Juicing the Mitchell: World Series edition

It's been a harrowing few months-- politicians have been keeping the blinders on and pressing forward on economic matters. Or taking vacations. Either way, we've been woefully devoid of Luther's Juicing the Mitchell...

...until now!

Four U.S. senators and health officials from the cities hosting the World Series are urging the baseball players union to agree to a ban on chewing tobacco at games and on camera.

The senators, including No. 2 Democrat Dick Durbin of Illinois, and health officials from St. Louis and Arlington, Texas, made the pleas in separate letters, obtained Tuesday by The Associated Press.

Is Obamacare Constitutional?

Here (sorry, I think it is gated) is the latest angle from Steve Willis and Nakku Chung in the debate taking place in Tax Notes Today. Not being a legal scholar, I have trouble understanding how Obamacare differs from any other tax or subsidy in any substantively meaningful way. As such, I find it interesting how the legal scholars are drawing the distinction, and you will find discussion of these points at the above link. Unfortunately, this debate itself seems to just boil down to philosophical difference of opinion on the constitution. As Willis and Chung write in the beginning:

Congress has limited enumerated powers. We view the limitations seriously. We understand that much academic literature disagrees. Kleinbard recognizes few, if any, important limitations on congressional power -- either to tax or to regulate commerce. He joins the academic majority in supporting Congress's role in solving problems, including those it created. While he would limit congressional power to choose our television shows, he provides no reasoning for his limitations other than that they are his. Fundamentally, that is the issue. Do we follow the limitations on congressional power found in the Constitution or do we largely ignore them, opting for a living-document approach that bends (some might say breaks) over time? Neither viewpoint is provable. Both are honest approaches to American law; yet they differ fundamentally, which colors this debate.

Assuming Willis and Chung are correct, and since they are the legal scholars I will assume they are, then I have to wonder if any constitutional challenge of Obamacare will constitute a Supreme Court showdown of the "correct way" to interpret the constitution.

Swine Flu Update

TPS friend Pavel Yakovlev sends along this bit concerning the swine flu; my thoughts from April are here, I'm happy to admit that it became a bit more of an issue than I projected if the other side would admit that it became nowhere near the issue they projected it to be. Also, for what it's worth, the elderly didn't end up in the high risk groups due to what the medical folk say was a similar virus a few decades ago that provided enough resistance to the current H1N1 virus.

Note the regulatory control aspects of the story-- government secures contracts with pharmaceutical companies that are activated with the World Health Organization's declaration of "pandemic," and the pharmaceutical companies' role in influencing the determination of which medical scenarios are elevated to "pandemic" status. The appropriate quotes:

"The aim is that none of the pharmaceutical companies under any circumstances must be allowed to make their influence felt on pandemic emergencies,” he says and adds that rules for patenting also will be checked...

...

"The governments have sealed contracts with vaccine producers where they secure orders in advance and take upon themselves almost all the responsibility. In this way the producers of vaccines are sure of enormous gains without having any financial risks. So they just wait, until WHO says "pandemic” and activate the contracts."

For that reason, Wolfgang Wodarg also finds it suspicious that WHO changed it’s definition of a pandemic on it’s homepage at the end of May this year:

"From June 2009 it is no longer necessary, that "an enormous amount of people have contracted the illness or died” - there simply have to be a virus, spreading beyond borders, and one that people have no immunity towards,” he says.

Mackey in the New Yorker

Here's an interesting bit about Whole Foods CEO John Mackey. It's long, as New Yorker pieces tend to be, but it's an interesting read (also a typical quality of the New Yorker). I have to admit, Mackey's one of the more unique people out there. I think this line hits the scenario perfectly:

The right-wing hippie is a rare bird, and it’s fair to say that most of Whole Foods’ shoppers have trouble conceiving of it.

He also was on Stossel's new show talking about health care.

