Criminalizing drugs makes about as much sense as criminalizing depression.

Which has a greater cost to society, depression or addiction? The estimated burden on America is similar. The White House reported in 2014:

The economic cost of drug abuse in the US was estimated at $193 billion in 2007, the last available estimate. This value represents both the use of resources to address health and crime consequences as well as the loss of potential productivity from disability, premature death, and withdrawal from the legitimate workforce.

That is pretty similar to the economic cost of depression which was estimated at $210 billion per year in 2014. Plus, depression is what drives many people into drug abuse, so there is considerably overlap. Given that depression causes many of the same problems as illegal drug abuse, and Americans tried to solve drug abuse (a mental illness) by sending drug abusers to jail, why hasn’t anyone proposed sending people to jail for depression? It makes about as much sense.

I’m not interesting in legalizing drugs, but why not treat drug use more like other nonviolent crimes like white-collar tax evasion and embezzling? We should just fine people for being involved in illegal drugs. That would prevent a corporate-run drug pushing industry (unlike full legalization) and make it easier to treat people who are abusing drugs. It would be more effective for social workers and public health professionals to address America’s drug problem rather than police officers. Now Ohio has a ballot initiative which gives a chance to move in this direction. German Lopez has an excellent explanation.

First, he explains that imprisoning drug addicts doesn’t have much more effect than fining them.

Research has long indicated that the severity of punishment has very little effect on someone’s willingness to commit a crime or use drugs. For example, a 2014 study from Peter Reuter at the University of Maryland and Harold Pollack at the University of Chicago found there’s no good evidence that tougher punishments or harsher supply elimination efforts do a better job of driving down access to drugs and substance misuse than lighter penalties.

So it doesn’t matter so much if people are punished harshly (through, say, a felony) than whether they’re punished more leniently (through, say, a misdemeanor).

In Ohio, critics of Issue 1 have pointed to another concern: that reducing drug offenses from felonies to misdemeanors will make it harder to get people into addiction treatment. As it stands, drug courts use the threat of criminal punishment — and prison in particular — to get drug offenders to agree to addiction treatment. If that threat is removed, then judges will be less able to push people into treatment. Critics point to California’s example, where drug court participation in some areas has dropped in the aftermath of Proposition 47.

But supporters of Issue 1 argue that the savings produced by the initiative — which will be largely put into addiction treatment — will actually lead to more access to treatment, not less.

…this is a particularly pertinent issue in Ohio, because it’s one of the states hit hardest by the opioid epidemic.

In the international arena, there’s a good basis for what Issue 1 supporters are arguing here: Portugal. In 2001, Portugal decriminalized all drugs and dramatically ramped up treatment… In the ensuing years, Portugal saw drops in drug-related deaths and reported past-year and past-month drug use, although some increases in lifetime prevalence of drug use and an uptick in reported drug use among teens after 2007, according to a 2014 report from the Transform Drug Policy Foundation.

Ohio is not going as far as Portugal. It’s not fully decriminalizing drugs, since drug possession offenses will remain misdemeanors. And it’s not dedicating anywhere as many resources to addiction treatment as Portugal did. But Issue 1 is in some ways a downscaled version of the Portuguese approach, so some lessons can be drawn — and they suggest that the critics of Issue 1 are buying into hyperbole.

As Jessie Balmert put it for the Cincinnati Enquirer, “Some say [Issue 1] will destroy the state. Others claim it will cure Ohio’s drug problem. Neither is true.”

Unfortunately, Issue 1 is only a very small step towards reducing the wildly high US incarceration rate which is tremendously high:

According to the World Prison Brief, the US incarceration rate is 655 per 100,000 people. That’s higher than any other country in the world, including authoritarian nations like Russia (402) and China (118). It’s higher than comparable developed nations like Canada (114), Germany (75), and Japan (41), which have similar levels of crime — or lower, particularly when it comes to murder …compared to America.

Issue 1 mainly deals with drug incarceration which is only a small fraction of total incarceration.  Lopez says that it is a myth that nonviolent drug crimes result in a majority of American prison sentences.  The reality is probably less than 15%.  That is still too many, but it isn’t the main reason why America’s prison population is out of control.

Over the past few years, there has been a powerful narrative told about mass incarceration, through books like Michelle Alexander’s The New Jim Crow, suggesting that America’s war on drugs has been the primary driver of mass incarceration.

This isn’t right. The latest data from the US Bureau of Justice Statistics shows that in state prisons, where about 87 percent of US inmates are held, nearly 55 percent are in for violent offenses (such as murder, manslaughter, robbery, assault, and rape), while only a little more than 15 percent are in for drug offenses.

These figures are at best a minimum for the number of violent offenders in prison. It’s not rare for violent offenders to plea down their charges to nonviolent crimes; …So at least some of the supposedly nonviolent offenders have likely committed violent crimes.

So if the US is to significantly reduce prison populations, it’s going to have to address non-drug crimes. For example, the criminal justice advocacy group #cut50 aims to reduce the prison population by 50 percent. This is going to be simply impossible if the focus is only on drug crimes, given that only around 15 percent of people in state prisons are in for drug offenses.

And even if the US reduced its prison population by 50 percent, its resulting incarceration rate of around 300 per 100,000 people would still dwarf countries like Canada, Germany, and Japan, none of which have incarceration rates above 120.

Ohio Issue 1 makes some progress in non-drug areas by allowing sentencing reductions up to 25 percent for other offenses.

As Mark Kleiman told Lopez,

We did the experiment. In 1980, we had about 15,000 people behind bars for drug dealing. And now we have about 450,000 people behind bars for drug dealing. And the prices of all major drugs are down dramatically. So if the question is do longer sentences lead to a higher drug price and therefore less drug consumption, the answer is no.

Higher penalties (incarceration) for drugs doesn’t work much better than low-stakes penalties like a combination of fines, probation, and community service because most people don’t know what the exact penalty is anyhow.  Do you know what your law says? Most people just know drugs are illegal. Secondly, the chance of getting caught with drugs is not as big as you might think.  We don’t know the chances of drug dealers getting caught, but even for our highest-priority crimes (murders), about 1/3 are never resolved.  Drug crimes are harder to catch because neither the customer nor the dealer wants to be caught and nobody is helping the police find the crimes whereas everyone wants to help the police catch murderers except the murderers.  Thirdly, we are mostly talking about addicts who we don’t normally expect to make the wisest cost-benefit planning in their lives.  Do you really expect them to dramatically change their behavior merely because jail time is worse than a big fine?

