Pareto proportions in healthcare

Health care finance and utilization is a Pareto curve.  A small minority of people drive the vast majority of costs and utilizations.  Conversely, most people are minimal users of healthcare services in any given year.  This means there are two very distinct strategies that should promote good outcomes.  But first, let’s look at a great graph via Martin Gaynor:


For people on the left hand side of the graph, they are relatively healthy and relatively low users. They’ll be using primary care providers, urgent cares, low end prescription drugs, the occasional specialist, the occasional low end surgery and hospitalization. There may be spikes in cost such as a year in which a woman gives birth, but over the medium run, costs and utilization are fairly low because need is fairly low.

Here, consumer driven healthcare could make a decent amount of sense. A co-pay of $50 for an urgent care visit instead of a $25 co-pay for a PCP visit could lead people to make better choices. Reference pricing for simple, straightforward elective surgery could drive people to choose low cost providers. Deductibles may force people to defer care that is not particularly valuable. High deductible health plans paired with health savings accounts are not inherently crazy nor malicious.

However any cost savings here don’t matter all that much because the base level of spending is so low to begin with.

The other side of the Pareto curve is where the real money is.

And there, consumer driven decision making runs into the brick wall of reality.  People don’t have $50,000 or $100,000 lying around to fix a blown shoulder that happened while mopping in various states of undress.   People don’t have the ability to continually pay $300,000 per year for preventative hemophilia treatments in the hope that they can avoid a $5 million crisis claim.  A deductible will be hit no matter what.  Coinsurance and co-pay limits will be hit no matter what.

If we were to fully embrace consumerism for the most expensive 10% to 15% of the population, what we will be telling the chronically ill to do is to buy an ounce or two of morphine, a syringe and a blanket so they can die quickly and quietly in the corner.

We’re not going to do that as a society.  Instead, we have to do a few different things.  The first is the 50 year policy of segregating the group of people who are most likely to have very large claims away from the rest of the population in the form of Medicare and dual eligibility for Medicaid-Medicare.  The Federal government picks up a good proportion of the shock claim risk.

But that does not do everything.   We put people into the market and hope it works well enough.  But that fails.   There is no market within a half day drive of the Major Academic Medical Center that can effectively treat certain types of pediatric cancers, so market forces don’t work.  Administrative forces need to work instead.  And that is where things like Accountable Care Organizations, gain-sharing, risk-sharing, population health management, preventative nursing visits and focus chronic disease management programs come into play. The systems, hopefully, are built so that everyone benefits in that the patient gets better quality of life, and the resources devoted to that goal are used effectively and efficiently.

Open Thread: Missing the Trend for the Stats

Is it necessary for Trump to win the GOP nomination for him to “win” the longer argument? Dave Weigel, at the Washington Post, asks “Why do data journalists keep missing the political story of the year?”:

The story of an election is far, far bigger than the story of who won it. The Trump drama, and the movement that has discovered and elevated him as its candidate, is obviously the political news story of 2015.

Actually, it’s the latest in a long, semi-tragic history of primary campaigns that revealed plenty without producing a nominee. You can start the clock in 1964, when then-Alabama Gov. George Wallace ran for president for the first (of four) times. He had no chance of defeating President Lyndon B. Johnson in the primaries, but where he competed, he scored margins that baffled the political establishment… You could have looked at that result and chided the media for making “news” out of what was, obviously, not a victory. You would have missed a historic moment in the politics of backlash.

Losing campaigns have played that role again and again. Ronald Reagan didn’t win in 1976; you know how that turned out. Pat Robertson’s 1988 primary campaign cemented the influence of the religious right in Republican electoral politics. Howard Dean’s 2004 primary campaign collapsed memorably in Iowa, but accelerated the Democratic Party’s evolution from a party that could put Joe Lieberman on a national ticket to one that was skeptical or apologetic about foreign military intervention. Indeed, by the autumn of 2006, Dean was chairman of the Democratic National Committee, and Lieberman had lost his Senate primary…

… [F]or five months, Trump has been able to swing into states and draw the biggest crowds of any Republican candidate. It’s been two and a half months since a thinly-attended South Carolina event, organized by a third party group, that was supposed to mark the end of Trumpmania. It’s been a month since a rambling Trump speech in Iowa, where even the people standing behind him grew bored with his rants about Ben Carson. The crowds kept coming. And they keep coming.