H1N1 calculation

I can't say I'm surprised about the hubbub over certain Wall Street firm receiving H1N1 vaccines. But it seems that the justification of how to distribute H1N1 vaccines is only half the story. The "highest risk" individuals are to first get the scarce vaccine-- that means those that are most likely to contract (and suffer most) from H1N1. That's only the direct cost. If we're economists, we also want to look at the indirect cost-- the lost productivity from contracting the flu. To that end, one could make the argument that maybe it was those on Wall Street that should be vaccinated first. It also could be the case that it's not those on Wall Street but another group entirely-- it doesn't matter either way. The point is that there's more to consider that just probability of catching H1N1. As it turns out, the market would cover this aspect quite nicely; willingness to pay considers foregone productivity. What we do know is that the government can't aggregate this information and create a top-down distribution strategy that replicates the market outcome. (Nor, for that matter, are they likely to be able to effectively distribute along the simpler lines of "highest risk" either.)

Intrade on on the Probability of Health Care Reform

Intrade on the probability that "A federal government run health insurance plan to be approved before midnight ET 31 Dec 2009"
Trade volume is about 12 thousand, and Intrade closed the day at just under 25%.

The narrative I am inclined to draw from it is that the expectations of his speech acted to improve the likelihood slightly, but after a day of analysis, the likelihood has returned to the pre-speech announcement levels.

More on the Income Effect in Nationalized Health Care

I tell anyone who listens that income continues to play some statistically significant role in health care access and health quality in countries with socialized medicine. In fact, the income effect appears to be more important in Canada than in the U.S. Now, this from Great Britain (Hat Tip: KipEsquire):

Thousands of women are having to give birth outside maternity wards because of a lack of midwives and hospital beds.

The lives of mothers and babies are being put at risk as births in locations ranging from lifts to toilets - even a caravan - went up 15 per cent last year to almost 4,000.

Health chiefs admit a lack of maternity beds is partly to blame for the crisis, with hundreds of women in labour being turned away from hospitals because they are full.

[...]

Others said women had to give birth on the wards - rather than in their own maternity room - because the delivery suites were full.

Tory health spokesman Andrew Lansley, who obtained the figures, said Labour had cut maternity beds by 2,340, or 22 per cent, since 1997. At the same time birth rates have been rising sharply - up 20 per cent in some areas.

[...]

The key now is to make sure this money is spent by the people controlling the purse strings at a local level.'

Care services minister Phil Hope said: 'The number of maternity beds in the NHS reflects the number of women wanting to give birth in hospital. Giving birth can be unpredictable and it is difficult to plan for the exact time and place of every birth.

Now, chances are if we start comparing income in the areas where these services are deficient, they are not the highest income areas. I would make a moderate bet that they would be most deficient in the lowest quartile of income areas, and a sizable bet that it is below the median.

Finally, this is not a technology problem. As long as people care about quality health care, and there are differences in quality among health care facilities, we will continue to see an income effect.

Private and Competitive Regulation of Medicine

The idea is laid out by Ronen Avraham in The Economists' Voice

A market of guidelines produced by private firms could create a gold standard for patient care. The firms would compete to sell their guidelines to doctors and hospitals and in turn offer their clients a safe harbor from medical malpractice lawsuits, provided that the guidelines are followed. The private firms, unlike current organizations that create guidelines, would be held liable for promulgating sub-optimal guidelines. They would strive not only to reduce costs in order to sell their guidelines, but also to maximize patient safety to avoid liability. The private firms would have a strong interest in continually funding objective scientific research to create evidence-based medicine in order to achieve their twin goals of cost savings and patient safety. Granting immunity to doctors who follow such guidelines would go a long way toward meeting the nation’s goals of minimizing healthcare costs while maximizing patient safety.

It is a meaty 5 pages, so have your coffee before reading.

