September 2007 – artdiamondblog.com

“A Payment System that Rewards Everybody for Staying Busy”

Source of map: online version of the NYT article cited below.

(p. H6) WHY does health care for the average Medicare patient cost nearly twice as much a year in New Jersey, at $8,076, as it does in Hawaii, at $4,529?

The differences are one example of perplexing geographic variations in medical expenses and quality. And in a study that has important implications for the nation’s $2 trillion health care tab, researchers have found that more intensive and expensive care does not necessarily mean better outcomes. In fact, the opposite may be true.

The Dartmouth Atlas of Health Care, a research group that studies variations and costs in medical care, sums it up like this: Geography is destiny. It means that your chances of undergoing certain surgical procedures, visiting the doctor often or even dying in a hospital or at home are related to where you live.

For example, Medicare patients living in Rhode Island undergo knee replacements at a rate of 5 in 1,000 people. In Nebraska, the number rises to 10 in 1,000. Female Medicare enrollees who receive a diagnosis of breast cancer have nearly seven times the chance of having a mastectomy in South Dakota, where the rate is 2 in 1,000, as they do in Vermont, where the rate is .3 in 1,000.

. . .

In communities with surplus hospital beds, research shows, patients do not necessarily get more elective surgery, but they have more hospital stays, more frequent doctor’s visits and are more likely to be referred to specialists.

Dr. Elliott S. Fisher, who studies health care economics and is a member of the Dartmouth research group, said that part of the problem was the way doctors and hospitals were paid.

“In a payment system that rewards everybody for staying busy, every bit of capacity you have, whether it’s the number of specialists or the number of intensive care beds or the M.R.I. scanner, has to stay fully occupied because they bought them already and they have to keep paying for them,” Dr. Fisher said in a telephone interview.

. . .

Paradoxically, the Dartmouth research, which confirms some similar studies, shows that patients in high-cost areas are not necessarily getting better care. Dr. Fisher said that he and his colleagues found higher mortality rates in higher-spending regions.

. . .

Extra care without better outcomes translates into waste in the health care system. Some experts say that waste accounts for as much as if not more than 30 percent of the national spending on health care. Such spending now totals 16 percent of the gross domestic product.

For full story, see:

STEPHANIE SAUL. "TREATMENTS; Need a Knee Replaced? Check Your ZIP Code." The New York Times (Mon., June 11, 2007): H6.

(Note: ellipses added.)

Source of map: online version of the NYT article cited above.

An Innovative Way to Reduce Global Warming, If We Need One

(p. B1) What if we wait too long to act on global warming? What if nothing we do is enough? Already, scientists are working up plans of last resort: stratospheric sprays of sulfur, trillions of orbiting mirrors and thousands of huge off-shore saltwater fountains.

Each is designed to counteract global warming by deliberately deflecting sunlight, rather than by retooling the world’s economy to eliminate carbon-rich oil, coal and natural gas.

Some scientists argue that such actions might be easier and relatively cheaper. Until recently though, whenever University of Maryland economist Thomas Schelling, recipient of a 2005 Nobel Prize, raised such geo-engineering ideas, "half the audience thought I was crazy and the other half thought I was dangerous," he said. As global temperatures rise and greenhouse-gas emissions accelerate, however, even wild ideas are becoming respectable.

. . .

Earlier this month, researchers at the Carnegie Institution of Washington, D.C., released the most precise computer studies yet evaluating the controversial sunshade idea. Their findings, reported in the journal Proceedings of the National Academy of Sciences, revealed that a last-ditch engineering effort to block sunlight could reverse global warming — at least temporarily. Indeed, it could lower average temperatures to levels not seen since 1900. "Every study we do seems to indicate it would work," said Carnegie climate modeler Ken Caldeira.

. . .

