some of us have begun to sense the magnitude of that danger again. Because of the rise of Islamism. Because as in the Cold War, where communism. Here we go back to Westphalia. Communism was opposed to every one of those procedural elements. The state had to be destroyed, smashed. International law was a tool of the bourgeois capitalist classes. Human rights was a farce. Against all of that, they would, the communist ideology, which was a religion in effect, was “We will destabilize the international system, we’ll overthrow it, and we’ll replace it.” That’s the same agenda that Islamists have. So in some sense the 1990s were a lost decade where we didn’t understand problems. Today I think people do understand it, but not Washington.

So communism and Islamism share ideological similarities. Never mind that the Soviets had the world’s largest land army and intercontinental missiles aimed at major American cities, while Islamists are poor, ignorant, persecuted, few, and don’t even control a single state. To view Islamism as a threat comparable to communism is absurd. Evidently, Hill’s favorite maxims – “take everything into account” and “be one upon whom nothing is lost” – are not to be taken literally. On the contrary, for Hill, the statesman should ignore any relevant facts that get in the way of constructing a specious ideological narrative.

Listening to Hill, one is reminded that a little learning a dangerous thing. Hill takes a fairly conventional neoconservative ideology and adorns it with a few pleasing references to Thucydides and Montaigne. Do not be fooled. This is not knowledge but sciolism. (Indeed, Hill admits his hostility to actual knowledge.) As guides to international affairs, his teachings are worse than useless.

Sunday, July 25, 2010

Weekend Links: CastroCare, RomneyCare, and McGovernCare

Cross-posted from The Agenda on National Review Online.

Laurie Garrett has a thoughtful piece on the precarious state of the health care system in Cuba in the latest issue of Foreign Affairs. For those who don’t want to spend 99 cents on the article, John Graham has a post on it over on Critical Condition.

Michael Cannon does a persuasive job taking down Jonathan Gruber’s defense of the Massachusetts health care system in the Wall Street Journal.

Philip Klein reports on the renewed push for single-payer health care at the Netroots Nation 2010 conference in several posts. The speeches that he refers to, from Melinda Gibson,  Harry Reid, and others will be posted on-line by the conference organizers after its conclusion.

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Friday, July 23, 2010

Health Wonk Review Review: Those Confusing Conservatives

Cross-posted from The Agenda on National Review Online.

Not so long ago, most liberal bloggers and policy wonks debated health care policy amongst themselves, without much reference to the conservative point of view. Most frequently, as if to channel Lionel Trilling, they dismissed conservative arguments as irritable mental gestures.

The most recent edition of Health Wonk Review, hosted by Julie Ferguson of Workers’ Comp Insider, appears to reflect a shift on this score. Perhaps it is a reaction to the persistent unpopularity of PPACA, given that many liberals were once confident that the law would gain in appeal once it was passed. Whatever the reason, the port side of the health care blogoboat is spending more time engaging the starboard, often constructively and sometimes not. I hope the trend continues.

One such example is Michael Tanner’s new report entitled Bad Medicine: A Guide to the Real Costs and Consequences of the New Health Care Law. Tanner argues that the law leaves 21 million Americans uninsured, despite its promises of universal coverage; that it will add $352 billion to the national debt over its first 10 years of full implementation; that health costs will increase at an accelerated rate; that the law’s $669 billion in new taxes “will significantly reduce economic growth and employment”; that it allows the government to interfere with how doctors practice medicine; and will disrupt existing coverage for many Americans.

Maggie Mahar of the Century Foundation, in “Part 1” of what she promises to be an extended rebuttal of Tanner’s report, disputes the claim that PPACA is unpopular. “What bothers me is…the fact Tanner is using old numbers,” she writes. But the new numbers don’t aid her case either. Personally, I find this debate a bit of a sideshow: I would oppose PPACA even if it was popular, and I would expect Mahar to support it even if it was unpopular.

Joe Paduda of Managed Care Matters declares that he is “confused” about conservative criticisms of PPACA, and it appears that he is:
There’s a bit of hypocrisy, or perhaps more kindly, ignorance among those who criticized ‘Obamacare’ for its ‘socialist’ leanings and now fault reform for benefit plan changes implemented by employers seeking market answers to rising costs…Critics can’t have it both ways. Either decry the bill for its weak cost controls and governmental ‘takeover’ of health care, or slam it for forcing employers to change plans to control costs because the bill doesn’t do enough.
Conservatives aren’t criticizing insurers for attempting to control costs. Conservatives are criticizing PPACA for introducing a blizzard of mandates which make insurance more expensive, forcing those insurers to raise premiums or increase cost-sharing. Requiring every health plan to pay for acupuncture, for instance, is a surefire way to increase costs; if insurers are to keep premiums constant, they are forced to cut other benefits, or increase cost-sharing, in order to pay for that benefit.

Princeton economist Uwe Reinhardt, on the Health Affairs Blog, wonders why conservatives advocate more competition among insurers. “I find it hard to believe that…fragmenting the buy side of health care even more would serve the goal of cost containment.” The conservative argument is two-fold: as Reinhardt speculates earlier in the post, interstate competition allows consumers to buy insurance from less-costly states; in addition, allowing insurers to gain a larger scale will allow them to counteract the power of hospital monopolies.

David Williams of Health Business Blog criticizes Republicans for passing the Medicare prescription drug benefit, at a cost of $50 billion a year, without any fiscal offsets. He suggests cutting the subsidy in order to send more Medicaid money to the states.

