Reality is Not Binary

A couple of weeks ago a research article being published in Science Advances made the rounds of healthcare policy Twitter. The article made the claim that there was a correlation between police shootings of unarmed black men and black infants being born underweight and premature. The research design took two datasets, one of fatal police shootings and another one of births in California, mapped them, and established a relationship for local police shootings that occured during an infants gestation based on a distance between the shooting location and the infant’s residence ranging from 1 to 3 kilometers. The working theory was that widespread perception of police discrimination against blacks, combined with exposure to local events of police brutality against blacks was causing undue stress on black mothers and having important consequences on the gestating infants. 

The research appeared to have found a significant result, showing police shootings of unarmed blacks being associated with negative effects on black infant gestation period and birth weight. Such a finding would have obvious serious implications and the signal was quickly magnified by the usual suspectsas well as Twitter in general. Once I looked at the article myself, however, things didn’t sit right. Whenever I’m mentoring people I tell them to always do a sanity check and make sure that things make sense. If you look at the results:


The first thing you notice is that unarmed black american victim / black infant is effectively the only combination that results in a significant result. Does this make sense? If the working effect is dependent on a perception of systemic injustice, why are infants not affected by shootings of armed blacks? Similarly, the police is not notorious for equitable treatment of hispanics, so why is there no effect for hispanic infants? In fact, shouldn’t we expect mothers being stressed by shootings of unarmed citizens regardless of their race? This didn’t pass my first sanity check. The second thing you’ll notice about the results is the size of the confidence intervals for black infants relative to the other groups. This made me wonder if there was something going on with the sample size and not being able to find any information in the main article about the number of each babies in each group, I looked into the supplemental materials.


I will leave it to the statisticians to debate whether these samples are sufficiently powered. The thing that I noticed is the ratio of infants exposed to unarmed vs armed black victim shootings – 3,296 : 3,888. I’ve looked into statistics police shootings and other general gun violence in the past when the “get in your lane” debate started (I encourage you to look at these publicly collected datasets yourself, you will be sure to come to surprising conclusions on the subject) and from the police shooting dataset maintained by the Washington Post I knew that the true ratio of armed:unarmed police shootings was much closer to 15:85. Fortunately the author supplied the data that they used for this analysis. This is obviously not common and I’m sure many of you also have had cases where you strongly doubted the findings of a research article but couldn’t contest it because the data was not available. After teaching myself R to open the file and matching the coding of the case ids in the research dataset against the case id in the Fatal Encounters database from which the data was drawn I was able to research the news stories about these cases and found numerous cases that were incorrectly coded as unarmed when there was concrete evidence that the victim was armed at the time of the shooting. I have my own theories of how these errors happened, but it’s all speculative (hint: there’s 2025 cases).

After bringing up these cases to the author’s attention and some back and forth the author stated that he redid the analysis and that there was no longer a significant effect and the paper was being retratected. I’m not sure what to make of the statement that he reviewed the data. It took me 4 hours to review the news stories and recode just 36 cases. Did the author really review all 2025 cases in the dataset in just a week? Did he have help? Whatever the case, it is true that the author must be commended for choosing to make the data available, for responding to the concerns, and for promptly issuing a retraction.

The reason for this post is that in the discussion that ensued after the retraction, a number of people have opined that the paper should not be retracted, but instead published with the null result. The basic argument is that a null finding is still a finding and in addition to fighting the academic bias of publishing only significant findings that it would further our knowledge and help build a foundation for future research. I disagree with the sentiment that publishing the null result furthers our knowledge and propose that this belief makes the same mistake as the original: erroneously making conclusions without a proper understanding of the underlying reality. As a system engineer in training my bias is to understand how data is collected and what it represents before even considering how to operationalize it into system improvement, but in my experience this is something that rarely happens in healthcare policy research. I’ve written previously about how data fails to accurately represent the underlying reality in comparative system research. By reducing a complex system to a set of binary or even continuous variables we are failing to accurately capture the complexity of interactions and behaviors inherent to that system. Furthermore, scientific analysis causes researchers to self-impose a required myopia focusing on only one variable while holding all else constant, an obvious conceit when dealing with organic human systems. I’ll use the cases between 2014-2017 that I recoded for this police shooting dataset to demonstrate the limitations of the scientific method at drawing conclusions about the real world. As a reminder, each case was originally coded as a simple binary ARMED/UNARMED and the hypothesis was that the stress of proximatory to discriminatory police shootings would impose stress on mothers and adversely affect infants. I will not go into the cases that I found to be coded clearly incorrectly (victim is known to have had a gun or knife) because that’s not relevant to the point I’m try ing to make here.

Before we start, let’s pay respect and remember the names of men and women that were unarmed and should have never been shot by the police. Many of these stories involve homelessness and mental illnesses and are a direct reflection of the mass alienation tolerated by our economic and political structures. These innocents are: Tommy Yancy Jr., Paul Ray Kemp Jr., Jacorey Calhoun, Charly Keunang, Brendon Glenn, Kris Jackson, Nathaniel Harris Pickett, Rodney Watts, Donnell Thompson, Alfred Olango, Nana Àdomako, Mark Roshawn Adkins, Keita Oneil, Elena Mondragon.

