How Did We Get Into This Health Care Mess?

Posted on by Stephen Feman

Many people would like the relationships in health care to follow a straightforward economic pattern. They imagine that the doctor-patient relationship should look like an Intro to Economics price to quantity graph, with physicians as suppliers and patients as demanders. If that were the case, simply adding more doctors could shift the supply curve and create a new equilibrium. They think that would produce a lower price for health care and resolve many of America’s health care concerns. The real world, however, is not quite like that.

The first, and most obvious, problem is that the physician supply has not kept up. That is one of the many reasons why the United States is being inundated with foreign-trained physicians. As another post showed, the number of U.S. physicians is inadequate for our country’s needs now. The most reliable resources indicate that there may be a shortfall of 150,000 by the year 2025. If the economics of health care followed the simple model described above, then the supply curve would shift in the undesired direction. In that case the price of health care would become even greater than the dollar figures mentioned in the current political debate.

But there is more. The demand for health care has increased much more than expected. A look at the Congressional Research Service’s demographic charts shows that there are many more older people in this country. The United States is in the midst of a profound demographic change, and has had an overall aging of its population; this has been characterized by the increased proportion of persons aged 65 and older in our population. In general, as people get older, they use more health care. The result may be a shift of both the supply and demand curves. Using that old economics diagram, the resulting equilibrium will be higher and much more costly.

However, some argue that physicians are more than just the suppliers of health care. Those people feel that physicians may be a part of the problem themselves and some physicians may stimulate overuse of the heath care system. In the recent past, President Barack Obama spoke to the American Medical Association about this issue, and implied that physician behavior may be one of the factors driving up costs. He suggested that some doctors create a demand for services, and their intervention has contributed to the problems of the health care market. The difficulty with that argument is in separating issues that relate to demand from the physician role as the gatekeeper to health care system. Physicians are often the means that patients use to initiate access the health care system. However, the health care demand exists in and of itself; it is an independent factor. All that physicians do is show they care for patients by responding to the existing demand.

If physicians are not the cause of the problem, is physician supply a factor of concern? It is important to be aware that some believe an increase in physician supply does not translate into better care. In fact, as counter-intuitive as it may seem, some recent reports indicate that patients’ satisfaction with care, and patients’ perceptions of access, are no better in high physician supply regions than in low physician supply regions. With that understanding, many argue that more physicians may not result in better care for patients. People who follow that argument believe that what we need is improved efficiency, not more doctors, to produce a more cost-effective result. (See: Skinner et al, “The Elusive Connection Between Health Care Spending and Quality.” Health Affairs 28, w119–w123, 2009.)

Could it be that what we need is both more doctors and more efficiency? In some countries with different health care systems, demographic predictions of this variety have resulted in significant changes in hospital design and physician education. The demographic details for our country present a pretty strong argument showing that there will not be enough physicians for your care when you get older. At the same time, every one could use more efficiency. How will the combined House and Senate bills respond to these issues?

Dave Roland Quoted on Charter Schools

Posted on by Christine Harbin

The Show-Me Institute’s Dave Roland was recently quoted in an article about charter schools in the Springfield News-Leader. He communicates some benefits:

“Part of the reason (traditional public) schools have gotten into the situation they are in — having quality problems — is they effectively have a captive audience. They don’t have to earn students,” said Dave Roland of the Show-Me Institute, a think tank that promotes free-market solutions to public policy.

“Wealthy parents already have the option of moving into the best school districts, or the best zoning within districts,” he said. “The idea of school choice is we make sure low-income parents have the same range of options.”

St. Louis Made the Right Call in Giving Vaccine to Retailers

Posted on by Sarah Brodsky

This Post-Dispatch article about the H1N1 vaccine mentions that St. Louis city sent most of its vaccine supply to hospitals and pharmacies. Some doses have been distributed for free in schools and existing public clinics, but the city didn’t open any new free vaccine clinics like the ones in other cities.

It was a smart move on the city’s part. Offering free vaccines is a recipe for shortages. Charging for the cost of administering the vaccine — as pharmacies do — prevents demand from skyrocketing and depleting the vaccine supply. And allowing people to buy the vaccine at their local retail pharmacies is better than forcing everyone to come to a few central clinics. People are used to going to those retailers for prescriptions or other vaccines, so they don’t have to go out of their way to find a clinic they’ve never been to before.