Jared Rhoads of the Lucidicus Project, an Objectivist blog for medical students, takes Mitt Romney to task for advocating further government control of the health care system in his book, No Apology.

Jan Sidorov of the Disease Management Care Blog is worried that, as the Medicare “doc fix” problem remains unfixed, physicians will stop taking Medicare patients, hindering access to health care for the elderly.

Beth Capell of the Health Access Blog celebrates the new insurance mandates of PPACA, arguing that they will eliminate “junk” insurance and require that all plans cover basic health benefits including “mental health and substance abuse.” The problem is that the insurance model should take exactly the opposite approach, letting individuals pay for such routine care out-of-pocket, and instead cover catastrophic care. Capell’s approach is precisely why the cost of insurance keeps going up.

Finally, Louise Norris of Colorado Health Insurance Insider raises concerns about the increased frequency of Caesarean sections. She argues that obstetricians are financially rewarded for performing more C-sections, and that reforming payment for these procedures could help keep costs down.

Thursday, July 22, 2010

Medicaid Reform in One Easy Step

Cross-posted from Critical Condition on National Review Online.

Stimulated by the comments of reader Joe C., I went back and looked at the Medicaid numbers. From 2010-2017, here are the Congressional Budget Office’s pre-Obamacare projections for the number of people covered by Medicaid and CHIP, and the Medicaid Actuary’s 2008 projections for federal and state spending on Medicaid (apologies for the small type):

Year (pre-PPACA)
Covered lives (millions)
Federal expenditures ($bn)
  Federal share
  State share
Cost per covered life
  Growth rate

As you can see, we currently spend almost $10,000 per Medicaid beneficiary, a number that will exceed $19,000 in 2017. The growth of per-beneficiary expenditures is not only well above conventional inflation, but also health care inflation. This is why Medicaid is annihilating state budgets.

What does the average individual health plan cost in the private sector, you ask? According to the Commonwealth Fund, the average private-sector individual health plan in 2008 cost $4,386. If we assume that premiums increased by 6% in 2009 and 2010, we get to a 2010 average of $4,928. In other words, the government is spending twice per Medicaid enrollee than middle-class Americans spend on their own insurance. And this is the system that PPACA wants to expand by nearly 50%.

Austin Frakt asks us to choose between two options: being uninsured, or accepting Medicaid. He posits that most people given that choice would accept Medicaid, despite its problems, and so the solution is to spend more money on the program. But this is a false choice, for two reasons.

The first is, as I’ve discussed elsewhere, a large proportion of the uninsured are not poor. These people are uninsured by choice. (In Massachusetts, instead of responding to the individual mandate, as Austin and others suggest they have, such people will game the system by claiming they have insurance when they don’t.) There are definite advantages to being uninsured over being on Medicaid, if you can pay the bills. The most significant of these is that nearly any doctor will take an appointment with someone who is willing to pay out-of-pocket.

The second of these, and the most important, is: why on earth are we spending twice as much on people with Medicaid as we do on private insurance for middle-class Americans, only to get substantially worse medical outcomes? People on Medicaid have poorer access to care (for reasons I have discussed elsewhere), and have more health problems in general. Let’s generously say that their health care should cost 50% more than that of the average American.

So here’s a modest proposal: Instead of spending $400 billion on Medicaid in 2010, let’s spend $300 billion, but instead of spending it on Medicaid, or even on vouchers, let’s write checks to the poor. Instead of filtering $9,815 per Medicaid enrollee through a cascade of government employees, let’s send $7,361 in cash into the mailboxes of impoverished individuals, to spend on whatever is most important to them and their families. It achieves more efficient wealth redistribution than does Medicaid, and allows the poor to afford high-quality, private-sector health insurance. If they are healthy, they can buy inexpensive insurance and save the extra cash; if they are sick, they can use the entire amount for insurance. This approach would not only save money, and appeal to the poor, but it would align Medicaid inflation with health inflation, saving trillions of dollars over time. Indeed, if healthy Medicaid beneficiaries choose less-expensive, consumer-driven plans, such a reform could actually bring Medicaid inflation below overall health inflation.

I can already hear an objection: what if they spend the cash on bad things, like alcohol, instead of good things, like health insurance? I would argue that the enormous efficiencies of a direct transfer payment outweigh that risk. At any rate, vouchers are designed to address exactly that concern. But those who wish to better control how the poor spend taxpayers’ money are perfectly able to do so without my encouragement.

Wednesday, July 21, 2010

Why Liberals Haven't Learned The Lessons Of Massachusetts

Cross-posted from Critical Condition on National Review Online.

