Health Care

From the abstract of a new working paper by Harvard Professor David Cutler, "Where Are the Health Care Entrepreneurs? The Failure of Organizational Innovation in Health Care:"

Medical care is characterized by enormous inefficiency. Costs are higher and outcomes worse than almost all analyses of the industry suggest should occur. In other industries characterized by inefficiency, efficient firms expand to take over the market, or new firms enter to eliminate inefficiencies. This has not happened in medical care, however. This paper explores the reasons for this failure of innovation. I identify two factors as being particularly important in organizational stagnation: public insurance programs that are oriented to volume of care and not value, and inadequate information about quality of care. Recent reforms have aspects that bear on these problems.

Here's a bit more detail from the paper about the orientation of public insurance programs to volume not value:

New from the Center for Retirement Research at Boston College is an issue brief with the provocative title, "Does Staying Healthy Reduce Your Lifetime Health Care Costs?"  The answer is, "not so much:"

Our main finding is that although the current health care costs of healthy retirees are lower than those of the unhealthy, the healthy actually face higher total health care costs over their remaining lifetime.  To illustrate, the expected present value of lifetime health care costs for a couple turning 65 in 2009 in which one or both spouses suffer from a chronic disease is $220,000, including insurance premiums and the cost of nursing home care, and 5 percent can expect to spend more than $465,000.  The comparable numbers for couples free of chronic disease are substantially higher, at $260,000 and $570,000, respectively.  This brief explains this somewhat counterintuitive finding.

It is kind of like the way being a very poor driver -- prone to accidents and the like -- may reduce your lifetime expenditures on automobiles.

Clive Thompson of the New York Times shines a well deserved spotlight on the research of Nicholas Christakis and James Fowler, who study the spread of health conditions through a population through social networks.  Here is a teaser from the article:

At this point there's little doubt  that CBO is coming under attack from health care reform proponents for its analysis.

For example, take a look at this column by Bruce Vladek in yesterday's Roll Call.  Although there are many, here's what I consider to be the money quote:

...CBO’s track record in predicting the effects of health legislation is abysmal. Over the last two decades, the CBO has routinely overestimated the costs of expanded government health care benefits and underestimated the savings from program changes designed to reduce expenditures.

This is actually a debate that's been raging for weeks in a variety of ways within the budgeting community.  I received a lengthy e-mail several days ago from a friend and budget scholar (whose name and material I don't have permission to use) that went into great detail about this.  That's typical.  After all, a discussion on estimating techniques is the stuff that dreams are made of for many budget wonks.

My "Fiscal Fitness" column from today's Roll Call.

Reconciliation for Health Care Should Not Be an Issue

April 21, 2009
By Stan Collender
Roll Call Contributing Writer   

How is it possible that the part of the Congressional budget process designed to bring people together and create closure is creating so much angst and leaving so much up in the air this year?

Your Sunday required reading today comes from The Valley News, my local paper, which profiles Dr. Elliott Fisher, one of the driving forces behind The Dartmouth Institute.  The early part of the article will give you some sense of how TDI grew up around the Dartmouth Atlas Project.  The best quote comes from Fisher about the waste in the health care industry:

I was not alone yesterday in thinking that Obama should push for some progress on health care reform immediately, but the sentiment wasn't universal.  Here (via Mark Thoma) is what some of his advisers are saying:

"It would be very difficult to come in and say, 'That agenda I've been pursuing for a year and a half? Never mind it,' " Jared Bernstein of the liberal Economic Policy Institute said during an interview with The Times last week.

But Bernstein, a key Obama economic advisor, acknowledged that some economic issues may have to be addressed with greater urgency to provide a foundation for others.

"We can't tackle healthcare until we get the economy working," he said. "If the economy is weak, how can you make good on the promises you made?"

I read with some interest this piece by Jeff Sachs in Slate, "What Obama Needs To Do."  I think there will be a lot of columns like this, so let me add to their number.  The thrust of Sachs' advice is this:

In sum, the recipes since 1981 of small government and small-bore solutions are passé and dangerous for our very survival in the United States and on this planet. While Reagan was crudely ideological, Clinton mildly reformist, and Bush simply crude in the application of these small-government doctrines, none of the recent approaches will do. It's time to stop talking about who can give away more to the public in rebates and start talking about investing in our future in a way that can save the poor, sustain the rest, and build a decent world for our children. Those are the real family values.

This morning, Fed Chair Ben Bernanke spoke on health care at the Senate Finance Committee Health Reform Summit.  His prepared remarks cited the extraordinary growth of health care spending as unsustainable, but he cautioned against harming innovation amidst the efforts to curtail health care costs.