So I’m going to vote in favor of Issue 1 this November.  It won’t cause a big change, and probably 99% of Ohioans won’t notice any difference, but it seems like a big step in the right direction for the <1% who are involved with these issues in the criminal justice system.  I have a lot of friends and people I respect who oppose it, but I’m not persuaded by their reasoning so far.  For example, the Cleveland Plain Dealer editorial board opposes the issue, but their explanation of what it does makes it look pretty good to me.

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Posted in Health, Public Finance

Marijuana decriminalization vs legalization

Americans tend to be conservatives in the sense that we tend to be risk averse.  We don’t want to change our system unless there is a really good reason.  In the case of our current policy towards marijuana, there is an overwhelming sense that the current federal policy of criminalization isn’t working.  We have been locking up too many people for marijuana use and it is only ruining lives.  Our jails take nonviolent drug users and by immersing them into a new life with a group of hardened criminals for years, they become more likely to develop a new kind of lifestyle that goes beyond simple marijuana use when they get out, particularly when employers actively discriminate against them as ex-felons.  So they gain new habits, skills, and social networks that make crime more productive and they lose opportunities to do legitimate work.

Unfortunately, Americans tend to have simplistic, fundamentalist views about drug policy and think that if statist criminalization doesn’t work, then the most radical polar opposite must be best: full-out free-market legalization.  They don’t see that a more conservative, incrementalist approach would be a better option: decriminalization.  That is what a recent Mason-Dixon Polling and Strategy survey found.  Vox made a graph showing the result:

poll.PNG

The least popular option is decriminalization and I think that is because most Americans don’t understand what that means.  That means that you allow permits for legal medical use of marijuana, but rather than using jail time to penalize use, you just use financial penalties (fines) to prevent a marijuana industry from becoming profitable for corporations and lobbyists.

“Decriminalization” is a lousy term for this because it doesn’t mean that marijuana would lose all criminal sanctions; it only means that penalties would be reduced.  A better term would be “deprisonization” because it eliminates prison sentences while replacing them with fines, probation, community service, and drug treatment.  That would change drug penalties from being an incredibly expensive burden on taxpayers (jail time) into a moneymaker (fines) that can be used to help pay for rehabilitation (drug treatment).  Community service is also better for rehabilitation that jail time and more useful for the community.

Full legalization would make the drug problem worse whereas many decriminalization programs actually do a better job of reducing drug demand than jail time.  If marijuana is fully legalized, then Cargill will invest millions bioengineering more potent new varieties that will be grown on giant corporate farms.  Phillip Morris will manufacture joints and vapes and hire Madison-Avenue corporations to market it on TV.  Walmart will sell it at the check-out counters.  With the economies of scale that these corporations can bring to the industry, marijuana will be the cheapest intoxicant in all of human history.  A potent dose will sell for a couple cents at most.  It will be about as expensive as the little sugar packets that restaurants give away for free with their tea and coffee.  For this reason, I don’t foresee new marijuana bars springing up around our college campuses, but restaurants might give it away as a loss leader because it is an appetite inducer and Doritos might even include free joints with each bag of chips to give people more munchies.

This drop in costs is already happening in Washington State, where after legalizing medical marijuana, “the cost per hour of cannabis intoxication “has fallen below $1, cheaper than beer or going to the movies.””

The danger of fully legalizing marijuana is that it will dramatically change American culture a bit like the advent of tobacco changed Western society.  America is now permanently addicted to alcohol and tobacco because there is a concentrated financial interest (corporations) and a large group of users who fight to maintain these industries that each kill more people than all illegal drugs put together (although rapidly rising opioid deaths may have beat out alcohol for the first time last year) and cause numerous other social costs like illness and family breakups.  If marijuana is fully legalized, it will essentially be given away for free and we have no idea how that will change society.

That is why the conservative approach to marijuana policy should be decriminalization first.  Then if that goes well (and I’m sure it will be better than current policy), we will have more information to help us consider whether we should attempt full legalization.  Going straight to full legalization might be better than the status quo because it eliminates the horrible social cost of jailing so many able-bodied youth but it might be worse and decriminalization would achieve all the benefits without the main risk of creating a marijuana industry with the corporate resources to engineer a permanent change in American culture.

Posted in Medianism

Failures of Obamacare and possible reforms

Jon Walker wrote a wonderful critique of Obamacare that Kevin Drum published in pieces so I’m copying it below so that it is all in one place.

1. State control combined with zero direct incentives for the states to make it work

The ACA left much of the regulation of the individual market and the implementation of the exchanges to the states, but it gave states no incentive to perform these tasks well. State/federal partnerships are common and there is nothing inherently wrong with them, but they almost always offer strong incentives for states to use good oversight. For example, with Medicaid, states are responsible for paying a portion of their costs, so they have a strong incentive to keep Medicaid costs low. The ACA should have given total control to the federal government or given states financial incentives for keeping premiums low, but lawmakers chose the worst of all policy designs. There was zero political justification for this design mistake.

2. Punishes low income people if their state or county tries to make the ACA work

Even worse, the law actively punishes low-income people in states and counties which try to make the exchanges function well. ACA’s tax credits for the poor are based on the price of the second-lowest-cost silver plan, which means that regions with higher prices also provide higher subsidies. Perversely, it turns out that badly managed ACA plans produce premiums so high that the tax subsidies rise even higher—which produces a lower net cost for anyone who qualifies for subsidies. Conversely, in well-managed states like California, the net cost of a bronze or silver plan tends to be fairly steep.

3. Heavily encourages development of local monopolies

In any market there is already a strong incentive for companies to try to develop local monopolies, but the ACA design supercharges this with its subsidies based on the second-lowest-cost silver plan. The low-cost insurer in a market can game this design by offering two low-cost silver plans, thus making it nearly impossible for anyone else to compete. California adopted plan standardization rules to reduce this problem and make shopping for plans easier. The Obama administration could have adopted similar rules for Healthcare.gov but chose not to. This is often worst in rural places where there are concentrated hospital markets, making it impossible for any but the largest insurer to negotiate decent rates, or markets where the dominant hospital network is the insurer. Of course, once an insurer has created a monopoly position, it can then use it to create a potentially massive windfall. The ACA was premised on the idea that more insurance competition should be a top goal, but its design encourages the opposite.