Faced with a barrage of bad news about the health-care system in Massachusetts, Obamacare advocates such as Jonathan Gruber, Jonathan Cohn, Ezra Klein, and Igor Volsky have started fighting back, arguing that things are going great in the Bay State. Cato’s Michael Cannon has done a great job of summarizing their arguments, and why they fall flat:
  • The Commonwealth Fund reports that even though Massachusetts already had the highest health insurance premiums in the nation, premiums rose faster post-RomneyCare than anywhere else; 21-46 percent faster than the national average.
  • A recent study estimates that RomneyCare has so far increased employer-sponsored health-insurance premiums by an average of 6 percent.
  • The success that Klein sees in Massachusetts’ individual market — which accounts for just 4 percent of the private market — is merely the product of shifting costs to workers with job-based coverage.
  • Contrary to Klein’s post hoc spin that RomneyCare “was never an attempt to control costs,” Romney himself promised that “the costs of health care will be reduced.”
  • Aaron Yelowitz and I find evidence suggesting that uninsured Massachusetts residents are responding to the individual mandate not by obtaining coverage but by concealing their insurance status.  Coverage gains may therefore be less than official estimates suggest.
  • Evidence is mounting that, despite stiffer penalties than ObamaCare will impose, increasing numbers of people are gaming the individual mandate by only purchasing health insurance when they need medical care. Such behavior could ultimately cause the “private” insurance market to collapse.
Liberals like to talk about controlling health costs, but in practice, they are far less concerned about reducing costs than they are about increasing spending. Here again is Jonathan Cohn:
If the lesson from Massachusetts is that “genuine cost control is avoided because it’s politically difficult” then fiscal disaster is inevitable. Health care costs are going to keep rising, no matter what we do. And if that’s the case, I would certainly prefer a world in which people don’t have to worry about paying their medical bills. It doesn’t cost a lot to make that happen; the incremental cost of insuring the uninsured is a small fraction of health care spending.
Cohn captures a lot of what’s wrong with liberal health-care philosophy in these few sentences. “If fiscal disaster is inevitable, we might as well cover the uninsured.” Actually, the exact opposite is true. The reason why health care costs keep rising, and the reason we face fiscal disaster, is because of subsidized insurance.

Government programs like Medicare and Medicaid, which started out small, reward irresponsible utilization of health-care resources. As MIT economist Amy Finkelstein showed in an important paper, Medicare alone is responsible for nearly half of the health care inflation between 1950 and 1990. The reason is hardly mysterious: if you subsidize health-care spending, as Cohn recommends, you will get more of it, leading to even more health-care inflation. It’s Economics 101: if you increase demand for a product, and keep supply constant, prices will go up.

And, so, we end up with the death spiral of state-funded health care. As the cost of health care increases, driven there by government subsidies, fewer people can afford private insurance, leading to more cries for more government subsidies, which will drive costs up even further. Wouldn’t it be nice if we could try the opposite approach?

Tuesday, July 20, 2010

Re (3): UVa's Surgical Outcomes Study

Cross-posted from The Agenda on National Review Online.

Austin Frakt is back for more, with two more posts on the issue of Medicaid’s poor performance in outcome studies vs. the uninsured. I am afraid that Austin makes a couple of analytical errors. These will take some time to go through, so I forgive readers who don’t want to wade in the tall weeds with me. In summary, the evidence Austin cites to argue that Medicaid might be just fine actually demonstrates the opposite: that Medicaid patients get worse medical care than do the uninsured, and that PPACA’s massive expansion of Medicaid will have tragic consequences.

To begin with, Austin is re-energized by some useful commentary from Aaron Carroll. Writes Carroll:
- Insurance doesn’t equal care.  Insurance can affect how likely you are to get care and how quickly you might get it.  But any study that looks at insurance has to adjust for many, many other variables in order to get the true effect of insurance.

- There is a large body of literature out there on insurance.  A lot of it shows that people with private insurance do better than those with public insurance or those without insurance; that should not be a surprise.  Most people (and most of your docs) would rather have private insurance than Medicaid.  But would you really rather have no insurance than Medicaid?  If so, that is everyone’s right.  Don’t get the Medicaid.  I wager few would make that choice.

- I find it interesting that most of the literature that Avik cites is about surgery.  Surgery is different than other types of care (like emergency care) in that it is harder to refuse.  So it may be that the uninsured are getting care on a compassionate basis.  Few would provide a screening mammogram or yearly colonoscopy to someone uninsured, however, and you would get that with Medicaid.
I entirely agree that insurance does not equal care: indeed, this is the point I have been trying to make all along. Medicaid, in particular, because it is heavily underfunded and mismanaged, is insurance of a kind, but not care. And as I pointed out in my previous post, arguments that the studies don’t adjust for enough variables miss the point. We are trying to distinguish between cause and effect: what elements of Medicaid’s poor outcomes are caused by Medicaid, and what elements are inherent to the Medicaid population? Clearly, things like one’s race or gender or age are not caused by Medicaid. But the chronically poor care that Medicaid patients receive, because they have poor access to physicians, is directly responsible for many of their comorbidities. Therefore, correcting for comorbidities, while a useful tool, treats Medicaid overly generously.

Medicaid, due to its extreme underpayment and other problems, gives its beneficiaries very poor access to health care—things like annual checkups, screenings, etc. In Texas, for example, only 32 percent of all physicians are willing to see Medicaid patients. A nationwide survey of major metropolitan areas found that 55% of physicians accepted Medicaid, with particularly low numbers for specialists.

Skeptics of the Virginia study want us to say: “The studies are flawed! They don’t consider all of subtle ways in which Medicaid patients are worse off!” Well, what if the main reasons that Medicaid patients are worse off has something to do with…Medicaid?

As to Carroll’s point about the fact that the uninsured aren’t getting mammograms and colonoscopies, but Medicaid patients are: that isn’t true, because Medicaid patients can’t get appointments to see doctors (see above). If Carroll was right, it would only render even more striking the fact that the uninsured have their cancers detected earlier than do Medicaid patients. With breast cancer specifically (since he brings up mammograms), Medicaid patients were 31% more likely to have late-stage breast cancer than the uninsured. With surgical resections for colon cancer (since he brings up colonoscopies), in a separate study, Medicaid patients had a 27% higher risk of mortality than the uninsured, and a 9% higher risk of surgical complications.

