Another Piece of Obamacare That Trump Should Keep

To get a sense of the future of American health care, amidst the post-election uncertainty, watch what happens to the Center for Medicare and Medicaid Innovation. This agency, created as part of the Affordable Care Act, has attracted substantial opposition. A recent proposal to change reimbursement to doctors for administering certain drugs, in particular, has led to calls that it be abolished. But let’s hope the center survives, because it could prove crucial to any new effort to raise the value of health care in the U.S.

From Bloomberg View – Articles by Peter R. Orszag


We Already Have Health-Risk Scores. Now Let’s Use Them.

Most Americans know they have a personal credit score, and many know where to find it. Few know they also have a personal health-risk score. If these were better known, and better constructed, health insurance markets in the U.S. would work more smoothly.

Commercial health insurance plans, as well as Medicare, Medicaid and other government programs, generate risk scores every year for most of the people they cover. These scores are estimates of each person’s cost of care, compared with the average costs in a large population. And they play a big role in health insurance; they’re often used, for example, to determine how much more insurers are paid for sicker beneficiaries.

From Bloomberg View – Articles by Peter R. Orszag

Health Care Costs and Patient Health

Healthcare costs vary greatly depending on where you are. While this fact is empirically known there is some debate about the reasons why. For decades, the Dartmouth Atlas of Health Care has published research indicating that the varying healthcare costs are attributed to differences in practice. That is, different hospitals go about treating illness in different ways, each resulting in different costs. What the Dartmouth team also finds, most notably, is that higher costs do not parallel higher quality. Therefore, it should be possible to reduce costs without diminishing quality of care. This position has been acknowledged and embraced publicly by many leaders in this arena, including American economist Peter Orszag.

Peter Orszag

Do health care costs relate to quality of care? (photo: Getty Images)

However, a new Brookings Institute report disagrees. Louise Sheiner, a senior fellow at Brookings, accepts that healthcare costs differ geographically, but asserts that varying methods of medical practice are not to blame. Rather, her report claims that the overall health of patients is what causes the variation in cost. Essentially, the states with higher healthcare costs have sicker people. Those states have sicker people, she explains, because of socioeconomic factors affecting the need for medical care.

The correlation between costs and overall health is the crucial point of the two perspectives. Sheiner holds that a diabetic patient in a state with a high prevalence of diabetes is ultimately less healthy than an apparently similar diabetic person in a state where diabetes is less common. Based on this position, the variation in Medicare costs across states is caused mostly by the underlying health of the people in the state. How doctors treat patients has no effect at all.

A way to examine this idea is by analyzing the spending of people on Medicare as they move from one state to another. A recent paper produced by academics from MIT and the University of Chicago examined just that, and found the costs changed as soon as Medicare beneficiaries moved. That change happened regardless of if they moved to high-spending area or a low-spending one.

From that, we can determine that the overall health of a patient determines, at most, half of the differing costs. It is starting to look better for the Dartmouth team.

Also, consider how easily health care costs can vary. A patient’s bill will vary greatly depending on what hospital the ambulance takes them to, though the quality of care will not.

So what we know is that health care costs fluctuate significantly and overall health of patients cannot account for the majority of it. Therefore, there most be ways to lower costs without diminishing quality of care — good news for Americans.

from Peter Orszag Healthcare

Disparity in Pay and the Fluidity of the Job Market

There is a longstanding and growing inequality in the incomes of Americans. That statement is woefully unsurprising, though the true terms of income disparity may be. It is often assumed that the rising inequality in earnings comes from differences within companies, when the senior high-level employees earn huge paychecks and their underlings make far less. Recent research indicates, however, that income inequality stems more so from differences in compensation across companies. Researches submitting to the National Bureau of Economic Research found that the growing dispersion of income, measured from the 1970s to 2010, was the result of increasingly unequal pay among different businesses.

These findings can do very little when engaged in a vacuum. In an article writing for Bloomberg, Peter Orszag relates that research to a study presented at the Federal Reserve conference this summer in Jackson Hole, Wyoming. The fluidity of the job market has decreased in recent years. Americans are staying at their current jobs longer. Indicators of this trend include the number of Americans moving across state boundaries for new jobs.

peter orszag

Are you chained to your current job?

Another chief piece of evidence for the stagnated fluidity of the job market is the relationship between job creation and job destruction. The rate that jobs are created and destroyed is only two-thirds as high as it’s peak in 1991. All the indicators show that this decline started prior to the recent recession.

These trends are not limited to any one industry or region. The decrease in job market fluidity is present across all states, in all major sectors, ages and genders. This decline in job turnover could also halt future productivity growth.