For Nobel laureate Schelling, the political advantages of geo-engineering outweigh its technical risks. It may be easier to launch a climate-control project than to persuade people all over the world to stop using fossil fuels. "It drastically converts the whole subject of climate change from one of regulation involving six billion people to a simple matter of a budgetary agreement about how to manage the modest cost," Prof. Schelling said. "I think geo-engineering is going to be the deus ex machina that will save the day."

For the full story, see:

ROBERT LEE HOTZ. "SCIENCE JOURNAL; In Case We Can’t Give Up the Cars — Try 16 Trillion Mirrors." The Wall Street Journal (Fri., June 22, 2007): B1.

(Note: ellipses added.)

“We’re Not Looking to Achieve Incremental Advances”

Genentech CEO Dr. Arthur D. Levinson. Source of image: online version of the WSJ article cited below.

(p. B1) WSJ: You have multiple blockbuster biotech drugs on the market and more on the way. In such an uncertain business, how do you manage scientists to achieve that kind of success?

Dr. Levinson: We are first and foremost committed to doing great science. If a drug can’t be the first in class or the best in class, we’re just not interested. We’re not looking to achieve incremental advances or extend patents or do X, Y, Z unless it is going to really matter for patients. That allows us to bring in phenomenal scientists and encourage them to do the basic and translational research.

We decided 15 years ago that we would be committing (p. B2) to oncology, which at the time for us was new. We are now the leading producer of anticancer drugs in the United States. We took a lot of risks. In many cases, those risks paid off. We are now also in immunology. Again, the role of management here is to set the broad direction and then hire absolutely the best scientists and bring them in and say, ‘Do your stuff.’

For the full interview, see:

MARILYN CHASE. The Wall Street Journal "How Genentech Wins At Blockbuster Drugs CEO to Critics of Prices: ‘Give Me a Break’." The Wall Street Journal (Tues., June 5, 2007): B1 & B2.

Source of graph: online version of the WSJ article cited above.

A Competent, Caring, Ultimate Authority Needed for Open Source to Work: Linux and Wikipedia

The excerpt below is from a WSJ summary of an article from the Summer issue of the journal Strategy + Business.

Linux’s success isn’t as egalitarian as it seems, says Mr. Carr. In 1997, Mr. Raymond praised Linux’s founder, Linus Torvalds, for realizing that "given enough eyeballs, all [software] bugs are shallow." However, Linux has always had a central authority — originally, Mr. Torvalds himself; later, a small group of engineers — that synthesized the work of the volunteers.

Similarly, the expansiveness of Wikipedia’s entries lies in its contributors’ wide range of interests. However, the encyclopedia is slowly putting together a management team to identify and improve poorly written articles and correct imbalances like the one where the "Flintstones" entry is twice as long as the one on "Homer."

For the full summary, see:

"Informed Reader; TECHNOLOGY; Small Teams Advance Open-Source Effort." The Wall Street Journal (Weds., June 6, 2007): B5.

Perverse Incentives in Medicine

Source of graph: online version of the NYT article quoted and cited below.

(p. A1) Stark evidence that high medical payments do not necessarily buy high-quality patient care is presented in a hospital study set for release today.

In a Pennsylvania government survey of the state’s 60 hospitals that perform heart bypass surgery, the best-paid hospital received nearly $100,000, on average, for the operation while the least-paid got less than $20,000. At both, patients had comparable lengths of stay and death rates.

And among the 20 hospitals serving metropolitan Philadelphia, two of the highest paid actually had higher-than-expected death rates, the survey found.

Hospitals say there are numerous reasons for some of the high payments, including the fact that a single very expensive case can push up the averages.

Still, the Pennsylvania findings support a growing national consensus that as consumers, insurers and employers pay more for care, they are not necessarily getting better care. Expensive medicine may, in fact, be poor medicine.

“For most consumers, the fact that there is no connection between quality and cost is one of the dirty secrets of medicine,” said Peter V. Lee, the chief executive of the Pacific Business Group on Health, a California group of employers that provide health care coverage for workers.

. . .

(p. C4) And the survey found that good care can go unrewarded. One Philadelphia area hospital, Main Line Health’s Lankenau center, which performs a large number of bypass surgeries and has a high success rate, according to the survey, was paid an average of $33,549 by private insurers. That was less than half the nearly $80,000 in average payments received by the other hospitals, with poorer track records.

. . .

“The current reimbursement paradigm is fundamentally broken,” said Dr. Ronald Paulus, an executive with Geisinger, who says there is no current financial incentive for a hospital to provide the kind of care that leads to better outcomes and lower payments.

. . .

The problem, according to some health policy experts, is that the hospitals may, in fact, be rewarded for poor care: keeping patients too long because they caught an infrection or had a complication. That, they say, could be the main lesson of the Pennsylvania survey.

"What this highlights is the assumption that more money means better care is flat-out wrong," said Mr. Lee, the chief executive of the California employer group. "It’s easy to pay for bad quality, and we pay for it every day."

For the full story, see:

REED ABELSON. "In Health Care, Cost Isn’t Proof of High Quality." The New York Times (Thurs., June 14, 2007): A1 & C4.

(Note: The last three paragraphs, and the last sentence of the fourth from the last paragraph, of the print version of the article, are missing from the online version.)

(Note: ellipses added.)

Hugh Laurie’s Wonderful Protest Song

Source of image: screen capture from the first link below.

Hugh Laurie hosted Saturday Night Live (SNL) on a show re-broadcast on Sat., Aug. 11, 2007. (I am not sure if the original broadcast was in 2006, or earlier in 2007.)

In one hilarious bit, Laurie announces he is going to sing a "protest song" and proceeds to sing one of those earnest-sounding, pompous, self-righteous save-the-world-with-a-cliché songs that were so common in the late 1960s and the 1970s.

The hilarious bit: whenever Laurie gets to the part of the song where he is going to tell us the "answer"—- he mumbles.

After showing the clip to my principles students, I told them that to fill in the mumbling with something effective, you need to know some economics.

Here is a link to the SNL version:

http://myspacetv.com/index.cfm?fuseaction=vids.individual&videoid=3591518

The song was apparently first performed as part of a show called "A Bit of Fry and Laurie" that was broadcast in the early 1990s in Britain. Here is a link to the earlier version of the song:

http://myspacetv.com/index.cfm?fuseaction=vids.individual&videoid=14405597

Arctic Species Readily Adjust to Big Climate Swings

"White arctic bell-heather (Cassiope tetragona) in the remote Svalbard archipelago of Norway." Source of caption and photo: online version of the NYT article quoted and cited below.

(p. A12) Many Arctic plant species have readily adjusted to big climate changes, repeatedly recolonizing the rugged islands of the remote Svalbard archipelago off Norway’s coast through 20,000 years of warm and cool spells since the frigid peak of the last ice age, researchers report in today’s issue of the journal Science.

Their finding implies that, in the Arctic at least, plants may be able to shift long distances to follow the climate conditions for which they are best adapted as those conditions move under the influence of human-caused global warming, the researchers and some independent experts said.

Some experts on climate and biology who were not involved with the study, which was led by scientists from the University of Oslo, said it provided a glimmer of optimism in the face of generally bleak scientific assessments of the vulnerability of ecosystems to the atmospheric buildup of greenhouse gases.

Terry L. Root, a biologist at Stanford who has been involved with many studies concluding that plants and animals are measurably feeling the effects of human-driven warming, described the Svalbard research as “great news.”

. . .

Norwegian and French scientists analyzed the DNA of more than 4,000 samples of nine flowering plant species from Svalbard, a group of islands between the Scandinavian mainland and the North Pole. They said they found genetic patterns that could be explained only by the repeated re-establishment of plant communities after the arrival of seeds or plant fragments from Russia, Greenland or other Arctic regions hundreds of miles away.

For the full story, see:

ANDREW C. REVKIN. "Many Arctic Plants Have Adjusted to Big Climate Changes, Study Finds." The New York Times (Fri., June 15, 2007): A12.

(Note: ellipsis added.)

For the original Science article, see:

Alsos, Inger Greve, Pernille Bronken Eidesen, Dorothee Ehrich, Inger Skrede, Kristine Westergaard, Gro Hilde Jacobsen, Jon Y. Landvik, Pierre Taberlet, and Christian Brochmann. "Frequent Long-Distance Plant Colonization in the Changing Arctic." Science 316, no. 5831 (2007): 1606-09.

More Live Longer and Better, Due to Ag Biotechnology

The author of the commentary excerpted below, 93 year-old Norman Borlaug, received the 1970 Nobel Peace Prize, and was awarded the Congressional Gold Medal on Tues., July 18, 2007.

Agricultural science and technology, including the indispensable tools of biotechnology, will be critical to meeting the growing demands for food, feed, fiber and biofuels. Plant breeders will be challenged to produce seeds that are equipped to better handle saline conditions, resist disease and insects, droughts and waterlogging, and that can protect or increase yields, whether in distressed climates or the breadbaskets of the world. This flourishing new branch of science extends to food crops, fuels, fibers, livestock and even forest products.

. . .

Consider these examples:

• Since 1996, the planting of genetically modified crops developed through biotechnology has spread to about 250 million acres from about five million acres around the world, with half of that area in Latin America and Asia. This has increased global farm income by $27 billion annually.

• Ag biotechnology has reduced pesticide applications by nearly 500 million pounds since 1996. In each of the last six years, biotech cotton saved U.S. farmers from using 93 million gallons of water in water-scarce areas, 2.4 million gallons of fuel, and 41,000 person-days to apply the pesticides they formerly used.

• Herbicide-tolerant corn and soybeans have enabled greater adoption of minimum-tillage practices. No-till farming has increased 35% in the U.S. since 1996, saving millions of gallons of fuel, perhaps one billion tons of soil each year from running into waterways, and significantly improving moisture conservation as well.

• Improvements in crop yields and processing through biotechnology can accelerate the availability of biofuels. While the current emphasis is on using corn and soybeans to produce ethanol, the long-term solution will be cellulosic ethanol made from forest industry by-products and products.

For the full commentary, see:

NORMAN E. BORLAUG. "Continuing the Green Revolution." The Wall Street Journal (Weds., By July 18, 2007): A15.

(Note: ellipses added.)

Florence in Its Prime: Ghiberti’s “Gates of Paradise”

In my work on the labor economics of the process of creative destruction, I make use of the competition between Ghiberti and Brunelleschi over who would do the bronze door panels. Brunelleschi withdrew, after a "tie" decision from the judges. He then retooled, and bult the marvelous dome that is still one of the world’s architectural marvels.

If Michelangelo’s "David" heads the "must see" list of Renaissance masterpieces for most visitors to Florence, then I suspect "The Gates of Paradise," Lorenzo Ghiberti’s monumental doors of the Baptistery of San Giovanni, rank a close second. The 20-foot-tall portal — 10 exquisitely articulated gilt bronze reliefs of Old Testament scenes, framed by standing prophets, foliage and projecting heads — has mesmerized viewers since its completion in 1452. Michelangelo himself is supposed to have given the doors the name by which they are still known.

. . .

Next year, visitors to Florence will again see "The Gates" restored to their full splendor, permanently installed in the Museo dell’Opera del Duomo.

For the full commentary, see:

KAREN WILKIN. "Ghiberti’s Doors Are Heavenly Again." The Wall Street Journal (Tues., June 5, 2007): D5.

(Note: ellipsis added.)

The Case for Patent Law Reform

The author of the commentary quoted below is the head lawyer for Intel. I believe that the evidence is strong that patents can provide strong incentives for innovation. But the devil is in the details. I have not studied the Patent Reform Act of 2007, so I am not sure whether, overall, it is an improvement over the current rules. But the case for reform is strong, and the topic is one that highly deserves further research.