Carroll makes another minor point, which Frakt echoes:
I’m going to take a tiny issue with Avik’s first post.  It was based on (as far as I can tell) a meeting abstract…I’m not saying the results of Avik’s discussed study aren’t valid.  I’m saying I can’t tell.  And neither can you, without more information.  The peer review for a meeting just isn’t the same as for full publication.  You have less time, different criteria, and almost nothing by which to judge the work.
As I have commented elsewhere, the full study is in press in the Annals of Surgery. It should be out in a few weeks, relieving Carroll's concerns. I certainly agree that the detailed study results, published in a peer-reviewed journal, will be useful. Skeptics of the study are setting themselves up for disappointment if they hope that the detailed results will exonerate Medicaid. Indeed, the detailed results are likely to show that social factors (e.g. alcohol and drug abuse) were counted as comorbidities, and were not meaningfully different between Medicaid and the uninsured anyway.

The Virginia study is based on the largest publicly available inpatient database in the U.S., that of the Nationwide Inpatient Sample. The NIS represents approximately 20% of all hospital discharges in the country. The UVa study is the most comprehensive analysis, with the largest sample size, of any published study comparing surgical outcomes on the basis of insurance status.

So, back to Austin Frakt. Austin implies that the Virginia study, and the other studies I cite, are “cherry-picked.” I can assure him that the four studies I described are representative. He is more than welcome to slog through the medical literature, as I did, and see if he comes up with a different conclusion. He won’t.

Austin then goes and picks out a single study, the thing he had earlier criticized me for, and uses that study to suggest that it is premature to conclude that Medicaid patients fare worse than the uninsured. Even worse, Austin actually misinterprets the results of the study he cites! Let us quote its authors (emphasis mine):
Most of the reasons for insurance-related disparities noted above for the uninsured are also applicable to Medicaid patients. Differences in the intensity of inpatient care, limited access to health care services, unmet health needs, and suboptimal management of chronic medical conditions were also reported for Medicaid patients in prior research. These factors likely contributed to the higher in-hospital mortality in this patient population, evidenced by the sequential decrease in odds after adjusting for comorbidities and disease severity.
Translation: Medicaid patients have poorer access to physicians. As a result, their diseases are managed very poorly. This leads them to die in the hospital at higher rates than the uninsured (in Austin’s study, Medicaid patients had a higher mortality than the uninsured with heart attacks and pneumonia, but did better than the uninsured with strokes). As the authors note, additional adjustments for risk factors increase the evidence that Medicaid is the problem, because those risk factors are the ones that Medicaid exacerbates.

I am glad that Austin has taken on this challenging subject. But I encourage him to take the effort he spends attempting to dispute that Medicaid has problems with access to care and medical outcomes, and apply it to actually solving those problems. (Suggesting that we throw an extra $200 billion a year into Medicaid is not viable.) I hope I am wrong, but I fear that he is less than enthusiastic about addressing the problems, because that would require him to acknowledge that PPACA’s massive expansion of Medicaid was a catastrophic mistake.

Monday, July 19, 2010

Re (2): The UVa Surgical Outcomes Study

Cross-posted from The Agenda on National Review Online.

I’m grateful for Austin Frakt’s continued interest in the problem of Medicaid’s poor outcomes. Here are his most recent thoughts:
Avik Roy responds to my post. He lists several more studies that find Medicaid patients have far worse outcomes than privately insured ones and the uninsured too. I’m not going to undertake a literature review. I don’t have time. So, I’m not really debating the merits of the studies Avik Roy cites or whether they are representative of the entire body of work in this area.

So, let’s presume they are credible and representative, then what is the implication? Should we make Medicaid more like private insurance or more like no insurance? Should we Federalize the program?

I believe that everyone should have access to affordable insurance that facilitates access to affordable, high-quality care…If Medicaid doesn’t fill that role for low-income individuals, some of whom are very sick and/or disabled, then it should be reformed. That probably means spending more money on it.

I’m not getting the sense that’s what Roy has in mind. He writes that “most people can afford to take on more responsibility for their own care, and indeed would be far better off doing so.” That sounds like he wants to make Medicaid more like no insurance.
Austin is a thoughtful guy, so I’m surprised to see him argue that throwing more money at a dysfunctional system is the best path forward. We already spend $436 billion a year on Medicaid, only to achieve the dismal results reflected in the Virginia study. Once PPACA is fully implemented, Medicaid may surpass Medicare as our most expensive health-care program. Medicaid is overwhelming state budgets, crowding out other essential government services. And I haven’t even mentioned our federal deficit. In the post-Obamacare era, increasing physician reimbursement for Medicaid patients to still-stingy Medicare levels will cost $200 billion a year. If Austin has that kind of change under his couch, he should let us know!

I instead favor, as a start, what Mitch Daniels has accomplished with the Medicaid program in Indiana (before PPACA destroys it): subsidized health savings accounts combined with consumer-driven health plans. And Indiana covers people at up to 200% of the poverty line, compared to Obamacare’s 133%. Instead of covering more people, I would more heavily subsidize those at or below the poverty line, in order to bring Medicaid’s low physician payments in line with those of the private sector. Ideally, we would move to a modified version of the Swiss model, in which everyone purchases consumer-driven plans in the individual market, with graduated subsidies for lower-income households.

Ultimately, the goal should be to minimize the number of people who require subsidized insurance. This requires comprehensive health reform aimed at reducing the cost of health care: de-linking employment from insurance; broadening the reach of consumer-driven care; creating a national insurance market; aggressive antitrust enforcement against providers; medical tourism; transparency; malpractice reform; and Medicare reform.

