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a blog from young economists at Nova SBE


Obamacare: missed opportunities

In this post, I suggest some ways of making health insurance more affordable and accessible with less, rather than more, government interference in the market.

It has become commonplace to use the case of the United States as evidence that leaving health care to the workings of the free market results in worse outcomes than if it provided by governments, as is usually the case in Europe.

Unfortunately, the health insurance market in the US can hardly be described as free, even before Obamacare. It has long become little more than a playground for politicians to push their pet social goals.

One of the reasons why health insurance tends to be so expensive is that government regulation forces insurers to include some benefits in their plans that buyers don’t want, don’t need, and are not even insurance against any discernible risk in the first place. A case in point is that, under Obamacare, everyone must buy health insurance that includes maternity care benefits. Even men.

These mandated benefits are not new to Obamacare, but they differ widely among states. Instead of mandating additional benefits, the federal government should allow people to buy insurance from outside their state. This would those living in states where politicians see themselves as social engineers to “escape the asylum” and get affordable health insurance that only covers actual risks to themselves, and not socialized care to others.

Another way of making insurance more accessible would be to shift away from employer-provided health plans to individually purchased insurance. Why exactly anyone thought that employer-provided insurance was a good idea in the first place beats me, but the problems are obvious: when you lose your job, you lose your health insurance. Even if you don’t lose your job, you will not want to change jobs if you already have a serious health condition, because it may not be covered by the new health plan.

Unsurprisingly, this problem was also created by the government. Employer-provided health benefits are excluded from taxation, which means that if you want health insurance, it is cheaper to ask your company to provide it (in exchange for a lower salary) than it is to buy it yourself. In fact, this is the biggest tax deduction in the US. Not only does it present an enormous cost to the treasury, it also creates huge distortions in the health insurance and labor market.

Since it is such a bad policy, it should come as no surprise that not only will it be maintained by Obamacare, it is being expanded! From 2015, companies with more than 50 employees will be forced to buy insurance for them.

Instead of fixing what was broken with health insurance in the US, Obamacare has managed to take every bad policy in the book and make it worse.

Diogo Pereira
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Aren’t we underestimating palliative care?

It is true that the developments of health care, treatments, drugs and even cures have been increasing considerably with time, but that does not apply to every disease. Unfortunately there are still some chronicle diseases that urgently need a cure, but that specialists and technologies were not able to discover yet. For example, in Portugal, cancer already kills 24 thousand people, and according to World Health Organization, this number is about to increase by 34% until 2030, while in worldwide terms the number will reach the 13 million people.

Going a little bit deeper, in Portugal the number of cancer cases below 65 years old will most likely increase by 12% hence in older people the growth is about to reach the 40% mark.

The truth is that we live in an ageing population. In Portugal people over 65 represent almost 25% of the total population and this number is expected to increase to near 35% in 2050. In addition, the ageing index has been growing exponentially, to near 127%, which means that people over 65 are more than double of the ones until 14 years, and that should be a reason to be worried. To be worried first all because, as the Grossman Model predicts, the more older we are more healthcare we demand, and continuing at this pace, in a near future we will most likely not have enough active people to satisfy that demand.

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Nevertheless, if we join all the dots we get to the point I want to highlight. The number of chronicle diseases it is increasing, and science hasn’t found a solution for that yet. At the same time, population is getting older, which obviously accelerates the growth of the number of these diseases. So the question that we should rise is: if science cannot do anything for these patients, what can we do that is going to increase their utility, their well being, that at least gives them dignity and release them from pain in the phase that they are heading to death?

It is curious to know that according to INE 51,2% of people would prefer to die at home, but incredibly, 61,7% of the Portuguese actually end up dying at a hospital. At the end of the day, only 10 to 12% of the Portuguese have access to Palliative care, when about 60% need it. Palliative Care are, according to World Health Organization, “Palliative care is an approach that improves the quality of life of patients and their families facing the problem associated with life-threatening illness, through the prevention and relief of suffering by means of early identification and impeccable assessment and treatment of pain and other problems, physical, psychosocial and spiritual”. Again, in Portugal there is only 1 to 1,5 domestic support services of palliative cares for 100.000 habitants and 80 to 100 beds per million of habitants (http://www.observaport.org/sites/observaport.org/files/RelatorioPrimavera2013.pdf), which is incredibly low compared to the demand that we are facing.

