Sunday, June 18, 2006


Yes, I'm still reading Crisis of Abundance, Arnold Kling's smart little book on health care economics. I should be posting more, and I apologize to the (almost certainly hypothetical) readers that have been eagerly awaiting my next post. Today - chapters 3 and 4


Health care economics are all about deciding how best to spend the limited pool of dollars available. This may seem obvious when you think about it, but many people probably don't. It's easy if you look at in extreme terms. For example, lets assume we have a billion dollars to spend. What if we could use it to save one life through an incredibly expensive but 100% effective medical treatment? What if that person was already 80 years old? What if we could instead spend the money ensuring sanitary drinking water for an entire developing country, saving thousands of lives that would otherwise be lost through cholera or dysentery? From this viewpoint, you'd almost certainly decide to let the one guy die and save the thousands.

In real life the decisions are a lot closer, and sometimes the answers aren't at all clear. These are the problems Dr. Kling engages in chapter 3 of Crisis of Abundance. He makes five "key points" at the start of this brief chapter and fills them in.

What I get out of the chapter:

  • A lot of health care spending isn't clearly necessary or unnecessary; it instead falls into a gray area.
  • In a perfect world, we could look at a given medical procedure and measure the probability it will help, and value of the benefit if it does work, against the cost of the treatment. In the real world, we can only know the costs for sure; few treatments are 100% effective, and the value of the benefit of the treatment, even if it were 100% effective, is often at best a rough guess.
All of this is complicated by the availability of different diagnostic procedures and treatments with different possibilities of success. The "best" diagnostic tool might be only 10% more effective than the next best, but it may cost 3 times as much. It's not so important if it's a difference between a $10 procedure and a $30 procedure, especially for a serious ailment, but it can make a big difference when you have a $5000 procedure.

Given these difficulties, it's not surprising that different doctors and patients come to different conclusions. Even for Medicare, which is fully paid for out of taxes, the results vary widely by regions. One statistic jumps out of chapter 3"

The proportion of patients seeing 10 or more physicians in the last six months of life ranges from a low of 17 percent to a high of 58 percent."
I don't think it means we have widespread random malpractice in the treatment of dying patients. It does mean that a lot of capable doctors and concerned patients are groping in the dark for answers.


What, then, should a health care system look like? Chapter four begins to look at this. No system can be perfect. He starts the chapter as follows (highlights are mine):

Any health care system must reflect a compromise of preferences. We cannot have a health care that is both accessible and affordable while insulating consumers from the cost.
It's a point that should be obvious to grown ups, but is often lost in the health care debates. You can can't have whatever you want whenever you want it for free. So we have to sacrifice some combination of accessibility, affordability, or cost. Which go over the side?

accessibility. In a world where we ditch accessibility, says Dr. Kling,

The solution would be to have government set a budget that limits the supply of health care services. Bureaucrats would set health care priorities. Inevitably, some consumers would be denied treatments that they seek.
Affordability. Maybe we could decide we want the best heath care possible, screw the cost. Is that a good idea? At some point it seems you run out of money.

Insulation. Here Dr. Kling hits an area that is one of my pet ideas: if "somebody else" is buying, you'll spend more. The lottery winner just walked in and is buying drinks for the house? You put down your bar scotch and order the Glenlivet.

The conclusion? Dr. Kling puts says that "insulation" goes over the side:

For an economist, it makes sense to sacrifice the principle of insulation to promote unfettered access and affordability. The principle of access unfettered by bureaucratic intrusion is consistent with consumer choice, free trade, and other concepts that economists hold dear. The principle of affordability also has an obvious economic appeal. However, the principle of insulation has little or no economic justification. In fact, I think that the task for economists, and for Chapter 5 of this book, is to explain the high cost and dubious benefits of catering to the principle of insulation.

So on to chapter 5 in the next post.

Previous Crisis of Abundance posts (6!):

Expat comments on Crisis of Abundance Posts.
Premium medicine in action
C of A: "Three Health Care Narratives"
Crisis of Abundance: "Premium Medicine"
May 20, 2006
May 16, 2006

Friday, June 09, 2006

Hit me harder

"Civic leaders" are pushing an additional 1 cent sales tax for Polk, Dallas and Warren counties, according to the Des Moines Register:

Shoppers in Polk, Dallas and Warren counties would pay an extra penny per dollar on most things they buy as part of a plan by civic leaders to build more recreation trails and boost metro-area cultural attractions.

Supporters say a sales-tax increase to 7 percent would also give communities a new source of money to pay for law enforcement, libraries, street repairs and other services. That, they say, would result in lower property taxes.

Counties and cities have been asked to outline in writing how they would spend the money.

They'll need to convince folks that they are spending the money they have already wisely. I wonder if these folks will help with the campaign:

Ramona Cunningham and Senator Harkin at the dedication of CIETC Tom Harkin Learning Center.

Former CIETC Director, current Des Moines city councilman and self-proclaimed "rubber stamp" Tom Vlassis

Former CIETC Chairman and Des Moines City Council Member Archie Brooks

Monday, June 05, 2006

Legislators attempt to muster a Kelo-veto override session

Can the legislature reverse the veto of the eminent domain reform bill? It looks like they're going to try:

Republicans in the state legislature want to attempt to over-ride Democrat Governor Tom Vilsack's veto of a bill that would have limited city and county powers to seize private property for economic development projects.

House Speaker Christopher Rants, a Republican from Sioux City, is sending certified letters to all 100 members of the House, asking for their signature in support of such a move. "We understand that private property rights are one of the bedrock principles involved in the founding of this country," Rants says.