Austin also passes along the comments of some of his readers, who question the methodology of the Virginia study. Reader Jay worries that the Virginians didn’t control for prior health status. On the contrary, they controlled for 30 co-morbid conditions, along with age, gender, income, geographic region, and surgical procedure. They may not have directly controlled for smoking or alcohol consumption (we don’t yet know), but these issues would show up in the comorbidities and in the surgeries themselves. For example, lung resections are typically performed on smokers.

Reader Steve worries that they chose procedures that would be heavily tilted to academic centers, and that this biases the results. From my reading, the procedures they chose are among the most common high-morbidity surgical procedures performed today, which is what you would want an outcomes study to examine. A larger issue, which I discussed in my previous post, is that Medicaid patients appear to spend more time in low-volume surgical centers.

Steve also says:
I would bet almost anything that they do not look at all of the social factors that would contribute to worse outcomes for a Medicaid population. Docs don’t generally look for those. If you are uninsured, how long have you been uninsured? Are you working if you are uninsured? What is the functional capability of someone on Medicaid not working vs. someone uninsured who is working? Which group is more likely to have communication problems? Which group is more likely to give a better history? Which group is more likely to get family support? Which group is staff more likely to dislike?
Steve is missing the point. It’s not the job of these studies to eliminate every conceivable factor that leads Medicaid patients to underperform the uninsured. Rather, they are seeking to establish whether or not Medicaid patients underperform the uninsured, after controlling for basic factors like age, income, and comorbidities. Once you establish that Medicaid underperforms, you can then begin to propose hypotheses as to why this underperformance happens.

On this score, Steve has reversed the cause and the effect. Welfare dependency is what leads to problems like family breakdown, underemployment, and diminished functional capabilities. Dumping 16 million more Americans into our broken Medicaid system is not the answer, but rather its antonym. It is not compassionate, but cruel.

Sunday, July 18, 2010

Re: The UVa Surgical Outcomes Study

Cross-posted from The Agenda on National Review Online.

Austin Frakt thinks I am making too much of the University of Virginia study showing that surgical patients on Medicaid fare more poorly than do the uninsured:
Never draw broad policy conclusions from one study. It could hurt your brain. Well it hurts mine, anyway…The policy implication is that we should make Medicaid as close as possible to private insurance, thereby making Medicaid surgical patients 97% less likely to die. Or, if that is too costly, we should instead make Medicaid more like no insurance at all and boost survival by 13%. Talk about bang for the buck!

One way this could make sense is if very little health care (such as that the uninsured might receive) is bad for you, a little bit of, perhaps low quality, health care (such as that Medicaid patients might receive) is very bad for your health, and a lot of perhaps higher quality health care (that the privately insured enjoy so much) is very very good for you.

Or maybe there’s a problem with the study.
Austin is convinced that access to health insurance is better for health outcomes than being uninsured. That is why he, and many others, supported PPACA. The UVa study agrees with him, insofar as those with private insurance fare much better than do the uninsured.

But what is striking about the study, and what gets to the heart of the policy assumptions around PPACA, is that state-run Medicaid insurance may not make much of a difference. Indeed, the literature as to the poor performance of Medicaid is overwhelming.

Austin’s first criticism—that I am relying on one study—can be addressed by surveying the medical literature for similar studies. The Virginia study appears to be, by far, the largest and most comprehensive surgical outcomes study ever conducted that compares Medicaid to the uninsured. Here are some others:

·    A University of Pennsylvania study published in Cancer found that, in patients undergoing surgery for colon cancer, the mortality rate was 2.8% for Medicaid patients, 2.2% for uninsured patients, and 0.9% for those with private insurance. The rate of surgical complications was highest for Medicaid at 26.7%, as compared to 24.5% for the uninsured and 21.2% for the privately insured.

·    A Columbia-Cornell study in the Journal of Vascular Surgery examined outcomes for vascular disease. Patients with clogged blood vessels in their legs or clogged carotid arteries (the arteries of the neck that feed the brain) fared worse on Medicaid than did the uninsured; Medicaid patients outperformed the uninsured if they had abdominal aortic aneurysms.

·    A study of Florida patients published in the Journal of the National Cancer Institute found that Medicaid patients were 6% more likely to have late-stage prostate cancer at diagnosis (instead of earlier-stage, more treatable disease) than the uninsured; 31% more likely to have late-state breast cancer; and 81% more likely to have late-stage melanoma. Medicaid patients did outperform the uninsured on late-stage colon cancer (11% less likely to have late-stage cancer).

I could keep going, but I don’t want to put our readers to sleep.

I would submit to Austin that, instead of assuming that the study must be flawed, because it jars with his intuition, a more scientific approach would be: what could be the logical explanations for why Medicaid underperforms the uninsured? What does the methodology of the study leave out?

The detailed study results will help us address these questions, but the answer almost certainly begins with access to care. Medicaid’s extreme underpayment of doctors and hospitals leads fewer and fewer health-care providers to offer their services to Medicaid beneficiaries.

This is especially likely to be true at the highest-quality surgical centers. A UCLA study published in the Journal of the American Medical Association found that the uninsured and those with Medicaid were far more likely to be treated in low-volume surgical centers than high-volume ones (high-volume surgical centers have consistently been shown to provide the best outcomes).

Another key element to consider is that many of the uninsured are not poor. According to the Census, 17.5 million of the uninsured make more than $50,000 a year. (Median U.S. income is around $40,000 per year.) These individuals are wealthy and/or healthy enough that they have decided to forego insurance. Though the Virginia study corrects for income status and other social factors, the fact that these patients are more capable of paying directly for their own care, at the prevailing rate, means that physicians are more willing to see them.