The first set of cases is those in which the definition of armed/unarmed explicitly fails to reflect the situation. In 2014 Andre Milton was in the process of publicly smashing his girlfriend’s head into a nearby vehicle when the female officer, unable to stop him, chose to use her firearm. Also in 2014, Michael Laray Dozer took the handle of a gas pump and after soaking a woman with gasoline tried to use a lighter when he was shot by the officer. In a strictly literal sense of the word, these cases could be coded as unarmed. But would any person say that it was unreasonable for the officers to use their firearm in these cases? In the context of the hypothesis, does it make any sense to say that women were stressed by systemic discrimination when a man brutally beating his girlfriend was stopped?

The second set of cases is those in which the concept of armed/unarmed comes under scrutiny to a much greater degree because the urgency so clear in the previous set are much more vague. The first category in this set are cases in which there is a physical struggle between the officer and the victim and at some point the victim grabs for the officer’s firearm or taser. This is the case for James McKinney, Ezell Ford, Anthony Ashford, and Leroy Browning. The police officers involved in these shootings were determined to have acted in self-defense or defense of a partner and did not have charges pressed against them. The author raised the legitimate issue that many of these cases only have other officers as witnesses and that there’s a known concern about police departments covering up to protect their own. But if we are correcting for systemic bias by assuming that the victim in all these cases never grabbed the firearm or that they were unarmed because the firearm in question was not theirs, are we sure that we’re not introducing an even greater bias into the data? If that’s the case, how should one handle cases in which the victim actually did get hold of a firearm or taser and even used it on an officer, such as Carl Blossomgame? And what about cases where a vehicle is being used to endanger officer and civilian lives such as the cases of Dion Ramirez? If you investigate the statistics on police shootings you’ll know that this is often how women become a police shooting victim. In many jurisdictions police officers are allowed to treat drivers who use their vehicle in a way that could endanger others as dangerous and are allowed to use their firearms to stop them. The issue of police self-reporting bias is present here, but how would you treat cases where there is civilian or recorded footage corroborating the victim using their vehicle to ram into officers themselves or into vehicles such as the case with Nephi Arriguin, Jessice Williams, Michelle Lee Shirley. Were these victims armed or unarmed? Is a car used as a weapon actually a weapon? What about corded electric clippers swung like a ball and chain? And what about the case of Marquintan Sandlin, who is not known to have had a weapon, but Kisha Michael, who died in the same shooting, did have a gun with her in the vehicle?

The next set of cases our understanding of what constitutes a police shooting of an unarmed victim is challenged. Dominic Andrew Hutchinson shouted that he was armed and upon the police approaching the door rushed the officers while gripping a set of binoculars like a firearm. There are many such cases of “suicide-by-police”. The victim didn’t have a weapon and was in principle harmless, but the research hypothesis was that unjustified shootings are causing stress on mothers. How are we to expect the police to react in this scenario? Should the case be coded as armed/unarmed based on reality or the information on which the police acted on? Similarly, Augustus Crawford was being chased for being the suspect in another case and was suspected to have a gun. The gun associated with the previous case was found in the area after the shooting. The author suggested that this case was up to interpretation. The interpretation seems to be whether Crawford discarded the weapon during the chase without the police knowing this, whether the police did know he discarded the weapon and still shot him, or even whether the police planted the weapon. How are we to interpret this? Washington Post interpreted it as a shooting of an armed victim. Similarly, how are we to interpret the case of Marquez Warren who broke into the home of off-duty police officer Vedder Li and was shot with a personal (not service) firearm. Is this a police shooting? Washington Post did not include the case in their database.

Finally, there are the cases where there’s simply not enough information. Damian Murray held a teacher hostage for 6 hours before being shot by SWAT, but the news does not confirm or deny whether he had a weapon. The news for Jeffrey Smith’s case says that it’s still under investigation whether the victim was armed. The cases were coded as unarmed, but is this appropriate? Should they be coded at all? Should more information be collected by reaching out to the local authorities? Or should the data be discarded?

The point I hope I’ve conveyed is that reducing complex events to a simple binary is completely insufficient when trying to provide evidence for a complex hypothesis like public perception of police brutality against a racial group resulting in long term health consequences for infants. The best that such evidence can conclude is an opinion, precisely because so much of the data is compromised and confounded in one way or another and the way that the data is coded often comes down precisely to opinion. In the above events, a reasonable case can be made for both the armed and unarmed option. That’s a major problem. Is a car driving at you a weapon? If you’re a strict legalist then it may not be, but if you’re in situ and the vehicle is coming directly at you, I bet you’re more than likely to interpret it as a weapon that’s a threat to you. The connection to healthcare system research is that this flattening of complex information and interpretation is pervasive in policy research. If you take Commonwealth Fund data and look at data saying that some percent of people were seen within 3 hours of arriving at a hospital and that this is a metric of healthcare accessibility, what does that actually mean? What is the underlying reality? Was the patient “seen” for 2 minutes which involved being told to come back next week for a scheduled clinic appointment or was the patient seen for a 2 hour full workdown? I don’t know, and I guarantee that the researchers don’t either. The bias of research to try to find significant differences causes the data to be flattened to a degree that it no longer represents any system from which it was drawn. The consequence of then making conclusions and policy based on this data is, in my opinion, flying close to fraud. I encourage healthcare system researchers to not only seek data but to deeply understand what this data means qualitatively, what it doesn’t mean, what its limitations are, and to be honest and explicit about these details. It’s the only way to avoid systemic disasters that are guaranteed when we try to reduce reality to a binary.

