Relevant and even prescient commentary on news, politics and the economy.

ACA, AEI, Forbes, and poor analytic skills

So, someone sent me this article, and as I am basically finished writing this grant (especially as it is delayed now anyway), I decided to read it.

http://www.forbes.com/sites/theapothecary/2013/09/23/its-official-obamacare-will-increase-health-spending-by-7450-for-a-typical-family-of-four/

“$621 billion is a pretty eye-glazing number. Most readers will find it easier to think about how this number translates to a typical American family—the very family candidate Obama promised would see $2,500 in annual savings as far as the eye could see. So I have taken the latest year-by-year projections, divided by the projected U.S. population to determine the added amount per person and multiplied the result by 4.”

I’m going to start here, because really, anything after this is just garbage. This is so simplistic, and makes such outrageous assumptions, that you really don’t even need to read further. What you need to know is that this is a ridiculous article written by someone from AEI. For starters, this “analysis” is a joke. He takes the entire population, divides it by four and then looks at cost increases. This would never be acceptable in an undergraduate classroom let alone a peer reviewed journal. It’s a joke. There is no age stratification, stratification by payer status (ignoring of course that 30% of the population is already under some sort of government insurance), ignoring the large differences in population (do we really think that children comprise 50% of the population?, it’s actually 23.7%)….it’s such a joke that you cannot even possibly take this seriously. The reasons are many. By also not stratifying by marital status, this analysis is a joke. IF 50% of the population was children, we were ALL married, and we were ALL purchasing insurance, sure…..but those assumptions are so ridiculous, that this article is well…..ridiculous. If this is what passes for scholarship at AEI, then they deserve all the ridicule that they well get for this. I can’t believe that Forbes actually published this. Then again, after the past 2 weeks, I should be able to believe anything I guess.

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Terrorism and the Debt Ceiling…

No, not what you might think.

I think that the entire discussion about the debt ceiling is simply comical, akin to building a house, customizing it, but then refusing to pay the contractor.

But something else struck me today. Now, I am a health services researcher and health policy wonk, but when President Obama said they would not ransom the budget today, it got me thinking about ransoms, and what that terminology means.

I think I understand the GOP goals now. It’s an end game of Financial terrorism. McConnell and those that are doing this are committing an act of financial terrorism.

I know, I know, that’s rather strong language, so let me explain my reasoning:

Terrorism is a weapon used by people who understand that they will lose a real power struggle and therefore is derived from a position of weakness. They do not have the actual resources to wage a real battle.

Most people think of terrorism as a form of violence, using guns, weapons, or bombs. But this sort of thinking is myopic in it’s limited scope. Terrorism I would expand to include any use of power by a group to frighten, expose, or scare another group into a different action, with the secondary goal of achieving political goals.

Terrorists often gauge success of their actions based on media coverage of their propaganda and of the fear mongering through psychological warfare that results in panic.

When President Obama said that he would not negotiate on this issue, and that he would not bend towards this ransoming of the good faith and credit of the US, he really cannot. The US government already has a policy of not negotiating with terrorists whether they be foreign, OR domestic.

So let’s be honest and call this what it is…….financial terrorism.

When 

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Hospital Consolidation and ACO’s

Jason Shafrin over at the Healthcare Economist points to this recent paper over at the RWJF. Interestingly the authors find that hospital consolidation increases prices and could decrease quality. Something that many of us have considered in the past.

In concentrated markets, the effects were even more pronounced with price increases over 20% noted.

Competition was noted to increase quality under an “administered” pricing system, ala the NHS in the UK. The evidence for competition increasing quality in a market system was much more mixed.

I have thought this for some time, and have even wrote about the concepts of leverage in the past. For example, I have cited a BNET article before. When one examines the the health markets in Milwaukee and Chicago, which are both midwestern cities, and geographically close to each other, one finds higher prices in Milwaukee, with providers not accepting less than 200% of Medicare. Which does not seem intuitive, as there is far more market competition in the health insurance industry there. In Chicago, one insurer, BC-BS, is rather dominant and prices are lower, with providers accepting 112% of Medicare on average. It would seem to make sense that increasing the leverage of the hospitals and providers through the mechanism of consolidation will increase prices. The same thing happens in Milwaukee, which has no dominant insurer, and therefore is unable to exert leverage over the hospital systems in Milwaukee.

The ACO models as proscribed by the ACA will increase consolidation. By developing an accountable model of care delivery, providers will attempt to consolidate to increase quality and minimize risk exposure in the sense of decreasing reimbursements.

The problem with the RWJF paper, as it rightly notes, is that the study does not really examine integrated health care systems. When you look at consolidation with true vertical and horizontal integration, it is my belief that quality improves even in the absence of competition. True integration in the case of Mayo Clinic and Kaiser also lowers prices.

In essence, I don’t think the problem is consolidation…..I think the problem is consolidation in the absence of integration.

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Do Successful Business people make good Presidents?

WARNING****** Not health care related

Romney has continually flouted his business experience, and how this will lead him to be a better President than Obama. That got me thinking….We’ve had to have businessmen become Presidents before, right? So what’s been our track record? How have they done? Surely, they’ve been successful Presidents too, right?
Well, not so much. Businessmen make good businessmen. Historically, they have not done well as President’s. We’ve had five President’s with significant business experience that were successful since 1900. Carter, Bush I, Bush II, Harding, and Hoover. Yep…..Those five.

As is mentioned in the Bloomberg article…..CEO’s are generally surrounded with like minded goal oriented people all working together to achieve a goal or vision…..

That doesn’t exist in politics, when you have to listen to multiple opinions and take abuse that a CEO would never tolerate. The country is not a business……let’s say it again…the country is not a business.

From the first article:

None of the great or near-great presidents—Teddy Roosevelt, Franklin Roosevelt, Harry Truman, or Woodrow Wilson—was a businessman. Truman was a failed businessman (a haberdasher) before entering politics, but that hardly constitutes a ringing endorsement of Romney’s claim for private sector ascendency.

For that matter, none of the better-than-average presidents was a businessman either. In this category think of Presidents John F. Kennedy, Dwight Eisenhower, Ronald Reagan, Lyndon Johnson, and Bill Clinton.

Probably the most successful president with real business experience (and success) was George H.W. Bush. Before going into politics he founded Zapata Petroleum, which ultimately became Pennzoil. Bush 41 ended up a one-term president unable to kick-start an economy in a recession and seemingly out of touch with the problems of the common man. Sound familiar?

It gets worse from here. Jimmy Carter, another one-term president beset with economic woes, was a success in agribusiness (peanut farming) before getting into politics. He generally falls into the lower half of the historians’ rankings.

And then we get the big three—the men widely considered by historians to be the worst presidents of the modern era: Warren G. Harding, Herbert Hoover, and George W. Bush. One left the country on the verge of a depression, one left the country in a depression, and one presided over such corruption and ineptitude that despite the failings of the other two he still manages to get the lowest ranking of them all. And yet all three made millions of dollars in the private sector before entering politics. All three were successful businessmen (a newspaper publisher, a mining tycoon, and the owner of a professional baseball team). Bush 43 even went to Harvard business school, like Romney, and like Romney promised to bring business principles to the Oval Office.

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Endogenous Economic Growth and Health

Repeat after me:

H_(t+1)=E(H_t )+[G(B-φ(K))] × s_H Y

This follows the work of Mokyr (1993) and is the final construct of Bishai and Kung. 
Basically, H_t is the current health stock of the population, E is a decreasing function of health stock as an environmental contagion, G is the quality of health production technology, B is the best available health technology in the area, and φ represents the gap between the best health technology and the actual health technology and is a decreasing function of capital. 
What does this mean? Why should anyone care? 
Simple…..
Any economy is dependent on the equation Y = f(K,L,H) with Y representing GDP, K equaling capital, L-labor, and H-health of the labor force.
What it means for the average reader? Well, investment in healthcare improvement by the government creates a positive feedback cycle where better health= better economic performance, which then becomes:
more health = more income= more health, etc. 
Certainly there are also exogenous factors as demonstrated by the Preston Curve, and McKeown has documented these well, although not without criticism. But that is the subject of an entirely different post. 

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Opposition to the Mandate

So, one thing has continually troubled me throughout the health care debate, and this is the consistent polling showing opposition to the individual mandate. It’s taken me a while, but I think that I have finally figured this out.

THIS article reviewing data from the AFLAC Workforces Report shows that we are doing a terrible job in educating our public on health concerns.

six out of ten workers (62 percent) think it’s not very or not at all likely they or a family member will be diagnosed with a serious illness like cancer, and more than half (55 percent) said they were not very or not at all likely to be diagnosed with a chronic illness, such as heart disease or diabetes.

 But of course, this is not reality. This fundamental disconnect as the article notes, is more than simply problematic..

Americans may be overly optimistic when it comes to thinking they won’t ever be diagnosed with a serious illness or experience an accident. According to the American Cancer Society, Cancer Facts & Figures 2012, one in three women and one in two men will be diagnosed with cancer at some point in their lives, and the National Safety Council, Injury Facts 2011 edition, says that more than 38.9 million medically consulted injuries occur in a year. The American Heart Association, Heart Disease & Stroke Statistics 2012, show that one in six deaths in the U.S. was caused by coronary heart disease. “The fact that American workers aren’t aware of their medical risks and the potential financial impact of those risks is a very real concern that is only compounded when workers don’t take full advantage of available benefits options or adjust their savings strategies to be more prepared,” said Audrey Boone Tillman, executive vice president of Corporate Services at Aflac. “Now, more than ever, people need to understand that well-being means more than just good health—it’s being prepared for the reality of whatever life may bring and taking the necessary measures to protect themselves and their families.”

I think that this explains this. Certainly some people are fundamentally opposed to government mandates of any sort, but they would hardly constitute a plurality, let alone a majority, but pure ignorance, or a magical suspension of disbelief I think explains it. I cannot think of any other explanation.

Having watched several relatives go through illness that resulted in death, and having a chronic condition myself, I simply cannot help but wonder how people have reached this conclusion. The simple fact that they don’t understand this is likely more troublesome than a rejection of the mandate itself.

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