Tuesday, March 20, 2007

Health care: Too much of a good thing?

I’ve often seen ideologues play with numbers. It’s easy to do but inherently dishonest though some of it is simply due to ignorance and not intentional dishonesty. People have a tendency to stop looking when they find what they want to find.

One of my private passions has been understanding the role of incentives and economics. One thing a decent economist can teach you is to think beyond the obvious. Much of economics is counterintuitive.

For instance, raising the minimum wage doesn’t raise the income of the poorest workers. They tend to become unemployed. Most workers are above the minimum wage so it has no impact on them. Only a small number of workers have productivity levels higher that what their pay scale indicates. They will see their incomes increase and remain employed since their productivity is worth more than their wages. Those with lower productivity, at the bottom of the wage scale, will end up on unemployment. This is a bit more complicated that the simplistic idea that a high wage minimum raises income.

Recently, in the Christian Science Monitor, Donald Boudreaux took on Corinne Maier from the New York Times. She claimed that French workers were more productive than American workers. And since the French work fewer hours this difference is “proof that you can work better by working less.” That may be a good sound bite but its not necessarily good economics.

Boudreaux noted that French labor regulations make hiring people very expensive -- one of the reasons for the very high rates of unemployment especially among the least educated. High labor costs weed out the least productive workers from the workplace.

In Boudreaux’s example he suggests a $500 per hour minimum wage would automatically make American workers the most productive in the world. The reason is simple. Only those whose productivity is worth more than $500 per hour would have jobs while the zero productivity of the unemployed is never factored in to the productivity rates.

Strictly speaking, if the French also included the vast numbers of people who can’t find work in their productivity ratings they wouldn’t look so good. Consider a race between two groups of kids. In one group the teacher goes around breaking the legs of slowest runners. Then they have a competition where only those who can run do so. They add up the times and declare the first class has a higher average speed. Breaking the legs of slow runners would increase the average of those who run. That is what the French do -- they break the “productivity legs” of their slowest runners.

I thought Boudreaux’s editorial was quite enlightening and one of the best things on economics I’ve read in a long time. It takes a “fact,” as the media reports it and scrutinizes it -- something the media is not likely to do for a number of understandable reasons.

Over at Slate Darshak Sanghavi has done something similar. He looks at the much touted infant mortality rate. The Left, in particular, loves to quote this number. America has a higher infant mortality rate than most developed countries. That fact, in isolation, doesn’t tell us much. We really need to ask why this is and what it means. But people assume this is a marker for conclusions they have already drawn. So it is alleged to mean, “that capitalism fails”, that the “lack of national health care” kills people, “that welfare cuts are killing babies”, and a host of other conclusions looking for evidence.

Save the Children had one of the ready made conclusions: “We are the wealthiest country in the world” but children “are not getting the health care they need.” Really? Anna Bernasek, at the New York Times, blamed the high rate on the lack of national health care. Another one of those conclusions looking for evidence.

But Sanghavi says “a closer look reveals the counterintuitive possibility that high infant mortality in the United States might be the unintended side effect of increased spending on medical care.” We should consider this for a moment.

Americans spend more on health care than any other nation. The very idea that the US isn’t spending enough is absurd. The reason couldn’t be a lack of spending as Save the Children claimed. America is condemned by the advocates of socialized health care for both spending too much and for not spending enough. It is condemned no matter the spending level.

You would almost conclude that the reason for the condemnation has nothing to do with the spending patterns. Perhaps the advocates of socialized care condemn both too much spending and not enough spending for reasons that have nothing to do with the actual spending but with their purported solution. If you want to propose a “solution” you sometimes have to invent the crisis that needs solving, or at least convince people that one exists. Condemning US health care for spending too much on Tuesday and too little on Wednesday has a lot to do with the new system they want to impose on Thursday.

Elsewhere I have investigated some of the illusionary arguments used by advocates of socialized medicine noting that Americans have an abundance of health care, especially of the expensive kind. One way to keep health care costs down in nationalized systems is to ration it out. Deny expensive treatments to people and costs will drop. Americans get more of those expensive treatments.

And America’s infant mortality rate may be directly connected to this crisis of abundance. Sanghavi asks what is the cause of infant mortality in the US. He notes that in poor countries the cause is usually easily treated problems such as diarrhea in the first few months of life. Two things are necessary to be included in this statistic. First the infant must be born alive and second it must die before the age of one. If it is born dead it doesn’t count in the statistic.

Sanghavi says that somewhere between one third and one half of all infant mortality in the US is due to complications of prematurity. I checked this out and he’s right. MedicineNet.com puts the rate even higher: “In the United States, about two-thirds of infant deaths occur in the first month after birth and are due mostly to health problems of the infant or the pregnancy, such as preterm delivery or birth defects.”

Sanghavi argues that modern medicine is not particularly good at preventing premature births. And some new medical techniques actually increases the risk but are still used for understandable reasons. He notes that the number of women using technology to conceive has doubled and that the technology increases the number of multiple births and multiple births are “at a high risk of premature delivery.”

And he writes: “Despite a doubling of health-care spending as a portion of the gross domestic product since 1981, the rate of preterm birth has jumped 30 percent.” If, as Save the Children complained, the problem is not spending enough then the rate of premature births should not have increased as spending increased.

Another counter-intuitive problem for prematures is that the number of neonatal units the country has increased. So much money is available for neonatal care that more care is available than needed. Infants who normally wouldn’t be given this care are sent to the unit as a precaution. Sanghavi writes about a study in the New England Journal of Medicine: “The authors ominously suggest that ‘infants might be harmed by the availability of higher levels of resources.’ They argue that the availability of a NICU may mean that infants with less-serious illnesses may be admitted to one and then ‘subjected to more intensive diagnostic and therapeutic measures, with the attendant risks.’”

He also notes that hospitals which treat large numbers of premature babies have high success rates. The increase in the number of neonatal units has meant that each hospital treats fewer cases. With less experience the number of deaths increases. A study in the Journal of American Medicine noted that concentrating these prematures in fewer hospitals could reduce the death rate and lower costs as well.

If this study is correct then reducing costs by reducing the number of hospitals offering neonatal care may increase the survival rate for premature infants. It is possible that one can have too much of a good thing. And spending more on neonatal care may exacerbate the problem. The reason for it seems obvious. And if I may allow me to use Ikea as an example.

Putting together that furniture is a real chore. Sometimes is it is downright difficult. And if you are doing one of this and one of that each piece is hard work. But if you have ever done multiple examples of the same piece you quickly learn the process. With more experience you make fewer mistakes, are more prone to notice details and faster. Experience makes you better at the work. Why would neonatal health care be any different? The more experience one has the better one becomes.

American health care has so much money thrown at it that care is being diffused. More and more hospitals have neonatal units, even though such units are expensive. The number of patients are spread over a greater number of hospitals reducing the average experience at each hosptial. With reduced experience there is a higher mortality rate. As the JAMA article noted: “Risk-adjusted neonatal mortality was significantly lower for births that occurred in hospitals with large (average census, >15 patients per day) level III NICUs.” So by concentrating such care, in urban areas particularly, “has the potential to decrease neonatal mortality without increasing costs.”

As I said sometimes life is counter-intuitive.

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