The one and only option

Imagine for a moment a country, their citizens are presumably under the same constitution and tax law. Some citizens in a geographic area have a per capita public budget for health care for 2014 equal to 1.541 €. Other citizens, 1.091 € or less. There is no possible argument to maintain such huge and increasing differences. Is there any clever politician in the room to treat such disease? For sure, there isn't.
Simplistically speaking, my understanding is that we could decrease taxes by 28% or otherwise increase public health expenditures by 41%. Since these options are not plausible, the third is to forget such country because it is unable to solve the real public policy challenges. And worst than that, it obliges to apply budget cuts to those that already are spending less. Since such problems have persisted for three decades, the one and only option is to leave, reform is not a credible option.

PS. Data

Reading suggestions

Christmas reading suggestions:

'The Humble Economist' by Tony Culyer is now available to download for free in PDF, Kindle and epub formats

Waste, Economists and American Healthcare by Robert G. Evans

Hospital Board Oversight of Quality and Patient Safety: A Narrative Review and Synthesis of Recent Empirical Research

The Healthy NHS Board. A review of guidance and research evidence

Health Policy Basics: Health Insurance Marketplaces

The Optimal Practice of Evidence-Based Medicine Incorporating Patient Preferences in Practice Guidelines

 Fee Increases and Target Income Hypothesis: Data from Quebec on Physicians’ Compensation and Service Volumes

 The influence of cost-effectiveness and other factors on NICE decisions

 NHS Productivity from 2004/5 to 2010/1

 Methods for the estimation of the NICE cost effectiveness threshold

Effectiveness of Medicines and Therapies

 Elaboració d’un sistema universal de priorització de pacients en llista d’espera

La pràctica de la medicina clínica: art i ciència

La mort i l’imperatiu de recerca 

Can Mobile Health Technologies Transform Health Care?

Idoctor. NBC News

Should The Cochrane Collaboration be producing reviews of efficiency?
Mike Drummond, Ian Shemilt & Luke Vale, on behalf of the Campbell and Cochrane Economic Methods Group 

A new stream of work from NICE - Medtech Innovation Briefings

Health systems taxonomy

Five types of OECD healthcare systems: Empirical results of adeductive classification

Once upon a time there were two types of health systems: Beveridge and Bismark based. Social Health Insurance vs National Health Service. This was an easy categorisation. Now, things are much more difficult to classify. Have a look at Health Policy and you'll find an update:

We argue that there is a hierarchical relationship between the three dimensions, led by regulation, followed by financing and finally service provision, where the superior dimension restricts the nature of the subordinate dimensions. This hierarchy rule limits the number of theoretically plausible types to ten. To test our argument, we classify 30 OECD healthcare systems, mainly using OECD Health Data and WHO country reports. The classification results in five system types: the National Health Service, the National Health Insurance, the Social Health Insurance, the Etatist Social Health Insurance, and the Private Health System.

Is there anybody available to guess where we are?. 

We the people

A Constitution of Many Minds: Why the Founding Document Doesn't Mean What It Meant Before

Cass R. Sunstein is a distinguished professor of Law at Harvard. For economists he is well known for his book with R. Tahler on "Nudge". Today I would like to reproduce several statements of his 2009 book: A Constitution of Many Minds: Why the Founding Document Doesn't Mean What It Meant Before. Just for those that consider that law should constraint people's expectations:

I mean to identify and explore three approaches to the founding document: traditionalism, populism, and cosmopolitanism.We shall see that in all three contexts, what is at work is a many minds argument–an argument that if many people think something, their view is entitled to consideration and respect.

Traditionalists insist that if members of a society have long accepted a certain practice, courts should be reluctant to disturb that practice. Some traditionalists go further, urging that even po-litical majority should respect longhstanding practices. Populists believe that if most people believe a certain fact or accept a certain value, judges should show a degree of humility—and respect their view in the face of reasonable doubt. Some populists think that if many people be-lieve something, they are probably right, and elected representatives should defer to them too.Cosmopolitans believe that if many nations, or many democratic nations, reject a practice, or accept a practice, the United States Supreme Court should pay respectful attention. Some cos-mopolitanians believe that if most nations, or most democratic nations, do something, other nations should probably fall in line with them.