4. Designed to get worse [less affordable] over time

The exchange plans and subsidies are based off actuarial value (AV). An actuarial value of 70% means the average person pays 30% of health care costs and the insurer pays 70%. The problem is that if health care costs rise faster than inflation, consumers end up paying the price. If health care spending averages $10,000 per person, cost sharing is $3,000. But if premiums go up to $20,000, then cost sharing goes up to $6,000. Even if you believe that the subsidy structure of the ACA was sufficient to make care “affordable” for people with specific income levels at the time of its passage, the design assures it will slowly make care unaffordable over time. What’s worse, ACA’s design includes a “failsafe” mechanism that will reduce subsidies if demand for insurance ever gets high enough—as it’s likely to do during a recession. Cutting help during a recession is a terrible policy move.

5. Accidently drove young, healthy people off the exchange

The ACA allows insurers to charge older people as much as three times more than young people pay in premiums; this is called a 3:1 age band. Compared to requiring insurers to charge everyone the same price, this added some real administrative complexity, but it was done to prevent premiums for older customers from getting too high. This inevitably means that premiums for younger people will be higher than they would be otherwise, but this at least was expected. What wasn’t expected is that young people might end up actually paying more for health insurance than older people. However, thanks to the subsidy design, it’s often the case that the net cost of insurance is more for the young than for the old. At the same time, if your income is high enough that you don’t qualify for subsidies, then it’s old people who pay more. This is a perfect example of people designing complex policies without even understanding how they work together. Regardless of whether you think the young or the old should pay more, it ought to be the same regardless of income level.

6. Created a massive negative marginal tax rate

The ACA has a massive subsidy cliff, particularly for older people, which means if an individual earns a dollar over the subsidy threshold, they end up losing thousands. This cliff problem will only get worse as premiums continue to rise. Even without increasing overall spending it would have been possible to smooth out the subsidies to at least remove this massive negative marginal tax rate problem.

7. The creation and promotion of silver plans, when no one should buy middle level insurance

The ACA exchanges offer Bronze through Platinum plans, which makes Silver a middle-level option in terms of cost-sharing. The problem here is that most people have a pretty good idea of whether they’re likely to be high-cost or low-cost patients in a given year. Rationally, high-cost patients should choose Platinum plans and low-cost patients should choose Bronze plans, but the ACA subsidies are designed to force insurers to offer Silver plans—and they all but force many people to buy Silver plans. Most people should only be choosing the highest or lowest cost sharing option depending on their expected health, never the middle option.

Note that this problem gets worse the higher premiums go because the gap between Silver and Bronze also goes up. People who already pay the most are the ones who are hit hardest by the bias of the ACA toward pushing everyone toward Silver plans.

8. A needlessly complex mess of plans

In addition to the four metal tiers, the ACA requires plans to offer Cost Sharing Reductions to some lower income people but only if they buy Silver plans. These CSRs turn Silver plans into effective 94% AV, 87% AV, or 73% AV plans. That is seven different insurance tiers for every insurer, with numerous plans within each tier. It is a confusing administrative mess that also makes it difficult to explain to people why buying a Silver plan is way better than a Gold plan. These multiple subsidies could have been simplified, and these extra saving Silver plans could have just been merged with a “platinum” tier.

9. Terrible public data makes smart shopping impossible

The idea of the ACA was to bring down costs by getting individuals to be better, more conscientious consumers of their health care. This idea can’t even work in theory unless an individual has good data. However, the ACA has done a very poor job of providing people with the critical network data they need. Combined with the needlessly large variety of insurance plan designs, it is unreasonable to expect people to make the best choice.

10. Lets employers punish their sick employees

One part of the ACA allowed employers to charge employees significantly more if they don’t take part in “wellness programs.” These programs offer dubious value when it comes to improving health but have serious privacy and social justice issues. This effort, meant to help encourage sick people get healthy, has likely turned into a way for companies to discriminate against and financially punish those most in need.

Of course, another huge problem with Obamacare is that it doesn’t even achieve universal health insurance.

Most of the above problems could be avoided by repealing Obamacare and replacing it with Medicare for All. But the biggest problem with both Obamacare and Medicare is the biggest reason why American healthcare is so ridiculously expensive. The prices are just too damn high. Medicare for All would help reduce prices more than Obamacare, but it could go farther if we would follow these four ideas from Matt Yglesias that neither Republicans nor Democrats have touched:

1) Let in more immigrant doctors

American doctors earn substantially higher incomes than doctors in foreign countries, which means that foreign doctors could raise their incomes by moving to the United States. Conversely, American patients could save money by being treated by immigrant doctors.

…despite high wages, the United States has a relatively small number of doctors per capita.

… foreign-born doctors face a great deal of difficulty in obtaining a license to practice medicine in the United States even as studies show that patient outcomes for Americans treated by immigrant doctors are just as good as those treated by native-born doctors. … Many foreign countries appear to have a comparative advantage in affordable medical education, and it would serve the interests of both the United States and those countries to have a clear pathway in place by which foreigners could be trained to work as doctors in the United States.

2) Curtail pharmaceutical monopolies [by funding prizes instead of awarding patents]

…Sarah Kliff recently wrote about a Hepatitis C treatment that costs $1,000 per pill. And yet [these] pills are not expensive to manufacture. Costly medications are expensive primarily by design. …the United States Congress has seen fit to create financial incentives for medical innovation by granting pharmaceutical companies monopolies known as patents that shield new drugs from market competition for years.

This leads to …windfall profits for drug companies. Those profits become the financial engine that makes new research worthwhile.

But patents also make innovation harder in some respects by making it more costly for new researchers to build on previous work. What’s more, they are hardly the only possible means of financing new research. Economists ranging from George Mason University’s Alex Tabarrok to Joseph Stiglitz have proposed moving away from medical patents to taxpayer financed prizes for key breakthroughs.

A large cash prize creates an incentive to innovate just as much as a patent does, but offers several important advantages. First, nobody needs to be priced out. All those $1000 hepatitis pills generate a lot of revenue, but also a lot of patients who end up with no pills at all. With a prize, the money is raised in a way that doesn’t need to exclude anyone. Prizes can also direct R&D efforts at problems that are genuinely important, rather than ones that happen to interest a large market. The patent system is better at generating treatments for conditions that annoy rich people (baldness) than conditions that kill poor people (malaria).