And, while it’s true that taxpayers paid for the H1N1 vaccine, as the people quoted in the article stated, that doesn’t mean that they should all receive it for free. Administering the vaccine would require the city to hire nurses. Taxpayers shouldn’t be made to incur yet another flu-related expense, especially considering that new H1N1 cases have been declining for weeks.

Innovations for Healthy Kids Game Challenge

Posted on by Sarah Brodsky

The USDA, always eager to tell kids what they should eat, wants to spread its message through a more effective medium than “Know Your Farmer” trading cards. The department is soliciting feedback for a contest to reward creators of online games that teach kids about nutrition.The games must be based on USDA data.

MyPyramid Blast Off Game is the only game I’ve found on the MyPyramid.gov website. It’s cute and colorful, albeit inflexible. Players are supposed to select a day’s menu from a list of foods. The game doesn’t take into account differences in nutritional needs, so every player is scored as an average American. A kid who is lactose intolerant has to choose dairy servings anyway, and a kid with Celiac disease has to add whole grains to the rocket ship’s “diet.” Players see a message that their rocket ship didn’t complete its mission if they go over the recommended calorie limit, even if they go just a few calories past the target with an extra serving of vegetables.

The contest will probably inspire new games that improve on MyPyramid Blast Off. Developers could start from the same premise but add complexity, allowing nutritional targets to vary. There would be no need to solicit personal health information from kids — players could be asked the design menus for hypothetical people. Changing targets would also make the game more fun to play repeatedly. In the current game, once players create menus for themselves, there’s nothing more to do.

I’m less confident that an online game can change a generation’s eating habits. Is it worthwhile for the government to sponsor a nutrition contest that may not have a large effect on public health? As usual, the USDA has lofty aspirations, and I’m left wondering whether we’re all really better off because of its actions.

Hoop House Dreams

Posted on by Sarah Brodsky

A video from the USDA shows the erection of hoop houses — also referred to less imaginatively as “high tunnels” — at the White House Garden. The USDA, through its “Know Your Farmer, Know Your Food” campaign, is launching a pilot study that will subsidize farmers’ hoop house purchases in the interest of increasing the availability of local produce. From the press release:

The 3-year, 38-state study will verify if high tunnels are effective in reducing pesticide use, keeping vital nutrients in the soil, extending the growing season, increasing yields, and providing other benefits to growers.

Missouri is among the states that will participate.

Farmers have sheltered plants in temporary greenhouse structures like these for decades. The practice wouldn’t have continued for so long if it weren’t advantageous, so I’m sure the study will find that hoop houses provide some benefits.

What is less certain is whether the USDA’s high expectations will be borne out. The press release states that the study will look into pushing back the end of the growing season. That seems like a reasonable — even cautious — goal, knowing that farmers already use hoop houses for that purpose. But, in the video, officials blithely assert that you can grow food year-round in a hoop house, in “pretty much any climate.”

Are hoop houses tools that can help some farmers grow crops a little longer? Or are they miracle implements that make plants grow anywhere, anytime? I suspect that if the latter were true, most farmers would buy hoop houses without the inducement of a subsidy. After all, hoop houses sell for anywhere from a few hundred to a few thousand dollars — not a big up-front expense. That would be a small price to pay for the ability to grow crops during several additional months of the year, no matter the weather.

Enhanced Enterprise Zone in Webster County

Posted on by Christine Harbin

According to an article in The Springfield News-Leader, Webster County in Missouri is seeking designation as an Enhanced Enterprise Zone so that it can attract industry and create jobs. The article communicates that Webster County is economically depressed and that the EEZ designation will benefit the area with new businesses and jobs, but it divulges few details about how the program is constructed. The following are the few that it includes:

The discretionary program offers state tax credits, accompanied by local real property tax abatement, for businesses that meet criteria such as adding jobs. […]

Ipock said state tax credits will only be allowed for qualified businesses and are geared toward industrial development.

Businesses that are ineligible to receive the tax credits include gambling establishments, adult businesses, retail trade, educational services, religious organizations, public administrators, food and drink establishments.