Of course the three positions are different, and it is possible to accept one while rejecting the other two. But the structure of the central argument is identical in all three contexts. Nothing in the Constitution itself rules out any of the three approaches that I shall be ex-ploring. The Constitution does not set out the instructions for its own interpretation, and many approaches fall within the domain of the permissible. But traditionalism, populism, and cos-mopolitanism all run into serious obstacles. In the end, much of my argument will therefore be negative and critical. I will try to show why each approach has intuitive appeal – but also why each of them faces powerful objections.

Today is a day to reflect on such issues. Laws are created after a political process, popular sovereignity is above them. I wanted just to reflect on that in a historic day.

It's the budget, stupid

Last week the proposal of health budget was submitted to the Parliament. The expected expenditure will be 1.095 € a level achieved 9 years before (2005) in nominal terms (if we consider the figure in real terms, there is an additional 20% less due to CPI -unfortunately no health CPI available). These are the figures, and this is the reality for those that talk about the end of recession. Next year, we are going to spend actually 20% less in publicly funded health care of what we spent in 2005. If somebody had predicted such trend I'm sure that would be considered a fool.
Now I would like you to suggest you an exercise. Estimate how many years it will take to return to 1.300 € (the peak of 2010). For sure, it will take many, many, many years.
Public Expenditure on health care has been reduced, mostly through salaries.This is a partial measure that has a limit. The review of regulatory and organizational structures is the key issue that is mostly forgotten.

PS. No complains about budget cuts, it's just the reality, we are poorer than before. The option is to work in a different direction, more of the same will get the same result.

Being transparent

Central de Resultats. Àmbit d’atenció primària. Dades 2012 

Today a new health budget is going to be presented. The focus will be on cutbacks. I'm really tired about talking always about the same in the Parliament. If public income is decreasing, public expenditure follows, changing priorities or more debt are not an option. Therefore, it may be better to know how money is spent and what are the outcomes.
You may check excellent information about primary care performance in this report, an example of transparency. The number of primary care visits in the public system is still falling (-2,5%, 1,1 m less). Instead of decreasing human resources there was a slight increase in full time employees in primary care. The aggregated impact has been a reduction in the number of physician visits per day in 3,2%  (average 2012: 24,5 visits).
One fact to highlight is that less visits have been performed, and we don't know exactly if this means anything special in health terms. In the next future, an update on morbidity will be introduced in the report.

PS. Good news. A new registry of health professionals will be created. Unfortunately we can't project the needs for the future and regulate access. It's only an issue of time, things are going in the right way.

PS. LSE Conference: Behavioral Economics and Diet. It is worth watching it. 

Reference pricing entering into terra incognita

If the regulatory reform proposal for drug reference pricing really succeeds, we can confirm that the end of reference pricing as we have known, has started. From this moment on, we enter in terra incognita.
I would suggest a look at the non-binding report by the Antitrust Commission. Two issues emerge: (1) a minimum threshold for reference pricing updating, and (2) only drugs with  monthly discount beyond 10% will be taken into account for minor prices.
Forget technicalities, the general issue is about competition. The concerns of the report are related to anticompetitive effects, if government doesn't ammend it, it will be another example of poor quality regulation.

Putting brakes on health expenditure

Health at a Glance 2013

We already know it. Health expenditures are stagnating across OECD countries. The size of such stagnation and its potential impact is what really counts. About the size we may check it at the new report with 2011 data, and with this figure:

Now is a good moment to remember the arguments of inevitability of health expenditure: demography, income and the residual (technology, relative prices and institutions). Check this paper for the projections (a useless effort in my opinion). The income reduction and specially the drop in public income is the factor that explains such decrease. Therefore, those that consider health expenditure will always increase because there are forces "out of control" - ageing and technology- (as Bob Evans said and criticised) have been left without argument. They have been surpassed by the decision making of politicians and citizens when income falls. They have put the brakes on health expenditure and we don't know how long it will last. The issue is right now about the impact, are we destroying value or waste? Maybe in our country we are simply increasing "productivity" with labour cost cuts. A founded answer is needed.

PS. Detailed data in excel file, here

PS. More data, here. And the ppt, here.

PS. Per capita public health expenditure next year will be 1.095€ and this is a drop of 15,5% in the last 5 years. Definitely, such reality is underrepresented in the figure, in other words we may be outliers, do you know why?.