Few, if any, reporters will tell you that they expected this to happen. Some may fantasize about another universe, where the field is Trump-less, and candidates like Sen. Rand Paul (R-Ky.) and New Jersey Gov. Chris Christie (R) are dominating the news with substantive fights about privacy rights and terrorism. Even this summer, the rise of Trump was seen by the Republican establishment as a way to freeze the field, while the grown-ups could hibernate and take over when it counted.

We do not live in that universe. We live in the one where, as The Fix’s Philip Bump points out, 53 percent of Republicans want all illegal immigrants to be deported and many are finding a champion in Donald Trump…

The Carson Show Rolls On

The petabytes of information that would compose the voluminous tomes of Things Ben Carson Doesn’t Know A Damn Thing About now includes an updated entry on the debt ceiling in this interview with Marketplace’s Kai Ryssdal.

Ryssdal: All right, so let’s talk about debt then and the budget. As you know, Treasury Secretary Lew has come out in the last couple of days and said, “We’re gonna run out of money, we’re gonna run out of borrowing authority, on the fifth of November.” Should the Congress then and the president not raise the debt limit? Should we default on our debt?

Carson: Let me put it this way: if I were the president, I would not sign an increased budget. Absolutely would not do it. They would have to find a place to cut.

Ryssdal: To be clear, it’s increasing the debt limit, not the budget, but I want to make sure I understand you. You’d let the United States default rather than raise the debt limit.

Carson: No, I would provide the kind of leadership that says, “Get on the stick guys, and stop messing around, and cut where you need to cut, because we’re not raising any spending limits, period.”

Ryssdal: I’m gonna try one more time, sir. This is debt that’s already obligated. Would you not favor increasing the debt limit to pay the debts already incurred?

Carson: What I’m saying is what we have to do is restructure the way that we create debt. I mean if we continue along this, where does it stop? It never stops. You’re always gonna ask the same question every year. And we’re just gonna keep going down that pathway. That’s one of the things I think that the people are tired of.

Ryssdal: I’m really trying not to be circular here, Dr. Carson, but if you’re not gonna raise the debt limit and you’re not gonna give specifics on what you’re gonna cut, then how are we going to know what you are going to do as president of the United States?

Carson: OK, let me try to explain it in a different way. If, in fact, we have a number of different areas that are contributing to the increasing expenditures and the continued expenditures that are putting us further and further into the hole. You’re familiar I’m sure with the concept of the fiscal gap.

Ryssdal: Why don’t you explain that a little bit, though.

Carson: OK, well, the fiscal gap is all of the unfunded liabilities that the government owes. Medicare, Medicaid, Social Security, all the departmental programs, all the agency and sub-agency programs extending into the future, which is a lot of money, versus the amount of revenue that we expect to collect from taxes and other revenue sources. Now if we’re being fiscally responsible, those numbers should be fairly close together. If we’re not, a gap begins to occur. We bring that forward to modern day today’s dollars, and that’s the fiscal gap, which sits at over $200 trillion and is continuing to grow. Now the only reason that we can sustain that kind of debt is because of our artificial ability to print money, to create what we think is wealth, but it is not wealth, because it’s based upon our faith and credit. You know, we decoupled it from the domestic gold standard in 1933, and from the international gold standard in 1971, and since that time, it’s not based on anything. Why would we be continuing to do that?

Oh good, in addition to knowing jack squat about foreign policy, criminal justice issues, the workings of the US Constitution, and basic civics, ol Doc McNothins here has no idea how modern macroeconomics works either, because we owe a bajillion zillion trillion dollars in unfunded liabilities because America’s GDP is just going to go to zero tomorrow and how can we pay for Medicare in 2065 because argle bargle collapse of all fiat currency GOLD WEED END THE FED.

Meanwhile, Ben’s over here reading Louie Gohmert’s bookmarked posts on Zero Hedge and going “You know, we don’t really need to pay for budget debts we’ve incurred because I’ll just magically cut waste so we don’t need to ever raise the debt ceiling.”