There is, doubtless, a level of poverty at which Medcaid is better than nothing at all. But most people can afford to take on more responsibility for their own care, and indeed would be far better off doing so.

Saturday, July 17, 2010

UVa Study: Surgical Patients On Medicaid Are 13% More Likely To Die Than Those Without Insurance

Cross-posted from Critical Condition on National Review Online.

At a cost of nearly $100 billion a year, Obamacare adds 16 million people to the rolls of Medicaid. The President and his allies are most proud of this aspect of the new law, as it helps to fulfill a long-held progressive goal of providing government-funded health insurance to all Americans.

Except that Medicaid is broken. Medicaid so severely underpays doctors—reimbursing them at 72 percent of already-stingy Medicare rates—that many physicians refuse to see Medicaid patients. Medicaid patients, in turn, fill up emergency rooms, where they delay the care of the seriously injured.

Now comes word, via a large study by the University of Virginia (h/t Joseph Colletti), that surgical patients on Medicaid are 13% more likely to die than those with no insurance at all, and 97% more likely to die than those with private insurance.

The Virginia group evaluated 893,658 major surgical operations from the Nationwide Inpatient Sample database from 2003 to 2007. They divided the patients up by the type of insurance—private insurance, Medicare, Medicaid, and uninsured—and adjusted the database in order to control for age, gender, income, geographic region, operation, and comorbid conditions (having 2 or more diseases simultaneously). That way, they could correct for the obvious differences in the patient populations (for example, older and poorer patients being more likely to have ill health).

They then examined three measurements of surgical outcome quality: the rate of in-hospital mortality; average length of stay in the hospital (longer stays in the hospital are a marker of poorer outcomes); and total costs.
In-Hospital Mortality (vs. Private Insurance)
Length of Stay (days)
Total Costs ($)
The in-hospital death rate for surgical patients with private insurance was 1.3%. Medicare, uninsured, and Medicaid patients were 54%, 74%, and 97% more likely to die than those with private insurance.

The average length of stay in the hospital was 7.38 days for those with private insurance; on an adjusted basis, those with Medicare stayed 19% longer; the uninsured stayed 5% shorter; and those with Medicaid stayed 42% longer.

Total costs per patient were $63,057 for private insurance; Medicare patients cost 10% more; uninsured patients 4% more; and Medicaid patients 26% more.

In summary: Medicaid patients were almost twice as likely to die as those with private insurance; their hospital stays were 42% longer, and cost 26% more. Compared to those without health insurance, Medicaid patients were 13% more likely to die, stayed in the hospital for 50% longer, and cost 20% more. It is hard to see how this problem doesn’t get significantly worse when Obamacare’s expansion of Medicaid is fully phased in.

Remember these statistics the next time you see a study claiming that the quality of American health care is no better than that of Europe. Such studies rarely separate patients with Medicaid and Medicare from those with private insurance.

The Virginia study reminds us that the true cost of government health care is not its impact on the budget, but its impact on the lives and health of every American. We can only hope that our representatives in Washington begin to understand this.

Health Care And The Long-Term Budget Outlook

Happy thoughts for your weekend barbecue.

As many readers will be aware, on June 30, the Congressional Budget Office put out its 2010 Long-Term Budget Outlook. This year’s LTBO is notable because it incorporates the CBO’s view of the impact of Obamacare on the long-term fiscal situation. The CBO provides two sets of projections: an “extended-baseline scenario” which contains unrealistic assumptions about the willingness of Congress to rein in spending and raise taxes; and a more realistic “alternative fiscal scenario” that assumes that the Medicare Sustainable Growth Rate (a.k.a. the “doc fix”) continues to get patched, and that tax revenues hold steady at 19% of GDP. Here is how the spending looks:

As you can see, if you exclude government spending on health care (the top area of the graph), federal spending actually goes down over time as a percentage of GDP. In other words, the entire fiscal crisis is being caused by health care spending.

But wait, there’s more, because the above chart doesn’t include interest payments on the debt. When you include interest, the chart looks like this:

In 2055, based on these projections, when today’s college students are getting ready to retire, interest on the debt will be 19.8% of GDP, whereas tax revenues will be 19.3% of GDP. In other words, every dollar spent by the government in 2055 will be borrowed from someone else. In 2055, according to these projections, federal debt will be 410% of GDP.

Enjoy your weekend!

Wednesday, July 14, 2010

Why Americans Dislike Britain's NHS

Cross-posted from Critical Condition on National Review Online.

Liberals find it odd, and perhaps slightly irrational, that Americans so heavily criticize the British National Health Service. This has been of particular relevance in light of Donald Berwick’s “love affair” with the agency.

The Conservative Prime Minister of the United Kingdom, after all, often talks “of how proud we in Britain are of the NHS.” Just as with Medicare in the U.S., British politicians who talk of dismantling the NHS get hammered in the polls. (Despite Her Majesty’s Government’s surprise announcement this week of incremental market-oriented reforms to the program, the Tories under David Cameron have repeatedly pledged to preserve its funding.)

But describing the NHS as “popular” with British voters is a bit like describing cocaine as “popular” with crack addicts. Once people become dependent on heavy state subsidies, it is natural for them to feel insecure at the thought of losing them. Tocqueville long ago articulated how this problem inevitably arises from majoritarian democracies. And people who live under a single-payer regime have no way, short of moving abroad, of appreciating that there are better alternatives.