Last but by no means least, a prize-based system would reduce the amount of money and effort firms currently spend on trying to game the patent system. Right now, for example, companies like AstraZeneca spend time doing things like reformulating the active ingredient from Prilosec into a quasi-new drug called Nexium in order to get a new high-margin product to sell. Prizes could be targeted at innovations with real health benefits, rather than …payoffs for hacking patent law.

3) Let non-doctors treat patients

In some states, licensed nurse-practitioners are allowed to provide basic medical treatment within their sphere of competency without oversight from a doctor. In [most states] this is illegal. But the state-to-state variation allows us to compare the quality of care provided by NPs to that provided by MDs, and it shows that NPs are just as good on objective outcome measures, and better on subjective accounts of patient satisfaction.

If [all] states acted in line with Institute of Medicine recommendations and let their NPs practice autonomously, patients could get the cheaper health care they provide. Studies of Certified Nurse Midwives and Certified Registered Nurse Anesthesiologists have, …found that they treat patients as well or better than physicians.

These various categories of advanced practice nurses receive training and education that is not as time-consuming and expensive as the training provided to doctors. Consequently, their services — where legal — can be obtained more cheaply than those of doctors. Relying more heavily on advanced practice nurses would save money directly through this channel. It would also leave doctors with more time on their hands to treat patients who really do need to see a doctor, bringing more supply and lower prices to those cases.

A similar dynamic obtains in the field of dentistry. Most years the vast majority of people need no dental care beyond basic tooth cleaning that a dental hygienist can provide. But in many states it is illegal for a hygienist to practice without the direct supervision of a dentist [who have monopoly power over hygienists to raise prices and get a healthy cut out of hygienist fees for] routine tooth cleaning…

4) All-payer rate setting

In [most countries with universal healthcare such as] Germany, the Netherlands, and the exotic foreign land known as Maryland they practice what’s called all-payer rate setting. That means that instead of each insurance company negotiating separately with each hospital group on prices, a government commission sets a price that everyone pays. And it works. Maryland has curtailed cost growth without inducing any noteworthy shortages of health care facilities:

Another advantage to all-payer rate setting beyond the simple ability to set low rates is that it would eliminate some of the necessity of doing everything through an insurance company middleman. Right now, one of the services your health insurer provides is a real insurance function that helps you hedge against risk. But for many people, the insurer’s most important practical role is as a [price] negotiator. Since the insurance company has a lot of scale, it can get a good price from a doctor or a hospital. An uninsured person would have to pay at a much higher rate.

[Eliminating] the insurance company’s role as a negotiator would [reduce administrative costs and] let insurers focus more on the insurance function… And by eliminating some of the advantages to sheer scale on the insurance side, it could also promote more competition in the health insurance industry.

Medicare for All is essentially a more extreme version of all-payer rate setting because Medicare would set the same rates for all payers. Ezra Klein wrote about a much less radical way to bring prices down by capping the maximum prices at a higher level than a typical all-payer rate. This would be much less radical than either Medicare for All or even all-payer rate setting.

Explaining why Americans pay so much more for health care than anyone else is really quite easy: Americans are charged higher prices for health care than anyone else [in the world].

Here are 15 charts proving the point… Cruelly, the uninsured are often charged the highest prices, because if you’re too poor to afford insurance, you’re also too poor to fight back against price gouging…. None of this makes even a little bit of sense. But Medicare could help fix it.

…In Health Affairs, Jonathan Skinner, Elliot Fisher and James Weinstein note data from Castlight Health showing that the price tag on one particular cholesterol test can range from $15 to $343 — and that’s just within the city of Dallas, Texas…

these prices are rarely, if ever, published, and often they’re not even the actual price people pay. If markets are going to work well, both buyers and sellers need a lot of information about how much things cost and how good they are. In health care, buyers are denied basically all of that information, and they’re occasionally unconscious when the transaction is being handled. This is not what a functioning market looks like.

But there are exceptions to America’s used-car dealership of a health-care system. One of them is Medicare. The way Medicare works — which is the way the health systems in pretty much every other country work — is that it tells hospitals and doctors what it’s willing to pay for various services and then they decide whether to accept Medicare or reject it. It’s a take-it-or-leave-it offer. Almost all of them take it. More than 90 percent of doctors accepted new Medicare patients in 2012 — a higher number, even, than accepted new patients on private insurance. The result is that Medicare beneficiaries pay much lower, and much more predictable, prices than people with private insurance.

… Skinner, Fisher, and Weinstein… suggest a simpler solution: why not cap all prices at 125 percent what Medicare pays?

The federal Medicare program has in place a complete system of prices for every procedure and treatment. It’s not perfect, but it is uniform across regions, with a cost-of-living adjustment that pays more in expensive cities and less in rural areas. If every patient and every insurance company always had the option of paying 125 percent of the Medicare price for any service, we would effectively cap the worst of the price spikes. No longer would the tourist checked out at the ER for heat stroke be clobbered with a sky-high bill. Nor would the uninsured single mother be charged 10 times the best price for her child’s asthma care. This is not just another government regulation, but instead a protection plan that shields consumers from excessive market power.

…why not just give [the same prices Medicare pays] to private insurers, too?

Well, one answer [why private insurers should start out being billed 25% more] is that the entire health-care system is organized around being able to charge these high prices. If everyone switched to paying Medicare rates overnight, you would see a wave of hospitals closing and device manufacturers going bankrupt. The system can’t take that much change, that fast.

…This …brings the variation in prices down. This is a plan to help the people who end up getting truly gouged — it will mean an end, for instance, to uninsured patients being charged 300 percent of what Medicare pays for an appendectomy.

The health industry would freak out, of course, because once prices are capped at 125 percent of Medicare’s rates, they know it’s a small step …towards All Payer Rate Setting — which is, more or less, a way of merging the savings of single-payer system with a lot of private insurers.

Posted in Health

Rolling out a new kind of “death panel” claim to try to scare senior citizens

Before becoming president, Donald Trump was a long-time proponent of single-payer health insurance (aka Medicare for All).  That shouldn’t be surprising given that Trump was a liberal Democrat for most of his life until Obama was elected and then Trump’s dislike for Obama seems to have motivated him to become a staunch Republican for the first time. Trump first gained prominence in the party by promoting birther theories against Obama.  Trump wrote about single payer at length in a book and said things on the campaign trail like “We’re going to have insurance for everybody” and “The government’s gonna pay for it.”

