Thought du Jour

The author of this op-ed column is donating one of his kidneys to a person he has never met.

Most people think this sounds like an over-the-top personal sacrifice. But the procedure is safe and relatively painless. I will spend three days in the hospital and return to work within a month. …. My remaining kidney will grow to take up the slack of the one that has been removed, so I’ll be able do everything I can do now. And I’ll have given someone, on average, 10 more years of life, years free of the painful and debilitating burden of dialysis. ….

The people waiting for kidneys aren’t dying because of kidney failure; they’re dying because of our failure — without Congress’s misguided effort to ban organ sales, they would have been able to get the kidneys they desperately needed. ….

There’s no reason that paying for a kidney should be seen as predatory. Last week, the Ninth Circuit Court of Appeals issued a ruling legalizing compensation for bone marrow donors; we already allow paid plasma, sperm and egg donation, as well as payment for surrogate mothers. Contrary to early fears that paid surrogacy would exploit young, poor minority women, most surrogate mothers are married, middle class and white; the evidence suggests that, far from trying to “cash in,” they take pride in performing a service that brings others great happiness. And we regularly pay people to take socially beneficial but physically dangerous jobs — soldiers, police officers and firefighters all earn a living serving society while risking their lives — without worrying that they are taken advantage of. Compensated kidney donors should be no different.

Alexander Berger, “Why Selling Kidneys Should Be Legal“, International Herald Tribune, 6 December 2011.

HT: Alex Tabarrok

The folks at The Incidental Economist have a new podcast, named “Rational Arguments“. Like their blog, the podcast will focus on health economics. You can subscribe to the podcast in various formats, including iTunes.

I like podcasts, especially those that are short and well-focused. This inaugural podcast is only 20 minutes, so I will listen to it tomorrow during my morning commute.

University of Arizona sociologist Lane Kenworthy plots trends in life expectancy and trends in health spending for 20 wealthy OECD countries from 1970 to 2008. The chart shows clearly that the US was not always an outlier; it began to break away from the pack only in the mid-1970s. (Click on the chart for a clearer view.)

In every one of these countries rising health spending initially is associated with large increases in life expectancy, up to expenditures of about $500 per person and life expectancy of around 74 or 75 years. After that, the trendlines remain positively sloped but the payoff per dollar of extra spending diminishes somewhat. In nineteen of the twenty countries the slope settles at 2 or 3 years of added life expectancy for each additional $1,000-per-person of health expenditures. The U.S. is a stark exception. Our gain slows to just 0.75 years for each additional $1,000 per person. ….

What we need to be wary of is life expectancy depressors that may have increased more or decreased less in the U.S. than in the other countries. Are there any? Not smoking: our rate of decline is in the middle of the pack. Not homicide: it’s decreased more here than elsewhere. …. One possibility, though, is obesity. Not only is it more prevalent here; it’s also increased more.

Lane Kenworthy, “America’s inefficient health-care system: another look“, Consider the Evidence, 10 July 2011.

Health expenditures in the chart are for the years 1965-2003, whereas life expectancy data are for 1970-2008. (Health expenditure is lagged five years, for reasons that are not clear to me.) Kenworthy notes that life expectancy is a very crude indicator of the outcome of health care expenditure; other factors impact on life expectancy, including life style, diet and obesity. Nonetheless, the pattern for the US is very different from that of the other 19 countries. Even though the US spends much, much more than other countries on health care, it is the only country in this group without universal health care.

HT Mark Thoma.

Organ transplantation has improved markedly, thanks to better immunosuppressive drugs. Three Korean scholars examine the historical record and forecast future survival rates for transplanted kidneys (living and deceased donors), livers (living and deceased donors), hearts and lungs. Here is the abstract of their study. The full paper can be downloaded from the link below.

A miracle in medical procedure, organ transplantation, has taken place in recent decades due to the diffusion of a new technology. The new technology refers to a family of the so-called immunosuppressive drugs. As a result, survival rates of major organ transplants have risen to a record-level of 80 to 90%.

