The two friends story

THE TWO FRIENDS WHO CHANGED HOW WE THINK ABOUT HOW WE THINK

Sunstein and Thaler provide an excellent review of a unique book by MichaelLewis in New Yorker. This is my suggestion for reading today.

Healthy lifespans are improving, do we know why?

Understanding the Improvement in Disability Free Life Expectancy In the U.S. Elderly Population

If you want to know the reason behind the improvement of healthy life expectancy in US, then you have to read this chapter.  Three fundamental conclusions:

First, we show that healthy life increased measurably in the US between 1992 and 2008. Years of healthy life expectancy at age 65 increased by 1.8 years over that time period, while disabled life expectancy fell by 0.5 years. Second, we identify the medical conditions that contribute the most to changes in healthy life expectancy. The largest improvements in healthy life expectancy come from reduced incidence and improved functioning for those with cardiovascular disease and vision problems. Together, these conditions account for 63 percent of the improvement in disability-free life expectancy. Third and more speculatively, we explore the role of medical treatments in the improvements for these two conditions. We estimate that improved medical care is likely responsible for a significant part of the cardiovascular and vision-related extension of healthy life.

And this is what I said two years ago in this post with Catalonia data:

Fortunately, new data about recent trends has been published and we can confirm that has increased over a period of 7 years, between 2005 and 2012 from 63 to 65.7 years for men and from 60.6 years  to 66.1 for women . In women the proportion of years lived in good health has gone up by 5 percentage points, from 72 to 77 % in men and has increased only one point from 81 to 82 %. In any case, in marginal and in absolute terms there is a substantial improvement . Nobody would have been able to foresee changes of this magnitude.

Unfortunately we don't know why.

PS. This is the post number 1.000 of this blog. Up to now, the visits reached 166.899. Thank you for your loyalty.

 Ramon Casas exhibition in Sitges

Simplistic arguments on healthcare cost growth

Technology Growth and Expenditure Growth in Health Care

After all these years of great recession, there is an argument that should be reviewed. There was a consensus that technology and ageing were forces that would increase costs. Today, we know that costs have stagnated and we are spending less resources over GDP than 7 years ago. Therefore, something has happened that requires an assessment. Maybe a delay on the introduction of innovation, maybe an increase in productivity, maybe a reduction in its costs/prices, we don't know it. Therefore health costs are not predestined to grow forever.
This is exactly what this article said about it:

Attributing cost growth and improvements in outcomes to “technology growth” is too simplistic and tells us little about where the cost growth is occurring, whether such growth should be tamed, and if so, how it should be done

 The key point is that U.S. growth in health care costs is neither inevitable nor necessarily beneficial for overall productivity gains. Instead, cost growth is the  aggregated outcome of a large number of fragmented decisions regarding the use and  spread of both old and new health technologies.

There is wide heterogeneity in the productivity of medical treatments, ranging from very high (aspirin for heart attacks and surfactants for premature births) to low (stents for stable angina), or simply zero (arthroscopy for osteoarthritis of the knee).

Why organizations are such a mess?

Many years ago I attended to a PhD course on Organizational Economics by Robbert Gibbons, from MIT. I still remember the title of one of his papers "Why organizations are such a mess". I found it really suggestive, because in a world of transaction costs the choice between organizations and markets is a difficult one, and Gibbons was trying to disentangle it. Later he coordinated the Handbook of Organizational Economics and contributed decisively to the development of the discipline. Last September he came back again at Universitat Pompeu Fabra and gave the annual lecture. It is an introduction to the key issues of organizational economics, highly recommended (starts at minute 12):

The farce of confidential drug prices

We are approaching the end of cost-effectiveness as we have known. If you can't use the price of the drug because it is confidential, then there is no possibility of cost-effectiveness analysis. As far as Pfizer has sued a public agency because its officials have leaked the prices, then everybody that uses such information is at risk of being sued. I had already said that some time ago, when in our country we moved to confidential prices. This trend is ridiculous, getting better discounts comes at the price of opacity. And opacity is an extraordinary arm to prevent competition and constrain prioritisation. Qui prodes? It's up to you to get the answer, for me it's clear. If money comes from taxes, the citizens have to know the final price paid. The time to finish such farce has come.

