Archive for the ‘Health’ Category
And now for something completely different… For 25+ years, I have suffered from a propensity toward lots of bad upper respiratory infections (URIs) and associated secondary bacterial infections. Recently, I have found two simple interventions that appear to have solved this problem and dramatically improved my quality of life.
First, the history. Ever since I can remember, at least back to high school, I have come down with more than my fair share of URIs. This source says that adults average 2-4 colds per year. I typically averaged 6-8. Moreover, my URIs seemed more severe than other people’s. This study on zinc lozenges says the average length of an untreated cold is 7.6 days. I typically averaged 10-14 days.
Even worse, I developed a lot of secondary bacterial bronchitis and sinusitis, which meant a lot of antibiotics. There were two periods, one in college and one in my late 20s, where I had 3 sinus infections per year for several years. They’d put me on inhaled steroids, which would solve the problem for the six months I was on them plus another six months, after which the sinus infections would return.
Finally, about 2.5 years ago, my father suggested I try a nasal irrigation syringe. I had tried a Neti pot previously without much luck, but the syringe seemed more usable and to generate better irrigation. After about 2 weeks (and two instances of experiencing copious amounts of amazingly neon-colored discharge), my sinuses were clear for the first time in years. I haven’t had a single sinus infection since.
Now, I still had the URIs. They weren’t as bad because I didn’t have painful sinus pressure or develop sinus infections, but they still sucked. This winter, I was on my normal trajectory of 3 colds between Halloween and New Year’s. Then I went for my physical in January and my doctor said my serum vitamin D was very low: 17 ng/ml when the recommended range is 30-100. So I started taking 1,000 IU of D-3 twice a day.
I haven’t had a severe URI since. I think I’ve had a couple of colds, but their quality is completely different than in the past. Hardly even worth mentioning compared to my previous experience. Could be coincidence. However, vitamin D is crucial to enabling the activation of your immune systems T-cells. So an improved immune response makes sense.
Rinsing my sinuses with saline once or twice a day and taking a vitamin supplement twice a day are pretty simple interventions. Probably cost 10-20 cents per day. Extremely low risk of adverse reactions. But if they only improve my experience to the average (and I seem to be doing better than average now), I can expect about 60 more days per year free of URI symptoms. If I’d known about this 25 years ago, that would be a cumulative 4 years saved!
I could have started a whole other startup with the time I spent sick in bed or barely functional at work.
It seems like as our health diagnostic, tracking, and analytic technologies progress, we should be able to identify these situations where simple interventions can result in dramatic health improvements. I imagine we could see a tremendous improvement in economic productivity if my experience is any barometer.
In this post, I disputed the so-called “scientific” exercise program of Little and McGuff. So I figured it was probably worth describing the exercise program that I do believe the science supports. The following recommendations hold for the “average” person who simply wants to be in decent shape for every day life.
I wanted to like Little and McGuff’s Body By Science. The fact is that most people, from novices to professionals, follow exercise programs that at best waste their time and at worst are counterproductive. BBS does do a good job of pointing out these areas. However, the conclusions it draws about what people should do instead are also not well supported by the science.
I get the feeling that Little and McGuff started with a pre-conceived exercise ideology and then went hunting for science that supports it. I would sum up this ideology as: less is more, weight machines are better than free weights, cardio is bad. The actual science on this is strong, non-existent, wrong.
What really rubbed me the wrong way was how they evangelized their specific program . I categorize the objectionable evangelical tactics into three categories: blinding readers with science, selective application of principles, and just plain wrong.
The trials chronicled in Part I have a happy ending. I eventually obtained an excellent individual plan from Assurant Health. I followed my own advice and got a high deductible plan that covers no primary care. I thought it would be worth comparing to the traditional PPO coverage I had previously.
The table below shows the salient aspects of each plan. To compare apples to apples, I had to estimate the 2010 premiums for the previous plan. I used a 9% increase over 2009, which is what a PricewaterhouseCoopers survey says will be the average for employer sponsored plans. Note that this is less than the 10.8% actual increase my company saw from 2008 to 2009 on this plan.
|Office Visits||$35||$0, after meeting deductible|
|Generic Drugs||$15||$0, after meeting deductible|
|Brand Name Drugs||$35||$0, after meeting deductible|
We see something very interesting here. The annual premium on the new plan is $9,833 less than the estimated annual premium on the old plan. Now, we all get checkups each year. Also, my wife and son have monthly medications they take for allergies. Adding in the copays for those yields extra $500 on the old plan, pushing us to $10,333 more guaranteed expenditures on the old plan than the new plan. Obviously, this excess is more than the new plan’s deductible.
