Good Column on Life Expectancy

Thank you Mary Josee-Kravis for this excellent debunking of the use of life expectancy as a measure health care effectiveness.   Some key words:

U.S. life expectancy at 65 (17.1 more years for males and 20 for females) is higher than in the U.K. and Germany. The more important point, however, is that life expectancy reflects not only health care but also diet and lifestyle. A raw match of life expectancy against health care spending is naive.

Take road fatalities: The U.S. holds the unenviable record of one of the highest rates in the developed world. Its road mortality rate is 15 per 100,000 people compared with 6.6 in Japan, partly because we drive more. Would universal health care shorten commutes or stop speeding? Would driver-distracting cell phones be shelved and more seat belts worn if there were universal health insurance?

Here are some stats I haven’t seen elsewhere:

The Organisation for Economic Co-operation & Development reports that 32.2% of Americans are obese. The OECD average is 14.6%, with Japan at 3%, France 9.5%, Germany 13.6%, Canada 18% and Australia 21.7%. Obesity isn’t caused by the health care system, but it does reduce life expectancy. It’s a lifestyle choice whose expenses are borne by everyone. Costs attributable to obesity account for almost 10% of health care spending in the U.S. In Canada the corresponding figure is from 2% to 3.5%.

Obese Americans spend an average of 36% more for health services and 77% more for medications than people of normal weight. They are 20 times as likely to develop diabetes, 2.5 times as prone to heart disease and twice as vulnerable to cancer, hypertension and asthma. Will health care reform cut portion sizes? A more pertinent question: Will obesity be classified as a preexisting condition preventing insurance companies from providing incentives for healthier life choices?

Supply and Demand Refresher

More words from Milton and Rose Friedman:

Economists may not know much.  But we know one thing very well:  how to produce surpluses and shortages.  Do you want a surplus?  Have the government legislate a minimum price that is above the price that would otherwise prevail.  That is what we have done at one time or another to produce surpluses of wheat, of sugar, of butter, of many other commodities.

Do you want a shortage?  Have the government legislate a maximum price that is below the price that would otherwise prevail.  That is what New York City and, more recently, other cities have done for rental dwellings, and that is why they all suffer or will soon suffer from housing shortages.  That is why there were so many shortages during World War II.  That is why there is an energy crisis and gasoline shortage.

This is how the law of supply and demand should be introduced.  This makes intuitive sense to most people.  It’s much more intuitive than the supply and demand curves.

Obvious Questions

In 1980, Milton and Rose Friedman wrote these words in their book Free to Choose regarding the energy crisis of that day:

Government officials, newspaper reports, and TV commentators regularly attribute the energy crisis to a rapacious oil industry, or wasteful consumers, or bad weather, or Arab shiekhs.  But none of these is responsible.

The subtle and sophisticated people who fill the newspaper columns and the airwaves with such silly explanations seem never to have asked themselves the obvious question: why is it that for a century or more before 1971, there were no energy crises, no gasoline shortages, no problems about fuel oil–except during World War II.

There has been an energy crisis because government created one.

To the despair of every economist, it seems almost impossible for most people other than trained economists to comprehend how a price system works.  Reporters and TV commentators seem especially resistant to the elementary principles they supposedly imbibed in freshman economics.

Obvious questions never get asked.

Much like in the energy crisis in the 70s, the usual suspects get blamed for our present day crises – bad mortgages, high gasoline prices and problematic health insurance.   Companies, CEOs, traders, greedy salespeople are the bad guys.  Unpopular politicians catch some blame too, but it’s usually misplaced and based more on how well the media and general public like the politician.

Obvious questions: Are these the right things to blame?  Why do some industries rarely or ever have crises and some seem prone with crisis?  What are the possible causal differences in these industries and how exactly do those causes generate the problems in one industry or not in another?

I Agree With Obama?

I’m sure friends and family will be surprised to read this, but I’m a fair guy.

I’ll give President Obama two points.

Point 1: I saw him on a news show this weekend correctly state that the discourse around health care isn’t about his skin color, rather about what people think the proper role of government is in society.

Point 2:  Today I read this quote from one of his TV appearances over the weekend:

“I think, that frankly, the media encourages some of the outliers in behavior, because, let’s face it – the easiest way to get on television right now is to be really rude,” Obama said on ABC’s Sept. 20 “This Week with George Stephanopoulos.” “If you’re just being sensible and giving people the benefit of the doubt and you’re making your arguments, you don’t, you don’t get time on the nightly news.

I agree with that too.  I find that goes for debates at the office and family living rooms around the country as well. We are TERRIBLE at constructive conflict.  We take things too personally. We call each other names.  We misrepresent our opponents’ viewpoints.  We get mad and frustrated.  We shut down when we hear something that might challenge the way we think.

In many debates, we have precious little time to make valid points and question our opponents position before the powder keg ignites.  We’re too caught up in winning, or at least making it appear that we are the victor, than bringing the best ideas forward and addressing the valid points, fair criticisms and trade-offs and getting others to think about the very things that successfully formed our mindsets.

That’s too bad.

Alternative Fix to Problem of Uninsured

Let’s say that people without health insurance is a major problem that needs fixing, as many believe it is.  One  estimate is that 46 million people, or 15% of the population, is not covered by health insurance.

Assuming Keith Hennessey has done his homework and this information is correct, he  says that of the 46 million,  10.1 million, or 3% of the population, may actually warrant some aid to obtain medical care.  Important to not, many of them receive health care now through other subsidized means.

If the goal is to cover this 3% of the population, why not use a program like food stamps that targets a low income demographic to give them the ability to put food on the table?  Why not provide medical stamps that can only be redeemed on medical care and health insurance?

People eligible to receive the stamps might use them in the same fashion as people on HSAs with high deductible health insurance.  They could buy high deductible health insurance with about 20% of the medical stamps and stockpile the other 80% in HSA (Health Savings Accounts)-like accounts to be used on day-to-day medical care until they reach the deductible amount.

Also, like an HSA, if they grow out of the eligibility for the stamp program because of rising income or other access to health insurance presents itself, they can keep the value they’ve accumulated in the HSA for future medical expenses.

I prefer this idea over other solutions because it allows people to control their own health care expenditures, replacing the bureaucracy of medical claims processing with a bureaucracy of distributing medical stamps.  A more efficient means of distribution may be through the tax code through an EIC-like credit.

It also may be self-funding, though I haven’t done no math on this.  In theory people managing their own medical care expenses will spend more carefully than receiving care funded by invisible donors.  For example, rather than spending $1,000 of medical stamps for emergency room visits for routine medical care, they might choose to conserve their dollars with a $60 visit to the CVS Pharmacy Minute Clinic.

What’s wrong with this idea?

Free to Choose

I’m reading Milton and Rose Friedman’s Free to Choose now.  Excellent so far.  They include a lot of real world examples and observations.  For example, it’s easy to make reference to a communist country, but it’s eye opening to read accounts of countries with varying experience and degrees of communism from people who visited and observed first hand.

For those not wanting to read the whole book, there’s a video series to watch.  Also, I highly recommend reading the Preface and Introduction.

I will post more about the book and video series as I get through it.