Having said that, Britons are frustrated by the indifference and inhumanity of the National Health Service. Its problems are covered widely in the British press. Here are some examples (and readers are welcome to provide others):
  • NHS doctors routinely conceal from patients information about innovative new therapies that the NHS doesn’t pay for, so as to not “distress, upset or confuse” them.
  • Terminally ill patients are incorrectly classified as “close to death” so as to allow the withdrawal of expensive life support.
  • NHS expert guidelines on the management of high cholesterol are intentionally out-of-date, putting patients at serious risk, in order to save money.
  • When the government approved an innovative new treatment for elderly blindness, the NHS initially decided to reimburse for the treatment only after patients were already blind in one eye—using the logic that a person blind in one eye can still see, and is therefore not that badly off.
  • While most NHS patients expect to wait five months for a hip operation or knee surgery, leaving them immobile and disabled in the meantime, the actual waiting times are even worse: 11 months for hips and 12 months for knees. (This compares to a wait of 3 to 4 weeks for such procedures in the United States.)
  • One in four Britons with cancer is denied treatment with the latest drugs proven to extend life.
  • Those who seek to pay for such drugs on their own are expelled from the NHS system, for making the government look bad, and are forced to pay for the entirety of their own care for the rest of their lives.
  • Britons diagnosed with cancer or heart attacks are more likely to die, and more quickly, than those of most other developed nations. Britain’s survival rates for these diseases are “little better than [those] of former Communist countries.”
These problems are not an accidental side effect of socialized medicine—they are inherent to socialized medicine. Liberals who believe that technocratic experts can rationally allocate health care resources ignore the real-world examples, like Britain’s, of how that model fails in practice.

The American health care system has its flaws, and real reform is urgently needed. But the reason why Obamacare is so unpopular is that most people would never trade our approach, warts and all, for that of Donald Berwick’s NHS.

Tuesday, July 13, 2010

The Coming Crisis In Emergency Care

Cross-posted from The Agenda on National Review Online.

As I wrote last week, emergency room visits in Massachusetts have increased, despite the fact that universal health care was supposed to solve that problem. PPACA is likely to nationalize the phenomenon. John Goodman has an excellent piece up on the Health Affairs blog in which he explains why this happens. It turns out that it is Medicaid patients, rather than the uninsured, who clog emergency rooms:
As we pointed out in a recent National Center for Policy Analysis (NCPA) Brief Analysis, the use of the emergency room by uninsured patients is not that much different than usage by the insured. The heaviest users of the ER (in proportion to their numbers) are Medicaid patients, probably because Medicaid rates are so low that physicians are not anxious to see them. And the reason why that is important is that more than half of the people who gain insurance under the new health reform bill will enroll in Medicaid.
Health insurance leads to more, not less, utilization of health care.
In general, people with insurance consume twice as much health care as the uninsured, all other things equal. The trouble is that the new health insurance law has no provision for increasing the number of health care providers. As a result, when people try to increase their use of physician services, many will be disappointed and a large number are likely to turn to the emergency room when they cannot get their needs met at doctors’ offices.
The conflation of health insurance with access to health care is one of the biggest epistemological problems with the progressive approach, one that the ensuing decade will lay bare.

Monday, July 12, 2010

TNR: Obama Wrong On Berwick

Cross-posted from Critical Condition on National Review Online.

Jonathan Cohn of The New Republic, in a post entitled “Obama (and Cohn) Wrong on Berwick,” appears to have been persuaded by Tevi Troy’s argument that Berwick would have benefited from a full hearing:
Several of my readers, particularly conservative ones, wrote back to say they disagreed. Among them was Tevi Troy, a former deputy secretary at HHS who is now a visiting senior fellow at the Hudson Institute. I always take Tevi’s arguments seriously and advise readers to do the same.
Cohn goes on to cite Troy’s correspondence:
I am also not averse to recess appointments in cases where the Senate is clearly dragging its feet or tripping someone up via rotating anonymous holds. In this case, however, I think the White House was unfair to both Berwick and CMS by recess appointing him before he could have a hearing.

Being a confirmed appointee really makes a difference at the agencies, and it is worth taking some political hits to give your nominees that important blessing.
There is another reason for thoughtful (and philosophically consistent) liberals to oppose Berwick’s recess appointment: There won’t always be a Democrat in the White House.

UPDATE: Ezra Klein disagrees.

Partisanship And The Health Care Debate

Cross-posted from The Agenda on National Review Online.

I’ve previously praised Maggie Mahar as a knowledgeable health-care analyst who conservatives can engage on empirical issues. She’s disappointed me with her discussion of Donald Berwick.

In a discussion of Ezra Klein’s contention that conservatives should be happy with Berwick’s recess appointment, she calls attention to one of the deficiencies in the health care debate of the last year:
What I like about Klein’s argument is that it follows one of the first rules of combat: “Confuse your enemies.” Make no mistake, the battle between health care reformers and hard-line conservatives has just begun, and Klein’s column must have left many conservatives scratching their heads.
I appreciate that people on both the left and right tend to think of their political opponents as “enemies,” but this approach had a destructive effect on the production of the Patient Protection and Affordable Care Act. Health care policy is extremely complex, and we’re all capable of getting things wrong. If those who disagree with Mahar are the enemy, it is unnecessary for her to address their criticisms, incorporate their salutary ideas, or find areas of bipartisan agreement. Conservatives, in Mahar’s view, “tend to be wary of science” and “prefer that medicine remain mired in custom” rather than empiricism. Quite the opposite is true: conservative critiques of liberal health-care policy revolve, in large part, around its lack of empirical rigor.

