Tag Archives: healthcare

(Revised) Hopefully Affordable Care Act

In early February, the Congressional Budget Office (CBO) attached an addendum to a decade-long budget projection that sharply raised the decrease in employment due to the ACA.  They write (on page 117):

The reduction in CBO’s projections of hours worked represents a decline in the number of full-time-equivalent workers of about 2.0 million in 2017, rising to about
2.5 million in 2024.

Before the most recent report, the CBO estimated a decline of about 800,000 jobs due to the ACA.  This threefold increase was in large part due to the CBO revisiting a concept called the implied marginal tax rate.  Large parts of the new healthcare law involve giving people from 1.5 times the Federal Poverty Level (FPL) to 4 times the FPL subsidies to help pay for insurance.  As a person earns more, the amount of the subsidy falls.  Thus, when they earn more money through their job, they also happen to lose some government subsidies.  Thus, for some people, there are more incentives to not work than there are to work, so they reduce the amount out output they produce.  Depending on the state, they are also “coverage gaps” where people are neither eligible for Medicaid nor federal subsidies, and thus earning too much could cause someone to lose the benefits of Medicaid.  The White House responded strangely, saying:

“CBO finds that because of this law, individuals will be empowered to make choices about their own lives and livelihoods, like retiring on time rather than working into their elderly years or choosing to spend more time with their families.”

This is an amazing twist of information; the Obama administration is implicitly praising people for living off government subsidies rather than working.  This is bad both from the perspective that taxpayers have to support people living off the government and they are adding nothing to the output of America.

January’s most recent number still indicate  that a smaller than expected number of uninsured young Americans have signed up for health care coverage under the provisions of the new Affordable Care Act (ACA).  They are deemed the “young invincibles” by commentators due to both the lower healthcare costs of younger patients and their own self-acknowledgement of that fact.  Unfortunately for legislators, the new healthcare law is built upon widening the overall pool of those with health insurance, including the healthy “young invincibles” in order to help subsidize the cost of universal healthcare.  If too many young people take the fine for not having insurance rather than buying insurance, the system for financing the new health care law could crumble.  The January report also indicates only 3.3 million people had signed up for insurance, about 1 million short of the goal for the month.

These few facts are just indications of a larger trend in American health care costs.  According to a 2012 piece by the CRS (Congressional Research Service), “CBO current-law projections indicate that federal health spending, including Medicare, Medicaid, and outlays for new health care exchanges and subsidies, could make up nearly 50% of mandatory spending in FY2022.

What are possible explanations for why the Affordable Care Act might not be affordable for America?  One that sticks out is that under the 2010 Affordable Care Act, consumers no longer pay premiums based on their health risks.   The idea behind this idealistic premise seems good; some people with preexisting conditions could not get health care or only get it for astronomical costs because no insurance company wanted to bear the cost (and loss on the bottom line), and that doesn’t seem right.  However, not being able to charge people more based on health risks really undermines the concept of insurance itself; more risk means higher premiums for any other type of insurance.   Simply changing what insurance fundamentally is doesn’t constitute a “better health insurance” system as proponents of the ACA claim.

As with any social policy, the actual costs cannot be realized until well after the program goes into effect.  However, Democrats in Congress clearly seem afraid of the turmoil the law has caused, and are themselves cutting into President Obama’s major policy.  They have begun supporting plans that don’t meet the minimum requirements set out by the law because they don’t want people to lose existing policies.  The President himself has changed the mandate on businesses.  Beyond the fact that the legality of these executive actions is dubious, they reek of politics.  Why would the President cut so heavily into the his trademark law, if not to try and get more people to sign up on the exchange (since less business will provide healthcare due to the new restrictions)?  I personally prefer good policy over good politics.  The evidence is mounting that “Obamacare” is the latter, and not the former.

(Revised) Nobel Economist Sees Market as Remedy to the Organ Donor Shortage

Life on the organ donation waiting list is a miserable experience for many Americans. A patient that entered renal failure today, a condition requiring a new kidney, would be placed on a organ donation waiting list with over 95,000 other patients with an average waiting time of about 4.5 years. Currently, only around 16,500 kidney transplant operations are performed each year in the U.S., so they’d have to be very patient.

RV-AM558_ORGAN__G_20140117131803

 

During the wait, patients are placed on dialysis, a process that filters the blood several times a day using a sophisticated mechanical pump, meaning they spend the majority of their time in and out of a hospital. This treatment doesn’t come cheap, dialysis currently costs around $80,000 a year, so patients spend about $360,000 in the 4.5 years just to stay alive while waiting for a miracle. Furthermore, dialysis isn’t a very good treatment either; it’s not as efficient as a human kidney, so the long wait shaves a few years off patients’ remaining years to live.

RV-AM559_ORGAN__G_20140117131809

 

Finally, assuming patients can get a transplant, they would have to spend an additional $150,000 on the surgery itself. Overall, while these patients would be lucky to be alive, they would also be out over half a million dollars and would lose about 10-15 years of their potential life span.

Some academics feel that organ donation doesn’t have to be such a miserable process. In his latest Wall Street Journal article, Gary Becker, a Nobel-prize winning economist from the University of Chicago, explains that legalizing the purchase of organs could improve the survival rates of patients on the donor lists and drastically reduce the cost of health care. He postulates that kidneys would be the most obvious choice for this market system, as people can live healthy lives even after donating one of their two kidneys. Studies suggest that donors could receive around $15,000 for each kidney, which would create a strong incentive people to donate and help boost the organ supply. On the patient’s end, the reduction to waiting time would substantially reduce the expensive costs of dialysis and dramatically improve the odds of surviving into old age. Becker also explains that in the case of a post-mortem organ donor, the proceeds could go to the grieving family and help support those who have recently lost a loved one. Overall, the goal of his strategy would be to create a more liquid market for organs to more efficiently treat those in need.

This proposed solution, though highly unconventional (and, in my opinion a bit disturbing), may have the potential to provide a strong public benefit. On the other hand, I could see a number of negatives to enacting this type of policy. The most obvious problem with this solution is that it could further increase the gap between the rich and the poor in the access to quality healthcare. The wealthy would have a smaller financial incentive to donate organs, and could more easily purchase a replacement organ if necessary. There would likely create strong moral hazard in this case, meaning the rich would have the incentive to take greater health risks because of the opportunity to easily “buy back” their health. The poor would have a large incentive to donate organs (and not without a considerable risk to their health) for the monetary reward, and would have lesser means to purchase an organ should their own health wane. Another potential obstacle would be to convince the public that this is an appropriate and safe answer to this difficult problem. Although few religions actually forbid organ donation, I think many people would find it difficult to accept the notion of buying and selling human organs as a common practice. Finally, since the market would likely assign a high price to organs (as the demand would be incredibly high and supply would almost certainly be low), there may be the rare but possible incentive for organs to be bought or sold (or stolen) in an illegal manner. High standards and regulations would be required to prevent incentives from escalating into potential deleterious behaviors. Overall, given the significant obstacles to making this a legal and publicly accepted practice, I feel that the organ market makes for better science fiction than for successful solution to a public health issue.

Overall, my opinion is that this is an interesting, potentially promising (if policy makers could get around the moral aspects), but ultimately temporary solution. A better answer may soon come from new advances in bioengineering, as scientists have recently demonstrated the ability to grow replacement organs in the lab using a patient’s own cells and organ tissue. In 2012, doctors were able to successfully grow and transplant an artificial windpipe into a patient suffering from cancer in his trachea. In further experiments, scientists have been able to grow artificial rat hearts and lungs in the lab, providing evidence that patient’s might sooner find hope in a test-tube than in an “organ market.” (For those interested, Dr. Anthony Atala, in his TED lecture demonstrates the latest advances in the field of tissue and bioengineering). New tissue engineering techniques that involve creating stem cells from a patient’s skin cells would allow doctors and policy makers to avoid the negative moral obstacles that organ markets would create. Furthermore, continued research in this field may soon allow scientists to produce artificial organs more quickly, cheaply, and, ultimately, more safely than organ donation could ever achieve. Although Becker’s unusual solution to the organ shortage may have potential public utility, in my opinion, science and medical research have a proven track record in improving the quality and lowering the cost of healthcare and are therefore much more realistic and safer bets.

 

 

Nobel Economist Sees Market as Remedy to the Organ Donor Shortage

Life on the organ donation waiting list is a miserable experience for many Americans. A patient that entered renal failure today, a condition requiring a new kidney, would be placed on a organ donation waiting list with over 95,000 other patients with an average waiting time of about 4.5 years. Currently, only around 16,500 kidney transplant operations are performed each year in the U.S., so they’d have to be very patient.

RV-AM558_ORGAN__G_20140117131803

During the wait,  patients are placed on dialysis, a process that filters the blood several times a day using a sophisticated mechanical pump, meaning they spend the majority of their time in and out of a hospital. This treatment doesn’t come cheap either, dialysis currently costs somewhere around $80,000 a year, so patients spend about $360,000 in the 4.5 years just to stay alive while waiting for a miracle. Furthermore, dialysis isn’t a very good treatment either; it’s not as efficient as a human kidney, so the long wait shaves a few years off patients’ remaining years to live.

Finally, assuming patients can get a transplant, they would have to spend an additional $150,000 on the surgery itself. Overall, while these patients would be lucky to be alive, they would also be out over half a million dollars and would lose about 10-15 years of my potential life span.

RV-AM559_ORGAN__G_20140117131809

Some academics, feel that organ donation doesn’t have to be such a miserable process. In his latest Wall Street Journal article, Gary Becker, a Nobel-prize winning economist from the University of Chicago, explains that by making it legal for donors to be paid for their organs, it could improve the survival rates of patients on the donor lists and drastically reduce the cost of health care. He postulates that kidneys would be the most obvious choice for this market system, as people can live healthy lives even after donating one of their two kidneys. Studies suggest that donors could receive around $15,000 for each kidney, which would create a strong incentive people to donate and help boost the organ supply. On the patient’s end, the reduction to waiting time would substantially reduce the expensive costs of dialysis and dramatically improve the odds of surviving into old age. Becker also explains that in the case of a post-mortem organ donor, the proceeds could go to the grieving family and help support those who have recently lost a loved one. Overall, the goal of his strategy would be to create a more liquid market for organs to more efficiently treat those in need.

This proposed solution, though highly unconventional (and, in my opinion a bit disturbing), may have the potential to provide a strong public benefit. On the other hand, I could see a number of negatives to enacting this type of policy. First, in order for this idea to gain any traction, the exchange of organs for money would first need to be made legal, and in a country with a sizable conservative population this would be a difficult path. Second, the most obvious problem with this solution is that it could further increase the gap between the rich and the poor in the access to quality healthcare. The wealthy would have a smaller incentive to donate organs, and could more easily purchase a replacement. The system might also suffer from moral hazard, meaning the rich would have the incentive to take greater health risks because of the opportunity to “buy back” their health. The poor would have a large incentive to donate organs (and not without a considerable risk to their health) for the monetary reward, and would have lesser means to purchase an organ should their own health wane. Finally, I wouldn’t want to even think of the unlikely but extreme case in which individuals “steal” other’s organs for profit. Overall, I feel that the organ market makes for better science fiction (or potentially horror) than for successful solution to a public health issue.

Overall, my opinion is that this is an interesting, potentially promising (if policy makers could get around the moral aspects), but ultimately temporary solution. A better answer may soon come from new advances in bioengineering, as scientists have recently demonstrated the ability to grow replacement organs in the lab using a patient’s own cells. In 2012, doctors were able to successfully grow and transplant an artificial windpipe into a patient suffering from cancer in his trachea. In further experiments, scientists have been able to grow artificial rat hearts and lungs in the lab, providing evidence that patient’s might sooner find hope in a test-tube than in an “organ market.” (For those interested, Dr. Anthony Atala, in his TED lecture demonstrates the latest advances in the field of tissue and bioengineering.)

Overall, although Becker’s unusual solution to the organ shortage may have potential utility, in my opinion, science and medical research, which have a proven track record in improving healthcare, are probably more realistic and safer bets.

 

Hopefully Affordable Care Act

Recent reports have surfaced that a smaller than expected number of uninsured young Americans have signed up for health care coverage under the provisions of the new Affordable Care Act (ACA).  They are deemed the “young invincibles” by commentators due to both the lower healthcare costs of younger patients and their own self-acknowledgement of that fact.  Unfortunately for legislators, the new healthcare law is built upon widening the overall pool of those with health insurance, including the healthy “young invincibles” in order to help subsidize the cost of universal healthcare.  If too many young people take the fine for not having insurance rather than buying insurance, the system for financing the new health care law could crumble.

Making problems worse, according to All Einboden,  an executive of a Texas-based health care provider, “several requests to preauthorize surgeries in the first days of coverage have executives worried”.  Now, instead of the uninsured simply not having optional procedures, they are using their insurance to have more procedures, unexpectedly driving up costs.  Furthermore, the widely held belief that the insured will rely less upon emergency rooms is now on shaky ground.  According to a random assignment study done by Science in Oregon:

We find that Medicaid coverage significantly increases overall emergency use by 0.41 visits per person, or 40 percent relative to an average of 1.02 visits per person in the control group. We find increases in emergency-department visits across a broad range of types of visits, conditions, and subgroups, including increases in visits for conditions that may be most readily treatable in primary care settings.