I disagree that the program’s benefits should be for “qualified” businesses. This is the same as the fundamental argument against targeted tax credits, like those to filmmakers. The government should not have the authority to pick and choose which businesses can operate in its borders. These programs create inequality because they force businesses that aren’t “qualified” to compete at a comparative disadvantage. This consequently encourages corruption, because it gives businesses an incentive to solicit the government for special treatment.

Instead, Webster County should focus on creating a favorable tax environment that would benefit all businesses equally, such as reducing commercial property tax surcharges and repealing mandates. If the city of Saint Louis were toying with such an idea, I would recommend that it repeal the earnings tax instead.

I also disagree that the focus of the program should be on job creation. Public works projects, such as Enhanced Enterprise Zones, encourage nonproductive work (e.g., “work for works’ sake”). I think that Milton and Rose Friedman would agree; in Free to Choose: A Personal Statement, they write:

If all we want are jobs, we can create any number—for example, have people dig holes and then fill them up again or perform other useless tasks.

Furthermore, although the program may be successful at attracting the targeted industries, any activity that it generates will be discounted by the amount of the economic incentives that it takes to attract it. As Henry Hazlitt explains in Economics in One Lesson, spending in the private sector destroys jobs in the private sector. This is because public spending is financed by money that is taken from taxpayers, who can’t spend this money on products and services in the private sector that would generate productive economic activity.

When providing employment becomes the end, need becomes a subordinate consideration. “Projects” have to be invented. Instead of thinking only of where bridges must be built the government spenders begin to ask themselves where bridges can be built.

Quick Fixes Won’t Raise Test Scores

Posted on by Sarah Brodsky

Charles Murray can’t be pleased with the New York City Department of Education’s plan to spend a few hundred thousand dollars on online SAT prep for public school students. Murray doesn’t believe policy can cause a significant rise in test scores, so he must view this expenditure — or any other program with a similar goal — as a waste of resources.

While I’m generally more optimistic that scores can rise, in this case I agree that student achievement is unlikely to change. A test prep course could help if students are simply unfamiliar with the test, or if they just need a little extra practice with the kind of questions that appear on it. But if low scores reflect a deeper problem, as I suspect they do for many New York students, last-minute test prep won’t make a difference.

The best course of action would be to improve schooling for younger students, years before they take college admissions exams. Then, by the time they get to high school, they won’t struggle with the math and vocabulary found in the SAT.

New York shouldn’t give up on current high school students, but it needs to help them build a stronger foundation of knowledge than what they’ll get from a course on test-taking strategies. The department could stick with the online education model, and instead of explicitly offering free test prep, it could open English or math courses similar to the St. Louis Public Schools’ virtual school. Course materials needn’t teach to the test, although students whose skills improved would do better on test day as a consequence. To preserve the college admissions focus, the department could use a practice SAT to place students into different course levels.

New York shouldn’t limit its use of online education to preparing students for one test. We want students to be prepared for the next high school course they take, and for whatever courses they take beyond high school, too.

It’s As If the Housing Bubble Never Happened!

Posted on by Christine Harbin

Today, the Suburban Journals reminds us that, earlier this month, the Missouri Housing Development Commission approved an initiative that will offer property tax relief to Missouri home buyers. From the article:

Under the new program, eligible Missouri families who enter into a contract to buy a new or existing Missouri home after Jan. 1 would have their property tax for the year paid, up to $1,250. In addition, to support the creation of “green jobs” in Missouri, families would be eligible for an additional $500 in tax relief if they buy an energy-efficient home or items to make the home more energy-efficient, such as Energy Star appliances.

Home ownership — just like any other investment — involves significant risks and costs. I’m worried that Missouri could help provoke another housing crisis by encouraging home ownership amongst those who wouldn’t otherwise select it.

In an op-ed in the Springfield News-Leader, to which David Stokes previously linked, Paul Hamby presents an alternative means than government subsidies to increasing home ownership:

If the goal is to get more Missourians into housing, there is a simple proven formula for that: Good paying jobs for Missourians. A business climate to create more jobs is where the governor should be focusing. That means less government regulation, fewer taxes on small businesses and families and fewer federal mandates. When government starts meddling, fairness goes out the window.

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