Good news everyone, health insurance doesn’t work

The passage of the AHCA through the House and the subsequent BCRA written in the Senate has made society at large anxious about the implications of these bills for the health of working Americans. Much of this fear has been fanned by politicians claiming that the bills will kill Americans. Bernie started off the parade:

Then Hillary jumped in:

Elizabeth Warren then accused the GOP of criminal activity:

These cuts are blood money. People will die. Let’s be very clear. Senate Republicans are paying for tax cuts for the wealthy with American lives.

— Elizabeth Warren

And then Nancy Pelosi gave an estimate of how bad the damage will be:

We do know that many more people, hundreds of thousands of people, will die if this bill passes

-Nancy Pelosi

If I was the average citizen, I would be terrified at this point. Fortunately, I’ve been trained to think like an engineer and I don’t get scared until the data tells me that I should be scared. There are several observational reports out there demonstrating that health insurance improves outcomes, some showing no effect, and some even showing that health insurance kills people overall. This is the problem with observational studies; they are especially vulnerable to vulnerable to selection bias and confounding and therefore are inconclusive and unreliable evidence. What we really want is experiments. Fortunately, there have been two major randomized controlled trials (aka real science) of the impact of health insurance coverage on health outcomes and mortality, the RAND health insurance experiment and the Oregon Medicaid experiment. What does the data tell us then? Good news everyone, you have nothing to worry about, because health insurance doesn’t do a damn thing.

The RAND Health Insurance Experiment is a gold standard study that ran between 1978 and 1983 on a sample of 3958 people by providing participants with health insurance with a randomized level of cost sharing ranging from 0% to 95% coinsurance . At the end of the experiment, the researchers concluded that:

For the average participant, as well as for subgroups differing in income and initial health status, no significant effects were detected on eight other measures of health status and health habits. Confidence intervals for these eight measures were sufficiently narrow to rule out all but a minimal influence, favorable or adverse, of free care for the average participant.

The Oregon Medicaid Experiment was the second randomized controlled trial, conducted between 2008 and 2010. In the study state of Oregon expanded Medicaid coverage to a random selection of 6387 beneficiaries out of a total of 12,229 eligible applicants, with the non-recipients being used as the control group. In the words of the researchers:

We found no significant effect of Medicaid coverage on the prevalence or diagnosis of hypertension or high cholesterol levels or on the use of medication for these conditions. Medicaid coverage significantly increased the probability of a diagnosis of diabetes and the use of diabetes medication, but we observed no significant effect on average glycated hemoglobin levels or on the percentage of participants with levels of 6.5% or higher. Medicaid coverage decreased the probability of a positive screening for depression , increased the use of many preventive services, and nearly eliminated catastrophic out-of-pocket medical expenditures.

Two major studies decades apart and they find the exact same thing: increased healthcare utilization, increased total healthcare spending (important finding: prevention doesn’t save money), increased financial security (and the corresponding mental health benefits), but no statistically significant effect on health status (they don’t teach you this part in school). The health insurance didn’t do anything to improve people’s health compared to those who didn’t receive insurance. Keep in mind that these are large studies involving thousands of subjects. They’re also not ‘partisan’ or biased. The Oregon study in particular was run by Finkelstein and Gruber, who worked on the ACA and would’ve loved to show a positive effect on health, they just couldn’t find one.

This is a surprising finding for most people. It’s pretty simple to establish a plausible relationship between health insurance and mortality. Person gets sick, person can’t get treatment, person dies. How can there be no positive impact of health insurance on mortality? There’s several reasons that are not immediately intuitive but are real scenarios. Consider the following:

Case 1. Man gets cancer. Man has health insurance. Man’s cancer has no treatment. Man dies. Health insurance had no effect on health.

Case 2. Man has a bad diet and doesn’t get exercise. Man gets diabetes. Man has health insurance. Doctor tells him what he needs to do. Man continues to eat poorly and not exercise. Man dies. Health insurance had no effect on health.