PS. On why external reference pricing is meaningless (p.36):

The practice of lowering list prices through discounts, rebates and similar financial arrangements15 between public payers and the MAH is wide-spread. 22 countries reported that discounts, rebates or similar financial arrangements (e.g. managed-entry agreements such as risk sharing schemes) – either statutory (i.e. based on a law) or confidential (based on agreements) – are in place. As will be discussed later in more detail (cf. Chapter 4.1.2), the widespread use of the discounts and similar provides financial benefits to the country using it, but the other countries referencing to that country do not benefit from the lower prices since they refer to undiscounted higher prices.

Rembrandt. Self portrait

Current exhibition in Caixaforum - Barcelona



In Memoriam of Thomas Schelling

Thomas Schelling: Game Theory, Cold War, Coordination, Leadership, Tipping, Focal point...

Eleven years ago, Thomas Schelling was awarded with the Nobel Prize, 4 days ago he died. It is not often that one man has such a profound impact on the world and the field of public policy. In this blog I have devoted some posts to him: Statistical life vs. identifiable life, Els pirates dels medicaments s'escapoleixen, Validesa i utilitat de les proves genòmiques.  Basically, all of them were related to his main contribution: The Strategy of conflict, a must read book for all people interested in negotiation. Today, the best thing you can do is to read Josep M. Colomer and his post on Schelling, it fits perfectly with his contribution and message, excellent post.

 Cubism and war. Picasso Museum exhibition in Barcelona

In search for the right approach to risk adjustment

Comparison of the Properties of Regression and Categorical Risk-Adjustment Models

Measuring risk-adjustment is crucial for avoiding risk selection incentives. Up to now, regression models have prevailed over categorical ones. However, such difference is often misunderstood or forgotten. A new article explains with all the details the comparison between both approaches.
The summary:

Regression and clinical categorical models represent very distinct approaches to risk  adjustment. Users must carefully choose the model that best suites the intended application. Although clinical categorical models have many advantages in terms of communication, transparency, and stability, their initial development requires a  significant effort and clinical input. Regression models usually require less initial development effort but are unstable in a changing environment and fail to provide the same degree of communication value and transparency

Great work by Fuller et al. Though I fully support the categorical approach, my impression is that beyond such options, there are also alternatives that may fit better with morbidity data: mixed models  (grade of membership). The following book explains the details (chap 17).

 

PS. R package

PS. Nowadays, unfortunately our government has lost its way regarding the design of the appropriate incentives in healthcare payment systems. The impact in the efficiency is huge, but nobody cares about it. There is a current effort to lie systematically in our post-truth era.

Hiding money in a neo-feudal world of concentrated wealth

The Panama Papers: Breaking the Story of How the Rich and Powerful Hide Their Money

There is a fight between State and wealthy people, and the outcome depends on the threshold of the cost-benefit of tax evasion. The Panama papers show that by now this threshold is quite low, benefits are higher than costs. My impression is that lobbys are successful in their effort to suggest rules that allow hiding money with a relatively low cost. After reading the book you'll be convinced about that. Therefore, it's a success of wealthy and a failure of the State. Is there are any alternative?

The more than 2.6 terabytes of data from the servers of the Panamanian law firm Mossack Fonseca provide an insight into the offshore world that is more detailed, immediate and up to date than anyone could have previously imagined. Over the course of many months we have seen with our own eyes how Mossack Fonseca has a tailor-made solution for virtually anyone with something to hide. The right loophole can always be found in one or other of the tax havens: if the company in the Seychelles can’t do it, then the Panamanian trust or the foundation in Bermuda probably can – or alternatively a combination of two, three or four of these elements. In our globalized world it seems there is hardly a single law that cannot be circumvented or have its impact lessened with the help of a few shell companies.

