Links on healthcare

Right now I’m stuck.  I have five or six good posts either half written or at least competently outlined, and I can’t figure out how to finish any of them.  So here are some good links instead:

The impact of patient cost-sharing on low-income populations: Evidence from Massachusetts

 Overall, we find price elasticities of about −0.16 for this low-income population, which is similar to, but somewhat lower than, elasticities calculated for higher-income populations in other settings.

We also find lower price elasticities among individuals with chronic illness and with higher levels of prior spending, suggesting that copayments are less important in these subsamples. In addition, we find no evidence of offsetting increases in hospitalizations in response to the higher copayments, although there are some statistically insignificant impacts among the chronically ill population.

Plan designs matter, and at the margin, incentives matter a lot for most people.  Individuals with chronic conditions are simply being made to pay more to manage their conditions in a higher co-pay world.

Uwe Reinhardt on Medicare pricing history:

Under this payment system, Medicare was required to reimburse each individual hospital (and other inpatient facilities) retrospectively for all the money that individual facility reported having spent on treating Medicare patients. These pro rata costs included operating costs, annual depreciation of the capital investments in the facility, interest of debt incurred to finance that capacity and, for investor-owned hospitals, a guaranteed rate of return to equity capital invested in the hospital…

 For their part, organized medicine struck a deal under which each physician (and certain other professionals) was to be paid his or her “customary, prevailing and reasonable (C.P.R.)” fee for each service…

One need not have a Ph.D. in economics, of course, to appreciate that the deal was inherently inflationary.

Rob Cullen at What-if Post on paying for the Doc Fix:

The solution that really caught our eye is one you might remember from when Congress was working on passage of the Affordable Care Act. The public option is simply an insurance plan run by the government that would be sold on the Obamacare marketplaces, and unlike almost all the other options it saves money without simply passing the cost onto individuals. Instead it negotiates for low rates with doctors and hospitals, and it provides other insurers an incentive to keep their rates low in order to stay competitive.

Liberals obviously love the public option and conservatives should love it since it saves the government a bunch of money. Unfortunately, of all the options on the list, the public option is perhaps the least likely to pass… even though it might be the smartest.

If we were operating in a world where deficit concerns had a real constituency, several major medical payment changes that were progressive favorable would be immediately on the table (single payer as a long term goal would be the crown jewel).  These include a public option, using competitive bidding for most Medicare supplies, and offering a Medicare Part D drug benefit buy-in to the Veteran’s Administration formulary.  Instead, we create rentier interests to provide services after they take their cut.

The net effect of smoking on healthcare and welfare costs; a Cohort Study

Conclusions Smoking was associated with a moderate decrease in healthcare costs, and a marked decrease in pension costs due to increased mortality. However, when a monetary value for life years lost was taken into account, the beneficial net effect of non-smoking to society was about €70 000 per individual.

Prevention is a wonderful thing if the goal is to have people enjoy healthier and longer lives.  In narrow accounting senses with very limited scope of cost-benefit accounting applied, prevention can be a net loser.  Intangible value of quality added life years is what makes prevention a net social good in most cases, not immediate cost avoidance. 

33 replies
  1. 1
    Cervantes says:

    The point of the last link being, smoking saves taxpayer dollars because the people die sooner and don’t collect as much Social Security. This has long been known — the calculations were done a decade ago or more. But, people forget and you can do it again and get published.

  2. 2
    Professor says:

    On the Medicaid Expansion program, Why didn’t the Fed Govt set it up in the states which are not participating? Since it is a federal program and the government is providing full funding for the first three years and 90% funding for subsequent years, would it not be better if the federal government had set it up regardless of the Supreme Court decision?

  3. 3
    Aimai says:

    @Professor: because the states could refuse the expansion per the supreme court.

  4. 4
    Baud says:


    Nothing in the ACA authorizes the government to set up Medicaid for states who refused. And it wouldn’t. If the feds set it up, they would have to pay 100% of the costs, which would put states who didn’t expand Medicaid in a better position than the states who did.

  5. 5
    Richard Mayhew says:

    @Cervantes: yep, it is an old paper that I was referencing as I’ve seen a few too many statements “let’s get everyone preventative care and save money that way” comments recently. Prevention is good, but it is not a cost-saving panacea.