In a time that population is changing and the healthcare necessities are changing if it, shouldn’t we be changing gears and shifting to solutions that can actually increase the utility, meaning will being, of these people? If that was not enough, one of the reasons why people do not have access to palliative care is because most of them do not have access to private health insurance, benefiting only from the public insurance offered by SNS which does not offer this type of care, which ends up being even more surprising considering the fact that palliative care is not as expensive as people in general think, especially when compared with the recurring attempts for saving people that unfortunately cannot be saved, through chemotherapy and other procedures. The question remains: aren’t we underestimating the palliative care?

Tomás Loureiro

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Be ill only if you have time for that (If you are Polish)

As during the last lecture the issue of the role of waiting time to medical care was touched, and as I have some personal experience with this topic, I decided to describe how the situation of patients looks like in my country in terms of waiting for medical treatment.

First, I want to define what I mean by waiting time – it is namely the time which goes by from symptom appearance to beginning of the treatment. So what I did was asking my family members about their experience in this field – the conclusion was: It is bad. Then I wanted to check what Google would ‘say’ about that. I put the phrase “Health care, waiting time, Poland” and the first article I saw was “Polish health care system is one of the worst in Europe” – so the second conclusion is: it is really bad.

Here are some examples of waiting time in particular health units in Poland:

Medical Practice Health care unit Waiting time (in days)
Ophthalmology Euromed in Zduńska Wola 2880
Endocrinology University Clinic in Gdańsk 922
Cardiology Railway Hospital in Wałbrzych 730
Ophthalmology Ophthalmology Centre in Wrocław 352

How does the Polish Ministry of Health want to deal with this problem? The latest idea was to introduce additional insurance, which would enable wealthy citizens to avoid the lines (but it would not mean that they would be treated in different places than “normal” citizens). But then the poorer part of society would have to wait even longer for medical treatment, which seems to be unfair. Apart from that, the majority of wealthier patients in Poland use the private health care, therefore this solution seems to be pointless because neither would it improve the situation of richer nor poorer people. Personally, I would rather improve the communication between particular health care units and the staff working there. For example in the hospital in the city which I am from, the waiting lists were prepared by few different people and the lack of communication between them led to the situations, in which one person was on many waiting lists making unnecessary chaos and delaying  thereby their own treatment. What is more, the more shrewd people use this fact and try to enroll for a lot of lines, thinking that it will make them wait shorter, however, it does not work. Just one month ago the IT system was introduced there and hopefully it will improve the present communication and organization. In 2010 there were 2.2 physicians and 5.3 nurses per 1000 Polish population, while the OECD overage amounted as follows: 3.1 and 8.7. The situation is similar in terms of medical equipment: for example the number of MRI scanners stood for 4.7 per million Polish citizens, well below the OECD overage of 12.5 scanners. However, in my opinion the biggest problem of polish health care is not the distinct lack of staff and medical equipment but rather the poor organization.

To compare: In Sweden the longest possible waiting time amounts to 125 days, but only in theory, because after having asked my Swedish friends it appeared that in practice waiting more than one month for a medical treatment is treated as a scandal. They should definitely visit my country.J

As a social response to problems and absurd caused by Polish Health Care there was established the Watch Health Care Foundation, which is in my opinion a very interesting initiative that collects and presents reliable data regarding health care services and health procedures to which access is aggravated. Not only the patients, but also service providers, decision-makers and regulatory authorities receive free of charge access to information presented in the form of rankings. Moreover, the website enables users to report cases of limited access to Health Care as well as solutions to those  problems. This platform has been not very known yet, but I really hope it will develop in close future.

Sources:

  1. National Health Fund’s internet page, http://www.nfz.gov.pl/
  2. Nie zapłacisz, to tyle poczekasz (If you do not pay, you have to wait), 07.03.2011, http://www.fakt.pl/
  3. http://www.watchhealthcare.eu/
  4. OECD Health Data 2012: How Does Poland Compare, June 2012, http://www.oecd.org/poland/BriefingNotePOLAND2012.pdf

Izabela Tomasiewicz


The Male Birth Control Pill: Sometimes fairytales never come true

1960 characterized a turning point in the lives of women (and men!) around the Globe: for the first time, the birth control pill had been approved! This occurred in the United States and after only two years the efforts of researchers seemed to have paid off, as 1,2 million of American women were on the pill.[1] For a while, women regarded the tiny colourful pill as a victory in a World dominated by men, as it ended an era of endless baby making and marrying the wrong guy too early. Unfortunately, the small drug did not come without costs: besides the religious, cultural and political controversies it generated, women started to feel the side effects in their bodies, which ranged from the soft and frequent mood changes, weight gain and acne to the severe but rare blood clots, heart attacks and strokes. The question that came to the mind of many was then: what about a male birth control pill? Despite the popularity of the idea, a simple analysis of demand and supply for the product shows its lack of viability.