A Case Against Free Markets in Medicine

In the final act of Shakespeare’s Richard III the eponymous villain king arrives on the battlefield to fight against Richmond, who will soon become Henry VII. During the battle Richard is dismounted as his horse is killed and in a mad frenzy wades through the battlefield screaming “A horse, a horse! My kingdom for a horse!” Richard shows us how  market value can change drastically depending on the circumstances, or your mental state, and even the most absurd exchange rate can become reasonable in a moment of crisis.

This presumably arbitrary nature of prices should be the first thing about the US healthcare market that catches the attention of any student of economics. Prices for the same procedure vary greatly between hospitals on opposite sides of the street, and even then appear to have no basis in reality. Further investigation reveals many other features of the healthcare market that economics teaches us will increase transaction costs and the misallocation of resources. The prices we discussed are generally not paid by the patient, but by a third party insurer. Often the patient isn’t even able to select the insurer, but is assigned one by his or her employer. What the patient thinks of the insurer’s ability as a steward of his or her premiums is irrelevant. Further, contracts between providers or pharmacies and the insurer completely hide the true price from the patient’s review. In addition, anti-competitive certificate of need laws limit competition between providers and expensive regulations compel providers to merge in order to compete in a nuclear arms race with the insurers, although the real victim is the patient’s wallet over which the providers and insurers fight their proxy wars. The best way to explain the US healthcare system is if you took every economic best practice and then to did the opposite. How does one get out of this mess?

Academics and physicians from places like Boston and San Francisco often argue that this situation is proof that free market healthcare has failed America and that the only solution is to implement a nationalized single-payer model. Writing in Medical Economics, Dr. Anish Koka makes the above point that “labeling this “the free market” is about as pure as labeling the offspring of a Great Dane and a Chihuahua a purebred” and retorts that the way out of this quagmire isn’t towards a centralized single payer, but to normalize a price driven medical market. When presented with this argument these Boston types profess their support of free markets in general, followed by a regretful proclamation that markets can’t work in healthcare because medicine is not a generic commodity or that people don’t shop.

But Dr. Koka is ready for this and preempts the argument by presenting the case of the Surgery Center of Oklahoma. Founded by Drs. Keith Smith and Steven Lantier in Oklahoma City in 1997, the Surgery Center does not accept insurance and operates on a cash basis directly with patients, or on a contract basis with businesses self-funding their employees’ healthcare. The prices for their procedures are available online and are binding, you won’t be surprised by unexpected items being added to you bill.  Their transparency and quality has earned the Surgery Center high praise from patients domestic and international, and their success is evidenced by their ability to survive for 20 years despite their unique model (unique for healthcare, that is, any fast food restaurant would be quite familiar with it, perhaps that’s why we’re more efficient at creating COPD than treating it?) Dr. Koka proposes that making the Surgery Center’s price model the standard will reveal and remove all the bureaucracy, middlemen and inefficient practices that are making the American healthcare system so expensive.

However, despite the success of the Surgery Center of Oklahoma, there really are features inherent to healthcare that make extension of the price mechanism to the rest of the market impossible or impractical. Every Russian schoolboy knows that one of the first criticisms of the market mechanics in medicine was the recently passed Nobel winner Ken Arrow’s “Uncertainty and the Welfare Economics of Medical Care“. From a libertarian perspective Arrow’s critique is a mixture of truth and opinion, but nonetheless it is a good starting point. He himself wrote that the short paper is an “exploratory and tentative study”.

Arrow’s analysis is built around the ubiquity of uncertainty in the medical field and proposes that “virtually all the special features” of medicine come from this origin. The first unique characteristic is that demand for medical care is irregular and unpredictable. Although there are other industries where demand is irregular, there is truth that relying on insurance financing schema would make a market less competitive as it adds a middleman between the patient and physician. This comment also shows the age of the analysis; written in 1963, when insurance was not as prevalent as it is today (although already a captured market with the employer sponsored insurance tax benefit in place) and medical care was still oriented around irregular acute cases rather than the reliable chronic diseases that are the greatest burden in medicine today.

Arrow next remarks that the physician has a responsibility for the patient’s welfare far above that of a typical salesman, such as a barber (I’ll write more about the Barberians at the Gates of healthcare later). While this is true of the profession in theory, in practice there is a robust medical malpractice industry that is a testament to the fact that in the end physicians are still human and there are good ones, bad ones, and sometimes even evil ones. I have no reason to believe that physicians are more saintly than barbers.

Arrow then makes his best point, which is that medical care is inherently different from commodities because the success of medical care is uncertain. In particular, this point is most relevant to the Surgery Center of Oklahoma’s model, which provides medical services that are most commodity like in their reliability and outcomes. Happy hip replacements are all like, every unhappy chemo response is unhappy in its own way.

Finally, Arrow concludes by pointing out that medicine is endemic with licensing restrictions on entry, uncompetitive pricing, and price discrimination based on income levels. This is a tautology that medicine can’t be a competitive free market because it hasn’t been a competitive free market. We’ve seen industries standardize as they mature (finance) and deregulate (airlines), so there’s no reason to believe medicine’s professional culture can’t change.

From Kenneth Arrow’s analysis we can see that there are some concerns about the uniqueness of medicine that aren’t true, some that are irrelevant, and some that are legitimate. It is these valid impediments to free market operation that need to be considered seriously before we propose that the price competition model should be extended to the rest of the market. Arrow’s most relevant point was that the success of medical services is uncertain, but in fact there are many more.

The first set of problems is cases where patients shopping is either impossible or socially undesirable. This includes shopping for medical services and health insurance, since the unpredictable incidence of disease makes the two inseparable, as Kenneth Arrow pointed out. The most obvious example is emergency medicine, which has already been culturally recognized in America as a universal service with the passage of EMTALA. An unconscious person brought into the ER by definition can’t price shop for services. Similarly, we don’t want insurers to be able to price shop by keeping ERs out of network. When I have an emergency, I need the ambulance to bring me to the closest ER able to take care of me, not the closest one that my insurer decided is a good value. Similarly, physicians are correct to be outraged with insurers trying to not cover care performed in the ER that they deem inappropriate for the ER setting. It’s absurd and dangerous to expect patients to self-diagnose when deciding whether to go to the ER. Finally, even the most brave libertarian would be hard pressed to say that the woman who recently pleaded not to have the ambulance called should not receive emergency care if she can’t afford it. I certainly can’t say it, and there are some on Twitter who have been impressed with my lack of empathy. If we as a society agree that emergency care is a public good and that shopping for it is impossible, shouldn’t coverage of ER services be nationalized?

Emergency Medicine is only 2-5% of healthcare spending, but it does demonstrate that there really are parts of medicine where free market competition is impossible. It’s a cornerstone from which the rest of my critique proceeds. Healthcare decisions that have negative externalities on the public are another example where shopping is undesirable. Mass vaccination of the public was one of the most successful medical developments of the 20th century, and the public health benefits provide a good reason for not only vaccination but all infectious disease treatment to be nationalized and available to the public at no cost. Coughing patients not going to the hospital because they’re afraid of the cost is how zombie movies and ebola epidemics start.

We also don’t want shopping to occur when the beneficiary of the medical care can’t shop for themselves. Here I am specifically referring to perinatal and child healthcare. Should infants have their entry into the world endangered because of women not being able to afford their prenatal care? Should children be required to not receive healthcare because their parents are not able to afford, or even worse choose not to purchase, child insurance? There are arguments to be made against John Rawls’ theory of justice, but they usually are based on adults using their agency to take advantage of such a system, which children by definition of their minor status can’t do. The national insurance coverage rate for children is 95.2%, it should be 100%. It is in the public’s interest that all children can receive appropriate care until they reach adulthood and are allowed to start screwing up their health however they wish.

The next set of problems are related to the nature of disease. Unlike televisions and cars, we don’t choose to buy the bodies that we are born into. As the existentialists argued, we are thrust into existence without our consent. This absurdist nature of our lives comes with many equity and justice problems, the most Rawlsian of which are pre-existing conditions, whether genetic disorders such as cystic fibrosis or more nuanced diseases like Type 1 diabetes. Disease like these, especially so when they are progressive, are a permanent tax on individuals’ ability to operate on a daily basis and impede their physiological, psychological, and financial wellbeing. The part about financial wellbeing is most important in this discussion, because these conditions directly decrease the patient’s ability to finance the healthcare that they need. Despite all the injustices and inefficiencies of cross-subsidization in healthcare, if we as a nation really are a unified community, then don’t the healthy among us owe it at least to those who are sick since their youth to support their healthcare financially as a thanks for taking the bullet during the genetic Russian roulette at birth? We did nothing to deserve to be healthy and  they did nothing to deserve to be ill; we can’t deny that we know this to be true.

The next problem is the mental health elephant in the room, which patients don’t talk about because of stigma and policy wonks avoid because there aren’t any clear solutions. In the past we used to have thick family structures to keep us insulated from life’s shocks and priestly confession to keep us from going crazy of guilt. The world developed and we became solitary atheists, but the problems of our minds remain.  Jordan Peterson often talks about how just about everybody either has or knows somebody with a mental disorder, but we still have to get up in the morning and go to work. The result is a society that is increasingly addicted, depressed, and suicidal. Similarly to genetic disorders, mental health disorders progressively decrease our ability to finance the healthcare that we would need, but to make matters worse they also inhibit our ability to even recognize that we need healthcare or to negotiate the prices for that healthcare, in a way that cystic fibrosis does not. There’s a perverse libertarian economic argument that an alcoholic with hepatitis who uses his money to buy more alcohol is making a welfare efficient decision because he is buying exactly what he wants. If we want society to remain even moderately functional, we have to reject this argument. Mental health is yet another area where price mechanisms are untenable.