PS. If there is a cut on labour costs by 10% and at the same time a reduction in the "production" of visits by 10% (p.25), what happens to productivity?. Following standard methods...productivity stagnates! (a nonsense)

Desperate discounts started

After the change of pharmaceutical pricing schemes in April 2012, the same product may have two prices, one for the National Health System and another for the citizen paying out of pocket. This scheme was put in place last January. Now it's a good moment to have a look at how it works.
For drugs sold on community pharmacies, NHS discounts range is 6-63%, and for specialty drugs 1-74% (!!!). You can check this statement in this table.
Does this make any sense?. I don't want to go further. I'm just confirming the situation after the regulator has paved the way: a desperate discounts process has started.

PS. Thinking critically, the former interpretation is wrong, discounts are not the issue. In order to be publicly funded, a discount gives higher satisfaction to the officials (anchoring). If this discount is confidential, still greater "satisfaction", because of fine tuning in the process of adjusting the cost per QALY to its expectations. A useless effort by the regulator (funded by our taxes), a successful effort for market access. As a citizen it is sad to be subject to such poor quality regulator, we can only expect to disconnect as soon as possible.

PS. Early impact of copayments, have a look at this post.

A healthier population (after all this years)

Enquesta de salut de Catalunya 2012. Informe dels principals resultats 

It is just a fact. The authors of The Lancet article were unable to have a look at the last Catalan Health Survey. In 2006, 78,6% of population considered their health as good, in 2012 (p54) this figure has moved up to 82,8%. The Lancet only emphasized negative issues without clear evidence. It seems that this is the selling argument of our times.
The most relevant thing from the health survey is that citizens view themselves healthier than before the recession, you'll find additional details inside the report.
However, a closer look may highlight some doubts about individual health behaviours, smoking by young people and specially the obesity epidemics. Therefore, a short applause and a clear public health alert for an improvement of health behaviours.

Internalities, habit formation and healthy individuals

Healthy Habits: Some Thoughts on The Role Of Public Policy in Healthful Eating and Exercise Under Limited Rationality

Selected statements from a chapter of new book presented recently: Behavioral Public Policy, a must read.

About unhealthy habits:

Neither self-control problems per se nor naivety about future self-control problems necessarily lead to special mistakes in light of habit formation. People over-indulge in un-healthful behaviors because of self-control problems. But it is primarily the unhealthfulness per se not the habit component that causes the problem. Self-control problems predict that people overconsume unhealthy goods and activities, but by themselves there is no simple prediction that overconsumption is worse for habit-forming goods than for non-habit-forming goods.

Message:

First, unless we believe that it is likely that people are making mistakes, the fact that some activities are habit forming does not (in any way that I can understand) heighten the case for policy intervention, regulation, or paternalism. Second, if we decide we'd like to deter some activity, we should never forget the power of prices. The most practical policy we may employ if we reach the conclusion that people are doing too much of bad habits or too little of good habits: tax or otherwise deter the bad habits, and subsidize or otherwise support the good habits. If we want to get people to do less unhealthy eating, we should make it more costly; if we want people to do more exercise, we ought to make it cheaper

Tool, a life cycle adjusted taxes on unhealthy behavior:

Instead of (say) 10% tax on unhealthy items for a persons entire life, consider heavy taxes for young people for these items, and no taxes when older, in a way calculated to leave the total tax burden the same overall if people do not change their behavior. What would happen, according to di§erent theories of motivation? If young people are acting according to fully rational models, fully realizing the habits they are forming and the costs they are incurring, then they will be made no worse off. Indeed, there is a behavioral prediction of the rational model: they will either keep consuming a lot in their youth and in their adulthood just like they did before, or they will stop in their youth and then start in their adulthood. But either way, economic theory based on full rationality says they will be just as well as before. How might people who have self-control problems or projection bias behave? The prediction is that they are very likely to decrease consumption dramatically both in their youth and thereafter. This is because the prediction of these alternative models is that those who were forming these habits when young (at least the ones who were close to indi§erent before) were not planning to do so. If people don't realize they will develop a lifelong habit as strong as they will, then they never thought they were going to pay taxes later in life just because of early consumption.

Wether this is possible to apply remains uncertain. I suggest looking at Acemoglu-Robinson paper to shed some light.

How much does healthcare cost during your life?