My impression is that Panama papers have increased the tax evading cost, but I'm not sure that this will be enough in our neo-feudal world of concentrated wealth.

Motivated bayesians or classical bayesians

Classical Bayesians will both seek out the most informative evidenceand process it in an unbiased way. However, motivated bayesians gather and process information before and during the decision-making process and they tend to do so in a way that is predictably biased toward helping them to feel
that their behavior is moral, honest, or fair, while still pursuing their self-interest. This is the definition in an interesting article in JEP, and this is the summary:

First, we argue that people often form self-serving judgments of what, exactly, constitutes fair or moral behavior or outcomes. When there is some flexibility in interpreting what is “right” and “wrong” or “moral” or “immoral,” people’s judgments of the morality of an act are often biased in the direction of what best suits their interests. Second, we argue that a similar but distinct phenomenon occurs when people actually alter their judgments of objective qualities—such as their own abilities or the quality of competing options—as a way of making egoistic behavior appear more moral. Finally, we argue that motivated Bayesian reasoning in moral decision making has important implications for many behaviors relevant for economics and policy. In domains including
charitable giving, corruption and bribery, and discrimination in labor markets, the ability of people to pursue egoistic objectives while maintaining a belief in their own morality has important consequences for their behavior.

We argue that an underexplored element in much of this research is the frequent tendency of decision makers to engage in motivated information processing—acting as motivated Bayesians—thereby resolving the apparent tension between acting egoistically and acting morally. Individuals’ flexibility and creativity in how they acquire, attend to, and process information may allow them to reach the desirable conclusion that they can be both moral and egoistic at the same time.

The article is full of examples and you can add more evidence with this case nowadays in the press. At the end of the article, ask yourself if you are a motivated or classical bayesian, or maybe both according to context...

PS. Must read post on private and public health in India.

Duchamp exhibition in Barcelona, until January.

Healthcare and financial markets

The next act in healthcare private equity

Mckinsey has released a short article that allows to understand recent profitability of healthcare in US financial markets. These exhibits speak by themselves: (Exhibit 1)

Exhibit (2)

and (Exhibit 3). 
Take a breath and think twice about what's going on.

Are we reaching the flat-of-the-curve medicine?

Health at a Glance: Europe 2016

Fifty years ago, Victor Fuchs wrote:

“Although many health services definitely improve health, in other cases even the best known techniques may have no effect.”

 Now this statement may seem obvious, though it requires close attention. In the late 1970's Alain Enthoven coined the expression: the-flat-of-the-curve medicine to describe the point where there is no marginal returns on health outcomes while additional resources are being spent. Some years ago, you may find a post on this in the blog.
Now OECD has released the Health at a Glance report and I would like to highlight a short comment:

Between 2010 and 2014, there have been virtually no gains in healthy life years for men and women in many EU countries. This suggests that greater efforts may be needed to prevent illness and disability and to improve the management of these conditions to reduce their disabling effects.

If this is so, then we are extending unhealthy life years, and  somebody should check precisely what's going on (p.57).

Populist health politics, the ultimate nightmare in the post-truth society

What is populism?

Nowadays populism is on the rise, unfortunately. Politicians embrace such option because we are in the post-truth society. As far as truth or facts are not relevant, populists may create false frames without any scruples. A worrying trend, and this is the reason why some people disconnect from public affairs, since it is so difficult to accept such exposure to ficticious reality. In my country, the health minister created a false frame (and he succeded on that, at least up to now). He said that he would "deprivatise" hospitals while hospital privatisation had not occurred formerly, only exceptional contracting out was necessary in certain situations with unattended demand. You can't undo what you have not done before.
Anyway, if you want to know the basis of populist strategists you should read this book :

Populism's core is a rejection of pluralism. Populists will always claim that they and they alone represent the people and their true interests. Müller also shows that, contrary to conventional wisdom, populists can govern on the basis of their claim to exclusive moral representation of the people: if populists have enough power, they will end up creating an authoritarian state that excludes all those not considered part of the proper "people." The book proposes a number of concrete strategies for how liberal democrats should best deal with populists and, in particular, how to counter their claims to speak exclusively for "the silent majority" or "the real people."

