More Hope for American Health Care

Previously I noted that globalization may the catalyst that brings real reform to U.S. health care. According to an article in the City Journal, another glimmer of hope may be found in "health care's new entrepreneurs":

For seriously ill patients, American health care is second to none. Our commitment to innovation is unmatched; our researchers have won more Nobel Prizes for medicine than all other countries’ combined; our biotech and pharmaceutical industries, thanks partly to lavish federal funding for basic science research, are the envy of the developed world. So lopsided is the field that thousands of European scientists have relocated to companies in the U.S., where they have a better chance of transforming cutting-edge research into lifesaving new medicines.

But American health care is also much more confusing, impersonal, and expensive than it needs to be. Conflicting opinions from doctors and insurers often strand patients with complex diseases in a medical maze. Many primary-care physicians, frustrated with red tape and puny reimbursements, limit the number of Medicare and Medicaid patients whom they see, or they drop out of the profession altogether. Adding insult to injury, employers and employees face seemingly endless cost increases, with health-insurance premiums rising much faster than inflation or income.

Thankfully, entrepreneurs are finding ways to bring innovative, consumer-oriented health care to market—simplifying medical decisions, reinvigorating primary care, and lowering health-care costs. From health insurance to DNA-driven medicine, American health care is experiencing a revolution from below that promises to improve quality, lower costs, and empower people to control their own health care.

Read the rest of the article here.

A Real Catalyst for Reforming Health Care

The Economist magazine has a great article that details how the opening of U.S. health care to trade is improving it. Bringing foreign competition to this bloated sector of the U.S. economy may be just the catalyst needed to spur real reform in the U.S. health care industry. This may be globalization's big moment.

Here is the article.

Interesting Discussions on U.S. Health Care

Earlier this year I read Overtreated by Shannon Brownlee and Healthy Competition by Michael Tanner and Michael Cannon. I was therefore, pleasantly surprised to come across and listen to two online discussions on U.S. health care that touched on some of same issues. First, Inside-Out Documentaries did an interesting piece on the shortage of primary care physicians called "The Doctor Can't See You Now." Second, Arnold Kling discusses his book, The Crisis of Abundance, in this podcast and includes interesting responses from Jason Furman and Sebastian Mallaby. Both are well worth your time.

Update: Here is Arnold Kling discussing his health care research with Russ Roberts on EconTalk. Also on EconTalk discussing health care policy is Henry Aaron of the Brookings Institution.

More on the Health Benefits of Recessions

I previously posted on Christopher Ruhm's research that shows recessions can improve one's health. Ruhm recently did an interview with the Richmond Federal Reserve Bank where he discussed his work in this area. Below are some excerpts:

RF: One of your articles is provocatively titled, "Are Recessions Good for Your Health?" Discuss the relationships you've discovered between economic growth and health.

Ruhm: Many years ago I did quite a lot of work examining the consequences of job turnover and labor displacement. One of the things you would read a lot about at the time was that when the economy stagnates, lots of bad things would happen. Wages don't go up and housing values fall. Then you'd also see other things reported such as how more marriages break up, crime increases, and health deteriorates. That seemed plausible, so I read a bunch of studies that had been done and realized they weren't using state-of-the-art methods. They were written by epidemiologists and social psychologists but did seem to include plausible mechanisms: When the economy goes bad, for instance, people get stressed out and stress is bad for your health. In addition, stress leads to people drinking more and smoking more and they engage in all this risky behavior as a consequence. I doubted the specific estimates, but not the overall direction of the effect. I wanted to come up with a better way to confirm the results and ended up finding something different.

In these early studies by others, there was a tendency to look at long time-series of aggregate data. They'd look at the United States or Britain from the 1930s to the 1970s and look to see, when the economy gets better, whether the health measures — hospital admissions or mortality rates — were improving or deteriorating. The studies tended to find that when the economy improved, health seemed to get better. But lots of things were going on at once during that period. For example, at roughly the same time the Great Depression ended, there were improvements in nutrition and in the availability of antibiotics.

So I looked at each state in the United States as a laboratory. I studied changes within states relative to what was going on in other states. The advantage to this method is that if there was a change in, say, medical technology, it is likely to affect workers in all states. But the Virginia economy might be improving at the same time the Texas economy is worsening. You can use the fact that there was independent variation in macroeconomic conditions across states to estimate the effects on health.

My first analysis of mortality rates was not at all what I expected. When times were good, mortality rates were increasing and when times were bad they were decreasing. When I first got the results, I didn't particularly believe them. I expanded the analysis in a variety of ways to see if the results would change, but they didn't.

What ultimately convinced me of the result is [that] I made a picture that overlaid the national mortality rates and unemployment rates — after de-trending them and normalizing them so the scales matched — and when I did all that, I found they were almost a mirror image. It was at that point I really believed my results.

[...]

The reasons for mortality increasing when the economy strengthens vary by cause of death. If you look at motor vehicle fatalities, they go up pretty dramatically when the economy improves. That's not so surprising. People drive more when times are good. But it's also true that deaths from heart disease or flu and pneumonia go up when the economy improves and down when the economy deteriorates. Across a wide variety of health measures I was finding the same result.

There were a couple of exceptions. Cancer was unrelated to economic trends. Since we were looking at relatively short-term changes, it's no surprise that we would see this result. Whereas, for something like heart attacks, we do notice that short-term macroeconomic changes can have a big effect.

Another exception was suicides. They went down when the economy improved, and up when it deteriorated. That's consistent with a long line of work on suicides. That also suggests to me, since suicide has a mental health component, it might be the case that economic patterns I had identified mainly refer to physical health measures. That led me to conclude that when the economy tanks, people are healthier but they may not necessarily be happier.

RF: What sorts of mechanisms do you think drive the health trends you studied?

Ruhm: In my research, I also look at behaviors, like drinking, smoking, and exercise. All of these trends exhibit a consistent pattern. When the economy weakens, people smoke less, they are less likely to drink heavily, and they tend to exercise more.

If you look at drinking, you notice that heavy drinkers become light drinkers when the economy deteriorates. Yet light drinkers don't abstain from drinking. For smoking, you see the same result. People also shift from being sedentary to being somewhat active, but not very active. We also don't see a big change in the number of people who are overweight, but we do see a reduction in severe obesity.

Holiday Reading

Following the recommendations of David Leonhardt and Arnold Kling, I read Shannon Brownlee's book "Overtreated" over the holidays. It was a fascinating read about (1) how there is a large amount of unnecessary health care and spending on it in the USA and (2) how this unnecessary care actually does more harm than good. I learned a lot reading this book, but probably the most fascinating thing I found is how much of medicine is an art and not a science. Many doctors simply fail to keep up with the literature in their field and even when they do, the literature is often inconclusive or not scientifically robust. Next time a doctor recommends an invasive procedure for me I will be sure to quiz him/her on the literature.

The broader point of "Overtreated"should not be too surprising, though, given that 86 cents of every dollar expended on health care comes from a third party--there is very little incentive to be conscious of costs by both consumer and providers when someone else is footing the bill. Michael Cannon and Michael Tanner also make the case in their book "Healthy Competition" that since Medicare accounts for 1/2 of the all health care expenditures and influences choices made by private insurers, there are going to be distortions in the health care industry.