Case 3. Man gets cancer. Man has no health insurance. Man’s cancer has a treatment. Man partners with a charitable organization and gets his treatment paid for. Man lives. Health insurance had no effect on health.

Case 4. Man has a non-life threatening lesion on a scan. Man has health insurance, so the doctor orders a biopsy to check. Man acquires an infection during the biopsy and dies. He would’ve lived if he had no insurance and didn’t get the biopsy. Health insurance killed the man.

It must be noted how common these situations are. 1 in 25 hospital patients acquire an infection. 1 in 500 hospital patients get killed by a medical error. Medical errors are the 3rd leading cause of death in America. Let that sink in, your average internist is involved in involuntary manslaughter 1-2 times per month. On top of that the expensive stuff that kills people, we’re not even that good at treating it. Overall cancer survival is only 50-60%. We also don’t have the slightest clue on what to really do with heart disease, respiratory disease, diabetes and such, because we don’t know how to stop patients from being themselves. Raj Chetty’s megastudy from last spring (1.4 million individuals observed) showed that the biggest predictors of life expectancy wasn’t income but whether you drank, smoked and exercised. 9 out of the 10 leading causes of death in the U.S. are preventable by changing your behavior. The inconvenient truth is that no amount of health insurance is going to save a smoker from themselves, because you’re just throwing money into a fire. Health care simply does not work for people who don’t care about their health.

The sum of all this is that health insurance has some real cost/benefit tradeoffs, but none of them are to improve health or save lives, and politicians should be more careful about saying things that are scientifically untrue. If you want to save lives, then try prohibition (that went well the first time), because health insurance expansion doesn’t get you there.

(Obviously this is all in the context of marginal effects at US insurance coverage levels, your mileage may vary in other contexts)

Lessons from “How Doctors Think” for Hospital Operations

Dr. Jerome Groopman is the Chair of Medicine at the Harvard Medical School and staff writer for the New Yorker. His 2007 book How Doctors Think seeks to inform lay readers through a collection of medical case studies about the training that physician receive and the thought process through which they gather information and formulate the diagnosis. Most importantly, however, the book emphasizes the cases in which the logical process through which the diagnosis is developed fails and the physician misdiagnoses the patient and puts their life in danger. Sometimes the diagnostic process repeatedly fails to correctly identify a condition across multiple physicians. How Doctors Think begins by presenting the case of Anne Dodge who had been misdiagnosed for fifteen years by psychiatrists, internists and dietitians as suffering from bulimia and irritable bowel syndrome until a gastroenterologist finally identified celiac disease as the cause of her weight loss. Dr. Groopman also recounts how three renowned Boston-area surgeons had misdiagnosed the hand pain he was experiencing, including one diagnosis that was not a real medical condition (pg. 170). Diagnostic errors like these provide a stark contrast to the idealistic public image of physicians as precise and evidence based practitioners.

The book argues that most of these errors are not due to malice or incompetence, but are a natural byproduct of the mental heuristics that physicians must use to treat patients in a timely and efficient manner. Although physicians are trained in medical schools to carefully record the patient’s narrative and consider all possible options, the operational realities of the healthcare environment such as time-consuming electronic medical records and decreasing appointment durations force physicians to increasingly rely on shortcuts that are vulnerable to cognitive errors.

Dr. Groopman concludes by urging patients to participate more in the diagnostic process by asking physicians key questions such as “Are there any other possible causes?” and “Does any of the evidence not match the diagnosis?” The purpose of these questions is to force the physician out of their diagnostic autopilot mode and give them a chance to recognize any logical fallacies they may have committed. This collaboration would ideally improve physician decision making, decrease the frequency of medical errors, and improve patient outcomes.