  6. 6
    Xantar says:

    @Baud: @Professor:

    Actually, Medicaid is not a federal program. It is a joint federal and state program. Broadly speaking, the Feds give a grant to the states of some money and the states are expected to administer the program. Even if the Feds pay 100% of the costs, it is state employees who run the program at the ground level. And the Supreme Court said states can refuse to run a program.

  7. 7
    Baud says:


    Right. But Congress could make it a federal program. But they wouldn’t make it federal for recalcitrant states only because that would mean that good states were paying into the program while bad states were not.

  8. 8
    Richard Mayhew says:

    @Baud: As a policy geek, I would prefer a complete federalization of Medicaid for three reasons:

    1) Counter-cyclical spending — either 48 or 49 states have balanced budget requirements. They have some wiggle room, but if there is a recession of more than 12 months, almost every state has to cut Medicaid spending at a time when macroeconomically it is a very dumb thing to do. The Feds don’t operate under such a counter-productive constraint.

    2) Bulk purchasing should make it cheaper.

    3) Mississippi residents who are not outright paupers should have coverage.

  9. 9
    Baud says:

    @Richard Mayhew:

    Sure. Maybe in a few years, after we get past the ODS period in American history, we can start talking about how to unify our various health care systems into a coherent whole.

  10. 10
    p.a. says:

    I have a decent understanding of basic supply/demand econ 101, but I have always been curious about the meme that the insured should bear more of healthcare’s costs to give them a better idea of its true cost and reduce frivolous usage. What percentage of the population uses the healthcare system for the fun of it? I get subsidies causing market irrationality for fun stuff. But for irradiating, blood letting and biopsies?

  11. 11
    FlipYrWhig says:

    @p.a.: we have a friend who is very quick on the trigger going to the doctor with various complaints, and if she doesn’t get what she thinks she needs — antibiotics, for example — it’s on the next one and so on until she’s satisfied. I’ve never known anyone else like that, having come from a family where you dread going to the doctor because she’ll tell you there’s something terribly wrong. But maybe it’s more widespread than I realized.

  12. 12
    Tommy says:

    @p.a.: Let me see if I can explain myself. My father had a mild stroke about 10 years ago. His cholesterol was through the roof. They gave him some drugs, which he doesn’t pay a penny for, cause well he worked for the DoD for 30+ years and he has amazing insurance.

    I say this cause he did NOTHING to change his diet. The drugs, well they worked to get his cholesterol to a level the doctors don’t bitch at him.

    I shutter to think of how much money has been spent on those drugs.

    Now I am not so sure I think individuals should bare more of the costs so they don’t use medical care as often, but in the world I want to live in the doctor would have been told that if they could get his cholesterol down, instead of just handing out drugs, they’d get PAID more, cause in the long term a change in diet, even if they hire a chef to come to his house to help for a few weeks, would be WAY cheaper then ten years of daily pills.

    Hope that makes sense …

  13. 13
    contract3d says:

    off topic, but how does one send an email to an author?

    I have a subject I’d like to share with Richard Mahew, but the ‘contact author’ dropdown on the right side of the front page doesn’t seem to do anything.


  14. 14
    Tommy says:

    @Baud: I am maybe more of a “state rights” guy then most liberals. Generally speaking I think my state knows more about its citizens then DC. And I would prefer more block grants from the Feds, not less of them. But then again I live in IL and generally speaking, my state ain’t half bad at doing the “right” thing.

    But with Medicaid I think it might need to be a 100% Federal program. I don’t have any inside info here, but when Congress and the White House was working on the ACA I am sure somebody like me, that always questions things and assumes the worse, must have raised their hands and said what if a large number of states, with Republican governors, won’t take our Medicaid dollars to expand the program?

    I am sure they were laughed out of the room, I mean who wouldn’t take free money?!

    But alas here we are.

    I try to choose my words carefully, but the fact these states won’t take the money and are leaving millions without insurance might not be illegal, but it sure feels like it should be. I am seeing polling number that even in pretty red states 63% want the expanded Medicaid dollars/program.