But while a big majority of the legislature's Democrats voted for the bill, they may not have the spine to stand up to their lame-duck leader:

But the effort is likely to fall short because Democratic leaders in the legislature say while a special session is "inevitable," they want to sit down and craft a new bill addressing some of the governor's concerns.

A primary victory tomorrow for Ed Fallon, a vocal supporter of the bill, would stiffen many a mushy spine. With no race for governor in the Republican primary, maybe some GOP property-rights fans will cross over for the day.

Sunday, June 04, 2006

Expat comments on Crisis of Abundance Posts

I have finished chapters 3 and 4 of "Crisis of Abundance"; I will be preparing a post soon. Meanwhile, I will share comments from a reader who has experience with both the U.S. and U.K. health care systems and who has perceptive observations, which I am sharing with her permission. My reader is an old friend from college days who moved sometime ago to rural Scotland, and who renewed contact with me via stumbling on my work blog. The internet is a great thing. Her comments:

The topic of health care really gives food for thought. The US healthcare system is probably the one largest reason I will not be returning to the US to live. Not out of protest, but because I know how hard it will be to get insurance. We’re all still healthy, but the premiums, even for healthy people are crippling.

When I lived in Iowa City and was working at a small law firm, they couldn’t offer my health insurance. There were just two lawyers and the business couldn’t handle the burden. I had to get private health insurance for myself and the two boys. When I looked into it, I discovered that the premium each month for one adult and two healthy boys was larger than the rent on my house. I tried with higher deductibles, but the bottom line was, I couldn’t afford it. I was just an office worker and a single mother. With no child support coming from their father, it was all I could do to keep the rent paid, utilities, car insurance, food and clothing. There were times when the phone was off because the cash just wouldn’t stretch. I could have packed in the job. Then I would have had help with rent and state medical cover but that wasn’t my style. The point is, I am sure there are more working poor who are in the same boat. People who need to work but whose employers are small businesspeople.

Granted, I am not as dirt poor as I was 15 years ago but from what I gather, the situation isn’t improving. I’m just looking for some sort of solution in Crisis of Abundance. Yes, it’s terrible that doctors won’t just treat illnesses. They feel they must refer up the ladder either because they are afraid of being sued OR they know that they will make more money by referring to a more expensive specialist. Are specialists getting annoyed by all these referrals or do they just line up the patients and watch the cash roll in?

Over here in the UK, the GP (general practitioner) or family doctor is the work horse of the National Health Service – NHS. They see the bulk of the pathology that comes in to the NHS. They will treat the problem then and there to the best of their ability. They have diabetic and asthma clinics a couple times a week to care for the patients with chronic and specific problems. At these clinics, practice nurses will be aiding in the bulk of the work. If there is a patient who requires more treatment than is provided by the local GP run health centre, either because the problem has gone beyond their capability OR the health problem has become more acute it is then that the patient is referred on to the hospital where the specialists practice their arts.

In my job as a pharmaceutical salesperson, I speak to GPs every day. I also speak to the hospital specialists. I know that most GPs will prefer to treat at the primary level. Specialists hate to get spurious referrals they feel it wastes their time when they get a patient through there door, referred from GP who really should have treated the patient himself. But for the most part, everybody gets taken care of. From my perspective as a former US resident, I think the system is brilliant. Naturally there are holes and problems as with all human run systems. Slick US style diagnostics are kept for the large teaching hospitals and centres in large cities. Shame for us folk out in the sticks but we’ll get to see them if our conditions warrant shipping us in to town.

I am reading your current thread with great interest and hope that in the end you will be throwing a ray of hope on the situation. If I ever move back to the US, I don’t want to be panicked about health care.

My correspondent notes a U.K. medical culture that seems to disfavor U.S.-style "premium care. I believe Mr. Kling would say it's just such cultural differences that make it impossible to transplant Britain's NHS over here. In a recent post on his blog, though, he suggests that it would be good for one state to try a single-payer system as a laboratory test of how single-payer might work in the U.S. medical culture:

Right now, single-payer represents a "grass is greener" model, where advocates are free to tell us how wonderful everything is in Canada, the UK, France, or wherever. I want to see a state in the United States implement it, with our culture and our technology. Then we can talk about how the system really works, instead of people's fantasies about how it works.

Any takers?

Previous Crisis of Abundance posts:

Premium medicine in action
C of A: "Three Health Care Narratives"
Crisis of Abundance: "Premium Medicine"

May 20, 2006
May 16, 2006

Friday, June 02, 2006

Archie Brooks still has a friend

He has trouble remembering whether he's dated the executive director of the agency whose board he chaired and whose salary he set, or how often, and for how long. He turned off the city emergency radio tower during the catastrophic 1993 floods in a petulant fit. He can't remember writing memos trying to stifle the CIETC whistleblowers.

Through it all, Des Moines city councilman Archie Brooks still has kept one friend: Governor Vilsack, who will veto the new emininent domain restrictions passed overwhelmingly (Senate 43-6 and the Iowa House 89-5) by the Iowa legislature. And Archie will be cool with that, given his past:

City Councilman Archie Brooks said he will propose action within the next month to move forward with eminent domain proceedings.

He said the $450,000 offer is far more than what the city will give Hamilton. The properties are valued at $206,000, up almost $70,000 since 2001, according to county records.

"We're not asking him to do anything else than what others have already done," Brooks said. "We're not going to let this die. We've got people standing in line to buy those buildings over there."

Yes, we can't take away the right of responsible guys like Archie to sieze property from the unworthy in favor of the worthy. How can we possibly have economic development without superior intellects like Archie directing the process? And it fits perfectly with the Vilsack (and Blouin) economic development philosophy of taxing existing businesses to lure and subsidize their competitors.

More here.