Implications

The transition of payment systems from fee-for-service to pay-for-performance through programs like DSRIP and MACRA will inevitably put pressure on providers to standardize processes in order to reduce variability and improve population health outcomes. How Doctors Think reveals the significant variability that exists in physician decision making caused by individual practice preferences and errors during diagnosis, which is a major challenge for large healthcare organizations trying to meet their performance targets. Because “as many as 15 percent of all diagnoses are inaccurate” (p.24), organizations that can control and reduce this variability will be increasingly rewarded by programs such as DSRIP for standardizing their care. Safety net hospital are more vulnerable to such variation because they are more likely to face the resource constraints that force physicians to reduce their time with patients, which Dr. Groopman identifies as a major cause of diagnostic error. Fortunately analyzing the types of errors that physicians make provides a framework to understand how physician processes need to be adjusted and what changes can be made in the organization to reduce the occurrence of these errors. It is therefore recommended that all providers, but especially safety net hospitals, address the problems presented in How Doctors Think by implementing three operational reforms: communication standardization, diagnosis standardization, and treatment standardization.

 Communication Standardization

Dr. Groopman emphasizes that good medicine relies on effective communication between the patient and physician. This requires the standardization of physician’s communication practices to ensure that they are obtaining as much information as possible from the patient.

Physicians should be trained to ask open-ended questions when interviewing patients, which avoids leading the patient towards a diagnosis that the physician is already thinking of, and “maximizes the opportunity for a doctor to hear new information” (p.18). The physicians should also be able to interview the patients quietly and uninterrupted, as distractions can cause the physician to miss important information (pg. 75). When the patient makes a statement that conflicts with the physician’s clinical judgement, the physician should make an effort to not dismiss the patient (pg.264). To maximize trust, the physicians must explain the condition and its risks in a clear manner, but also be prepared to spend more time with the patient when it is clear to the physician that the patient is still nervous or uncertain (pg. 88). Accordingly, the hospital should make it easy for physicians to extend their time with the patient or to schedule a follow-up appointment. Physicians should also explain why they are performing any tests and specifically what they are looking for (pg. 172) to engage the patient and give them a chance to express their own opinions and concerns. Finally, the physician needs to clearly explain all possible outcomes, the positive and negative features associated with those outcomes, and the likelihood of those outcomes (pg. 173) to enable patients to make the choices most consistent with their preferences. This discussion should always be framed within the context of the condition to minimize the risk of patients fearing the treatment’s side-effects more than the disease itself (pg. 246).

Diagnosis Standardization

Safety net hospitals should implement a diagnostic checklist that physicians must review at the end of each case to ensure that they are not committing a logical fallacy in their diagnosis. Common errors that physicians make include:

  1. Representativeness – assume the symptoms correspond to a standard case (pg. 44)
  2. Availability – diagnosis affected by ease with which options come to mind (pg. 64)
  3. Search satisficing – stop searching for problems once you find one diagnosis (pg. 169)
  4. Vertical line failure – thinking inside the box when data and symptoms disagree (pg.171)

To avoid these logical failures, after the physician decides on a diagnosis they should be required to go through the following questions that Dr. Groopman recommends in the epilogue of How Doctors Think:

  1. What else could it be?
  2. Is there anything that doesn’t fit?
  3. Is it possible there’s more than one problem?
  4. What is the patient worried about?
  5. Review the patient’s story from the beginning.

In addition, patients should be encouraged to ask these questions and should be trained to do so through informational materials available to them in waiting areas and posters around the hospital. The benefit of this strategy is that it engages the patient in their health and prevents the physician from ignoring the checklist by going through it carelessly to save time.

Finally, this diagnosis verification process can be further enhanced by implementing systems of physician peer monitoring, such as radiologists reviewing a sample of each other’s slides and discussing the diagnoses that are found to be incorrect (pg. 188). This allows physicians to identify mistakes in a safe environment and collectively improve their skills. The knowledge that they are being peer reviewed also encourages physicians to more careful in their decision making.