    Somebody has to step in here and say enough is enough. IMHO the primary goal of government is to care for and protect the wellbeing of its citizens. This could be with safe roads. Clearn water. A strong national defense. The enforcement of laws. But it also has to be health care.

    We’re dropping the ball here letting these states refuse “free money” to expanded health care enrollment numbers.

    But that is just my two cents ….

  15. 15
    cleek says:

    I have five or six good posts either half written or at least competently outlined, and I can’t figure out how to finish any of them.

    do as good Sir Paul would do, and combine them into a suite. all it takes is some clever key changes and a little fade in/out magic, and you’re set.

  16. 16
    Amir Khalid says:

    See the Contact box near the top of the right-hand column? Click on Select An Author drop-down menu and then click on Richard’s name.
    ETA: Do you have Microsoft Outlook? If not, maybe that’s your problem.

  17. 17
    FlipYrWhig says:

    @Tommy: your two cents were topped by a higher bid by the Supreme Court.

  18. 18
    Tommy says:

    @FlipYrWhig: And I know that. I’d say we should tweak this part of the ACA, but alas that can’t happen without control of the House. I am not proud of this, but if you piss me off I can be kind of a spiteful person. However, I would still take free money if you wanted to give it to me :).

    I mean you have to have a pretty “black heart” not to take basically free money from the Feds to offer expanded health care.

    But alas, as many have said, I am 110% sure the Republicans know EXACTLY what they are doing here. As with not setting up an exchange, they want to break the ACA and then point at Democrats and say, “see, see, we told you government is bad.”*

    As I said, I know this isn’t illegal, but it sure feels like it should be.

    *I should note when Bush passed I few things I didn’t think they were good ideas, but I wasn’t actively nor would I ever actively work to ensure they fail. I mean who does shit like that?

  19. 19
    Richard Mayhew says:

    @contract3d: bjdickmayhew At Yahoo

  20. 20
    Xantar says:


    The most commonly cited study about this topic is the Rand Health Insurance Experiment which was run several decades ago and followed people over 15 years. Basically, they split their subjects into several groups and gave them varying levels of insurance. One group got absolutely free, everything paid for, no coinsurance no co-pay policies. The other groups got insurance with varying levels of deductibles and co-pays.

    What they found is that the people without any cost-sharing used more medical services but (with a few important exceptions) they did not really have better health outcomes. The exceptions are that the poorest people still had better measurements for hypertension, dental health, and a few other things when they were given completely free health care with no cost-sharing. Otherwise, though, the Rand HIE did not find huge benefits to people who had free health care compared to those who had some cost-sharing.

    There are criticisms and quibbles with the study. Frankly, I’m not qualified to judge whether they are correct. But this study is basically where the idea of cost-sharing comes from.

  21. 21
    Belafon says:


    IMHO the primary goal of government is to care for and protect the wellbeing of its citizens.

    There’s a large percentage of the population, who get to the polls a lot, who do not believe this. They may believe that the government is there to take care of them, but not the general population. All members of the IGMFY party.

  22. 22
    Richard Mayhew says:


    the biggest critique of the Rand HIE study is that it increases mortality for people who have long term chronic diseases that require management and who don’t have a lot of assets to pay for it. It becomes a game of pay the rent or pay deductible for the monthly blood test….

  23. 23
    Tommy says:

    @Belafon: That is very true, and honestly I think the real divide in our nation. I wish more people seemed to grasp this that are in public life/elected leaders. It is the core of why we are where we are I think. And to change this, well I got no clue how.

  24. 24
    Richard Mayhew says:

    @Richard Mayhew: Co-pay/co-insurance designs are good at aligning incentives for people where insurance is truly insurance — protection against unknown quasi-random events, but it breaks down when an insurance policy combines both an insurance function and a health maitenance function.

  25. 25
    WaterGirl says:

    Richard, I have a question for you, if you don’t mind.

    Sister and brother-in-law live in Colorado are very religious and very conservative, believe Obama is the anti-christ (probably) and listen to all the right-wing news. My sister (64) does not work and brother-in-law (60) just lost his job on Friday. His former company will pay for one month of cobra, so they need insurance effective April 1.

