Innovation in Health Care

Reason's Ronald Bailey had an interesting article about what a market for health care would look like. I think they leaned far too much on profit incentive in their arguments as usual - most physicians are not out to make a buck. However, taking the profit motive out actually strengthens their argument. Currently, we have a medical system that is enabled and fostered by excessive regulation and price-fixing. The system is driven by entities that do not have patient health in mind; insurance companies are highly profit-driven, and government agencies are driven by the two-headed monster of bureaucratic stagnation and get-re-elected corruption. These evils sit between the physician and patient, sucking 30% off the top of care in the form of "overhead" and "Medicare contributions," respectively.

Most doctors want to make enough to cover expenses and live comfortably, like the rest of us, but they also overwhelmingly like to help people. Look at veterinary care: prices are reasonable and care is accessible, despite similar education costs to medical school. So, profit motive or not, doctors left to their own devices and left with their own decisions weighing budget and care will make the best possible decisions for their clients.

But the comment I found the most was near the end of the post:

Prostate cancer patients can evaluate and choose between options like watchful waiting, various radiation therapies, surgery, and soon, a new biotech immunological treatment. Information gathering would take no more time than the current wait for a follow up appointment.

Finally, one would expect that competition would spark that virtuous cycle in which innovation progressively drives down costs, just as it has in so many other areas of commerce. Medical care would become ever more affordable and thus reduce the perceived need for government intervention on behalf of the poor.

My father is an avid skier, and the almost-inevitable occured back in the early 1990's: he blew out his ACL and meniscus in the bumps on Sunday River's White Heat. After consults with physicians, he realized his choices:
  1. Physical therapy to strengthen the muscles around the knee, which would allow ambulatory movement but would mean that strenuous exercise would slowly destroy his knee.
  2. A painful and costly operation that was only partly covered, which involved cutting an incision along the knee, flipping the knee cap, cutting a piece from the patellar tendon, and grafting it into the ACL spot. This would be followed by several months in a lower-body cast and extremely painful healing of a wound that was prone to infection.
Those were the obvious choices at least. But my father read up on some procedures that his orthopedist referred him to, and found that there was a technique called "arthroscopic" surgery that was coming along in a few years. It wasn't covered yet, but all he had to do was wait. He opted for #1. He kept up his skiing and took up biking to keep the leg muscles strong. His knee popped out on a regular basis, until in 1997 he could stand it no longer and got the surgery.

But by May 1997 that surgery was a fraction the cost it was when he first got hurt. What's more, the practitioners had started to clean up other damage while they were in the knee - so they could essentially fix whatever damage he had done to his cartilage by playing on it for those years. They also were trying out various options for new ACLs, so instead of needing the graft harvested from his body, meaning another surgery wound, he got a cadaver's ACL. The surgery was so unintrusive that he literally watched it as it went on, because local anesthesia was sufficient. He was out of bed by weeks end on crutches, and he was on skis again by November with the help of physical therapy. He had missed one epic July 4th weekend in Tuckerman Ravine.

That level of innovation is what is possible in a market-based health care system. Those surgeries were perfected on rich people and professional athletes, out of pocket. Arthroscopic knee surgery began in earnest in the early 1980's, part of a long line of experimentation - mostly failures or ambivalent outcomes. I simply cannot see such a technique becoming affordable and common in a decade or two under a single-payer system of medicine. What government board does not shut it down after failures of silk, carbon, goretex, and about 10 different types of harvested connective tissue?


It used to be better, so let's make it even less like it used to be

Nurse Ratched is, well, a nurse, and she is in support of a public option for health care. I think her point about rationing care is right on. We already do it, from not going to the doctor every time we cough, to GPs not pushing for a specialist consults when they are unlikely to turn up anything, to insurance companies not covering highly experimental procedures. The difference is that insurance companies ration payment while government would ration procedures. They are not the same thing, but that leads to my next point:

Everyone is in a rancor about the cost of health care, but I don't think that cost is the primary sticking point. If you told me that I could live to 200, but that I would have to spend 50% of my income to do it, I would find a cheap apartment and start eating Ramen every night. Wait, I do that already. But you get the point. People by and large are willing to pay for good health, and a dying man will clutch anything but his checkbook. The problem with the current system is uncertainty, because health insurance is not health insurance. Insurers will try to reject anything they can, and in the end you put in hundreds of hours for them to cover some percentage of your costs that is well below 100%.