Finally, we need to discuss chronic disease management and the problem it poses to the medical field. When Kenneth Arrow was writing in 1963, the majority of healthcare was infectious disease treatment and low-probability surgeries, or conditions amenable to insurance financing mechanisms. Back then obesity affected 10% of the population and childhood overweight was virtually non-existent. Today 75% of the population is overweight and 40% is obese. 50% of the population has at least one chronic disease. The obesity, addiction, and e-cig trends all indicate that the problem is only going to get bigger. It is increasingly becoming not a question of whether somebody will get a chronic disease, but when they will get it. Conservatives correctly raise the concern that insurance covering a known adverse event is no longer insurance. The problem is further complicated by the fact that although there are behaviors that can significantly improve their outcomes, there are many smokers who won’t develop COPD and there are many exercise junkies who will get diabetes. These diseases have too many causal variables to attribute blame to any specific reason. But we can’t throw up our hands and give up just because insurance isn’t going to be a viable financing mechanism. Is price driven medicine a viable solution? It doesn’t seem so. The problem is that chronic diseases are developed over decades from the accumulation of strain caused by daily living and normal aging, with the majority of costs rapidly (and somewhat reliably) materializing in the last 1-2 decades of a person’s life. People don’t consciously factor in the cost of diabetes 40 years from now when they decide to eat a slice of pie because they simply can’t forecast effectively over such a long horizon. The correct financing mechanism to solve this asymmetry is not an insurance (the outcome is known) or uninsured shopping (the cumulative cost is too high) but a long maturity bond, with the person paying into the bond over the course  of their life with the bond paying out a large lump of cash at maturity. Sound familiar? That’s exactly how pensions work, which is something that has always been nationalized (the problems with our pension schemes is a separate discussion).

To conclude, this is not a critique of the Surgery Center of Oklahoma’s model, which I praise and admire, but a beginning analysis of its limitations. The broader problem that I see is that much of the health insurance market is already nationalized through Medicaid, Medicare and the VA. The reality is that it is politically impossible to reverse from this position. If we then add to this list emergency medicine, perinatal healthcare, child healthcare, genetic diseases, mental health and chronic disease management, all of which I earnestly believe have a legitimate case to be nationalized, then what are we left with for free market shopping? Surgeries and generic drugs? At that point you might as well nationalize the rest just to simplify things and remove any regulatory asymmetries. I hate to say it, but it’s not clear to me that single payer (or at least universal coverage + optional private supplemental coverage) isn’t the right solution.

Healthcare Reform is Comatose

The Sanders/Klobuchar/Graham/Cassidy CNN healthcare “debate” is a must watch for anybody who cares about healthcare reform in the US. However, it’s not important because it was filled with intelligent and critical discussion of the health care system’s problems and the smartest ways to fix them. On the contrary, it’s essential viewing because it reveals how politically dogmatic and intellectually lazy the two sides have become.

To start off, the bright point of the debate was that both sides seem to finally agree that the ACA isn’t working. When the ACA marketplace’s average deductibles increased to $6,000 and premiums increased by 17% in 2017, the true believers argued that this was a one-time actuarial adjustment as the marketplaces aligned themselves to the demographics of the newly insured population. As we get closer to 2018, this position is becoming increasingly indefensible as it’s becoming clear that exchanges are going to see another wave of large premium increases. Florida, a state that expanded Medicaid under the ACA, is forecasting a 45% increase. It shouldn’t be a surprise that the marketplaces are spiraling since ACOs, which were the primary cost saving mechanism in the ACA, have been a tremendous failure at producing any meaningful results. Importantly, this mechanism has been a failure nationally as well as locally in Massachusetts, which was lauded as a better version of the ACA because it had more robust wealth transfers and higher individual mandate penalties. This is why nobody at the debate tried to argue that the ACA is working. The Democrats praised the law for expanding coverage, but were also eager to admit that something is rotten in the state of Denmark and called out to their Republican colleagues to work together on fixing it together. And this is where the problems begin. Despite agreeing that cooperation will be needed, the ACA has warped policy thought in DC to such a degree that neither side is capable of thinking of solutions outside of the “fund the ACA” vs “defund the ACA” paradigm.

Republicans for their part are completely obsessed with pushing through a repeal bill that also controls Medicaid spending. While their hearts may be in the right place (the CMS trust is still scheduled to run out of money in 2029), this is a fight against reality. Three Senate vote defeats have made it clear that a bill that reduces future spending will not pass and that bill writers need to move into a new direction, including consideration of increasing taxes to stop the fiscal hemorrhage. The proposed Trump tax cuts, however, provide little hope for a balanced budget. Similarly, the desire to completely delegate healthcare policy to the states is also unrealistic. Nicholas Bagley wrote up a reasonable critique pointing out how despite transferring control of funds, the federal government is not going give states the ability to pick and choose federal regulations. What may have worked for welfare in the 90s probably would not work for healthcare because of the entrenched special interests that protect themselves from competition through legal barriers to entry.