Let me start with the demand side. Why on earth would men demand a birth control pill? Rationally, it would only compensate if the expected benefits exceeded the expected costs. However, there are practically no benefits! Indeed, pregnancy imposes a higher cost on women than men, so the expected benefit from avoiding one is small for men. As for the expected costs, take into account worse or as negative side effects as women pills and the price men would have to pay for the drug. The obvious conclusion is that men are very unlikely to try this drug, which is confirmed by the scarce empirical evidence. Indeed, a study by Kaiser Family Foundation[2] for the USA found that even if the male birth control pill was provided freely, 29% of men would never use it. Women were even more sceptical regarding male use of the drug: 45% did not believe their partners would try it.

From a supply point of view, incentives are also weak: so far, the development of male birth control pills has shown to have more costs than expected return. R&D projects have started in the 70’s at Oregon, USA and then focused on the use of hormones to control sperm production. However, they were abandoned in phase I due to the adverse effects in men’s eyes. In the 90’s, a revival of the study of the male birth control pill has occurred: despite the different products tested, which ranged from papaya seeds to drugs such as Adjudin, Gamendazol or Trestolone[3], all failed during animal testing or phase I, after huge investments of time and resources. And in 2007, studies slowed down. Pharmaceuticals finally understood by past experience that the product would probably sell at a price that would not compensate the costs, if it sold at all. Indeed, besides the studies pointing out that demand is weak, entering with a new pill in the market could lead to a decrease in the whole price of pills (including women’s pills markets), due to increased competition. So, it was mainly universities and non profit organizations which continued research in the field.

More recently, scientists have isolated JQ1, a molecule which blocks a protein essential to produce sperm in mice and that has shown minimal adverse effects on animals. As such, a revival of enthusiasm on the male birth control pill has aroused, contaminating even prominent magazines such as the Economist[4]. But in my opinion, it is again a false promise, as the product is not viable from an economic perspective. The new pill (if it exists!) will be tested for efficacy over “several years” and due to the high costs of R&D, will be abandoned afterwards after the finding of some side effect on men. And the story will go on, over and over again. At last, until the day when a really high skilled economist kills the dream once and for all.

Ana Rita Borges


A Market for Kidneys, why not?

A Pareto Efficient allocation can be described as one where “there is no way to make some individual better-off without making someone else worse-off”. Efficiency is a desirable property of any allocation, but unfortunately there are many situations in which the allocation is far from efficient. 

One of them is the donation of kidneys. Although it is well documented that people can live healthy lives with only one kidney[1], thousands and thousands of people around the world die every year waiting for a kidney transplant. This is clearly a situation where it is possible to make the ones that need a kidney better-off without making the donators worse-off and, thus, an inefficient situation. 

With this in mind, several economists have been arguing for the abolition of the laws that prohibit the sell of human organs, in order to create a legal market for kidneys. Their main argument is that these laws constraint the supply of organs and therefore do not allow markets to clear. Given that markets usually led to efficient outcomes, why a market for kidneys has not yet been created?

In practice the question is not so straightforward and the critics of this propose have two major arguments: (i) wealthy people who need a kidney would bip up the prices and so poor people would be ‘priced-out’ of the market and (ii) only poor individuals would sell kidneys and such sales would be coercive in nature, which is morally outrageous. 

Regarding the former argument, Adams, Barnett, and Kaserman (1999) suggested that “market-clearing price per organ would be quite low substantially less than $1,000 per organ”. Moreover, several authors sustain that a combination of a free market for kidneys with governments acting as a third-party payer-of-last-resort can eliminate the need to ration kidneys and, thus, everyone who need a kidney (poor or rich) could get one[2].

With respect to the latter argument, the main defense is that people have the right to choose what they think it is better for their well-being, instead of being treated like they were incapable to do so, just because they are poor.