She blames fat cat CEOs and shareholders, the usual suspects and everyone's favorite targets. She says that if they weren't taking home big salaries and profits this wouldn't be a problem. This is mostly true. But while she establishes the correct arguments, Nurse Ratched whiffs the conclusion. It is the same fallacy I pointed out in Malcolm Gladwell's piece a while back. She even points out the fatal flaw in her argument for us in her opening stanza:
I remember when nurses and insurance companies use to get along with each other. Back in the 1960s, these nurses even took time out of their busy schedules to pose for one of their ads. We took care of patients at the bedside, and the insurance companies paid the hospital bill. It was as simple as that, but then things started to change. It began with three little letters—HMO
The problem isn't private insurance, in other words, it was whatever happened that brought about HMOs. I contend that this was dense thickets of regulations. These made compliance too expensive for small, traditional insurers. They also put up roadblocks - literally - so that private groups could not deduct their insurance costs, and in fact could not even legally set up joint funds for medical costs. We have been steadily erecting barriers to entry and cutting down grassroots competition for nearly 50 years in medicine. If we had done the same thing in, say, education, imagine what the consequences would have been. Oh, wait. Nevermind.

The other thing the good nurse says is that we need a public option. She again preempts herself by noting that, uh, we do have a public option. We have several of them. They are called Medicare, Medicaid, SCHIP, and higher bills to cover free care for those who cannot afford insurance. Actually, it turns out that we all subsidize Medicare through the back door because they get to dictate rates rather than pay what is charged. So really, there is a huge amount of subsidy already in the system. Why does everyone think that a little bit more will dramatically lower costs?

In summary, I only see one problem with the current system, and that is the lack of ethics in actually paying out insurance policies. I don't think cost is a problem per se. I do think vastly greater competition would vastly improve the system, and unlike socialized medicine proponents I can point to an existence proof of a system in America that worked this way and worked well, nostalgia notwithstanding. You don't bring back the good old days by running away.



Robert Reich has an interesting theory about this recession: it will not have a recovery. At least, that's the title, but he hedges by saying the economy will "change" at the end, which is a bit like saying that if I eat, food will not come out of my body. The commenters fall over themselves to congratulate the great insight, as though the guy just invented something called creative destruction or something. More evidence of general economic illiteracy, but I'm not going to complain about that here.

So how DO we come out of this? A few of the lackiest writers out there have been trying to compare this recession to the last one, but that is foolish. It is much closer to the last two big ones: 1980-83 (I'll count it as one despite some recovery between, because the second dip was deeper than the first) and the GD (ditto). There is no long wave issue here - the economy is a chaotic system, and at best any long-term rhythm is just a strange attractor. What is at issue is that the economy is phase shifting, always a dangerous and giddy time to say the least. Once FDR finally and thankfully got the fuck out of its way, the economy changed from agriculture-and-mass-production to the mega-industrial complex of the 50's and 60's. After this house came down through the 70's and early 80's, we got service and high-tech. Now? Here are some possibilities I can see:

1. The market does what socialists keep trying to get the government to do, and evens out income disparity. I'm not talking so much about disparity within the US. I am talking about first world vs. third world. Already China is bouncing a lot sooner out of its funk. It spent the last two decades running against time to build enough breathing room into its economy and those around it that it could take advantage of a time like this. India is in worse straits, but still better off than us and Europe. Face it. With globalization, we were never going to keep up 10-to-1 income disparities with our suppliers. We had a good ride while it lasted. The hope here is that living standards slow or stagnate, rather than falling off a cliff. Eventually, the majority of the world will be making $30,000 a year, and then (probably well before then) the manufacturing and industry jobs will come back. It's not a bad thing. I am willing to give up 1000 sq ft of house if it will raise 5 billion people out of subsistence. The innovative power alone of having all those people free from the plow and able to afford an education is enough to probably change the human race into something we can't imagine in a shockingly short time.