He still campaigned on for single payer during the beginnings of the Republican primaries and although he gradually moved towards the standard Republican Party platform, after he became president, he still sometimes praised single-payer systems abroad like the system in Australia.

In today’s USA Today, Donald Trump produced an op-ed that has been widely ridiculed for so many deceptions and/or errors.  The Washington Post’s fact checker said, “almost every sentence contained a misleading statement or a falsehood.” Among the falsehoods are targeted attacks on Medicare for All claiming that proponents really want to cut Medicare not expand it.  For example, Trump said:

  • Democrats favor “eliminating Medicare as a program for seniors”;
  • “the Democratic Party’s so-called Medicare for All would really be Medicare for None”
  • “under the Democrats’ plan, today’s Medicare would be forced to die.”

This is how he is attacking the people who want to expand Medicare to include all Americans AND make it more generous.

The only age demographic in which a majority consistently opposed Obamacare was Americans older than 65 because they feared that Obamacare might take resources away  from their socialized health insurance system: Medicare and Medicaid.  US News listed several of the fears that senior citizens have had about that. Seniors were opposed to Obamacare even though it wouldn’t affect them at all largely because the Republican political elite succeeded in making them fear “death panels.” This was the idea that Obamacare would cut lifesaving Medicare benefits. Similarly, organizations like the Heritage Foundation that wants to cut Medicare and Social Security misleadingly criticized Obamacare by claiming it cut Medicare’s generosity to Senior Citizens by $700 billion. In reality, that much was saved through greater efficiency and no benefits were cut. Heritage opposed Obamacare because it was too generous, not because it was spending less, but that would be a political loser, so they made Senior Citizens afraid of benefit cuts instead. Trump’s new op-ed is a another attempt to whip up new fears of death panels. He is literally claiming that Medicare for All would actually mean Medicare for none!  This is Orwellian. Up is down!

Ironically, the Republican party leadership, like Paul Ryan, has a long history of promoting numerous proposals that really would have cut Medicare spending and privatized it and Trump distinguished himself during the Republican primaries by consistently pushing back against that direction of the party elites during his campaign, as he proudly tweeted:

I was the first & only potential GOP candidate to state there will be no cuts to Social Security, Medicare & Medicaid.

Trump’s generosity towards senior citizen welfare programs is one reason why Trump’s supporters skewed more elderly than previous Republican presidential candidates. But Trump tried to break his signature promise after the election when he promoted every Affordable Care Act repeal proposal. All the Republican proposals included large cuts to Medicaid.

Meanwhile, some studies suggest that one reason the US has lower longevity than any other rich country despite spending more on healthcare (per person) than any other country on earth is that there are many Americans who lack adequate health coverage. Below is one such estimate.

All the other countries have universal health insurance. Maybe we could save lives and cut spending if we copied one of them? The Mercatus Center is another Republican think tank that with similar views to the Heritage Foundation.  Mercatus did a recent analysis of single-payer healthcare which was supposed to be critical of it, but actually came to a number of conclusions that make it sound great. They fear that Medicare for All proposals will

  • “substantially reducing drug prices and administrative costs”.  Sounds good to me.
  • “become responsible for financing nearly all current national health spending.”  That implies less out-of-pocket spending, yea!
  • “expand the range of services covered by federal insurance (for example, dental, vision, and hearing benefits)” which would be more generous than in most single-payer systems like Canada.
  • And reduce overall healthcare spending by over 2 trillion dollars over the first ten years despite more healthcare access! Here is their data in a chart by Kevin Drum:

Of course, they oppose this plan to expand healthcare and lower total spending because

  1. They think that moral hazard is a huge problem that would only get worse if people had better health insurance. In reality the moral hazard of patients isn’t a significant problem because doctors already ration all the expensive tests and treatments.  Patients only have control over relatively cheap office visits and 99% of us don’t wants to go to any more doctor visits than the absolute minimum necessary for our health.  Most Americans could probably benefit from more office visits. Other countries with single payer healthcare don’t have a worse problem with it than the US.
  2. They worry that spending less on healthcare would reduce the quality of healthcare. But for all of you who have a really generous ‘Cadillac-quality’ healthcare policy now, you will still be able to buy a supplemental private healthcare policy that tops off the generosity of the public plan if you want to just like most senior citizens buy supplemental private insurance to top off our existing Medicare insurance. Few people opt for supplemental insurance in nations like Great Britain because most people feel like their free insurance is good enough, but some British citizens want to additional private insurance and they are free to choose to spend more on even better healthcare. Universal healthcare generally only puts a floor on the minimum healthcare citizens can get. The only place I know of where there is any ceiling restricting the maximum is Canada, but I haven’t heard of American politicians proposing any limits on additional insurance that private individuals might want to add to the public plan.
  3. It would increase taxes massively. Although Americans would have more disposable income on average because private insurance spending would drop more than taxes would go up, Mercatus really, really hates taxes.  They are the kind of ideologues who would rather give $10 to a private health insurance company than pay $9 in taxes for a public health insurance plan that gives more coverage!  This is also a major reason why they hate Obamacare.  Most Americans don’t realize it because most of the burden fell on rich people and corporations, but it was one of the biggest tax increases in American history as this graph from the Incidental Economist shows:

Obamacare-tax.0

But turning most of the private insurance payroll deduction into a public insurance system would certainly mean that payrolls would have much higher taxes. The average cost of private insurance is over $20,000 per year for an average family policy with normal deductibles and over $18,600 for stingier family policies with high deductibles as the following graph shows.  The full cost of healthcare for a family of four is sometimes estimated at about $28,000 per year on average! Even though single-payer would be cheaper, there is no way to replace private insurance without raising taxes a lot.  Now, paychecks should still go up after taxes according to this analysis because the new taxes are projected to be less than the insurance they replace, but if you hate paying 95 cents of taxes more than a dollar of insurance payments, then this is a worse scenario.

Ronald Reagan also made similar ‘death panel’-style arguements against the original creation of Medicare in the 1960s.  It is humorous in hindsight, particularly when combined with some funny video imagery from the era:*

Whereas Reagan said that Medicare would turn America into a socialist Russia, Trump’s op-ed is warning that it will turn America into a socialist Venezuela!  It is the same fear all over again.