    Sister was talking about insurance and I tried to talk about the ACA without saying ACA or health care and without using Obama’s name. She seemed to know nothing about exchanges and health care. I was happy to google and find that there appears to be a state exchange called Connect for Health Colorado. So we may get through this yet without having to say Obama!

    Sister’s birthday is in June and she will turn 65. So how does medicare play into this when they are looking for insurance? And how about the supplemental thing she will have to get related to Medicare? Any tips so I can help send them in the right direction?

  26. 26
    Mnemosyne says:

    @Richard Mayhew:

    I still kind of wonder about that, though. If we prevent people from dying early from smoking, are they automatic drags on the system from then on, or does preventing the expensive health issues that will crop up create enough savings that it’s a wash financially?

    All the studies I see focus on how much longer people end up living and thus how much more they cost the system, but not on whether suffering fewer smoking-related diseases creates a cost savings of its own.

  27. 27
    p.a. says:

    @Xantar: Good info. I am not qualified to judge the study’s methodology, but I will note that it is several decades old, and the market trend over those decades has been to shift more cost onto the consumer, and outcomes still have not seemed to improve (allowing for tech advances). This could indicate flaws in the study or a qualitative difference in the current healthcare marketplace.

  28. 28
    Tommy says:

    @WaterGirl: I can’t address your direct question, have to leave that to folks that know more then myself.

    But you hit on something important. I’ve seen polling numbers from KY. The western part of the state has some of the lowest percentage of uninsured in the nation. Also very religious and conservative. MSNBC (The Ed Show) send a camera crew with aid works trying to get folks enrolled in the KY program: Kynect Kentucky.

    Folks were breaking down and crying. Saying they had never had insurance before. Stunned at their options. Selling Kynect Kentucky seemed like an easy sell cause NEVER did they have to mention Obama. ACA. Health care reform.

    None of that, they just told them what Kynect Kentucky offered.

    There is a large part of me that wish they knew where their insurance was coming from. So credit could be given where credit is due. But honestly, I’d rather them just have health insurance.

    I hope the same happens for your family members!

  29. 29
    Xantar says:


    Yeah. What I take from the study is that cost-sharing has a place but that it has to be used very carefully. There are a lot of services where it makes sense both from a cost perspective and a health perspective to have them available for free without any cost-sharing. This would include most preventive care and contraception. And then there are services which may be more expensive to cover without cost-sharing but which we should do anyway for moral reasons. I’d say chronic conditions fall in that category.

    Where I think cost-sharing has a place is in discouraging people from using procedures and services that aren’t shown to have a great return, healthwise. My insurance company charges me high co-pays for brand name drugs but very low co-pays for generics. And I think that’s only right.

  30. 30
    Richard Mayhew says:

    @WaterGirl: @Mnemosyne: Old people are expensive in general, so the cost savings of not treating someone for lung cancer or emphysemia or COPD is eaten up by the costs of keeping those people alive and in relatively good functional health for another decade. As a society, I think that is an excellent trade-off as I loved having grammy and granpa around for a very long time as a kid, but it is not a cost savings panacea.

  31. 31
    Richard Mayhew says:

    @WaterGirl: Speak with a broker or a navigator for your sister and BIL.

    My bet is your sister can get on a Connect for Healthy Colorado plan for April and May while she submits her Medicare enrollment application for June coverage. When she goes to Medicare as her primary (either regular Medicare or Medicare Advantage (she should start to get bombarded with calls/junk mail any day now from brokers/agents), she can end her Exchange policy as she has a qualifying health plan via Medicare.

    If you think that she won’t even touch an Exchange twice removed, she can buy directly from an insurance company and get the subsidy that her family may qualify on next year’s tax return.

    Biggest thing may be to contact the local council on aging or senior center for assistance on the options.

  32. 32
    WaterGirl says:

    @Richard Mayhew: Thanks, Richard!

  33. 33
    Fred Fnord says:

    @Cervantes: Except that if you do the calculations in the US, where health care costs are dramatically higher (which skews towards making smokers more expensive) and pensions are dramatically smaller (which skews towards making nonsmokers less expensive) the conclusion is much less clear.

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