This paper has four objectives. First, the speed of new technology diffusion is measured from the historical penetration ratio for the major immunosuppressive drugs. It took, on average, 6 to 8 years for new drugs to gain the 50% penetration ratio. Second, historical improvement patterns of survival rates for major organ transplants are analyzed by the use of both classical and kinked experience curves. The results indicate that kinked experience equations generated much steeper slopes. Third, the relationship between the increased penetration ratios of new drugs to the improved survival rates of organ transplants is analyzed. Overall, rapid diffusion of new drugs appears to have caused faster improvement of the survival rates. Finally, we forecast the future improvement of survival rates through 2030 by the use of kinked experience equations. Our forecast shows that nearly every type of transplant will reach 90% or higher survival rates by 2020.

Yu-Sang Chang, Jinsoo Lee and Yun-Seok Jung, “The Speed and Impact of a New Technology Diffusion in Organ Transplantation: A Case Study Approach“, KDI School of Public Policy & Management, Working Paper 11-04, April 2011.

The abstract refers to one-year survival rates of grafts. Five-year survival rates are lower, but are also improving. The first successful transplant was in 1954, when a kidney was transplanted in Boston from a healthy male to his identical twin. Few transplants are to (and from) identical twins, so initially the procedure was thwarted by reaction of the immune system. A breakthrough came in 1962 when a new immunosuppressive drug – azathioprine – allowed one-year survival rates for kidneys to reach around 50%. In 1983, cyclosporine, another breakthrough drug, pushed survival rates higher, and there has been continual progress, with new drugs and procedures, ever since.

In medical care, the US is an outlier, spending far more than any other country in the world, both per capita and as a percentage of GDP. Cost-cutting thus should be an important part of any reform of the system. Indeed, during the 2009-2010 debate on President Obama’s Patient Protection and Affordable Care Act (ACA), secretary of Health and Human Services Kathleen Sebelius asserted that “every cost-cutting idea that every health economist has brought to the table is in this bill”. Political scientist Jonathan Oberlander concedes that the ACA contains numerous provisions for cost-containment, but predicts that they are not likely to have much effect on costs. Americans, he writes, are “determined to try all available cost-control options — except those that actually succeed elsewhere”.

The enthusiasm for the cost-containment provisions in health reform is striking precisely because so many of those provisions are tepid. Put simply, the Affordable Care Act lacks systemwide, reliable cost control. ….

[A] major cost-control instrument [in the ACA] is the 40 percent marginal tax that will be imposed on high-cost insurance plans …. That other nations spend much less than the United States on health care despite having comprehensive benefits and, in some cases, no cost sharing has so far not disturbed the view that moral hazard is the root of our high costs. Tax health insurance, advocates believe, and insurers and employers will trim overly generous benefits, patients will consume less medical care, and national health spending will slow. ….

The final piece of the ACA’s cost-control strategy is delivery system reform. ….

[M]any American policy analysts continue to lament fee-for-service payment and argue for the “necessity” of switching to a “fee-for-value” system if costs are to be controlled — never mind that other nations that pay doctors fee-for-service, including Canada, control costs much better than we do. The American debate has lost sight of a crucial fact: it is not just about how you pay for medical care, but how much you pay for services. Rather than emulating policies that actually work to constrain spending abroad (e.g., global budgets, fee schedules) the United States seems intent on reinventing and reorganizing its way out of the cost crisis. ….

Proponents of the ACA have attempted to turn the absence of reliable cost control into a strength. …. [Health economist] Jon Gruber argues “health policy experts can’t really say for sure how governments should best go about slowing cost growth”. But international experience suggests that other nations do know how to slow medical spending; the United States is simply unable or unwilling to adopt those policies. Americans are, in other words, determined to try all available cost-control options — except those that actually succeed elsewhere. Ultimately, the insistence that the United States has to try everything because nothing is certain to contain medical costs sounds less like agnosticism or intellectual curiosity and more like ignorance.

Jonathan Oberlander, “Throwing Darts: Americans’ Elusive Search for Health Care Cost Control“, Journal of Health Politics, Policy and Law 36 (June 2011), pp. 477-484.