But Medicare for All is already much more popular than Obamacare ever was because it is based on a proven program that is even more phenomenally popular, Medicare, and everyone understands what that is.  In contrast, Obamacare is confusing and complicated to explain. Some recent polls are finding that 70% of Americans are in favor of Medicare for All versus only 20% opposed.

Although Trump is an incredibly talented salesman, I don’t think his recent death-panel style attack on expanding healthcare coverage will work because Medicare is something Americans already know and love and it will be hard to convince Americans that expanding it is really cutting it.

In the remote chance that the Democrats end up winning a majority of both the House and the Senate in November and thereby getting the power to pass legislation, I’d be surprised if Trump didn’t sign it into law. He is rarely ideologically consistent and he has a long history of supporting this idea.  Plus, it would be a great way to become popular and show that he can reach across the aisle to make deals with the Democrats.   Ironically, Medicare for All could help him get re-elected in 2020!

 

*If you want to hear the complete 12 minute recording of Reagan’s 1961 warning about the evils of Medicare, the original is available from the Reagan Presidential Library.  When Reagan made the recording for the AMA, Medicare for All was the original plan and doctors opposed the idea of a universal insurance for all Americans because they were afraid that it would reduce their wealth and power.  But Johnson compromised with the AMA and cut back Medicare into a program that only gave universal insurance to the elderly who rarely had been able to afford insurance anyhow.  The AMA approved of this change because they figured that providing Medicare only to the elderly population would dramatically raise doctor incomes because the elderly had mostly been previously uninsured anyhow. Reagan also reversed his position and became such a big supporter of Medicare that he raised the payroll taxes that fund it (and Social Security) by more than any other president.  He also tried to expand Medicare to cover pharmaceuticals and other new benefits.

Posted in Health

OTC hormonal birth control is a simple way to cut costs and improve health

On the one hand, deregulating the market for the pill would improve health, lower costs, reduce abortion, and eliminate a political football.

On the other hand, it would reduce incomes for physicians and drug manufacturers, a small passionate minority thinks birth control is immoral, and it is easy to scare the public into resisting change.

Birth control pills are available without a prescription in most countries of the world. Generally most (but not all) rich countries require a prescription as denoted by dark blue on the map and most (but not all) poor and middle-income nations do not as denoted by the other colors.

Over-regulated rich countries could learn from our poorer friends abroad. For example, women who live along the US-Mexico border frequently buy their birth control pills on the Mexico side of the border because they are cheaper, more convenient, and don’t require an expensive doctor appointment.  As Virginia Postrel says:

Partly because birth-control pills are available only by prescription, people tend to think they’re more dangerous and less well understood than they actually are. In fact, “more is known about the safety of oral contraceptives than has been known about any other drug in the history of medicine,” declared an editorial in the American Journal of Public Health back in 1993. That editorial accompanied an article arguing for over-the-counter sales…. Nearly two decades later, birth-control pills look even safer than they did then, and recent research indicates that women are both able and eager to manage their own purchase decisions.

….Aside from safety, the biggest argument for keeping birth-control pills prescription-only is, to put it bluntly, extortion. The current arrangement forces women to go to the doctor at least once a year, usually submitting to a pelvic exam, if they want this extremely reliable form of contraception. That demand may suit doctors’ paternalist instincts and financial interests, but it doesn’t serve patients’ needs.

….Right now, the American women who have the most choice are those who live near the border with Mexico, where pharmacies sell oral contraceptives without a prescription, generally for about $5 for a one-month supply. A group of researchers [] conducted extensive interviews with more than 1,000 women who live in El Paso, Texas….One result from the El Paso study surprised researchers. “Women who got the pill in clinics were significantly more likely to stop using it during the study — even though they still didn’t want to get pregnant,” Grossman says. That’s a big deal. In fact, he says, “my hope was that we would show that continuation was no worse for the OTC group, but in fact we showed it was better.”

Kevin Drum comments:

It’s not just doctors who resist making oral contraceptives available over the counter. Pharmaceutical companies usually resist it too. After all, it costs them money for extra testing and produces lower profits at the same time, since OTC meds generally have lower margins than prescription meds. That’s a lot of resistance to overcome.

another study done in California …compared continuous use of contraceptives among women who got monthly supplies vs. women who got yearly supplies. Over the following 15 months, the women who got yearly supplies were less likely to run out, less likely to get pregnant, and less likely to have an abortion.

Making oral contraceptives available over the counter might be a good idea, but it’s not something likely to happen any time soon. In the meantime, though, providing women with annual supplies instead of making them visit a clinic or refill their scripts every month might have nearly the same benefit. This would require both doctors and insurance companies to change the way they do business, but given the safety of the drugs and the danger associated with running out, annual prescriptions probably ought to be the default.

Although 99% of American women use birth control at some point, many politicians and religious leaders objected to the Obamacare regulation that birth control be covered by health insurance plans.  Their objections culminated in the the US Supreme Court’s Hobby Lobby decision.  Offering oral birth control over the counter would eliminate the need for them to be covered by health insurance because it would dramatically reduce their cost and increase accessibility. Anna Reisman argues that many other over-the-counter medications like aspirin are more dangerous than birth control and reducing unwanted pregnancy and abortion would do more to improve women’s health than the small risk of adverse side effects that are easily prevented with simple screening done at pharmacies.

[With] the reluctance of religious institutions and hospitals to cover the cost of contraceptive services, the time is ripe for women to make it as easy as possible to get oral contraceptives themselves. The obvious solution is to make the Pill available over the counter. But isn’t that dangerous? Don’t certain oral contraceptives interact in scary ways with other common medications, such as antibiotics? And don’t we need a doctor to help us navigate this complicated maze of information?