What can the US possibly offer during this period that might pay for the wait for everyone to catch up? In the business world, those who don't physically produce but still make a lot of money are either lawyers, financiers, or consultants. The first option seems to be cornered by Europe, who comes up with a new layer of bureaucracy and governance every other week. The second option seems to be the one we're pursuing, just because we were the first and most aggressive at opening up our financial markets, and because we, uh, print all the gold. But money is so fluid in the days of ubiquitous computing that we will be hard-pressed to maintain that middleman role much longer. The dollar is quickly becoming the world's largest toxic asset, and the US people will be the shareholders in the bank that is holding them. Also, we're bad at it.

I like the third option. We can become the Athens of the modern world. We are currently on a trajectory to absolutely roast this goose. Throwing government cash at more and more federal laboratories might make for interesting journal articles, but doing that will not make us money.it will make us the PhD students of the world: smart, sheltered, and... dirt poor. If we want to stay the world's foremost incubator of marketable ideas, we need to de-regulate venture capital markets, de-regulate and de-tax small businesses, and perhaps above all make immigration easier for smart people. The best idea I have heard is to automatically issue a green card to anyone with a bachelor's degree. I would extend this to anyone with a letter of admission to a US university (take away the slave labor and ridiculous restrictions, let them work like citizens), and anyone who has been granted a patent or anyone in an executive or board position at a profitable business. We need to be an idea factory, unless we are ready to compete on a wage basis with Sumatrans.

2. Jobs will come out of some emerging industry sector. This is arguably what happened in the last two decades with the information revolution. The US economy keeps pulling rabbits out of the hat. There is no reason it cannot do so again. Certain prognosticators like Aubrey de Grey and Ray Kurzweil believe that biotechnology - and I'm saying that broadly, to include things like human-AI interfaces and genetically engineered crops - is ready to be the Next Big Thing. I don't know how well it can penetrate the US medical-industrial complex, but it's possible. I won't try to prognosticate this. Even the very most optimistic investors in the thick of the recession in 1982 would not have expected a couple shares of Apple to fund his retirement. It didn't become apparent what was going on until the early '90s and the internet. As I heard Burt Rutan say once, we were buying computers for 20 years before we figured out what the damn things are for.

3. Inflate. This will kill the dollar standard, which on the whole would have to be seen as a good thing. Nations are just jockeying for who gets to tank the dollar at this point. We are way over-exposed by being the world's reserve currency. For all the power we think it gives us, we can bit back just as badly in monetary terms, and much worse in real terms because we have to use the stuff to buy food.

The problem becomes, if we inflate the dollar we risk destroying a lot of other economies who were foolish enough to invest in us on the downside. If you thought the '08 credit crisis was bad, imagine if it was nations going bankrupt. International trade would collapse, and it would be a miracle if a world war didn't ensue. This is if we totally devalue the stuff. If we balance our budget and slowly inflate over the course of ten years, then the world will do okay. The transfer to a free market of currencies will be a gradual, nation-by-nation affair. There will be some binational disputes over payments, but nothing will blow up. We will be poorer in real terms at the end. But it's a very tight rope to walk.

4. War. A world war. These tend not to solve things, but they do force reality on most of the big players. They destroy a huge amount of wealth, and knock the battlefield inhabitants back generations in terms of living standards. And this time there won't be an undamaged superpower like in 1945 to fund the whole cleanup. This would be a terrible thing in every way.


Meet the new boss, part what, seven?

Obama was against presidential signing statements in the campaign. But now he's for them! And he even has a reason! Paging Dr. Orwell. Dr. Orwell please...



I am writing my thesis right now, trying to conform to the rules in "Engineered Writing" by Melba Jerry Murray. It's an excellent book my boss gave me at the company I'm doing my research at. One of the best suggestions is to make your figures first, and then do the writing around them.

Now, I could write at length about California's budget seppuku. I could even make it funny and interesting to read. But I would rather just show the picture: