Health Care Incentives and Information Improve When Patients Are Payers

Nobel Prize winning economist Vernon Smith sees that the current health care system is an incentive and information “nightmare.” The third parties, who pay, have neither the incentive nor the information to reward the providers who do a good job. And patients, who have the information, do not have the power or incentives to reward those who do a good job. And since providers are not being rewarded for doing a good job, they will only avoid becoming cynical bureaucrats as long as they are mission-driven saints.
A better system, that goes a long way toward Smith’s “solution,” has been suggested by Susan Feigenbaum, who suggests that third parties provide payments directly to patients, who then may choose what services to buy from which providers.
Here is the core of Smith’s analysis:

(p. A11) The health-care provider, A, is in the position of recommending to the patient, B, what B should buy from A. A third party–the insurance company or the government–is paying A for it.

This structure defines an incentive nightmare.
. . .

I don’t know whether this problem has a solution. If it does, I think it requires us to find mechanisms whereby third-party payment is made to the patient, B, who in turn pays A, supplemented with any co-payment from B for services. Hence, from the moment B seeks services from A both know who is going to be paying A for what is delivered. A and B each has need for what the other brings to the table, and this structure carries the potential for nurturing the relationship between A and B. B is empowered to become better informed about the services recommended by various A’s that he might choose among, and the A’s might find it particularly important to build good reputations with B’s.

For the full commentary, see:
VERNON L. SMITH. “The ABC Dilemma of Health Reform; Third-party payment creates a big incentive problem.” The Wall Street Journal (Sat., OCTOBER 16, 2009): A11.
(Note: ellipsis added.)

Feigenbaum’s prescient suggestion for reform can be found in:
Feigenbaum, Susan. “Body Shop’ Economics: What’s Good for Our Cars May Be Good for Our Health.” Regulation 15, no. 4 (Fall 1992): 26-27.

Harvard Medical School Conference on the Quest for Eternal Life

SinclairWestphalStiris2009-10-04.jpg“AGE WELL. David Sinclair, left, and Christoph Westphal, co-founders of Sitris Pharmaceuticals, in Dr. Sinclair’s laboratory in Cambrdge, Mass. The company develops drugs that mimic resveratrol, a chemical found in some red wines.” Source of caption and photo: online version of the NYT article quoted and cited below.

(p. D4) BOSTON — Who would have thought it? The quest for eternal life, or at least prolonged youthfulness, has now migrated from the outer fringes of alternative medicine to the halls of Harvard Medical School.

At a conference on aging held here last week, the medical school’s dean, Jeffrey Flier, was to be seen greeting participants who ranged from members of the 120 club (they intend to live at least that long) to devotees of very low calorie diets.
. . .

Dr. Gallagher said that unpublished tests in mice showed that another chemical mimic, SRT-1720, increased both health and lifespan; after two years, twice as many mice taking the drug were alive compared with the undosed animals. Resveratrol itself has not been shown to increase lifespan in normal mice, although it does so in obese mice, laboratory roundworms and flies.
Sirtris has so far been doubly fortunate. No severe side effects have yet emerged from the clinical trials. The company has also been lucky in having apparently picked the right horse, or at least a good one, in a fast-developing field.
Besides the sirtuins, several other proteins are now known to influence longevity, energy use and the response to caloric restriction. These include the receptors for insulin and for another hormone called IGF-1, and a protein of increasing interest called TOR (“target of rapamycin”). Rapamycin is an antimicrobial that was recently found to extend lifespan significantly, even when given to mice at an advanced age. Since TOR is involved in the response to caloric restriction, rapamycin may extend life through this pathway.
. . .

“In five or six or seven years,” said Christoph Westphal, Sirtris’s other co-founder, “there will be drugs that prolong longevity.”
But neither Dr. Sinclair nor Dr. Westphal was the most optimistic person at the conference. That status belonged to the English gerontologist Aubrey de Grey, who sports a beard so luxuriant that it is hard to see if he is wearing a tie. His goal is “negligible senescence.”
. . .

Sirtris’s quest for longevity drugs is founded on solid and promising research. But most drugs fail at some stage during trials. So there is no guarantee that any of Sirtris’s candidate compounds will work in people. The first result from a Phase 2 clinical trial is not expected until the end of next year at the earliest.
Meanwhile, it is a pleasant and not wholly unfounded thought that, just possibly, a single drug might combat every degenerative disease of Western civilization.

