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Tag Archives: Uwe Reinhardt

Industries afflicted with Baumol's Disease have slower productivity growth.

It might be tough to use statistics to judge US health care.

Among OECD countries (Organization for Economic Cooperation and Development), from 1980 to 1999, for life expectancy, the US ranked #19 and Canada was #5. However, the order flips–US #1 and Canada #4–once you exclude fatal injuries like auto accidents, suicides and murder.

Similarly, the US has had a higher infant mortality rate than Canada. The reason, though, could relate to our higher incidence of teenage pregnancies. Teenagers tend to give birth to babies with a higher mortality rate because of their lower birth weights.

You see where this is going. If a candidate defends his healthcare policy by referring to a health outcome like life expectancy or infant mortality rates, we need to be sure that the statistic actually reflects our healthcare system and not another characteristic of our society. And it even gets more complicated because we could say that we have 3 healthcare systems: Medicaid, Medicare and private insurance with a fourth on the way when statewide healthcare exchanges begin.

On which statistics would you base your your policy preferences for the US healthcare system? Or maybe we should just remember what Benjamin Disraeli (1804-1881), British Prime Minister under Queen Victoria said:

“There are three kinds of lies: lies, damned lies, and statistics.”

Election Economics Topics:

 

Sources: In this 2007 NY Times column, Harvard professor N. Gregory Mankiw looks “Beyond Those Health Care Numbers” while I also referred to this Forbes article and this econtalk podcast on misleading healthcare system statistics. Finally, for a perspective that takes us away from the stats and to the bigger ideas that are driving this election, do look at what Princeton economist Uwe Reinhardt says in his NY Times economix.com articles.

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I get concerned when people say we may need to start rationing health care. Like most goods and services, because there is a limited supply of health care, we have always rationed it. In some way, we had to decide who would get more and who would get less. And that is rationing.

Now, with a SCOTUS decision that has validated an insurance buying mandate, it is possible that our rationing system will change. Princeton economist Uwe Reinhardt suggests that cost effectiveness will have to enter health care decisions.

And that takes us to the price of an extra year of a human life.

Explaining how to price life, Dr. Reinhardt uses QALY: Quality-Adjusted Life Years and a curve (below) that represents the most cost effective approach. Starting on the curve at the far left and moving rightward on the curve to point Z, every dollar spent has a relatively good extra year return. Then though, as the curve goes vertical, the extra life span diminishes.

Where on the curve do you say no?

At $10 for an extra year of life? $100? $1000? $100,000? $10 billion?

For whom?  A hip replacement for a healthy 35 year-old? For a healthy 85 year-old? Yearly mammograms for all women past 50? A 45 year-old who is grossly obese, has diabetes and heart problems and now needs a kidney? A $100,000 drug dose after a heart attack?

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From: http://economix.blogs.nytimes.com/2009/03/20/pricing-human-life-years/

Discussing how to ration, Dr. Reinhardt suggests we contemplate the following:

1. Should we establish a maximum price beyond which society will not buy additional QALYs out of collective insurance funds?

2. If there is a maximum price, should it apply to everyone equally? Rich and poor? Famous and unknown? Science researcher and manual laborer? Old and young?

Whether our current health care system is based on individual decision-making, ability to pay or government, it still is all about rationing.

Here and here, Dr. Reinhardt clearly explains key issues that have become the “third rail” of health care politics like cost effectiveness. He also directs us to this paper with a fascinating chart of the cost of a life for 500 life-saving interventions.

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Pondering healthcare reform again, I came across this comment from Adam Smith, 1776, WEALTH OF NATIONS:

22] We trust our health to the physician: our fortune and sometimes our life and reputation to the lawyer and attorney. Such confidence could not safely be reposed in people of a very mean or low condition. Their reward must be such, therefore, as may give them that rank in the society which so important a trust requires. The long time and the great expense which must be laid out in their education, when combined with this circumstance, necessarily enhance still further the price of their labour.
(Book 1, Chapter 10)

In our Econlife note for December 22, 2009, Uwe E. Reinhardt (Princeton economics professor) discusses doctor pay.
http://economix.blogs.nytimes.com/2009/07/17/what-is-a-just-physician-income/
You might also look at:
http://economix.blogs.nytimes.com/2008/11/14/do-doctors-salaries-drive-up-health-care-costs/
and

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