The Economics of Joab's Cancer

I'd like to point students and educators of economics alike to this paper by TPS friend Joab Corey, who will be at Florida State in the Fall:

The Economic Principles of my Cancer Treatment: How to Use Medical Experiences to Teach Economics

Abstract:
This paper uses specific examples from my cancer treatment to illuminate multiple concepts that are typically covered in economic principles classes. Economics is a method of thinking that reveals itself in all aspects of life and a good economics instructor should be able to recognize and adapt these economic concepts in even his or her most severe life experiences. The real events of my treatment serve to illustrate and further clarify basic economic concepts such as inelasticity, cost-benefit analysis, bundling, the concept of a second best world, and marginal decision making. This paper illustrates how an economics instructor can use personal medical examples to make the course material salient to students while bolstering their confidence in the economic way of thinking.

Joab tells these stories with the greatest elements of comedy, which hopefully will come across to you in the paper.

Here is Joab on Rational Ghost Game Theory.

Becker and Posner on health care

Becker and Posner have had a nice conversation on health care; for those of you who, like myself, find the issue almost burdensome to become educated about, it's a nice jumping off point. I particularly like Becker's easy dismissal of looking at life expectancy as a metric for health care success, as well as the alternative of looking at disease survival rates. I would also agree with his implyied assertion that the best solution, in terms of solutions that might actually see the light of political day, would be some sort of health savings account, which aligns the proper incentives for economization on the demand side and efificiency on the supply side.

By the lofty standards provided by Becker and Posner, we here at TPS have quite a way to go with our "discusssions" threads!

Swine flu thoughts

Yes, we've been inundated with news about it recently, and in case you've somehow missed it, here is a story about Mexico's fear of swine flu, here is how companies are dealing with possible swine flu labor force effects, here is a video about a flu ward being too risky for a reporter to enter, here is how to make music out of the swine flu gene, here is a question and answer session about swine flu, here is Spain worrying about the swine flu, here is Joe Biden giving his take on the swine flu and how to protect yourself, here is a first-hand account of fears in Mexico, here is where the swine flu is, and here is a bit concerning swine flu and flying. And that's all visible from the CNN.com front page without scrolling down. Seriously.

My thoughts:

- All we've been fed is statistics about the number of cases and the number of deaths. These mean nothing by themselves. The important figures that need to go along with these are comparable diseases and their potency. According to Wikipedia, with good ol' normal influenza, "the worldwide death toll exceeds a few hundred thousand people a year." I'm also fairly certain that within the U.S., the toll is in the tens of thousands every year, though I can't find anything to back that up. But these numbers need to be kept in mind when considering the scope of swine flu.

Of more importance, though, is the potency of swine flu. No matter how widespread swine flu becomes-- if the death rate of swine flu victims is less than traditional influenza, is it something that should ever be dealt with over and above traditional influenza? Absolutely not, and that's the beauty of economics in dealing with health issues-- we can get at appropriate paths of action without placing a value on human life. Nonetheless, I haven't see percentage numbers. Perhaps N is still too small at this point. But I'd like to see exactly how much worse this swine flu is compared to other sicknesses.

- I'm not going to get worried until a healthy adult in America dies from this illness. Children, the elderly and anyone else with less-than-full-strength immune systems are more at risk for every sickness; swine flu is no different. Could a healthy adult die? Sure. But do past instances of supposedly deadly, human-race threatening diseases being overestimated lead us to believe that this might fall under the same category? You betcha.

- I wonder if the WHO is more likely to declare a disease more risky around budget determining time? I don't know who supports them, but that would be an excellent paper.

Cuba's Hospitals

Proceed, if you have the stomach. Pictures from here and here

I Love This Question

From the NBER:

Can a rational choice modeling framework help broaden our understanding of anorexia nervosa? This question is interesting because anorexia nervosa is a serious health concern, and because of the following issue: could a rational choice approach shed useful light on a condition which appears to involve "choosing" to be ill? We present a model of weight choice and dieting applicable to anorexia nervosa, and the sometimes-associated purging behavior. We also present empirical evidence about factors possibly contributing to anorexia nervosa. We offer this analysis as a consciousness-raising way of thinking about the condition.

Cigarette Tax

Typical nonsense here concerning the increased cigarette tax. Let's go over the Principles-level basics...