Jonathan Oberlander is Professor of Social Medicine and Health Policy & Management at the University of North Carolina-Chapel Hill. The link is to longer excerpts posted by Physicians for a National Health Program. The full essay (gated) can be accessed here.

The Patient Protection and Affordable Care Act (ACA) – ‘Obamacare’ – is patterned after a 2006 Massachusetts reform, known as ‘Romneycare’, after then governor Mitt Romney. The results of Romneycare are not only of general interest, they are also useful for predicting likely outcomes of Obamacare. Via Austin Frakt, MIT economist Jon Gruber summarizes the Massachusetts experience.

The Patient Protection and Affordable Care Act (ACA) is the most comprehensive reform of the U.S. medical system in at least 45 years. The ACA transforms the non-group insurance market in the United States, mandates that most residents have health insurance, significantly expands public insurance and subsidizes private insurance coverage, raises revenues from a variety of new taxes, and reduces and reorganizes spending under the nation’s largest health insurance plan, Medicare. Projecting the impacts of such fundamental reform to the health care system is fraught with difficulty. …. This paper … begins by reviewing in broad details the structure of the ACA and then reviews evidence from a key case study that informs our understanding of the ACA’s impacts: a comparable health reform that was carried out in Massachusetts four years earlier.

[Gruber's conclusions?]

1. There has been a dramatic expansion of health insurance, reducing the uninsurance rate by 60-70%.
2. No change in wait times for general and internal medicine practitioners have been observed.
3. The share of the population with a usual source of care, receiving preventative care, and receiving dental care all rose.
4. The rate of utilization of emergency care fell modestly.
5. There has been a 40% decline in uncompensated care.
6. The proportion of the population with employer-sponsored health insurance increased by 0.6%.
7. The rate of employer offers of coverage grew from 70% to 76%.
8. Mandate compliance has been very high: 98% compliance in reporting via tax filings of obtaining coverage or paying penalties.
9. The administrative costs of health reform have been low. Overall implementation costs have been close to expectations.
10. Premiums have fallen dramatically in the non-group market.
11. Though group premiums have risen, they have not increased faster than one would expect from increases in other states in the region.

Jonathan Gruber, “The Impacts of the Affordable Care Act: How Reasonable Are the Projections?”, NBER Working Paper No. 17168, June 2011.

Jon Gruber (born 1965) is well-known in the area of public finance and health economics. He was a key architect of Massachusetts’ health insurance reform.

US Republicans demonize Britain’s National Health Service (NHS) as socialized medicine gone wrong. British politicians are now turning the tables, criticizing the American system. Henry Chu reports from London.

Two years ago, Britons were outraged when U.S. politicians like Sarah Palin, in the debate over healthcare reform, turned this country’s National Health Service into a public whipping boy, denouncing it as “evil,” “Orwellian” and generally the enemy of everything good and true. ….

For a people accustomed to free healthcare for all, regardless of income, the fact that millions of their cousins across the Atlantic have no insurance and can’t afford decent treatment is a farce as well as a tragedy.

But critics here warn that a similarly bleak future may await Britain if a government plan to put more power in the hands of doctors and introduce more competition into the NHS succeeds — privatization by stealth, they say.

So frightening is the Yankee example that any British politician who values his job has to explicitly disavow it as a possible outcome. Twice.

“We will not be selling off the NHS, we will not be moving towards an insurance scheme, we will not introduce an American-style private system,” Prime Minister David Cameron emphatically told a group of healthcare workers in a nationally televised address last week.

In case they didn’t hear it the first time, Cameron repeated the dreaded “A”-word in a list of five guarantees he offered the British people at the end of his speech.

“If you’re worried that we’re going to sell off the NHS or create some American-style private system, we will not do that,” he said. “In this country we have the most wonderful, precious institution and also precious idea that whenever you’re ill … you can walk into a hospital or a surgery and get treated for free, no questions asked, no cash asked. It is the idea at the heart of the NHS, and it will stay. I will never put that at risk.”

Henry Chu, “British fear ‘American-style’ healthcare system“, Los Angeles Times, 13 June 2011.

HT Paul Krugman.