Treatment Standardization

Treatment protocols should be standardized across physicians practicing in safety net hospitals to reduce variation and ensure equity in the treatment that patients receive. Dr. Groopman highlights how two very different procedures can be believed to be the optimal treatment protocol at the same time simply because they are both championed by a prominent physician who “did it that way” (pg. 163). Physicians are also susceptible to influence from the industry to prefer treatment plans based on non-clinical incentives that may not put the patient’s interests at the forefront, which may be the case with spinal fusion surgeries (pg. 228). As much as possible, treatment protocols should be directly based on the available clinical evidence and physicians practicing at the safety net hospital should be expected to conform to them. This has the benefits of reducing variability, increasing the rate of physicians’ expertise gain, increasing NYC Health + Hospital’s ability to negotiate with insurers, and makes it easier to explain and justify treatment plans to patients.

Conclusion

Although How Doctors Think was published in 2007, experience with the healthcare system today quickly reveals that few of the lessons this book contains have been addressed. In fact, many providers have made the situation worse by continuing to put physicians under time-pressure without developing the physician workflows necessary to maximize patient-physician interactions or redesigning organizational processes to improve diagnostic quality. This fundamental gap in understanding between management and physicians demonstrates why How Doctors Think should be required reading for healthcare administrators.

Primary Care: Collapsing the Pipeline

With a 35,000 primary care physician shortage coming up in 2025, eventually the healthcare policy agenda is going to shift back to the medical education pipeline. In my previous piece on the Iranian healthcare system, I predicted that community health workers were a political dead-end because of the labor market lockout that the AMA has on the healthcare industry. I still predict that’s going to be true, which means that the conversation is instead going to focus on training physicians more efficiently. Fortunately, there’s already work being done on this front.

NYU SoM’s annual report highlights (NYU Three Year Pathway) the three-year medical program that the school launched in 2013. Back then the primary goal of the compressed schedule was to lower the overall cost of medical education and differentiate NYU SoM from the rest of the competition in the medical school marketplace, but the efficiency gains due to reduction in training must not be ignored.

The first batch of students in the compressed program are now graduating, with 15 out of 16 in the inaugural class successfully completing the degree. In addition, testing of the students shows the three year students demonstrating better knowledge and clinical skills than four year students at the end of their respective programs. This finding has enormous potential ramifications and requires additional research. Was the first three year class special, with top performing students self-selecting into the more ambitious program? I’d like to see a comparison of the three year program graduates against other program applicants who were rejected from the three year program due to space limitations and enrolled into the four year program instead. In addition, the three year students may be performing better because they’ve simply had one year less to forget everything that they crammed in MS1; it would be interesting to compare the clinical skills and knowledge of the three year graduates against their four year conterfactuals after they’ve been practicing medicine for a decade to determine which method is really better at integrating the knowledge for long term use. In the meantime, however, the three year program appears to be winning.

accelerated-three-year-md-pathway

What’s important about the accelerated program is that it’s still not fully optimized. The majority of the program time savings is done through cutting down on the time dedicated to electives and residency interview. This is possible because the three year applicants are admitted with a guaranteed residency slot. However, the  students in the three year program retain the option of switching back into the four year program,m which means that the core curriculum is still over-training physician to be able to go to any residency. The core curriculum can therefore be collapsed even further to focus only topics and rotations relevant to primary care. I would be shocked if such a degree can’t be reduced to a two year program. Could we produce a family physician in one year? Probably not. But a two year program would be a 100% efficiency gain.

Not to mention that being able to filter out primary care physicians out of the same pipeline that needs to train academic researchers and neurosurgeons would allow institutions to price the degree more appropriately, therefore further reducing the cost barrier of entry. The specialization could also allow institutions to relax their requirements for acceptance. Could we then get away with accepting people with high school degrees into this specialized primary care program, therefore collapsing the current 8 year primary care physician pipeline into a 2 year one? I don’t see why not. There’s no reason to require a Bachelor’s degree; practicing clinicians don’t use what they learn for their premed coursework and MCAT. Students in Europe start medical school straight out of high school and our kids aren’t any dumber.

The efficiency gains are enormous, but we’ll need to do the work to achieve them.