Democrats, on the other hand, may be in an even worse position. They quite literally have no idea what to do about the ACA. This is why Hillary’s campaign position on healthcare could be accurately summarized as “we will do stuff.” Despite agreeing with the Republicans that the ACA isn’t working, they seem to have stumbled unwillingly to the bizarre conclusion that the solution is to throw more money at the fire. The Maine and Alaska reinsurance programs Klobuchar championed at the debate is simply taxpayer funded nationalization of sick patients and their costs, and Graham was correct in criticizing it as throwing good money after bad. The other proposal from the Democrats is Bernie’s Medicare for All single payer, which not only throws good money after bad, it throws enough money to bankrupt the nation within a decade (his own words, not mine). The helplessness of the Democratic position is therefore fueling the growth of a malaise among ACA supporters. Where there was once exuberance and joy about the law’s potential, there is now a resigned feeling that this is the best that we can do. Aaron Carroll, ACA proponent and one of the panelists on NYTimes’ recent “Best Healthcare System” tournament, now says that “THERE IS NO WAY TO SPEND LESS, COVER MORE, AND MAKE IT BETTER” (his emphasis, not mine), which effectively concedes that the ACA does nothing to push the health production possibility frontier outward. Aaron Carroll is obviously wrong about this; competition and innovation have been making healthcare cheaper, broader and better for a century now. But more importantly, that statement reveals the lack of imagination that pushes the Democrats to promote more spending. In their view the only way to improve care for everybody is to spend more, so if we’re doomed to spend more then it’s better to do it now rather than later. There’s an internal logic to this fiscal suicide. In addition, because deficit spending and redistribution are critical to this vision, they are also doubling down on centralization of healthcare management in the federal government. Aaron Carroll criticizes the Republican’s state-oriented vision by claiming that none of the states have any idea how to fix this mess. It’s a strange  argument to use to defend the ACA, because it makes the false assumption that the federal government somehow does know what to do and ignores the fact that the ACA itself was a watered down version of a state idea.

Ultimately the biggest problem is that neither of these boring approaches is going to solve America’s problems. The ACA isn’t what’s wrong with healthcare in the US, it just magnified the problems by adding more money into the system. Whether you eliminate it completely or empower it with more money, you’ll still be left with the same structural problems that are driving the irrational healthcare sector. There are critical market focused reforms that need to be made to price transparency, provider market entry, occupational licensing, health insurance purchasing, drug patent law and funding for behavioral health, all of which would immediately and significantly bend the healthcare cost curve. Instead we’re going to keep going back and forth about ACA funding. With so little brain activity going in Congress, the only plausible conclusion is that healthcare reform is comatose for the foreseeable future until something critical breaks.

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)

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 3. This act shall take effect immediately.

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


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?


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…


… 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.

Review: Rand Paul’s Obamacare Replacement Act

January 2017 is Obamacare hunting season and Sen. Rand Paul decided to throw his replacement plan proposal into the mix of Republican ideas on the discussion table. Finally we have something concrete and serious from the Republicans to work with. The summary can be found here and law nerds can find the entire 149 page bill on Capitol Hill here. So how does it look? Well, it’s not great. It’s actually pretty bad for a variety of reasons rooted in poor understanding of economics and human behavior, but let’s go over the summary section by section.

Repealing Obamacare

  • Effective as of the date of enactment of this bill, the following provisions of Obamacare are repealed: Individual and employer mandates, community rating restrictions, rate review, essential health benefits requirement, medical loss ratio, and other insurance mandates.

Alright, repealing the individual mandate is an immediate reprieve for the 6.5 million poor taxpayers whom the government was forcing to pay $3.0 billion in penalties because they valued having money for things like food and rent more highly than subsidized health insurance. Repealing the employer mandate is a benefit more broadly to the working class by making it easier for employers to hire above the 50 person boundary imposed by Obamacare. Repealing the insurance regulations and requirements allows them to revisit their plans and deliver a greater diversity of products that better match consumers needs. We’re doing well so far, let’s see what’s next.

Protecting Individuals with Pre-Existing Conditions

  • Provides a two-year open-enrollment period under which individuals with pre-existing conditions can obtain coverage.
  • Restores HIPAA pre-existing conditions protections. Prior to Obamacare, HIPAA guaranteed those within the group market could obtain continuous health coverage regardless of preexisting conditions.

Another good change. The patient protection portions of the Patient Protection and Affordable Care Act were popular for obvious reasons, but they’re also the reason why it should be called the Patient Protection and Unaffordable Insurance Act. The Obamacare regulations give far too much protection to individuals and open up the insurance market to abuse by patients who take advantage of their information asymmetry by signing up for insurance only when they anticipate heavy usage of the healthcare system. Rolling back the regulations to the 1996  HIPAA pre-existing condition rules restores to insurance companies ways to protect themselves from such manipulation. These are good changes so far, but unfortunately this is the repeal portion of the bill. The rest is the replace portion, and it’s all downhill from here.

Equalize the Tax Treatment of Health Insurance

  •  Individuals who receive health insurance through an employer are able to exclude the premium amount from their taxable income. However, this subsidy is unavailable for those that do not receive their insurance through an employer but instead shop for insurance on the individual market.
  • Equalizes the tax treatment of the purchase of health insurance for individuals and employers. By providing a universal deduction on both income and payroll taxes regardless of how an individual obtains their health insurance, Americans will be empowered to purchase insurance independent of employment. Furthermore, this provision does not interfere with employer provided coverage for Americans who prefer those plans.

This is very bad economics. For those not familiar with this issue, there is a massive loophole in the tax code where health insurance benefits provided by the employer are not subject to taxation. The rule is rooted in World War II wage controls where employers were not allowed by the government to give employees salary increases because of the war effort, but the worker unions negotiated to be allowed to receive health insurance benefits instead of additional wages. Except the tax code did not have any provisions for these health insurance benefits. By the time that Congress realized this loophole, the unions had also realized that  they were effectively receiving a subsidy from the government on every dollar that they got paid in health insurance as opposed to wages, and the practice became so widespread that politicians were not able to muster the courage to go through with the fix. The result is that 60% of Americans receive insurance through their employer. This is an enormous economic problem, because it completely distorts the insurance market. The employer does not know your preferences, willingness to pay, and healthcare needs. Therefore making the employer  the primary purchaser of health insurance guarantees sub-optimal insurance selection and decreases market competition. If your employer provides only one or two insurance plan choices, did you as a consumer really participate in the insurance marketplace? By tying the insurance to the employer rather than the individual, it makes insurance less portable and forces the individual to renegotiate their insurance every time that they get a new job or move between state which makes people less likely to do so if they do develop a condition. In addition, the tax loophole results in an effective market distortion of the pricing signals (if they existed, more on that later) that the economy creates. By giving health insurance an effective 20-30% subsidy, this guarantees that people will purchase more insurance than they need and that providers, knowing that there is an excess of insurance protection in the marketplace, increase their prices in order to take advantage of this fact. This doesn’t make healthcare easier to pay for the insured, and makes it MORE difficult to afford for the uninsured. Expanding this loophole to insurance premiums for the sake of “equality” only makes the problem worse!

Expansion of Health Savings Accounts

  • Provides individuals the option of a tax credit of up to $5,000 per taxpayer for contributions to an HSA. If an individual chooses not to accept the tax credit or contributes in excess of $5,000, those contributions are still tax-preferred.
  • Removes the maximum allowable annual contribution, so that individuals may make unlimited contributions to an HSA.
  • Eliminates the requirement that a participant in an HSA be enrolled in a high deductible health care plan. Currently, in order to be eligible to establish and use an HSA, an individual must be enrolled in a high-deductible health plan. This section removes the HSA plan type requirement to allow individuals with all types of insurance to establish and use an HSA.

In addition to the above changes, there is a very long list of HSA deregulation giving people more freedom in how they can spend their HSA accounts and how they can transfer that money between people and funds if necessary. This is the core of the new Republican healthcare agenda, trying to move people off unlimited premium driven insurance plans and to a more cash based healthcare market. It’s a great idea, but it’s necessary to be critical and skeptical about this bill’s implementation. Critical because these changes further expand the tax loophole described above to cash based purchases of healthcare, which further inflates healthcare prices. This hurts the uninsured more than everybody else, because the insured are loss protected after their deductible limit is reached. It’s also necessary to be skeptical, because promoting health savings accounts implies that people are able to take their cash and use it to make purchases in a transparent competitive free market. No such thing exists.You can’t go to your local hospital’s website, navigate to the orthopedics section, and find out the cost of a hip replacement. Healthcare is the only industry where there are no publicly available prices and it’s acceptable to quote a price after the service has been delivered. Imagine airlines billed you for a transcontinental flight AFTER you arrived at your destination. Would you be surprised if they tried to overcharge you? Without transparent prices it’s completely irrational for consumers to try purchasing their healthcare on a cash basis. It’s safer to stick with your insurance than risk it with the HSA. Providers, for their part, will never be the first to provide prices because doing so would mean that they would have to actually compete for business and innovate, instead of generating profits by overcharging your insurance behind the scenes. Despite all the changes proposed by Sen. Rand, HSA’s in this bill are a non-starter without provider side reforms.

Charity Care and Bad Debt Deduction for Physicians

  • Amends the Internal Revenue Code to allow a physician a tax deduction equal to the amount such physician would otherwise charge for charity medical care or uncompensated care due to bad debt. This deduction is limited to 10% of a physician’s gross income for the taxable year.

Is this real? Somebody pinch me. Besides the obvious critique that this is a physician senator peddling to the physician special interest, here’s why this is a terrible idea. In Brazil health expenditure is a limitless tax deduction. So what do people do? They go to their friendly neighborhood physician and have him write out receipts for a large amount of fake healthcare which they use to reduce their taxable income while giving the physician a kickback for his cooperation in the scheme. Every single physician will max out this Sen. Paul tax deduction. Physicians  who did not have enough uncompensated care during the year will go to their friendly neighborhood uninsured patients to “provide” charity care until they reach 10% of gross income. In addition, this rule encourages physicians to increases the cost of their services, because Increasing their billing to insured patients increases their gross income, which in turn increases the allowed net amount of the 10% tax deduction.

Pool Reform for the Individual Market

  • Establishes Independent Health Pools (IHPs) in order to allow individuals to pool together for the purposes of purchasing insurance.
  • Amends the Public Health Service Act (PHSA) to allow individuals to pool together to provide for health benefits coverage through Individual Health Pools (IHPs). These can include nonprofit organizations (including churches, alumni associations, trade associations, other civic groups, or entities formed strictly for establishing an IHP) so long as the organization does not condition membership on any health status-related factor.

Sure, deregulation is good, but this won’t go anywhere as long as employers provide insurance. Businesses will always have more negotiating power against insurers than self-organized groups of individuals, so people will always get a better deal from their job than their individual group.