However, rather than just discussing in theoretical grounds it is worthwhile to provide some evidence about the only country that legally allows kidney vending: Iran[3]. Since 1988, selling kidneys is allowed in Iran and, nowadays, vendors receive from the Iranian Government a fixed compensation of $1.200 plus a compensation from the recipient between $2.300 and $4.500.

The results achieved in Iran are remarkable: since 1999, Iran has had no waiting list for kidneys transplant. According to Hippen (2008), “a sucess [that] no other country can claim”.

Competitive markets are not a panacea for all the inefficient situations in the world but, in some cases, and specially in kidney’s one, they can help to achieve more efficient situations, which in this case would mean saving thousands of lives every year.


[2] See: Barnett, Saliba and Walker (2001) and Barnett, Blair and Kaserman (1996).

[3] For more about Iranian System, see Hippen (2008).

 

Miguel Bandeira da Silva

 

References:

Adams, Frank A.; Barnett, Andy H. & Kaserman, David L. (1999). “Markets for Organs: The Question of Supply”. Comtemporary Economic Policy 17(2), 147-155. 

Barnett II, William; Saliba, Michael & Deborah Walker (2001). “A Free Market in Kidneys: Efficient and Equitable”. Independent Review 5(2), 373-385.

Barnett II, William; Saliba, Michael & Deborah Walker (2003). “We Favor a Freer Market in Kidneys”. Independent Review 7(4), 595-598.

Barnett, Andy H.; Kaserman, David L. & Blair, Roger D. (1996). “A Market for Organs”. Society 33(6), 8-17. 

Hippen, Benjamin E. (2008). “Organ Sales and Moral Travails: Lessons from the Living Kidney Vendor Program in Iran”. Policy Analysis, No. 614.

Kathryn Shelton, Richard B. McKenzie, “How Free-Market Kidney Sales Can Save Lives—And Lower the Total Cost of Kidney Transplants.” March 5, 2012. Library of Economics and Liberty. 30 September 2012.<http://www.econlib.org/library/Columns/y2012/SheltonMcKenziekidney.html>.


Access Time to Health Care for Rural Newfoundland and Labrador

The provision of public health services to rural locations is an area of interest for policy makers, especially in my home province of Newfoundland and Labrador where almost half the population live in rural areas. Many factors in the history of the province have contributed to this urban-rural divide including attempts by the government post-confederation to relocate the rural population to more urban centers, and more recently in 1992 with the collapse of the cod fishing industry. In the decade following this collapse, rural population declined by 18% and what followed from a health care perspective is a highly dispersed rural population competing against urban centres for the allocation of health resources[1]. In a report profiling rural Newfoundland and Labrador, the Government of Canada concluded:

Residents of rural and small town Newfoundland and Labrador are clearly not equivalent to their urban counterparts with respect to economic prosperity, educational attainment, housing, and access to health care (…) decision makers should recognize the range of conditions across the province when drafting policy and implementing programs[2].

Residents in rural Newfoundland are four times more likely not to have a doctor compared to urban counterparts[3]. For rural habitants, access time to medical services is higher as they face longer traveling time for appointments and other health services. This leads to varying demands for health care between rural and urban residents, since rural residents may decide not to seek care after factoring in explicit and implicit costs associated with travel.

Without increases in efficiency or technological gain, in order to decrease the access time for rural areas the supply of health care must increase. Increasing the supply comes from increasing the number of health professionals directly in the region or by allocating more resources (hospitals, clinics, etc.) to the area, also increasing the supply of professionals. The provincial government offers incentives for workers to relocate to rural and remote areas. Grants, increased incomes, and other benefits are offered to physicians, nurses, and other health professionals in exchange for their commitment to work in rural areas. Even with incentives, common barriers to nursing in rural areas include the lack of services and resources, diminishing population and isolation, shortage of professionals and increased workload, and decreased opportunity for professional development[4].

Budgeting and other constraints impact the ability to provide comprehensive health services across the province. Taking into account the higher cost for workers in rural areas, the distribution of health professionals across the province must be balanced in such a way as to reach the maximum number of patients while ensuring reasonable access time. As the population of rural Newfoundland decreases, health infrastructure such as hospitals and clinics are consolidated in more urban regions. Although resources are in place to offer all residents essential services, major procedures or treatments can only be done at specific locations with the right equipment, located in urban regions.