AHCA Post-Mortem: We’re in trouble

I’ve been holding back from writing about the AHCA, because I wanted to let the dust settle from the fallout of this bill. I say fallout because right from the start it was obvious that the bill was dead on arrival. It just didn’t do anything. It ended the individual mandate, and replaced it with a slightly worse mandate. It ended tax credits, and replaced them with slightly different tax credits. It ended risk adjustment transfers, and implemented a risk adjustment fund. It ended the poor Medicaid funding structure, and replaced it with a slightly better structure that made everybody anxious. If it wasn’t for the estimated $337 billion in savings over ten years, which made everybody really anxious, the only way to make sense of the bill was that it was intelligently designed to be just innocuous enough to pass popular muster, but just incompetent enough to make the core components of the Affordable Care Act to slowly death spiral out of existence.

Back in November, immediately after the election, a mild hysteria spread throughout the health policy and administration community. President Trump ran and won on a platform that emphasized the repeal and replacement of the Affordable Care Act, and many vulnerable populations that non-profits work with would have been adversely affected by such a bill. I calmly told my fellow students that there’s nothing to worry about, because safety net benefits are virtually impossible to repeal once they have been implemented.  How come? Because it is much easier to demonstrate the specific individual cases that would be adversely affected by the repeal of such programs than to show the widespread, but individually marginal, improvements that a large amount of people would benefit from. And this is exactly what happened to the AHCA.

First the Republicans were pilloried in the town halls, which made them hesitate.

And then the CBO report came out, the conclusions of which made moderate Republicans completely drop support for the bill.

CBO and JCT estimate that, in 2018, 14 million more people would be uninsured under the legislation than under current law… In 2026, an estimated 52 million people would be uninsured, compared with 28 million who would lack insurance that year under current law.

So the AHCA died. Which means that we’re in a lot of trouble.

How come?

A few week after the AHCA report, the CBO issued another report that didn’t get nearly as much coverage despite being arguable the more important one, the 2017 Long Term Budget Outlook. The media didn’t report on it, because the outlook is terrible.

Forecast

In fact, it’s so bad, that by 2038 virtually all of our tax revenue is going to be consumed by social security and healthcare expenditures (85%), which means that everything else will have to be funded by debt. We’ll have to bring back the “Army of One” recruitment slogan because the DoD will literally only be able to afford one guy on payroll whose responsibility will be to sweep the Pentagon and keep it clean for tourists.

Forecast2

Healthcare and social security, by the way, are driving this persistent deficit, which is why they keep increasing as a percentage of the budget. So how much course correction do we need to make to get ourselves out of this hole?

CBO estimated the magnitude of changes that would be needed to achieve a chosen goal for federal debt. For example, if lawmakers wanted to reduce the amount of debt in 2047 to 40 percent of GDP, its average over the past 50 years, they might cut noninterest spending, increase revenues, or take a combination of both approaches to make changes that equal 3.1 percent of GDP each year starting in 2018. That amount would total about $620 billion in 2018. If, instead, policymakers wanted debt in 2047 to equal its current share of GDP (77 percent), the necessary measures would be smaller, totaling 1.9 percent of GDP per year (about $380 billion in 2018)

We’re expected to cut spending by $380 billion per year just to stop the debt load from growing?? Not only the Republicans were incapable of agreeing on the $337 billion over 10 years draft of the AHCA, they couldn’t even vote on the watered down manager’s amendment version that only saved $150 billion over ten years. If the Republicans can’t even pass this legislation, where in the budget are we supposed to find $380 billion per year? It’s certainly not going to be in the military, which at 16% of the federal budget is dwarfed by the 64% dedicated to benefits. The political reality is that we’re simply not going to find these spending cuts. The US is going to keep using debt to fund benefits, which will need to be paid for by future generations of Americans. The political establishment in Washington is now committed to walking millennials off a fiscal cliff.

And so, we’re in trouble.

