We're Better Off with the ACA

In order to be completely aboveboard, I want to be clear that I support the ACA. In my opinion, we're better off with it than without it. Extending health insurance coverage to over 30 million Americans will be a major improvement for the US. That doesn't mean I think it's perfect or that I like every aspect of the ACA (I seriously doubt if anyone does), or that I don't seem problems or issues with some aspects of it. I do, and it's not how I would have done it (more on this in a post to follow). But I feel that it's a major accomplishment finally passing a health reform bill and substantially reducing the ranks of the uninsured. Imperfect as it is, that's progress, and I'll take it.

Have We Bent the Cost Curve? Not So Fast

The Health Care Cost Institute issued a new report today that shows the rate of growth of (private) health care spending trending up again after a couple of years of slower growth.   This casts some doubt on contentions that the slower growth we've seen is due to cost control efforts finally taking hold. Obviously it's too soon to know for sure, but this reversal in trend is disturbing.

What's driving the increase? Prices are the answer, as previously. We don't know what's behind the increase in prices, but there are a number of possible candidates, including increased consolidation and exercise of market power by providers, overall price increases in the economy, and the ACA 80/20 rule. Provider consolidation has been increasing, and we know that this leads to substantially higher prices. The 80/20 rule specifies that health insurers can allocate no more than 20% of their total expenses to administration; the rest has to go to medical care for beneficiaries. Obviously the intent is to moderate administrative expenses, but this regulation can be complied with either by controlling administrative spending or increasing spending on medical care. It's possible that an unintended consequence of this rule has been to drive up health care spending, although I need to be clear that this is just speculation at this point. Some careful research is necessary in order to determine what the major factors are driving these price increases.

Another important finding in this report is that spending on children's health care (age 18 and under) rose faster than for any other age group. This continues a trend that was discovered in the 2010 HCCI report. This indicates that this is not simply a one time phenomenon, but rather an ongoing trend. Obviously this is cause for concern and we need to dig in to determine what's behind this.

Everything You Need to Know About a Doctor Shortage, Medical School Debt, and Physician Payment in a Few Easy Numbers

There has been a lot of discussion recently about an impending doctor shortage, the large amounts of debt medical students are saddled with, and whether physician reimbursements (Medicare specifically) are sufficiently high.  These issues all basically revolve around whether medicine remains an attractive occupation. While it's certainly possible to subject this question to extensive empirical analysis, a few simple numbers tell the story.

First, more than twice as many people apply to medical school as are admitted. In 2011, 43,919 people applied to US medical schools, and 19,230 were accepted and matriculated -- a ratio of nearly 2.3 applicants for every person admitted (who subsequently attended). This ratio has varied over time, but the long run average is greater than two. Don't just believe me -- the Association of American Medical Colleges -- the medical school trade association, publishes these statistics.

The fact that so many people want to become physicians (and so few do) over a long period of time is prima facie evidence that medicine is an attractive occupation.  If medical school debt is so crushing, or Medicare physician reimbursements so penurious, then why do so many people desperately try to get admitted to US medical schools?

Second, physicians from other countries want to come to the US, not the other way around. Currently approximately 26% of physicians practicing in the US were trained in other countries. Some of those people of course are US citizens, but the majority are (originally) foreign nationals. There is very little flow in the other direction.

Clearly medicine remains a very attractive occupation. That's not to say that we couldn't face problems when the Accountable Care Act extends health insurance coverage to over 30 million Americans, thereby expanding the demand for medical services. But any such shortage (if it occurs) will largely be due to restrictions on entry into the profession, not because medicine has become financially unattractive.

Video Interviews on Health Care Reform from Aspen

GenConnect just posted a couple of brief video interviews they did with me in Aspen, Colorado this summer. One is on health care reform, the other is on information in health care markets. Take a look!

Why Are There No Economists in Heaven?

Because there's no scarcity! Cute. Column by Jessica Irvine in the Sydney Morning Herald. If you like this, she has a collection of her columns in book form.

"Obama" Talks Yiddish!

OK, this video has nothing to do with economics, health policy, or even compassion, but I find it just too funny not to post. It's hilarious if you talk Yiddish, but (I think) pretty darn funny even if you don't. The guy has Obama's mannerisms down pat.

The Health Care Industry Is Really Messed Up

The Institute of Medicine just issued a new report entitled "Best Care at Lower Cost: The Path to Continuously Learning Health Care in America." The conclusions of the report are nicely summarized in this graphic. In short, what they say is that the health care industry should simply do what every other industry in America does, and has been doing, for years -- emphasize customer service, provide high quality, be efficient, be safe, have workers cooperate and communicate, and innovate in order to improve in all of these areas.

Really? Shouldn't all of this be totally obvious? The fact that (apparently) it's necessary to point these things out epitomizes for me what's wrong with US health care.  In what other industry would businesses be closed when customers most need them (how many pediatrician offices are open nights and weekends)? In what other industry would receptionists ask for payment before greeting you or asking any other questions about what you're there for? In what other industry would customers be kept waiting for long periods of time until it's convenient for the business to serve them? What other industries actively resist the adoption of technologies that would improve the quality of the product and reduce costs (can you say health information technology)? How many customers would a bank, McDonald's, even an airline, have if they behaved this way?

The health care industry is inefficient and very reified. There are many causes behind this problem, but to my mind one of the key ones is lack of competition. Doctors, hospitals, etc. aren't efficient, and don't serve customers well because they don't have to. The reason for that is there aren't enough rivals competing aggressively enough to force them to innovate.

Health care providers have been given a free rein for many years. Perhaps the understanding (or hope) was that they'd provide high quality care for middle and upper income folks and charity care for low income people. If so, neither of those has happened to the extent it should if we are to tolerate the inefficiency, high costs, and low quality in the system. It's time for a change. More on that in future posts.