Access time to health care adds additional dynamics to deriving the demand for health services and efficiently allocating health resources. Through policy measures such as incentives to increase the supply of health professionals and the allocation of health resources across the province, the government is able to impact access time for rural residents. With high rural populations, public expenditures on health must be balanced to ensure all residences are covered. The challenge comes with balancing the distribution of health professionals between urban and rural areas while meeting budgeting constraints and reaching the most patients possible.

Jacob Macdonald -60-
Nova SBE

[1] Higgins, Jenny. 2008. Depopulation Impacts. http://www.heritage.nf.ca/society/depop_impacts.html (Accessed Sept. 20, 2012)

[2] Government of Canada. 2005. Rural Newfoundland and Labrador Profile:  A Ten-year Census Analysis (1991-2001).  Ottawa, Ontario

[3] Mathews, Maria and Alice Edwards. 2004. Having a Regular Doctor: Rural, Semi-Urban and Urban Differences in Newfoundland. Canadian Journal of Rural Medicine. Vol. 9, Issue 3 166-172

[4] Aylward, Mark, Alice Gaudine and Lorna Bennett. 2011. Nurse Recruitment and Retention in Rural Newfoundland and Labrador Communities: The Experiences of Healthcare Managers. Online Journal of Rural Nursing and Health Care. Vol. 11, Issue 1 (Spring): 54-69


The evolution of some health indicators: The case of Germany

Developed countries are experiencing great gains in life expectancy along the past years owing this to improvements in living conditions, public health interventions and evolution in medical care.

In this brief comment I will focus on the particular case of Germany.

It is common in EU countries to have jointly financed health care systems. In fact, the Social Health Insurance was first established by the German politician Otto von Bismarck.[1]

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In graph 1 we can observe an increase of the total expenditure on health per capita since the 70s and although this raise is more significant in Germany, it is also common to the EU12 and EU15 countries. 

 

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In graph 2 during the period 1989-1990 (there was no data available about 1991) we can perceive a fall in the total expenditure on health (as a % of GDP) that may be due to historical reasons (the reunification of Germany may have led to allocation of funds from health to the catch-up process from Eastern to Western Germany). Still nowadays, the costs of reunification consume four percent of Germany’s gross domestic product annually.[1] 

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Despite the Euro crisis, health spending has, in fact, been increasing approximately 2% from 2000 to 2010. The only exception happened between 2003 and 2004, where this indicator reached a negative value.

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Germany’s health system is financed through a Publicly-Financed Scheme (SHI) (statutory health-insurance) but also by Private health insurance (PHI). The public sector is the main source of health funding in Germany.

In the graphic 4 and 5 it is noticeable a sharp increase in the public expenditure on health as a percentage of total expenditure after 1992. Nevertheless, after 1996 the weight of the public expenditure on the total expenditure (on health) has been close to 76%, which represents a decline in comparison to the previous 4 years. The introduction of the social long-term insurance provoked an increase in health expenditure leading to the high growth rates between 1994 and 1996. The modest increases in health-care spending in 1997 and 1998, are due to the benefit cuts passed in 1996 and 1997.[1]

 Since the 1990s, German health care policy has been varying. From a political perspective, the SPD and Greens favoured the citizen’s insurance, while the CDU/CSU preferred a flat-rate insurance. This citizen’s insurance would subject all individuals to health insurance contributions.[2] In Germany, a coalition of the Social Democratic Party and The Greens governed the country from 1998 to 2005.

 The health sector has been increasing its weight relatively to the overall economy (as a percentage of GDP), almost doubling its share from the 70s to 2010. The ageing trend in Germany, also observed in Europe, and the following need for an increased expenditure in long-term care costs; the lower fertility rate are aspects to take into account when interpreting this variable.

 

Sofia Gonçalves


[1] Wörz, Markus; Busse Reinhard; Analysing the impact of health-care systemchange in the EU member states: Germany; Department of Health Care Management, Berlin University of Technology, Germany

 

[2] Mosebach, Kai; Institutional change or political stalemate? Health care financing reform in Germany; London School of Economics

 [1] http://www.spiegel.de/international/spiegel/germany-s-eastern-burden-the-price-of-a-failed-reunification-a-373639.html

[1] Zweifel, Peter; Breyer, Friedrich; Kifmann, Mathias; Health Economics