These few facts are just indications of a larger trend in American health care costs.  According to a 2012 piece by the CRS (Congressional Research Service), “CBO current-law projections indicate that federal health spending, including Medicare, Medicaid, and outlays for new health care exchanges and subsidies, could make up nearly 50% of mandatory spending in FY2022. ”  As some of the charts in the linked piece illustrate,  current federal health spending makes up far less than 50% of mandatory federal spending.

In essence, federal healthcare costs are rising both nominally, and as a percentage of mandatory (and total) government spending.  Combine this current trend, along with a huge wave of baby boomers able to become eligible for Medicare, and some of the faulty assumptions about the financing of the ACA listed above, it seems as though a cocktail for spiraling health care cost could be upon us.

What are possible explanations for why the Affordable Care Act might not be affordable for America?  One that sticks out is that “under the 2010 Affordable Care Act, consumers no longer pay premiums based on their health risks”.   The idea behind this idealistic premise seems good; some people with preexisting conditions could not get health care or only get it for astronomical costs because no insurance company wanted to bear the cost (and loss on the bottom line), and that doesn’t seem right.  However, not being able to charge people more based on health risks really undermines the concept of insurance itself; more risk means higher premiums for any other type of insurance.   Simply changing what insurance fundamentally is doesn’t constitute a “better health insurance” system as proponents of the ACA claim.

As with any social policy, the actual costs cannot be realized until well after the program goes into effect.  This is even more dangerous with an entitlement program such as the ACA, because as difficult as enacting the ACA was, taking away the entitlements would be incomparably more difficult.  I can only hope that somehow the program does cut costs, but as it stands I am quite skeptical.

Health care spending and Econ 401

I believe it is safe for me to say that most of people in our class have heard about the terms like ObamaCare or Affordable Care Act without me presenting tangible evidences. This is because those terms are written in everywhere. You can hear about them in the news, radio, and classes. Why is this so prevailing? I wonder. Can this be because I pay $110 per month for my health insurance and I never go to hospital?

As an international student in the University of Michigan, I am obligated to buy a health insurance which I think it is forced upon me. In addition, it is also very difficult for me to change my current health insurance and substitute with a cheaper insurance, which by the way, I really tried and wanted. This is because the university has set very high standards relates to the health policies for the international students.  Perhaps little bit too much.

Like what the university thinks about the importance of having a good health insurance, everyone living in the United States of America is bounded by health care policies. This can mean that health-care policy can play influential roles in our life and it has been since the first health insurance came out. You can find an interesting story by clicking the link, and it is very accidental.

Briefly I have pointed out that health care policies and insurances are very important in our lives, yet how many of us understand the effects of change in health care policies in the economy? According to the recent Wall Street Journal article, Health-Care Spending Grew at Modest Pace in 2012, it states that

“Health spending is rising at a slower pace than a decade ago and making up a slightly smaller portion of the U.S. economy”

It is very vague, even with carefully reading the fact that U.S health-care spending in 2012 was $2.8 trillion dollar and this is 3.7% increase than the previous year. What is this mean in terms of microeconomic scales? We learned in ECON 401? I do not know. Can spending less and seeing a slower pace of increasing in health-care spending it be a huge problem for the U.S economy? I do not know. As I mentioned in my previous blog inside ECON411 class blog, What is behind Mr.Draghi’s mind? How do I know?, I wish news is easier and self-explanatory so laypeople can understand better.This time, however, I decide to give a response to the one of economists’ comment presented in the article and ask the readers about my responses.

A Harvard University health economist and former adviser to the Obama administration said,

“This and more recent data are pretty profound. What is says is that even as the economy is rebounding, health spending is not. It looks less and less like a hangover from a recession and more like a change in the nature of the health-care system.”

I believe his words means is perhaps that the decreasing trend in the national health expenditures as a share of U.S GDP since the 2008, economy recession, is not due to the recessions but the changing nature of our health care system, right? So I did a quick reading about the new changes in health care policies and law. According to the White House’s webpage on Medicare, President Obama has signed the Affordable Care Act into law in March, 2010. One of the new benefits from the Affordable Care Act is aimed to have an affordable coverage for more people.

For example, new policy favors small business by providing them tax credits because they have been paid more premiums than larger employers which I think is the main reason that has reduced the share of health care spending in the U.S. GDP. Do you think this can be applied to one of the reasons that a Harvard professor had in his mind?