1) Not liking something is not a reason to tax it, not in the economic sense anyway. Though it just struck me that it might be a good example of the divide between political costs and economic costs. Perhaps we should tax the "hot, juicy steak" smoke since I don't like the feeling of hunger it encourages?

2) Some people say that taxing cigarettes is good since people "have to have them," i.e., the demand for them is inelastic. Fair enough; low deadweight loss in taxation is a reasonable goal, and Ramsey would be proud. Then people come around and say it's good to tax them because it will significantly reduce their consumption, and that's a good thing since cigarettes are little white evil sticks. I want these people to argue with each other. Sometimes it's the same people saying both things.

3) Saying that taxing smokers makes fiscal sense since "it hits us in our pocketbooks eventually" (via public health care) is a misplaced argument; that's a problem with the public provision of health, not the smoking of cigarettes.

Let it also be said that I've never smoked a cigarette in my life, don't anticipate doing so and hope that I don't, yet cigarette taxation, and its increasing excess, is an embarassment.

I'm also curious if a study has been done to compare, in a cost/benefit framework, the costs of increased public medical burden due to smoking, but in light of the increased benefits of early death to the Social Security system.

How Many States Mandate Insurance Companies Cover Acupuncture?

Eleven.

To see every health mandate for every state in 2008, as well as their cost, see here.

In the opening of the short report, the group channels Milton Friedman:

Mandating benefits is like saying to someone in the market for a new car, if you can’t afford a Cadillac loaded with options, you have to walk. Having that Cadillac would be nice, as would having a health insurance policy that covers everything one might want. But drivers with less money can find many other affordable car options; whereas when the price of health insurance soars, few other options exist.

Hat Tip to Suzie Witmer, for the pointer.

Are Health Insurance Markets Competitive?

New working paper from the NBER, by Dafny:

Although the vast majority of Americans have private health insurance, researchers focus almost exclusively on public provision. Data on the private insurance sector is extremely difficult to obtain because health insurance contracts are complex, renegotiated annually, and not subject to reporting requirements. This study makes use of a privately-gathered national database of insurance contracts agreed upon by a sample of large, multisite employers between 1998 and 2005. To gauge the competitiveness of the group health insurance industry, I investigate whether health insurers charge higher premiums, ceteris paribus, to more profitable firms. I find they do, and this result is not driven by cross-sectional differences across firms or plans: firms with positive profit shocks subsequently face higher premium growth, even for the same healthplans. Moreover, this relationship is strongest in geographic markets served by a small number of insurance carriers. Further analysis suggests profits act to increase employers' switching costs, and insurers exploit this inelasticity where they have sufficient bargaining power. Given the rapid industry consolidation during the study period, these findings suggest healthcare insurers possess and exercise market power in an increasing number of geographic markets.

The existence of price discrimination is interesting, as well as the observation that it seems to be geographically expanding market power. (I wonder if the reason behind such an expansion rhymes with the words "shmate shmegulation.") I still stop short of associating price discrimination with a direct lack of competition, especially because health insurance does not seem to be a particularly profitable industry itself.

However, if these markets are not competitive and lagged employer profit margins (see Table 2) are positively correlated with insurance premiums, then this is all the more reason to not encourage/subsidize employer-based health care, correct? Firms' profit margins are more easily attainable than household income shocks, price discrimmination would be more difficult. (The author actually points the policy implications in the direction of antitrust and reduced private sector expansion, but I'm left wondering what the public premiums are comparable in the ceteris paribus cases.)

Moral Hazard: Birthday Edition

From CNN:

But during a visit to her parents' house, Darling received news that sent her into a panic. A neighbor, who also worked at Archway, told them the plant was closing and their health insurance was ending two days later.

"I flipped out," Darling said. "It was five minutes after she told me, I was on the phone with the doctor," Darling said. "I told her, 'I need to be induced.'"

A few hours later, Darling was in the hospital. The next day, she had to have an emergency C-section.

A silver lining in the recession may be a reduced political demand for subsidizing employer provided health care.