Interstate Market for Health Insurance

  • Increases access to individual health coverage by allowing insurers licensed to sell policies in one state to offer them to residents of any other state.
  • Exempts issuers from secondary state laws that would prohibit or regulate their operation in the secondary state. However, states may impose requirements such as consumer protections and applicable taxes, among others.
  • Gives sole jurisdiction to the primary state to enforce the primary state’s covered laws in the primary state and any secondary state.
  • Allows the secondary state to notify the primary state if the coverage offered in the secondary state fails to comply with the covered laws in the primary state.

In addition to HSA’s, this is the other major tent pole of the new Republican health insurance agenda. Trump especially emphasized deregulation of state barriers on insurance as a major fix to the health insurance market. That’s probably not the case. The problem is that insurers trying to move into new states do not have a provider network in the target state, and therefore have no negotiating power which results in plans that are more expensive and networks that are smaller than the incumbent insurers. Even Kaiser ended up fumbling when they tried expanding to the east coast. The idea is good, and the changes are a move in the right direction, but it likely won’t be meaningful except for cases where insurers are especially abusive in their relationship with the local providers.

Association Health Plans

  • Association Health Plans (AHPs) allow small businesses to pool together across state lines through their membership in a trade or professional association to purchase health coverage for their employees and their families. AHPs increase the bargaining power, leverage discounts, and provide administrative efficiencies to small businesses while freeing them from state benefit mandates

More bad policy. We discussed already how employer sponsored health insurance is bad because it limits individual participation in the insurance marketplace and results in suboptimal health insurance utilization. While this change has the understandable goal of increasing small business bargaining power against insurers, it only expands the employer’s presence in the insurance marketplace when we need less of it. In the words of American philosopher Donald Trump, “Bad!”

Anti-Trust Reform for Healthcare

  • Provides an exemption from Federal antitrust laws for health care professionals engaged in negotiations with a health plan regarding the terms of a contract under which the professionals provide health care items or services.
  • This section applies only to health care professionals excluded from the National Labor Relations Act. It would also not apply to contracts or care provided under Medicare, Medicaid, SCHIP, the FEHBP, or the IHS as well as medical and dental care provided to members of the uniformed services and veterans.

Hold on. Full stop. What? So if a health insurance company tries to negotiate a rate with an independent specialist, the Sherman anti-trust act is waived and he is allowed to collude with all the other independent specialists in an area in order to push up his negotiated rates? In an economy where physicians are generally overpaid compared to their counterfactuals? From an economic perspective that’s fine, cartels fall apart because there’s always an incentive for members to cheat and eventually one of the colluders will independently agree to lower rates in exchange for more referrals. But Anti-Trust Reform? Let’s at least be honest Sen. Rand “Physician Special Interest” Paul that this will only increase cost of care and call it Trust Empowerment.

Increasing State Flexibility to Conduct Medicaid Waivers

  • Provides new flexibilities to states in their Medicaid plan design, through existing waiver authority in current law.

The final tent pole in Republican healthcare policy, giving power back to the states, a tale as old as time. This is guaranteed to be part of the final policy, regardless of whose plan is passed. Innovation and decentralization is good and I look forward to what the states will create.

Self-Insurance Protections

  • Amends the definition of “health insurance coverage” under the Public Health Service Act (PHSA), and parallel sections of ERISA and the Tax Code, to clarify that stop-loss insurance is not health insurance.
  • This provision is designed to prevent the federal government from using rule-making to restrict the availability of stop-loss insurance used by self-insured plans.

This is interesting. Some of these regulations are decent, like requiring stop-loss insurance to cover unpaid claims if the small business plan terminates. Others, like requiring a certain amount of healthcare spending before stop-loss is allowed to kick in, are very invasive. That being said, it is completely correct to say that stop-loss insurance is not health insurance. If it were, every single financial product that insurance companies use to manage their risk profile could be construed as health insurance.


What’s the verdict? It’s pretty disappointing. The only good thing it achieves is the repeal itself, because the replacement is mediocre. A mixture of decent changes that aren’t going to reduce costs significantly (interstate sale, individual pool reform) and well-intentioned bad policy (tax treatment equalization, association health plans).

In fact, it’s embarrassing that people claim Sen. Rand Paul is libertarian leaning when this bill engages in such heavy manipulation of the tax code and obvious  pandering to the physician special interest. The biggest problem with the bill is that it focuses entirely on health insurance reform and does nothing with respect to  regulation on the provider side of the equation. Obamacare proved that you can’t reduce health care costs through financial engineering, but even Obamacare tried to address provider behavior with bundled payments and the accountable care organizations. Healthcare COSTS will not be reduced until providers have to quote prices, until incumbents are no longer protected by certificates of need, and until the physician trade union is no longer protected by scope of practice and licensing restrictions.

Failing to push any provider side change(except for empowering their cartel powers!), or provide any evidence based insurance reforms, the bill gets a C+. Why not an F? There’s a fringe case where it could work out. The tax treatment equalization section means that there will be no tax treatment difference between employer sponsored health insurance premiums being paid directly by the employer or by the employee. Therefore some employers may opt to increase employee wages and not pay directly for health insurance in order to appear more competitive in the job market. Healthy employees then could choose to opt out of health insurance and keep the money instead of buying through their employer. This would result in an employer sponsored insurance death spiral due to increasing average costs, which would ultimately increase the uninsured population and could force providers to compete on price. That’s a lot of ifs, however. A simple “providers must quote a real price on their website for every episode of care that they provide” bill is much more reliable.

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.