For the full story, see:
NICHOLAS WADE. “Quest for a Long Life Gains Scientific Respect.” The New York Times (Tues., September 28, 2009): D4.
(Note: ellipses added.)

Rapid Mutation of RNA-Based Flu Virus Allows Rapid Adaptation to Immune System Response

I found the passage quoted below to be especially illuminating on how rapid mutation helps explain why the flu virus is so successful and dangerous. (An additional important factor is that the virus can survive in birds, without killing them.)
It occurs to me that something akin to rapid mutation (e.g., rapid experimentation) has also been advocated as a way to quickly advance science (Karl Popper), or enterprise (George Gilder).

(p. 105) Whenever an organism reproduces, its genes try to make exact copies of themselves. But sometimes mistakes–mutations–occur in this process.

This is true whether the genes belong to people, plants, or viruses. The more advanced the organism, however, the more mechanisms exist to prevent mutations. A person mutates at a much slower rate than bacteria, bacteria mutates at a much slower rate than a virus–and a DNA virus mutates at a much slower rate than an RNA virus.
DNA has a kind of built-in proofreading mechanism to cut down on copying mistakes. RNA has no proofreading mechanism whatsoever, no way to protect against mutation. So viruses that use RNA to carry their genetic information mutate much faster–from 10,000 to 1 million times faster–than any DNA virus.
Different RNA viruses mutate at different rates as well. A few mutate so rapidly that virologists consider them not so much a population of copies of the same virus as what they call a “quasi species” or a “mutant swarm.”
These mutant swarms contain trillions and trillions of closely related but different viruses. Even the viruses produced from a single cell will include many different versions of themselves, and the swarm as a whole will routinely contain almost every possible permutation of its genetic code.
Most of these mutations interfere with the functioning of the virus and will either destroy the virus outright or destroy its ability to infect. But other mutations, sometimes in a single base, a single letter, in its genetic code will allow the virus to adapt rapidly to a new situation. It is this adaptability that explains why these quasi species, these mutant swarms, can move rapidly back and forth between different environments and also develop extraordinarily rapid drug resistance. As one investigator has observed, the rapid mutation “confers a certain randomness to the disease processes that accompany RNA [viral] infections.”
Influenza is an RNA virus. So is HIV and the coronavirus. And of all RNA viruses, influenza and HIV are among those that mutate the fastest. The influenza virus mutates so fast that 99 percent of the 100,000 to 1 million new viruses that burst out of a cell in the reproduction process (p. 106) are too defective to infect another cell and reproduce again. But that still leaves between 1,000 and 10,000 viruses that can infect another cell.
Both influenza and HIV fit the concept of a quasi species, of a mutant swarm. In both, a drug-resistant mutation can emerge within days. And the influenza virus reproduces rapidly–far faster than HIV. Therefore it adapts rapidly as well, often too rapidly for the immune system to respond.

Source:
Barry, John M. The Great Influenza: The Story of the Deadliest Pandemic in History. Revised ed. New York: Penguin Books, 2005.
(Note: italics in original.)

How Wilson and the Feds Turned “Only Influenza” into “The Great Influenza”

Here is the core of John Barry’s account of how President Woodrow Wilson, and his administration, turned what might have been an ordinary flu, into what, by some measures, was the worst pandemic in human history:

(p. 396) . . . , whoever held power, whether a city government or some private gathering of the locals, they generally failed to keep the community together. They failed because they lost trust. They lost trust because they lied. (San Francisco was a rare exception; its leaders told the truth, and the city responded heroically.) And they lied for the war effort, for the propaganda machine that Wilson had created.

It is impossible to quantify how many deaths the lies caused. It is impossible to quantify how many young men died because the army refused to follow the advice of its own surgeon general. But while those in authority were reassuring people that this was influenza, only influenza, nothing different from ordinary “la grippe,’ at least some people must have believed them, at least some people must have exposed themselves to the virus in ways they would not have otherwise, and at least some of these people must have died who would otherwise have lived. And fear really did kill people. It killed them because those who feared would not care for many of those who needed but could not find care, those who needed only hydration, food, and rest to survive.