So what happens next? Is there any hope? Entitlements clearly need to be cut and reformed, so how do we get there? In public policy there is a concept that draws heavily on biological sciences called punctuated equilibrium. The theory is that policy, which is a fixed legal construct, generally remains stable and unchanged for long periods of time. However, the world continues to change, which creates misalignment between the policy and reality. This misalignment creates errors, which don’t immediately cause a change in policy because of friction, but continuously accumulate. Eventually the accumulation of errors becomes unbearable and it overcomes the friction therefore punctuating the equilibrium and forcing a period of rapid policy reform that corrects the errors and settles into a new equilibrium. One example is how the decades of inactivity in federal healthcare reform were punctuated by the stars aligning in 2010 and Democrats being able to pass the Affordable Care Act without concern of a Republican filibuster. Unfortunately, the next punctuation is unlikely to happen until 2028, when the Medicare trust fund is scheduled to run out of money. At that point Medicare will need to rely entirely on current payroll tax revenue to make payments, which would require at least 13% in spending cuts increasing to 21% cuts in the subsequent decades. This is painful reality that should create sufficient public uproar to force serious reform from Washington. Maybe. Until then, however, healthcare reform just might be dead on arrival.

NY’s Alternative Price Transparency

I recently attended a panel discussion about the future of healthcare reform and specifically the American Health Care Act that the Republicans unveiled (review coming up soon). When I asked the panelists about the importance of price transparency for the effective functioning of a free market, I was told that New York State passed a law requiring the top providers in the state to post prices for their procedures. This surprised me because I had never heard of this law, what great news!

A quick search of “New York price transparency law” reveals several unrelated articles about price transparency in general, a few links about a new pharmaceutical price transparency effort being pushed and then finally a link to New York Senate Bill S77 which seeks to “enact the transparency in health care fees act”. That sounds great so far, what does this thing do?

  S 2999-L. HEALTH CARE BILLS.  1. FOR PURPOSES OF  THIS  TITL  "HEALTH
CARE  PROVIDER"  SHALL  MEAN  A  PRACTITIONER IN AN INDIVIDUAL PRACTICE,
GROUP PRACTICE, PARTNERSHIP, PROFESSIONAL CORPORATION OR  OTHER  AUTHOR-
IZED  FORM  OF  ASSOCIATION, A HOSPITAL OR OTHER HEALTH CARE INSTITUTION
ISSUED AN OPERATING CERTIFICATE PURSUANT TO THIS CHAPTER OR  THE  MENTAL
HYGIENE  LAW,  A  CERTIFIED  HOME  HEALTH AGENCY OR A LICENSED HOME CARE
SERVICES AGENCY, AND ANY OTHER PURVEYOR  OF  HEALTH  OR  HEALTH  RELATED
ITEMS  OR SERVICES INCLUDING BUT NOT LIMITED TO A CLINICAL LABORATORY, A
PHYSIOLOGICAL LABORATORY, A PHARMACY, A PURVEYOR  OF  X-RAY  OR  IMAGING
SERVICES,  A PURVEYOR OF PHYSICAL THERAPY SERVICES, A PURVEYOR OF HEALTH
OR HEALTH RELATED SUPPLIES, APPLIANCES OR  EQUIPMENT,  OR  AN  AMBULANCE
SERVICE.
  2.  PRIOR  TO  PERFORMING  ANY  HEALTH  CARE SERVICES, ALL HEALTH CARE
PROVIDERS SHALL ADVISE PATIENTS IN WRITING OF THE FEE TO BE  CHARGED  TO
THE PATIENT FOR THE SERVICES TO BE RENDERED IN THE EVENT SUCH FEE IS NOT
PAID FOR BY INSURANCE.
  S 3. This act shall take effect immediately.

Beautiful! This is exactly the bill that our healthcare system needs. When does this go live?

Capture

Oh…it hasn’t passed into law yet, it’s still a proposal. That must be why I never heard of this bill. But it’s in the health committee, so that’s good news, right? It’s a good cost control mechanism that also has the benefit of protecting consumers from surprise billing, surely it will pass, right?