Not exactly. First, there are clear guidelines easily available online to determine which women shouldn’t take the Pill at all and which women should have physician oversight. The guidelines are really medical history questions; other than a blood pressure check, a woman can look through the list on her own and determine if she’s a candidate for the Pill. With the combination pill, for example, which contains both estrogen and progestin, women over 35 who smoke and those with chronic medical conditions (including high blood pressure or diabetes, liver disease, specific types of migraines, or a history of blood clots) may be advised not to take the Pill or to take it only with medical supervision. The progestin-only “minipill” can be a good option for women who cannot take an estrogen-containing Pill, since it has fewer risks. User-friendly online guidelines plus a very clear list of risks spelled out on the pill package could make this information easily accessible.  Even serious complications such as blood clots and allergic reactions are not a reason not to make the Pill more easily available. Those are extremely rare, and women would have them whether they got the Pill with a doctor’s prescription or not… In many ways having the Pill available over the counter would make it more effective, not less. While the Pill has an impressively low failure rate on paper—0.3 percent in the first year; in practice, the actual failure rate is about 8 percent. One important—and fixable—reason: missed pills and gaps in prescriptions. Some physicians won’t provide a refill prescription unless a woman comes in for an appointment (with some doctors insisting on an often unnecessary pelvic and Pap in many cases). And so for women who can’t get an appointment when they need one, or lack health insurance and can’t afford to see a doctor, or can’t get time off of work to get to an appointment, the story is sadly familiar: missed pills, less effective backup methods, and unintended pregnancies… Pharmacies in metropolitan Seattle have experimented with [one of several models] of “safe use”—the Direct Access study—of making contraceptives available over the counter, in which community pharmacists were permitted to dispense hormonal contraceptives after a woman completed a self-administered screening tool and had weight and blood pressure measurements; both women and pharmacists were satisfied with this experience. Pharmacists already often counsel patients about medications, so it makes sense that they could also play a key role in helping women choose whether an oral contraceptive over the counter would be a good option.

Fortunately, some states are starting to deregulate the market for hormonal birth control:

8887-02-figure-3

 

Posted in Health

Optimal pricing of cancer drugs

The Nobel Prize for medicine went to cancer researchers this week who developed immunotherapy drugs that can be miraculously effective, but as Julia Belluz reports, the prize is also a reminder of how expensive the cancer treatments they developed have become:

Getting a cancer immunotherapy treatment costs more than a house in many cities in the US, more than putting a few kids through private college. The average cost of cancer drugs has increased from $50,000 per patient in the mid-1990s to $250,000 today. That’s four times the median US household annual income.

Immunotherapies in particular often cost more than $100,000 per patient. Doctors now use immunotherapies in combination, which means those costs can quickly double or triple. For some of the newest immunotherapies, the price tag is even steeper: When you include the value of the medical support necessary to deliver these treatments, a price tag of $850,000 per patient is not unheard of, according to Emanuel. “The drug companies say that they offer significant discounts to many patients, but because they won’t release this data, the list price is all that we have to go on,” he wrote.

This chart from Peter Bach …says it all.

(Keep in mind that the y-axis here is logarithmic, not linear…) Patients with health insurance can be denied coverage for immunotherapies, even when it’s recommended by their oncologists.

The Washington Post reported on medical trials using a blood cancer drug called Imbruvica. Oncologists discovered that it was just as effective at lower doses than had been standard practice.

The researchers at the Value in Cancer Care Consortium, a nonprofit focused on cutting treatment costs for some of the most expensive drugs, set out to test whether the lower dose was just as effective — and could save patients money.

The researchers saw as a breakthrough because the pill had cost $148,000 per year. But when the manufacturers discovered the new research, they tripled the price per pill:

Within the next three months, the companies will stop making the original 140-milligram capsule, a spokeswoman confirmed. They will instead offer tablets in four strengths — each of which has the same flat price of about $400, or triple the original cost of the pill.

Just as scientific momentum was building to test the effectiveness of lower doses, the new pricing scheme ensures dose reductions won’t save patients money or erode companies’ revenue from selling the drug. In fact, patients who had been doing well on a low dose of the drug would now pay more for their treatment. Those who stay on the dose equivalent to three pills a day won’t see a change in price.

“That got us kind of p—ed off,” said Mark J. Ratain, an oncologist at the University of Chicago Medicine who wrote about the issue in the Cancer Letter, a publication read by oncologists. “We were just in the early stages of planning [a clinical trial] and getting it organized, and thinking about sample size and funding, and we caught wind of what the company was doing.”

Kevin Drum defended the pharmaceutical company, arguing:

what did these oncologists expect? Everyone knows that the price of drugs like Imbruvica doesn’t depend on the cost of actually manufacturing the stuff. Whether it costs a penny a pill or $100 a pill is irrelevant. These drugs are priced to recover their R&D costs based on the number of patients who are likely to use them. …there’s really no argument that the price of a cancer drug should decrease if it turns out you can use less of it. …The pharmaceutical company still has to recover its development costs, and that doesn’t change regardless of how big a dose is typically required.

This isn’t quite correct. First, and most importantly, a for-profit company never does pricing to recover R&D costs. Ever. R&D costs are sunk and for-profit companies price to maximize profits. R&D expenditures are irrelevant for determining pricing, but they are important for determining profit levels and that is important for determining whether a company goes bankrupt or not. But if a drug company goes bankrupt because it cannot repay the loans that financed R&D, then some other company will buy up the patent rights to sell the drugs if it can price the drug over the cost of manufacturing the stuff. That is the second part the Kevin Drum gets wrong. The manufacturing price always influence pricing because for-profit companies care about markup which is the price minus the marginal cost (manufacturing cost in this case). Suppose a company has been getting a $1000 markup, and the manufacturing cost was $200. If the manufacturing cost drops down to $100, the rational thing for a for-profit company to do is drop the price! The mathematical logic is hard to explain in words, but basically, if the profit-maximizing markup was $1000, then it doesn’t suddenly rise to $1100 simply because the manufacturing costs drop. The optimal markup is determined by the elasticity of the demand curve and unless demand is perfectly inelastic for some reason, the company can boost revenues by dropping the price and selling a higher quantity. Now, you could argue that the demand for drugs is very inelastic because people will die without them, but they aren’t perfectly inelastic or for profit companies would earn infinitely much money from selling them. So when for-profit companies get more efficient at manufacturing goods, they increase profits by reducing their selling prices.

Kevin Drum argues that setting the same price per patient regardless of the dosage makes the new pricing scheme fairer:

the new pricing model for Imbruvica may be fairer than the old one. Should a 300-pound person pay more than a 150-pound person just because their body requires a bigger dose? Should people with higher cancer loads pay more than those with lower cancer loads? That’s not at all clear, is it?

It is probably fairer to charge every patient approximately the same amount of money regardless of how much of the drug they acutally take because sicker or bigger patients generally don’t have more money. It is certainly more profitable to price this way. Although it might be fairer to patients, doctors don’t like the new pricing regime because it makes harder and more expensive to change dosages to respond to side effects and patient needs.