Source:
Barry, John M. The Great Influenza: The Story of the Deadliest Pandemic in History. Revised ed. New York: Penguin Books, 2005.
(Note: ellipsis added.)

How Government Universal Health Care Works in India

JahanAmirIndianWeaver2009-09-26.jpg “Amir Jahan found her health insurance wouldn’t pay for all of her $200 stomach surgery; she continues to work with an untreated tumor.” Source of caption: print version of the WSJ article quoted and cited below. Source of photo: online version of the WSJ article quoted and cited below.

(p. A14) PANIPAT, India — Amir Jahan can spin thick, white thread into magnificent cloth, but the 46-year-old weaver has been unable to unravel her health plan to pay for stomach surgery.

Under a health-insurance program introduced a few years ago, the Indian government has provided health-insurance coverage for the country’s hand-loom weavers, a group of 6.5 million workers, 60% of them female, who are mostly illiterate and invariably poor. Yet holding an insurance card hasn’t helped Ms. Jahan, who says the coverage only pays for minor ailments and not for major problems, such as the removal of a stomach tumor.
“The health care is all a sham,” Ms. Jahan says angrily. “I was refused treatment on grounds of huge expense. I won’t ever go to be humiliated again.”
Ms. Jahan’s health-care issues represent the problems that come with trying to provide insurance to India’s poor. Access to quality care remains a distant dream for many in this country of 1.1 billion.
Last year, the Indian government launched the National Health Insurance Program on (sic) promised health coverage of $700 per person for families earning less than $100 a year.
Holders of health cards have to register in their home states to access benefits, thereby precluding a large population of migrant laborers. Those who can get past the complex state-identification and qualification process often can’t cope with hospital bureaucracies.

For the full story, see:
VIBHUTI AGARWAL. “Indian Weavers Shun Health Plan.” The Wall Street Journal (Sat., Sept., 2009): A14.

Government Actions Helped Spread 1918 Influenza

GreatInfluenzaBK.jpg

Source of book image: http://www.virology.ws/wp-content/uploads/2009/08/great-influenza.jpg

I like John Barry’s The Great Influenza very much, although not entirely for the reasons that I had expected to like it. I wanted to learn more of the details of the worst flu pandemic in history, and the book delivers those details.
But I had not expected that there would be substantial discussion of the epistemology of science and medicine, and of the political and global context that preceded and affected the 1918 H1N1 influenza pandemic.
As an added bonus, the book gives substantial coverage to the life and work of one of my heroes, Oswald Avery. As a result of his research related to the pandemic, he discovered that DNA was the genetic material—a huge milestone in the history of medicine. But he never received the Nobel Prize because the Nobel Committee didn’t want to be seen endorsing controversial work that had not stood the test of time.
On the other hand, the Nobel Committee had no such compunctions about giving the Nobel Peace Prize to President Woodrow Wilson. Barry’s book indicts Wilson for having major responsibility for the severity of the pandemic. His administration drafted huge numbers of young men to fight in WWI, bringing them into close contact in shoddy, incomplete training camps. Some of these young men already had the flu, and they quickly spread it to many of their fellow soldiers. The Wilson administration continued to move these soldiers around the country and to Europe, vastly speeding the spread of the disease.
Barry also documents that the Wilson administration, in the name of patriotism and morale, punished those who told the truth about the severity of the pandemic. The results extended far beyond the trampling of civil liberties. For example, there was a huge parade in Philadelphia to sell war bonds, a parade that could easily have been canceled, but was not—igniting the rapid spread of the disease in that hard-hit city. If the newspapers had been allowed to print the truth about the pandemic, then there probably would have been sufficient outcry to cancel the parade; or at the very least, many better-informed citizens would have avoided the parade, and saved their lives, and the lives of their family members.
There is also a lot in book about the biology of the disease that is of interest, and about the suffering of those who experienced it.
But what I found eye-opening was the extent to which the severity of the disease was due to avoidable actions by Woodrow Wilson and his administration.

Source of book discussed above:
Barry, John M. The Great Influenza: The Story of the Deadliest Pandemic in History. Revised ed: New York: Penguin Books, 2005.

For another eye-opening account about Woodrow Wilson and WWI, see:
Raico, Ralph. The Spanish-American War and World War I, Parts 1 & 2: Knowledge Products, 2006.