So there’s no way I can loose on the new plan. If we stay healthy, I get to pocket $10,333 minus the cost of routine visits and medications. If something bad happens and someone has a major medical issue, I save at least $8,333 due to the deductible and coinsurance on the old plan. Probably much more due to co-pays for additional office visits and prescriptions, which are not limited by the out-of-pocket maximum. I actually ran the scenarios and there’s no way I don’t save at least $5,000 per year.
Moreover, the new plan is much better at insuring against catastrophic loss. The lifetime maximum is 2.5 times as high. That’s a real selling point for me. I don’t want the plug pulled on my ventilator because my insurance ran out.
How can this be? Why do we even have PPO plans? You may think the tax deductibility of employer-paid premiums is the reason. But this doesn’t explain why employees wouldn’t choose an employer-sponsored version of the high deductible plan. Those are paid with the same pre-tax dollars. (It also doesn’t affect me because I’m technically self-employed and deduct my premiums anyway). It certainly explains why the CEO of Whole Foods is absolutely right to offer his employee’s a high deductible plus HSA plan. It saves everyone money. The math speaks for itself.
The only explanation that makes sense is that people want to spend more on health care when it doesn’t come out of their own pockets. A combination of moral hazard and mental accounting. On the moral hazard front, they go to the doctor more often than they otherwise would because the marginal cost to them is so low. On the mental accounting front, the automatic monthly deduction from their pay is less painful than personally writing checks to pay doctors. But it’s irrational.
Perhaps some marketing wizards should figure out how to pitch high-deductible plus HSA plans in a way that the average person would find attractive. How about an infomercial that promises to save you thousands of dollars every year with a proven system and throws in a set of handy dandy steak knives if you act now?
As you may recall, I previously posted about my recommendations for fixing health care (Part I, Part II, Part III). Recently, I had to navigate the current system and thought I’d share my experience in the context of those recommendations. You see, COBRA ran out on my health insurance from the last startup I founded and the new one hasn’t set up a company health plan yet. Thus I had the, um, “pleasure” of trying to obtain individual coverage.
I started by going to eHealthInsurance and hitting up the big three companies: Aetna, Anthem (BlueShield/BlueCross), and HealthNet. My first disappointment came when I discovered that there is no universal application. You have to type in roughly the same information in substantially different formats for each company. What value exactly is eHealthInsurance adding here?
My second disappointment came when they all rejected the applications for different reasons. There are four people in our family. One of them was rejected by two companies, two of them were rejected by one company, one of them was not rejected at all. The reasons were allergy shots, acne, possible acne, and being underweight. The first two are minor ongoing issues. Considering we were applying for $10K deductible plans with no office visit or prescription coverage, it’s hard to see what the problem is. The second one was unconfirmed by the first doctor, totally minor, and subsequently excluded by a second doctor. The last one is the only one that should have been of any concerned and a check with that person’s doctor would have eliminated the concern.
My working hypothesis is that these companies don’t actually want to offer individual health coverage. For regulatory or political reasons, they have to appear to offer such coverage. But unless an individual is so low risk as to be obscenely profitable, why go to the effort? It’s so much easier to focus on selling group coverage to employers. This is a side effect of the tax deductibility of premiums for most companies but not most individuals.
Luckily, there are niche providers that pursue opportunities that are not attractive to the largest players. One of them is Assurant Health. After filling out the online application at their Web site, I received a call from their underwriting department within two days. They wanted to review the medical records for the two family members receiving allergy shots to make sure these were not indicative of larger issues. No problem, we had signed a release and I had no objection to paying a premium based on actual risk.
Now, the story takes a funny turn. Apparently, HIPAA has made doctors so paranoid about penalties for breaching patient privacy, that they don’t want to give out your medical records to anyone. Despite the general release we signed, two medical clinics wanted us to sign special releases. It took a month to actually get these special releases so we could sign them. Even then, one of the clinics also required us to call them on the phone and give them verbal permission as well. Government intervention strikes again! If the government had clearly specified the mechanism for releasing medical records, there wouldn’t have been a problem. Even better, if the government hadn’t distorted the market for insurance toward employer-sponsored coverage, this transaction would be so routine that the free market would have solved the problem
The story has a happy ending. In Part II, I will analyze the excellent coverage we got from Assurant in the context of my previous recommendations.
Now, it’s worth repeating that I don’t object to increased spending per se. It might be perfectly normal given personal preferences and growing wealth. I do object to distortions caused by the current system. I have identified three areas where we could save money through eliminating distorting policies.
Barriers to Competition
Hospitals are a highly protected industry. I found this Forbes article an excellent overview of the problem. Generally, competition from so-called “specialty hospitals” improves care and reduces costs for both specialty hospital patients and community hospital patients (see this overview of the relevant research). However, like most businesses, community hospitals don’t like competition so they engage in anti-competitive practices and regulatory capture games.
Eliminating such abuses could save 2.4%, the cost reduction that the entrance of specialty hospitals into a market produces according to this study. That would be close to $20B/year. But I would go farther. I would require all hospitals to publish costs and outcomes for different treatments. Moreover, they would have to further disclose the price discounts they offered to insurance networks. A more transparent market would drive costs down even farther.
The standard objections to these measures are typical anti-competitive propaganda. Opponents say specialty hospitals duplicate infrastructure, which drives up costs. Tell that to PC manufacturers. They had to duplicate all their infrastructure but look at how costs have plummeted due to competition. Why are hospitals any different? Opponents say that doctors who own hospitals have a conflict of interest. Tell that to Apple who has to make phones that people really want if they are going to make any money. Why are hospitals any different? And the list goes on…
Drug Development Restraints
Excepting cosmetic procedures, almost everyone would prefer to avoid consuming hospital care if they could at reasonable cost. The biggest substitute for hospital care is taking drugs that prevent hospitalization. Unfortunately, the market for drugs (and medical devices) is tightly controlled, increasing costs and stifling innovation in the drug market. I contend that these factors increase hospitalization beyond the efficient level.
This review article claims that $100B/year worth of hospitalization stems from people not adhering to their medicine regimens. Obviously, formulations and devices that improved adherence would reduce this number. Moreover, I believe it also implies that there are a substantial number of other hospital admissions that could be avoided if more drugs were available.
As I’ve advocated before, eliminating Phase III trials (in favor of some sort of probationary approval) and reducing the term of patent protection would accelerate drug discovery and reduce costs. I also think that streamlining the approval of drug delivery devices in particular would help address the issue of adherence.
Inability to Commit to a Lower Standard of Care
Lastly, we the problem of end-of-life care. There has been a lot of angst over the so-called “Death Panels” discussed as part of health care reform. I admit that it gives me the willies. But I think the problem is that the government is pursuing an interest in getting you to die quietly.
But consider a private alternative. You’re somewhere between 40 and 60. You’re pretty healthy. You have a choice of two major medical insurance plans. One covers heroic end-of-life measures for terminal conditions. One doesn’t. The second one is 30% cheaper. Personally, an extra few months hooked up to machines in intensive care plus a vanishingly small chance of a miracle recovery isn’t worth it to me. I prefer to spend my money on safety and prevention thank you very much. But that’s just my personal choice. You could chose differently.
This decision doesn’t give me the willies. People make all sorts of decisions that statistically shorten their lives by this amount: where they live, what activities they pursue, and what jobs they do. This is a completely voluntary decision well in advance of the event. The only problem is that providers must be convinced that such agreements are enforceable. Otherwise the providers can’t count on the savings and premiums remain high. This is a problem the government can do something about: assign rights and enforce contracts.
All in all, I think these three measures might save a couple of hundred billion per year. They would certainly lead to a more efficient outcome.
Now that we’ve solved the problem of the uninsured, it’s time to move on to the problem of doctor’s visits. Spending on physician and clinical services was $479B in 2007, 22% of total health care spending. Only hospital spending accounts for a larger share at 32% (I’ll be addressing this category in a subsequent post).
First, let me say that I have no problem with increased spending per se. We’ve increased spending on entertainment as well as health care and almost nobody has a problem with that. They’re both signs of increased prosperity. However, our current system encourages an economically inefficient level of spending. That’s the problem we need to fix.
If we want to get close to the efficient level of spending on doctor’s visits, here’s what we need to do:
- Eliminate insurance payment of primary care. The risk pooling benefits of insurance only work for rare events or unknown losses. When you use insurance to pay for common events of known magnitude, you are playing the Diner’s Dilemma and most people overconsume. Moreover, you get additional social losses from administrative overhead and reduced incentive to compete on quality. So we should tax any insurance plan that covers primary care (excepting organizations like Kaiser that are paying for essentially all of your care).
- Establish personal Health Savings Accounts (HSAs). To reduce the sticker shock of (1), we should give people the ability to pay into personal HSAs roughly the same way they pay into personal IRAs. They will still respond to pricing incentives in the outpatient services market, but the use of pre tax dollars will soften the blow and encourage saving.