I was reminded, in reading Mahar’s remarks, of Jonathan Cohn’s valedictory column closing out The New Republic’s health-care blog. Cohn expressed regret that TNR had published articles critical of the Clinton health care effort in 1993; his new editor, Franklin Foer, “wanted universal health care to become the magazine’s new crusade.” This time around, Cohn and his allies would deploy campaign-style rapid-response articles against adverse news and analysis. Sympathetic reporters would similarly ignore the arguments of skeptics, until the bill was safely signed into law.

TNR is a journal of opinion, and its writers have every right to their point of view. There will always be passionate philosophical differences between the right and left on health care. But those who engage health care questions in a partisan and uncritical fashion are likely to get the answers wrong, at great cost to the country. The last 45 years are proof enough of that.

Saturday, July 10, 2010

Podcast: Donald Berwick's Recess Appointment

In which we discuss the “four P’s” of healthcare policy.

On Friday, I spoke with Ben Domenech, Managing Editor of the Heartland Institute’s Health Care News, about President Obama’s controversial usage of the recess appointment procedure to install Donald Berwick atop the Centers for Medicare and Medicaid Services (CMS). I believe I was the first person to raise questions about Berwick’s nomination in a major journal, and you can review my extensive coverage of his nomination and appointment on this website. Here is the full audio of my 18-minute conversation with Domenech (performance by browser may vary):

The Heartland Institute’s health care subsidiary, Consumers for Health Care Choices, does a nice weekly podcast on health care policy, to which you can subscribe via iTunes.

Thursday, July 8, 2010

Why Drug Patent Settlements Are Good For Consumers

Cross-posted from The Science Business on Forbes.com.

The New York Times has an editorial out in opposition to the “devious tactic” whereby innovative pharmaceutical companies and generic drug manufacturers settle patent litigation. The Times argues that consumers come out as “the big loser” in such settlements, when in fact the exact opposite is true.

Settlements of patent litigation are just like settlements of any other type of litigation. Each side concedes total victory, in exchange for eliminating the risk of total defeat. In the case of patent litigation, the source of controversy is a patent. Let’s say Forbes Laboratories owns a patent on the composition of a blood-pressure-lowering drug called Presslow. The patent expires on January 1, 2013. A generic company files a lawsuit, arguing that Forbes’ patent is invalid. And let’s also say that there’s a 70% chance that Forbes would win the lawsuit.

But Forbes would rather lock in that 70% chance than risk the possibility that the judge rules against them, allowing generics onto the market today. So they offer to settle with the generic manufacturer, allowing them to sell a generic version beginning in March 2012. The generic company agrees, because they get to sell the generic version of Presslow 9 months earlier than they would have if the patent was upheld, giving the generic manufacturer a revenue boost.

Consumers only “lose” in such circumstances on the 30% chance that the judge rules against Forbes. They win if the judge would have ruled for Forbes, because the settlement allows generic drugs to appear earlier than they would have normally.

Innovative pharmaceutical companies have much more at stake than generic companies do in these settlements. If Presslow sells $2 billion a year, and investors can’t be sure of the stability of that revenue stream, they stay away from Forbes stock. For generic companies, on the other hand, it’s all upside to their existing revenues. Hence, innovative companies have more at risk, and often settle even when they are confident that they would win in court.

As a result, if the government banned the “devious tactic” of legal settlements, the likely outcome is that consumers will spend more on pharmaceuticals, not less. Claims to the contrary are only accurate if you believe that generic companies are dumb enough to settle even when they would win in court. The truth is the opposite: modern generic companies like Teva employ the most sophisticated patent lawyers on the planet. You can rest assured that they will only settle when they think their case is weak.

Thanks to the Hatch-Waxman Act of 1984, the United States has the most efficient generic pharmaceutical market in the world. Generic drugs represented 75 percent of all dispensed prescriptions in the U.S. in 2009, up from 57 percent in 2004. Let’s let generic companies continue their effective work in this regard, instead of tying their hands with clumsy new regulations.

Wednesday, July 7, 2010

Best Of The Berwick Blogosphere

Because it's that important.

I realize that this is my third post on Donald Berwick today. This time, I share with you the best of the day’s commentary on this issue—because anyone who is interested in health care policy needs to learn as much as possible about Berwick and the future of Medicare and Medicaid.

Ben Domenech of the New Ledger, who has been following the Berwick controversy from the beginning, does a nice job summarizing the early reaction to Berwick’s recess appointment (replete with videos of his controversial speech to the British National Health Service). He adds in a follow-up post that the recess appointment allows Berwick to avoid standard disclosures about who his financial backers are.

Tevi Troy, a deputy secretary of Health and Human Services in the Bush administration, gives a nice insider’s take as to why the CMS Administrator is important, and why he is disappointed by the President’s maneuver. In a similar vein, Keith Hennessey goes through the inside baseball of Senate confirmation hearings, and explains why the Berwick recess appointment was so unusual.

Joe Rago of the Wall Street Journal gets past the sound bites and digs into the real problem with the Berwick appointment: his affection for centrally planned health care systems, and the fundamental flaws of that approach.

The progressive end of the blogosphere is puzzled as to why conservatives are so exercised about Berwick’s fondness for the British National Health Service. Conn Carroll of the Heritage Foundation cites one of NHS’ cruelest features: if the NHS denies you an expensive drug, and you try to pay for it yourself, the NHS bans you from future NHS support, driving you into bankruptcy or death. This is the same NHS to which Dr. Berwick professes a “love affair.”