 LEGISLATIVE HISTORY :

S.344 of 2015-2016 (Hoylman): Died in Health
A.250 of 2015-2016 (Rozic): Died in Health
S.7124 of 2014 (Hoylman): Died in Health
A.3518 of 2013-2014 (Rozic): Died in Health

Of course it won’t pass. This is yet another incarnation of a bill that gets brought up every year (thank you state senators Hoylman and Rozic), gets sent to the health committee, and dies there. Well, I wonder why it keeps dying there? It’s most likely not so different from what happened to the price transparency law that was passed in Ohio:

The hubris of the healthcare lobby, as displayed by its actions after the law passed unanimously in June, 2015, is unfortunately telling.  The lobbyists who are ostensibly representing Ohio providers failed to even inform their members that this legislation passed, leaving the vast majority in the dark and unprepared to comply with the law.  This failure to inform provider members of legislation that would affect their practices is not surprising given the confidence of the lobby in its ability to reverse the will of the people.  According to the healthcare lobby, it “had the votes” (meaning had enough “friends” in the legislature) to repeal the law.

So if we don’t get to have true price transparency, as I was misinformed by the panelist, what do we have instead? In 2015 New York State passed a bill establishing FAIR Health as a benchmark pricing tool to protect consumers. FAIR Health claims that law offered “comprehensive healthcare cost transparency”, which is a very loose definition of comprehensive, since it does no such thing. What FAIR Health does do is provide an award winning consumer website that tells me that in my area my estimated out of pocket cost for a hemodialysis procedure with one physician evaluation is $85.50…

Capture

… which means absolutely nothing! What theoretical provider matches this estimate? What theoretical plan matches this coverage setup? What if the provider is out of my network? Of course they don’t even provide a recommendation of a provider that most matches this estimate.  And as a consumer that magical word “estimate” is really unsettling, because if I walk into the wrong facility, that cost could easily be much higher. So do I feel like I am protected from surprise fees? Am I able to shop around for a hemodialysis at the price best for me? Absolutely not, because we don’t have “comprehensive price transparency,” we have alternative price transparency.

And as long as we allow lobbies to hijack the legislative process to protect entrenched monopolies, that’s the price transparency we deserve.

Rare diseases are the great case for UHC

The Economist’s article reporting on developments in gene therapy for rare diseases mentions something important:

The lessons from Glybera, the first gene therapy to be sold in Europe, still loom large. It cures a genetic condition that causes a dangerously high amount of fat to build up in the blood system. Priced at $1m, the product has only been bought once since 2012 and stands out as a commercial disaster.

Incredibly high need for the patient, but high development costs, essentially non-existent consumer base, no competition, no economies of scale, and no consumer bargaining power. Any one of those can destroy a market, but all at once? The only thing that would make it worse is if the patients can’t pay. Oh, right. They can’t. Because it costs $1m. If I’ve ever heard of a perfect government job, then this is it.

In the US, rare disease treatments will need to be covered by CMS and the associated costs spread across the entire tax base, because the free market will quite literally never be able to find a humane solution for this problem. Good luck using charity, vouchers or tax credits to cover a $1m treatment.

Health Fail – ACA Smoking Surcharges

Sometimes people’s behavior triggers, surprises and pleases me all at once. The ACA contains a provision enabling insurance providers to add a surcharge on the premiums of smokers, hoping to incentivize smokers to quit. Yale researchers report in Health Affairs how the smokers reacted to these incentives:

That’s right. Smokers dropped insurance coverage. I can’t even anymore.

The administration managed to put through a measure penalizing smoking without using the word that shall not be spoken in congress (tax) and got outsmarted (outdumbed?) by the smokers. I napped through most of my college macro economics course, but the one thing I took away from that class was that if you encounter a market failure that you want to correct, you tax it directly and never tangentially.

This is exactly why.

By the way, this is also why we desperately need to #MakeTaxesGreatAgain in U.S. politics. Treating the taxman as a pariah is tying down policymakers hands with foolish and disastrous consequences.