That seems like it’ll work.  Can’t wait until he overtakes Trump on which cartoon idiot is winning the beauty contest.

Greeced Skids

The Kroog points out that despite five years of doing everything that it was told to do by the troika and sucking down that Good Ol’ Austerity Juice, Greece still finds itself in the bank holiday/capital control stage of the mess that it was supposed to avoid.

But doesn’t the ultimate cause lie in wild irresponsibility on the part of the Greek government? I’ve been looking back at the numbers, readily available from the IMF, and what strikes me is how relatively mild Greek fiscal problems looked on the eve of crisis.

In 2007, Greece had public debt of slightly more than 100 percent of GDP — high, but not out of line with levels that many countries including, for example, the UK have carried for decades and even generations at a stretch. It had a budget deficit of about 7 percent of GDP. If we think that normal times involve 2 percent growth and 2 percent inflation, a deficit of 4 percent of GDP would be consistent with a stable debt/GDP ratio; so the fiscal gap was around 3 points, not trivial but hardly something that should have been impossible to close.

Now, the IMF says that the structural deficit was much larger — but this reflects its estimate that the Greek economy was operating 10 percent above capacity, which I don’t believe for a minute. (The problem here is the way standard methods for estimating potential output cause any large slump to propagate back into a reinterpretation of history, interpreting the past as an unsustainable boom.)

So yes, Greece was overspending, but not by all that much. It was over indebted, but again not by all that much. How did this turn into a catastrophe that among other things saw debt soar to 170 percent of GDP despite savage austerity?

The euro straitjacket, plus inadequately expansionary monetary policy within the eurozone, are the obvious culprits. But that, surely, is the deep question here. If Europe as currently organized can turn medium-sized fiscal failings into this kind of nightmare, the system is fundamentally unworkable.

For whatever reason, this time around was different, as they say. Maybe PM Alexis Tsipras miscalculated, maybe the troika miscalculated, Junker and Merkel and the like, but the rules of the EuroCalvinball changed and now we’ve got ATMs across Greece closed today and a whole lot of people asking a whole hell of a lot of questions.

The other lesson is austerity kills economies, as can be evidenced from Greece to Kansas to the UK to Puerto Rico. I’m not sure how many more financial meltdowns we need to get this into the heads of the suits that make the decisions, but you don’t need a Nobel Prize in order to figure out that maybe drastic reductions in spending for programs that people depend on isn’t the way to save a struggling economy.

Sausage Factory Blues

It looks like the fast track authority deal for the Trans-Pacific Partnership trade agreement will move ahead in the Senate towards a final vote as the price of a deal involved holding a separate vote on the Export-Import Bank.

In a dramatic vote critical to the future of the president’s goal of securing new trade deals with Pacific Rim and European countries, the Senate on Thursday broke a bipartisan filibuster of legislation to give the president “fast-track” authority to negotiate new trade deals.

The 62-38 vote preserves the possibility that the Senate can finish the trade bill before the Memorial Day recess, which would be a major boon to Obama and Republican leaders in the House and Senate. It came after a round of horse-trading that assures the Export-Import Bank will receive a chance at a lifeline to live past June 30, when it is scheduled to expire.

“It was a nice victory. We’re going to continue and finish up the bill this week,” Senate Majority Leader Mitch McConnell told reporters.

McConnell was seen on the floor talking with senators in both parties who want to see Ex-Im extended, and soon after a half-dozen lawmakers announced their support for the trade measure, lifting it above the filibuster’s 60-vote threshold. Republican and Democratic senators had been pushing to attach Ex-Im to the trade bill. But McConnell resisted because he fears that combining the two would have imperiled the trade bill’s prospects in the House, where it already faces difficult odds.

Whether Orange Julius and the House play ball, who knows.  There are probably enough votes to get 218, but then again, things have this nasty habit of breaking down when one of the factors involves “John Boehner rounding up enough votes” to get something to work that the Senate has already passed.

Regardless, looks like fast track authority on the TPP will continue to survive in Congress for a bit longer.