For a neat little paper on Oswald Avery, see:
Diamond, Arthur M., Jr. “Avery’s ‘Neurotic Reluctance’.” Perspectives in Biology and Medicine 26, no. 1 (Autumn 1982): 132-36.

Doctors Seek to Regulate Retail Health Clinic Competitors

NursePractitioner2009-09-26.jpg“A nurse practitioner with a patient at a retail clinic in Wilmington, Del.” Source of caption and photo: online version of the WSJ article quoted and cited below.

Clayton Christensen, in a chapter of Seeing What’s Next, and at greater length in The Innovator’s Prescription, has persuasively advocated the evolution of nurse practitioners and retail health clinics as disruptive innovations that have the potential to improve the quality and reduce the costs of health care.
An obstacle to the realization of Christensen’s vision would be government regulation demanded by health care incumbents who would rather not have to compete with nurse practitioners and retail health clinics. See below for more:

(p. B1) Retail health clinics are adding treatments for chronic diseases such as asthma to their repertoire, hoping to find steadier revenue, but putting the clinics into greater competition with doctors’ groups and hospitals.

Walgreen Co.’s Take Care retail clinic recently started a pilot program in Tampa and Orlando offering injected and infused drugs for asthma and osteoporosis to Medicare patients. At some MinuteClinics run by CVS Caremark Corp., nurse practitioners now counsel teenagers about acne, recommend over-the-counter products and sometimes prescribe antibiotics.
. . .
As part of their efforts to halt losses at the clinics, the chains are lobbying for more insurance coverage, and angling for a place in pending health-care reform legislation, while trying to temper calls for regulations.
. . .
(p. B2) But such moves are raising the ire of physicians’ groups that see the in-store clinics as inappropriate venues for treating complex illnesses. In May, the Massachusetts Medical Society urged its members to press insurance companies on co-payments to eliminate any financial incentive to use retail clinics.
. . .
The clinics are helping alter the practice of medicine. Doctors are expanding office hours to evenings and weekends. Hospitals are opening more urgent-care centers to treat relatively minor health problems.

For the full story, see:
AMY MERRICK. “Retail Health Clinics Move to Treat Complex Illnesses, Rankling Doctors.” The Wall Street Journal (Thurs., SEPTEMBER 10, 2009): B1-B2.
(Note: ellipses added.)

A brief commentary by Christensen (and Hwang) on these issues, can be found at:

CLAYTON CHRISTENSEN and JASON HWANG. “How CEOs Can Help Fix Health Care.” The Wall Street Journal (Tues., July 28, 2009).

For the full account, see:
Christensen, Clayton M., Jerome H. Grossman, and Jason Hwang. The Innovator’s Prescription: A Disruptive Solution for Health Care. New York: NY: McGraw-Hill, 2008.

RetailHealthClinicGraph2009-09-26.gif

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

Increase Health Insurance Competition by Ending Cross-State Ban

(p. A13) How do we get to a competitive market? The tax deduction for employer-provided group insurance, which has nearly destroyed the individual insurance market, is a central culprit. If we don’t have the will to remove it, the deduction could be structured to enhance competition and the right to future insurance. We could restrict the tax deduction to individual, portable, long-term insurance and to the high-deductible plans that people choose with their own money.

More importantly, health care and insurance are overly protected and regulated businesses. We need to allow the same innovation, entry, and competition that has slashed costs elsewhere in our economy. For example, we need to remove regulations such as the ban on cross-state insurance. Think about it. What else aren’t we allowed to purchase in another state?

For the full commentary, see:
JOHN H. COCHRANE . “What to Do About Pre-existing Conditions; Most Americans worry about health coverage if they lose their job and get sick. There is a market solution.” The Wall Street Journal (Fri., AUGUST 14, 2009): A13.

In Economic Policy, as in Medicine: “First, Do No Harm”

(p. A13) Consider someone rushed into an emergency room in severe cardiac distress. After starting acute life-support measures, doctors still apply the rule stated by Galen of Pergamum more than 1,800 years ago: primum non nocere, or “First, do no harm.” Treatment interventions are selected carefully from a battery of technologies and potent drugs while recognizing that any one of them, or a combination, could hurt the patient if misapplied or given in the wrong dosage. Economic interventions require no less care.
. . .
Our economic doctors should permit America’s uniquely effective immune system to take over as companies and financial institutions deleverage their balance sheets. With people and with capitalism, the tincture of time is often the best medicine.