- Require pricing disclosure. Partly due to strategic behavior in negotiating reimbursement from insurance companies and partly due to wanting to extract the maximum surplus from patients, doctors and labs are reluctant to disclose their prices. Unfortunately, this behavior makes it difficult for patients to respond to pricing signals and decreases service innovation by obscuring differentiation. Therefore, we should require doctors and labs to publicly disclose their general price lists and give patients specific estimates before rendering services.
- Eliminate barriers to “Wal-Mart Medicine”. Doctor’s probably like (1). The are probably mixed on (3). They probably won’t like this. One of the reasons that trips to the doctor’s office are so expensive is that they just aren’t very efficient operations. Normally, competition would squeeze out inefficiency but doctors are effectively insulated from competition through a variety of subtle and not-so-subtle regulations. Among the biggest are local restrictions on “retailer clinics” through companies like Wal-Mart and state restrictions on the use of Nurse Practitioners (NPs) and Physician Assistants (PAs). Retailer clinics cost substantially less and provide equivalent care (at least for some basic needs) according to a recent study. Then if you look at salary data from PayScale, NPs and PAs cost about 40% less than family practice doctors. Here, I depart from my usual libertarian bent and advocate using the withholding of federal funds to blackmail encourage local and state authorities to comply.
- Fund startups in health advisory and tracking. The first four measures will create a much more open and transparent market for outpatient services. As in other such markets, there are probably a lot of advisory and tracking services that could improve decision making and efficiency. Imagine a self-help applications that advises when a trip to a Wal-Mart clinic is sufficient versus when it’s worth the money to go to a more boutique operation. Or a sophisticated rating and cost comparison services by zip code.
With these measures in place, we would most likely get a richer market that spans Wal-Mart clinics staffed primarily by NPs and PAs that cost $35-50 per visit to high end boutiques where a 30 minute consultation with a star doctor costs $300-$500. Each person would spend much closer to the economically efficient level given their personal circumstances and preferences.
Declan McCullagh of CBSNews reports that a Department of Treasury analysis released under the Freedom of Information Act estimates that a cap and trade program would raise $100B to $200B a year in taxes. Those taxes come from us one way or another. Recall that my estimate of the cost to cover the uninsured is about 2/3rds of that amount ($63B to $126B).
So we have a fortuitous illustration of the tradeoffs we have to make. There are two issues, priorities and effectiveness. It’s not that I don’t think there is some merit to reducing CO2 emissions. Rather, I think there are other problems that are higher priority with solutions that are more likely to be effective. Health care for the poor is one of those. I’m willing to pay an extra $1000/year to solve health care for the poor. I’m not willing to pay an extra $1500/year on top of that to address global warming.
If you do nothing else intellectual this Sunday, do these two things:
(1) Read Tyler Cowen’s NYTimes column on how the bestowing of political favors was at the heart of the financial crisis and how we’re about to make the same mistake with health care.
(2) Remember Norman Borlaug. He is the scientist who led the “Green Revolution“. In my opinion, he would be a strong candidate for the man who did the most good for the most people in the second half of the 20th Century. And the mainstream media will not make nearly a big enough deal of his death at 95 compared to that of Ted Kennedy.
Yes, I’ve decided to wade into the health care waters again. One of the problems with the current debate is that it confounds several distinct problems. So I’m planning to briefly address each one individually in the hopes of achieving some clarity. First up, the uninsured.
Most of us don’t want people to die simply because they can’t afford basic health care. So I ran the numbers on what it would cost to solve just this problem. The most cost effective approach I know of is a major medical plan plus a health savings account (HSA). According to this Forrester analysis of eHealthInsurance data, the average annual cost of an individual major medical plan in 2007 was $1896.
Premiums have obviously gone up since 2007. However, let’s be optimistic and assume two points of cost savings: having a very large group and following my recommendation of not using insurance for primary care. Let’s put the optimistic annual premium estimate at $1500. Of course, we’re talking about poor people so a no-primary-care major medical plan isn’t enough. We’ll also give them a $300 per year HSA allowance, enough to cover a couple of office visits and some generic drugs plus save up some to pay for a hospital stay. Not that generous, but I’m trying to figure out the minimum cost. Total cost per person: $1800/year.
So how many uninsured are there? Well, estimates vary. But the Census Bureau released a pretty detailed report in 2007. Looking at Table 6 on page 22, we see that there were just over 28,000 uninsured with household incomes below $50K. Now, if we offered a government program means tested to $50K, we’d probably get some people dropping their private insurance for the government insurance. I think only a 25% cross-over would be optimistic. So we have to cover a minimum of 35,000 people at $1800/year. Total cost: $63B/year.
Call it an even $100B due to my optimistic estimates. It will probably add close to $1000/year to my tax bill. I’m willing to pay that. So let’s just do it and then move on to the next problem.