Eye of the Beholder

I see this story in the NYT as another reason not to have state-sponsored health care. I suppose others may see it as a reason to have state sponsored health care, depending on their view of immigration:

Dr. Bernhard Moeller moved to Australia with his wife and three children nearly three years ago when he was hired to work as a specialist at a rural hospital in the southern state of Victoria.

The family decided to apply for permanent residency, but were appalled when their application was rejected this month because Dr. Moeller’s 13-year-old son, Lukas, has Down syndrome.

Australia has a longstanding policy of weighing medical conditions in its residency decisions. Any applicant deemed to have a condition that would incur significant costs to the state-run health care system must be rejected under Australia’s immigration laws.

Ahhh, the compassionate system we get to look forward to in the U.S.

Hat Tip: Philippe Legrain

Anecdotal Evidence That at Least One of My Theories is Right

Health care correlations I wish to explain:

1. There is a positive relationship between health care (access & outcomes) and income in the U.S., Canada, and Britain.
   
2. In Canada, income appears to be more important than in the U.S., and the best evidence suggests it is an absolute (not relative) effect. In Britain, income effects in children are statistically insignificant from 0-4, but become significant afterward and increase with age.
   
3. Health care expenditures do not seem to have much of a relationship with outcomes.
   

#3 seems to contradict #1 & #2, so what could be going on? It makes sense, for the most part to have a income effect in the U.S., but why does it exist in England and appear larger in Canada?

I have hinted on this blog before, that I suspect that the reason the Canadian and English Health Care Systems have an income effect is due to capitalization in the housing market. Everything I could tell about these two health care systems seems to ration their services geographically, just like the U.S. does with its public school system. Therefore, people who care about access to the better hospitals will bid up the price of housing in those areas. This creates the appearance of an income effect without the expenditure effect. Now, this story appears in the U.K. Telegraph:

New figures seen by the Daily Telegraph illustrate for the first time how Government changes in the way the NHS is run have fundamentally altered the way care is provided.

Data from Dr Foster, an independent health care information company, published today (MON) reveals that more than a third of the NHS hospital trusts in England suffered a fall in the number of routine operations they performed last year.

Many hospitals have witnessed a sharp fall in income as a result of health care reforms, including the introduction of a Payment by Results system.

Patients are now able to choose where they are treated, with many snubbing the traditional visit to their local hospital and opting for units with the best treatment records, facilities and, crucially, cleanliness and infection control.

GPs can also choose where to send their patients. Crucially, hospitals no longer receive a guaranteed block grant and are paid according to the number of patients they treat.

Bold emphasis added by me.

Short-sighted alcohol tax effects

CNN reports on a new study [pdf] in the American Journal of Public Health that notes that higher alcohol prices via taxes leads to the saving of lives. That spin of the results makes all of the difference-- the researchers correctly note that the increase in alcohol taxes leads to "immediate and sustained reductions alcohol-related disease mortality." [emphasis added] The real issue here is that taxation causes substitution away from the taxed good (beer, wine and spirits) and for the answer that everyone cares about-- what's the overall effect on mortality-- to become apparent, we'd need to look at the spillover effects of this tax into related activities. Are all of the high-value drinkers substituting into lower quality alcohol? Maybe they're drinking less and eating more potato chips on the couch watching football. The direct effect is clear, but the truth comes in looking at the secondary outcomes. The authors don't extend their research beyond alcohol, nor beyond drect alcohol related deaths by disease (i.e. drunk driving), so they aren't trying to overstep their bounds. CNN gave it a bit too much range, however.

For what it's worth, Figure 2 doesn't provide a compelling story. Personally, if I don't see it in the simplest of terms, I'm not going to buy any level of statistical fudgery. And at first glance, under the right circumstances, an increased propensity for alcohol-related death over the second span could generate the downward dichotomy at 1983 that the authors attribute to the tax shock. Also, the variance of the error terms doesn't seem to be constant across the span either. And are they drawing the last line in the thrid section with 8 data points over 2 years?

Again, I believe the paper doesn't try to say too much, but the policy implications of papers like this can't be underestimated if they get into the wrong, MADD-inspired hands.