For the full commentary, see:
MICHAEL MILKEN and JONATHAN SIMONS. “Illness as Economic Metaphor; The first rule, as always, is do no harm..” The Wall Street Journal (Sat., June 20, 2009): A13.
(Note: italics in original; ellipsis added.)

Four Month Wait for Blood Test in Brits’ Government Health Care

(p. 6) Founded in 1948 during the grim postwar era, the National Health Service is essential to Britain’s identity. But Britons grouse about it, almost as a national sport. Among their complaints: it rations treatment; it forces people to wait for care; it favors the young over the old; its dental service is rudimentary at best; its hospitals are crawling with drug-resistant superbugs.

All these things are true, sometimes, up to a point.
. . .
Told my husband needed a sophisticated blood test from a particular doctor, I telephoned her office, only to be told there was a four-month wait.
“But I’m a private patient,” I said.
“Then we can see you tomorrow,” the secretary said.
And so it went. When it came time for my husband to undergo physical rehabilitation, I went to look at the facility offered by the N.H.S. The treatment was first rate, I was told, but the building was dismal: grim, dusty, hot, understaffed, housing 8 to 10 elderly men per ward. The food was inedible. The place reeked of desperation and despair.
Then I toured the other option, a private rehabilitation hospital with air-conditioned rooms, private bathrooms and cable televisions, a state-of-the-art gym, passably tasty food and cheery nurses who made a cup of cocoa for my husband every night before bed.

For the full commentary, see:
SARAH LYALL. “An Expat Goes for a Checkup.” The New York Times, Week in Review Section (Sun., August 8, 2009): 1 & 6.
(Note: the online title is “Health Care in Britain: Expat Goes for a Checkup.”)
(Note: ellipsis added.)

Native Americans Suffer from Government Health Care

(p. A11) Native Americans have received federally funded health care for decades. A series of treaties, court cases and acts passed by Congress requires that the government provide low-cost and, in many cases, free care to American Indians. The Indian Health Service (IHS) is charged with delivering that care.

The IHS attempts to provide health care to American Indians and Alaska Natives in one of two ways. It runs 48 hospitals and 230 clinics for which it hires doctors, nurses, and staff and decides what services will be provided. Or it contracts with tribes under the Indian Self-Determination and Education Assistance Act passed in 1975. In this case, the IHS provides funding for the tribe, which delivers health care to tribal members and makes its own decisions about what services to provide.
. . .
Unfortunately, Indians are not getting healthier under the federal system. In 2007, rates of infant mortality among Native Americans across the country were 1.4 times higher than non-Hispanic whites and rates of heart disease were 1.2 times higher. HIV/AIDS rates were 30% higher, and rates of liver cancer and inflammatory bowel disease were two times higher. Diabetes-related death rates were four times higher. On average, life expectancy is four years shorter for Native Americans than the population as a whole.
. . .
Personal stories from people within the system reveal the human side of these statistics. In 2005, Ta’Shon Rain Little Light, a 5-year-old member of the Crow tribe who loved to dress in traditional clothes, stopped eating and complained that her stomach hurt. When her mother took her to the IHS clinic in south central Montana, doctors dismissed her pain as depression. They didn’t perform the tests that might have revealed the terminal cancer that was discovered several months later when Ta’Shon was flown to a children’s hospital in Denver. “Maybe it would have been treatable” had the cancer been discovered sooner, her great-aunt Ada White told the Associated Press.
. . .
The Chippewa Cree Band runs its own hospital and has hired a registered dietician who has gotten the local grocery store to implement a shelf-labeling system to improve consumer nutritional information. They’ve also built a Wellness Center with a gym, track, basketball court, and pool. These are small steps that won’t immediately eliminate heart disease or diabetes. But they move in the direction of local control and better health.
At a time when Americans are debating whether to give the government in Washington more control over their health care, some of the nation’s first inhabitants are moving in the opposite direction.

For the full commentary, see:
TERRY ANDERSON. “OPINION: CROSS COUNTRY; Native Americans and the Public Option; After decades of government-run care, some Indians are finally saying enough.” Wall Street Journal (Sat., August 29, 2009): A11.
(Note: ellipses added.)
(Note: the online version is dated Fri., Aug.28, 2009)