What we can assert from the studies is that people are hesitant to leave high (or even simply adequately) paying jobs for something they would enjoy more. Also, those with low-paying jobs have less accessibility to new opportunities. Earnings at different companies are growing more and more unequal and job turnover rates are falling. But why? It is unclear how closely these two findings are related, it is clear that these trends are having a surprising effect on the economy and hopefully policy makers are taking note.

from Peter Orszag Healthcare

In Focus: Suicide in America

The death of Robin Williams has brought suicide and depression back into the forefront of the national conversation. The nature of Williams’ career presents a particularly painful juxtaposition between how the public perceived the comedic actor and the tremendous persona turmoil he most have suffered. The Italian opera about the sad clown, Pagliacci, has been alluded to by many to describe Williams’ death.

If any good can be taken from Williams’ death it is that the issue of suicide is getting some necessary attention. Suicide presents a very real problem in the United States — and a problem that is getting worse. In 2000, there were 10.4 suicides per 100,000. In 2011: 12.4. There are disparities amongst which age groups are most prone to suicide. It is an easy assumption that teenagers would be highest demographic, but that is incorrect. Those most likely to take their own lives are 45 to 59 years old.

The next logical examination of this data is to break it down by gender. Studies related to depression have consistently reported woman are twice as likely to be depressed than men. Also, women are more likely to have suicidal thoughts. Those statistical trends, when taken at face value, are in great contrast with the fact that men are about four times more likely to commit suicide.

So why the disparity? If more woman are depressed and having suicidal thoughts, why is it that men succeed at suicide at a much higher rate. The answer indicates how challenging an issue mental health is in America.

Men and women experience depression differently. Researchers at Vanderbilt University have determined that men and women can experience drastically different symptoms. They found that depressed men are more likely to report, “anger attacks/aggression, irritability, substance abuse and risk-taking behaviors”. The signs of depression we traditionally think off (crying and sadness) are not always present and therefore make it less likely to be diagnosed and reported. Adding these often overlooked indicators to the list of symptoms, depression rates amongst men and women are about the same.

So men and women experience depression differently but at around the same frequency. However, men commit suicide almost four times as often as women. Or, more accurately, men are four times more successful at committing suicide. We turn now to the methods, rather than motivations. Men are more likely to use methods with a high success rate — hanging and firearms. In comparison, women often use poison, where the likelihood of resuscitation is higher. In 2011, over 3/4 of suicides committed by men between 35 and 64 years old involved firearms or hanging (77 percent). Suicides amongst women that same year involving hanging and firearms accounted for 49 percent. 40 percent of suicides among women involve poison, but only 15 percent among men do.

Unfortunately, we are left with more questions than answers. Why do men prefer more lethal means of suicide? Do statistics of gun ownership correlate? How does gender relate to the likelihood of the individual seeking professional help? Knowing that suicide rates are rising in the United States, these are questions that need answers.

from Peter Orszag Healthcare

Medicare Spending Slows, Hospital Care Grows

peter orszag medicareBack in 2011, Medicare spending was finally slowing down. Over the past three years, it has remained relatively steady – decreasing and increasing periodically but no drastic changes.

The decline in Medicare spending back in 2011 was the result of timing shifts in regards to certain Medicare payments. Adjusting for those shifts, Medicare spending was still only increased by 4% in 2011.

In comparison, from the early 1970s until 2010 spending rose by an average of 12 percent each year. During that time span, there were only four years that spending rose by less than five percent.

Fast forward to 2014 and you’ll realize that the spending rate in regards to percent of the country’s gross domestic product has halted. For the last four years, Medicare spending has been at or below 3% of the United States’ total GDP. The last time that it plateaued in this manner was in the late 1990s when payments were cut back.

One reason why this has leveled off is due to the fact that healthcare is more efficient. Reimbursements are less generous than before, placing a greater emphasis on value.

This trim of medical expenses, however, also represents a weak economy. Consumers are finding ways to cut back on everything – health care included. Back in 2011, Maggie Mahar pointed out that the slowdown in Medicare’s growth, however, is much greater than the slowdown in private health insurance. While health insurance rose by seven-and-a-half percent, Medicare only rose by two-and-a-half percent. And consumers are also deciding which treatments are necessary; there has been a decrease in joint replacements – something that is typically a choice rather than a necessity.

One reason why were seeing this decline in Medicare growth can be attributed to the decreasing percentage of patients being readmitted to the hospital within 30 days of discharge. The federal health care reform law, enacted in 2010, placed penalties on hospitals with high readmission rates. Typically, readmission rates are around 20 percent; in 2011, it was approximately 15 percent.

The decrease in readmission rates can also be attributed to technological improvements. Patients are receiving better care (better prescription drugs, treatments, etc.) and hospitals are managing patients with higher efficiency due to information technology systems.

However, back in 2011, the financial incentives were skewed against hospitals offering better service. Regardless of the penalty placed on hospitals for readmissions, hospitals are still making less revenue by decreasing their readmission rate. Medicare reimburses hospital services; that far outweighs the penalty for readmission.

The U.S. was still looking at ways to find a balance – that’s where the Independent Payment Advisory Board stepped in. This panel is focusing its efforts on reducing Medicare spending growth while also boosting the quality of care.

With the growth in spending coming to a halt, it appears as though we’re heading in the right direction.

from Peter Orszag Healthcare