But the new regimen could undermine patient safety, Ratain and colleagues argue. People on Imbruvica often need to have their doses adjusted, because it can interact with other drugs. Physicians also may try lower doses when people have trouble tolerating the drug because of side effects, such as extreme joint pain.

The companies said in their statement that a dose exchange program with rapid shipment would allow physicians to make those changes. Under the old regimen, doctors could adjust the dose immediately by telling a patient to take one or two pills a day, instead of three, then return them to the higher dose when necessary. Under the new regimen, physicians will have to initiate a dose-switching protocol that requires paperwork. The phone number physicians have been given to call is only open Monday to Friday during business hours, several oncologists noted.

“I do share their concerns,” said Jennifer Brown, director of the Center for Chronic Lymphocytic Leukemia at the Dana-Farber Cancer Institute, who was not an author of the Cancer Letter paper. “We frequently change the dose of this drug, in relation to drug interactions in particular, and usually we need to do that basically instantaneously.”

Presumably the pills cannot be cut into smaller pieces for some reason or else everyone would just buy the maximum dose and cut the pills down to size. So every time a patient’s dosage is adjusted, another $148,000 set of pills must be bought and the unused pills returned for a refund. That is a lot of administrative expense.

The good thing about these outrageous prices is that they encourage more research to develop more therapies and more Nobel Prizes. The bad things about high prices is obvious to everyone. And prices are the highest in the USA. America accounts for less than 4.3% of the world population, but 45% of the world’s pharmaceutical expenditures in 2016! Americans use fewer drug prescriptions than many rich nations (Japan prescribed 60% more per person), but our prices are much higher which means that the USA provides the global pharmaceutical industry with much more than 45% of their profits. The US is also unusual in that nearly 75% of US drug expenditures went to branded drugs (as opposed to generics) even though 84% of prescriptions in the US specified cheap generics (the highest percent utilization of generics of any rich nation). So the US is paying the majority of the world’s pharmaceutical profits plus a tremendous amount of government-sponsored research in our state universities and grants to research hospitals and that buys a lot of Nobel Prizes.

Posted in Health

Oats, the neglected superfood

The Washington Post food columnist, Tamar Haspel, argues that oats are the best superfood on the planet and everyone should eat oats for breakfast every day. I whole heartedly agree.  I’m a bit of an oatmeal fanatic.  It has been my main staple for breakfast ever since I spent a semester in London in 1989.  That is where I discovered muesli. Muesli is like an uncooked granola.  It is rolled oats (I much prefer quick oats), nuts, seeds, some cereal flakes, and dried fruit.  My favorite brand in Europe even had some powdered milk already mixed in. Pretty much anywhere I went in Europe, I could go into any convenience store or grocery and buy a box of muesli for a nutritious meal that was light weight, non perishable, easy to pack in a bag, and cheaper than eating fast food. I generally tried to eat it with milk (powdered was the most convenient for travel), but I just ate it with water when I couldn’t get milk easily and although I like it a lot better with milk, and it is nutritionally much more complete with milk, it isn’t too bad without it.

Ever since then, my staple breakfast has been plain, raw rolled oats mixed with fruit, milk, nuts, seeds, and a bit of bran flakes or corn flakes for a crunchy texture. A bowl of raw (or toasted) oats and seeds tastes great and keeps you full for a long, long time. Quick oats are easier to chew than the old-fashioned or steel-cut oats, but I like to soak my breakfast oats in milk for at least 15 minutes while I shower to make it easier to chew. I’ve experimented with soaking steel-cut oats overnight to make it chewable, and it becomes edible, but is still too chewy for my tastes.  Soaked oats taste better and make their nutrients more bioavailable.  Oats contain a substance called phytate that can block absorbtion of some of the minerals in your oats, but soaking your oats can help decrease phytate and make them more digestable.  Soaking overnight makes them more digestible, but I think they taste best after about a half hour.  And I prefer quick oats which are briefly pre-cooked and then dehydrated so they aren’t truly raw.  Heating also destroys phytate.

This is what it looks like when miniature Nordic walkers traverse my breakfast:

My current practice is to soak chia seeds, quick oats, and raisins for about 15 minutes while I’m getting ready in the morning. Then I lightly grind sunflower seeds, flax seeds, and pumpkin seeds in a dedicated coffee grinder that only grinds seeds. I grind them fresh every morning because seeds go stale quickly after they are ground up whereas whole seeds are designed by nature to last. I prefer to only partially grind the seeds because I prefer a bit of a chewy texture rather than a powder. I don’t soak ground flax seeds because they can get gummy. Fruit can be added at any time. This is about what my current breakfast would look like if I didn’t grind up my seeds before pouring them on top of my oats:

The main reason I like raw oats is that they keep me full a long time.  They don’t digest nearly as quickly as cooked oats, so I don’t get hungry a few hours later.  In fact, I routinely skip lunch after my superbreakfast.  Although a 3/4 cup serving of raw oats has more than double the calories of the same size serving of cooked oats, the cooked oats digest more completely and more quickly, so you don’t necessarily actually digest more calories from the raw oats and it takes a lot longer.  Similarly, keeping the seeds ground up a bit coarse helps them digest more slowly too.

Unfortunately, this superfood is increasingly being contaminated by Roundup because of changing agricultural processes, so it is probably worth paying a few cents more to get organic oats.  Most Roundup is sprayed on genetically modified crops, but that isn’t the problem with oats because with GMO crops, the Roundup is sprayed when the crop is young and it fairly rapidly biodegrades so that by the time the crop is harvested, there is hardly a trace in the food.  Unfortunately Roundup is finding a new use and the Environmental Working Group found that most conventionally-grown oats have high levels of Roundup. because of a new trend in agriculture:

Increasingly, glyphosate is also sprayed just before harvest on wheat, barley, oats and beans that are not genetically engineered. Glyphosate kills the crop, drying it out so that it can be harvested sooner than if the plant were allowed to die naturally.

That is the absolute worst time to spray crops.  It guarantees that it will persist on the crop after harvest.  But even organic raw oats are super cheap and still have one of the highest ratios of nutritional value per dollar that you can get.  Plus with a few seeds and a little fruit, it makes a super tasty and convenient meal that is nutritionally dense and nonperishable. To this day, I like to travel with a little bag of my homemade muesli mix (with milk powder pre-mixed in) for a quick meal anywhere, anytime.

 

Posted in Personal (not econ)

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