Two comments:

"Populism is not just antiliberal, it is antidemocratic—the permanent shadow of representative politics. That's Jan-Werner Müller's argument in this brilliant book. There is no better guide to the populist passions of the present."—Ivan Krastev, International New York Times
"No one has written more insightfully and knowledgeably about Europe's recent democratic decay than Jan-Werner Müller. Here Müller confronts head on the key questions raised by the resurgence of populism globally. How is it different from other kinds of politics, why is it so dangerous, and how can it be overcome? Müller's depiction of populism as democracy's antipluralist, moralistic shadow is masterful."—Dani Rodrik, Harvard University

Sadly, populism is on the right and on the left, they adopt the same strategies and they finally will undermine democracy. Now is the moment to keep away from populism, to fight against populism.

PS. In the last chapter you'll find the right strategy to fight populism, 10 actions:

6. Populists should be criticized for what they are—a real danger to democracy (and not just to “liberalism”). But that does not mean that one should not engage them in political debate. Talking with populists is not the same as talking like populists. One can take the problems they raise seriously without accepting the ways in which they frame these problems.

PS. In London Review of Books, Jan-Werner Müller says:

Populists aren’t just fantasy politicians; what they say and do can be in response to real grievances, and can have very real consequences. But it is important to appreciate that they aren’t just like other politicians, with a bit more rabble-rousing rhetoric thrown in. They define an alternative political reality in which their monopoly on the representation of the ‘real people’ is all that matters: in Trump’s case, an alt-reality under the auspices of the alt-right. At best, populists will waste years for their countries, as Berlusconi did in Italy. In the US, this will probably mean a free hand for K Street lobbyists and all-out crony capitalism (or, in the case of Trump, maybe capitalism in one family); continual attempts to undermine checks and balances (including assaults on judges as enemies of the people when they rule against what real citizens want; and life being made extremely difficult for the media); and government as a kind of reality TV show with plenty of bread and circuses. And the worst case? Regime change in the United States of America.

Genome editing: a major breakthrough in life sciences

Redesigning Life: How genome editing will transform the world

While in a previous post I claimed that genome editing could be a "weapon of mass destruction", today I would like to suggest a close look at this new book. Specifically, chapter 4, The Gene Scissors is a must read to understand the scientific revolution that's going on in life sciences.

In contrast to such limitations of traditional genetic engineering approaches the power of genome editing lies inf four key features. First, the technique can be applied to practically any cell type from any plant or animal species, ranging from bacteria to humans. Second, it can precisely target any región of genome. (...) . Third, the efficiency of gene targeting is extremely high, so no complicated drug selection to identify a one in a million event is required. Fourth, this type of genetic engineering leaves no trace of foreign DNA in the genome that is being targeted.

The tools for the newest type of genome editing are simple to prepare, being well within the power of any scientist with basic molecular biology skills, reagents and equipment.

The complexity of this new approach is explained in clear and understandable language. John Parrington has made a good job, as he did in his previous book: "The deeper genome".

PS. If you want to know the latest on the topic, check Nature: The dark side of human genome
PS. If you want to know a snake-oil seller on genome, check this. The regulator is still on vacation.

Taxing the rich to feed the leviathan (2)

Once upon a time there was a country that 2% of the population  (143.092 citizens) earned 25% of total income of the country and paid 36%% of total income tax collected by the government. More than one third of government funding coming from income tax depends on 2% of population.
Do you think is this fair?. Right now some populist and comunist parties consider that the amount collected from this 2% of population (those that earn more than 60.000€) is not enough and should be increased. Well, this is only an option. I mean, the option to increase is only one, the consequence according to Hirschman may be voting with their feed, the exit, to leave the country.
If you are really concerned about inequality, now is the time to forget any income tax increase and read Branko Milanovic or this previous post.You'll reach exactly the right conclusion, far from nowadays populism and comunism.