(p. A15) The U.S. patent system is beginning to show its age; outpaced by the swift evolution of technology and commerce, it increasingly favors speculators over innovators, impeding innovation and economic growth. Fortunately, the bipartisan "Patent Reform Act of 2007," introduced in both the House and Senate, would improve the process for granting patents, and rebalance court rules and procedures to ensure fair treatment when patents wind up in litigation. The Senate Judiciary Committee will take up S.1145 today.

Congress needs to pass this bill, during this session, as the need for reform is clear. Nationwide, the number of patent lawsuits nearly tripled between 1991 and 2004, and the number of cases between 2001 and 2005 grew nearly 20%. Until 1990, only one patent damages award exceeded $100 million; more than 10 judgments and settlements were entered in the last five years, and at least four topped $500 million. One recent decision topped $1.5 billion.

The number of questionable, loosely defined patents, moreover, is rising. One company holds patents that it claims broadly cover current technologies that allow people to make phone calls over the Internet. Another has staked a claim on streaming video over the Internet generally and has pursued colleges for royalties on their distance-learning programs. In 2002, a five-year-old boy patented a method of swinging on a swing.

Unfortunately, under current law, parties that want to innovate in areas covered by questionable patents have only two options, both of them bad: an ineffective, rarely used re-examination process, or litigation — the average cost of which is, by some estimates, $4.5 million. This impedes innovation, as the FTC noted: "One firm’s questionable patent may lead its competitor to forgo R&D in the areas that the patent improperly covers."

For the full commentary, see:

BRUCE SEWELL. "Patent Nonsense." The Wall Street Journal (Thurs., July 12, 2007): A15.

Think “Passports” When You Hear a Call to Grow the Government

In an earlier blog entry, I expressed my own personal outrage at the passport debacle.

HOUSTON, June 6 — With government phone lines jammed by record numbers of passport-seekers, Veronica Alvarez and three anxious friends hoping to travel to Cancun next week showed up at the federal building here on Wednesday at 3 a.m.

There were 11 people in line ahead of them.

“We’ve been calling for a week every day,” said Ms. Alvarez, 29, a bank clerk, who joined about 1,200 people who have been besieging the downtown office here daily for word on their passports, some of which were requested in February.

The State Department has acknowledged long delays from “unprecedented demand” after new rules requiring passports for travelers returning from Mexico, Canada and the Caribbean. It expects to announce new measures soon to ease the nationwide crush.

. . .

Much of the spike in applications is attributed to the Western Hemisphere Travel Initiative, which went into effect Jan. 23 and requires passports, merchant mariner documents or frequent-traveler Nexus cards for air travelers returning from Canada, Mexico, Central and South America, the Caribbean and Bermuda. Next January, the requirement is likely to be extended to ship, rail and road travelers.

But somehow, the government seemed caught by surprise when crowds began besieging passport offices this spring.

. . .

“Basically, they’ve taken my money,” said Kevin Owens, 39, an oil industry employee, who sent in an expedited application April 20 and, with a June 14 trip to Jamaica looming, was still passportless. “The whole process is —” he searched for a word — “lacking.”

. . .

A nervous Brianna Pollinger, 35, of suburban Katy, Tex., arrived at the passport office on Tuesday not knowing whether she would be able to leave Friday on a 10-year anniversary trip to Mexico with her husband. But after waiting nearly eight hours, she emerged with a prized blue-covered booklet. Was she mollified? “Oh, no,” she said. “I definitely minded.”

For the full story, see:

RALPH BLUMENTHAL. "Travelers Face Frustrations With Passport Rule Changes." The New York Times (Thurs., June 7, 2007): A20.

(Note: ellipses added.)

Notice how excited those in line seem to be at hearing what passport official Eric Botts ist telling them. Source of photo: online version of the NYT article cited above.