Estimating lifetime healthcare costs with morbidity data

We don't know when we can get an illness, how much it will cost to treat and how much time will last. Thats the rationale for being  insured. However, if you were born in 2007 your lifetime healthcare costs in Baix Empordà were 111.936 € for women and 81.566 € for men (on average and without any additional assumption about changes in unit costs). As far as this is the average, mandatory insurance allows for compensating those in ill health by those that are healthy. This is an unique efficient result, any departure from such option would require individual savings and potential debt when having an illness.
We have just published such estimation in BMC Health Services Research, those of you that follow this blog will remember this 2011 post. Lifetime health trajectories is a challenge for research, our contribution is just one of the first steps in such direction.

PS. Must read (as usual), Uwe Reinhardt blog on Angus Deaton.

PS. Economic and financial conditions are again "bubble-like.". WSJ dixit today. I agree.

PS. Toni Catany, exhibition at Galeria Trama.

Incentives and physician specialty choice

Specialty choice in times of economic crisis: a cross-sectional survey of Spanish medical students

Two opposite trends coincide, on one hand Health Policy is strengthening primary care, and on the other hand the number of students that apply for it is decreasing. The shortage of primary care practitioners should be an issue of concern for any regulator. However, current professional incentives are set up in a different opposite direction.
You'll find the details in this article. Key messages:

Results: 978 medical students (25% of the nationwide population of students in their final year)
participated. Perceived job availability had the largest impact on specialty preference. Each 10% increment in the probability of obtaining employment increased the odds of preferring a specialty by 33.7% (95% CI 27.2% to 40.5%). Job availability was four times as important as compensation from private practice in determining specialty choice (95% CI 1.7 to 6.8). We observed considerable heterogeneity in the influence of lifestyle and work hours, with students who preferred such specialties as Cardiovascular Surgery and Obstetrics and Gynaecology valuing longer rather than shorter workdays.
Conclusions: In the midst of an ongoing economic crisis, job availability has assumed critical importance as a determinant of specialty preference among Spanish medical students. In view of the shortage of practitioners of FCM, public policies that take advantage of the enhanced perceived job availability of FCM may help steer medical school graduates into this specialty.

Meanwhile, you can check today some details about  the salaries in the public sector. An this link shows how physicians are really paid in one region. The summary is that all you thought and presumably knew about it (average salaries and complements), is completely wrong when you have detailed information about individual salaries. I strongly suggest to have a look at it, and find the first primary care physician salary.

Undermining agency theory

The Rhetoric of the Economy and the Polity

Two statements from an excellent article by D. McCloskey:
 
A criticism on agency theory:

The Great Recession gave us all some perspective on how agency theory works. The deepest problem in agency theory in any of its forms (public choice, law-and-economics, finance, whatever) is the same as the problem in prudence-only political theory, subject to the Nussbaum Lemma. The theory declares that one has an “obligation” tomake profit (and further that the economic analyst has an obligation to articulate such a theory, always, and has an obligation not to talk about the ethics of  managerial or scientific obligation, since these are matters of value about which one has an obligation not to dispute). But where does the obligation come from? It comes in fact from the ethical responsibilities of a manager to her professionalism, her stewardship, her stakeholders’ interests, or her promotion of the common good. The agent is not a pure prudence-only, Max U creature after all, just as the Hobbesian selfish individual is not. In the very theory that
denies ethics to the agent, she is imagined to be driven by an ethic, albeit a tacit and abbreviated one. Kant fell into a similar self-contradiction when he claimed to base ethics on reason alone, yet gave no account of the reasons an agent would want to act on reason.

About the crisis:

If we have a crisis, it is one of ethics. Bad People (mainly Bad Men) did it. But the baddest men are the political theorists and business-school professors who recommend an approach to the politics of life that omits the virtues. Is that you, looking at yourself in the mirror?

My understanding is that we have emphasized agency teory beyond its initial purpose. The combination of agency and utilitarism forgets professionalism. I share the view of McCloskey.

PS. 30 years after Fama-Jensen famous article on separation ownership and control.

PS. Another article against agency theory.

PS. Nussbaum Lemma:  I think it implausible to suppose that one can extract justice from a starting point that does not include it in some form, and I believe that the purely prudential starting point is likely to lead in a direction that is simply different from the direction we would take if we focused on ethical norms from the start.
McCloskey interpretation: You have to put the rabbits into the hat if you are going to pull them out.