The Devil Mandate

Did you realize the Supreme Court was in session earlier this week? Might’ve been some arguments about health care? Of course there was, and of course the Supremes are considering striking down the whole law. This leads Matt O’Brien to argue that insurers saw the news and are cheered:

One reasonable conclusion is that Wall Street's betting that Obamacare will either be struck down in its entirety or upheld in its entirety. Both would be very, very good news for healthcare companies. The death of the individual mandate, alone, would be bad news for Big Insurance.

It’s correct that losing the mandate alone would be bad news for insurers—but I’m not sure the entire law being struck down is all that wonderful for insurance companies specifically and the health care industry more broadly. Obamacare has many elements that envision a much different health care industry than the one around today, but it’s not that hostile to the system. It really could go so much worse, and with continuing inflation in health care and pressure on public budgets, the risk of it becoming so much worse increases. That scenario has a lot of uncertainty. The devil you know can be so much more friendly than many of the devils you don’t.

Cheating and High-Stakes Testing

The AJC has a super article about cheating on standardized tests. It probably should cause some hard questions to be asked:

The analysis shows that in 2010 alone, the grade-wide reading scores of 24,618 children nationwide — enough to populate a midsized school district — swung so improbably that the odds of it happening by chance were less than one in 10,000.

And:

Big-to-medium-sized cities and rural districts harbored the highest concentrations of suspect tests. No Child Left Behind may help explain why. The law forced districts to contend with the scores of poor and minority students in an unprecedented way, judging schools by the performance of such “subgroups” as well as by overall achievement.

Hence, high-poverty schools faced some of the most relentless pressure of the kind critics say increases cheating.

Improbable scores were twice as likely to appear in charter schools as regular schools. Charters, which receive public money, can face intense pressure as supposed laboratories of innovation that, in theory, live or die by their academic performance.

This will almost certainly need more study to see how widespread cheating on these sorts of high-stakes standardized tests. There have been some recent gains on standardized tests—how much of that is attributable to cheating? The impact of charter schools on test scores is ambiguous—but how much of that ambiguity might be removed if we knew that a disproportionate number of them were cheating, as the AJC article suggests? These questions need further study.

Pittsburgh Brawl

A WSJ and Jeffrey Young piece in Huffington Post reveals one of the big tensions in health care post-ACA. The articles examine a situation in Pittsburgh in the middle of a market share fight (I’ve written about that exact subject here). It seems that the University of Pittsburgh Medical Center is prepared to reject patients who are insured by Highmark, an insurer, due to Highmark’s acquisition of a struggling health group. They feel that it will boost Highmark’s attractiveness and thereby lessen market share and bargaining power.

As Young points out, agglomeration among health care entities is probably a necessary byproduct of an integrated system. Most of the health care systems health policy people seem to admire—your Kaisers, your Geisingers, your Intermountains—are integrated insurer/health care providers housing many different groups. On the other hand, big hospital groups will definitely also raise prices. It’s something that needs disentangling.

At any rate, such aggressive tactics are not something I’ve heard of the innovative providers engaging in as frequently. In fact, Geisinger usually uses the patients insured by third-parties to subsidize their innovative activity. I’m not suggesting the two situations are exactly the same, but I do think it’s worth thinking about.

The Robots Are Probably Coming For The Surgeons, Too

I appreciate this Atlantic article questioning whether robots are currently more effective than surgeons—technological reporting is too often dominated by slightly-naïve acceptance that this stuff all works—but I found this note to be a bit naïve to end with:

"Robotics is a tool, albeit the most technologically advanced and expensive one, but a tool nonetheless," says Dr. Bernard Park, the chief of thoracic surgery at Hackensack University Medical Center. "No technology will ever replace the critical importance of a skilled, thoughtful surgeon."

“Ever” is an awfully long time, isn’t it? I’m fairly confident we’ll see robots infringing on surgeons’ domains more and more because we’ve seen it for most other professions; for example, see software replacing grunt-level lawyers for coding depositions. Indeed, it’s not as if health care people are totally innocent of robots—they’re starting to introduce them to the hospital (though, again, for low-level stuff).

Let’s consider the stuff robots might do better than human surgeons:
1) Robot “hands” don’t tremble.
2) Robots do not get tired.
3) Robots do not forget tools inside the people they’re operating on.

And so on—I’m sure you can think of additional things which a robot might be really good at that people might not be so good at. Again, you don’t have to be at the-singularity-is-coming level of techno-optimism to believe that this is the case.

Totally Not-Policy Related

But this ad really is incredible (as in unbelievable):

(via Andrew Sullivan)

This reminds of this ad:

How did anyone think this is a good idea, again? Forget women--I don't see how this works on men.

We Don't Know What We Don't Know: Hip Replacement Edition

A striking result from The Lancet has led researchers in Britain to urge banning metal-on-metal hip replacements in that country:

Data on more than 400,000 hip replacements found metal-on-metal implants needed revising more often than other types and that failure rates were higher in women.

It comes two weeks after the Medicines and Healthcare products Regulatory Agency (MHRA) issued new guidance on the implants, saying almost 50,000 patients in the UK will need annual blood or MRI checks.

That’s bad, of course, but the danger is mitigated in the U.K. by the fact that only about a tenth of hip replacements in that country are metal-on-metal—and it’s been decreasing, also. The process would seem to have worked—you’ve got data from a large registry; the data is worrying; you act upon it.

Contrast, of course, to the U.S. The study cites the rate of U.S. metal-on-metal hip replacements at 35%...in 2009. It appears the study has no more recent source of data, and I wasn’t able to find anything more recent in my own searches. That’s because we have no such registry and therefore aren’t able to track the failure rates of hip replacements in the field. As ever, we don’t know what we don’t know.

Why Sports Superstars Are Liked and Others Might Not Be

Kenneth Rogoff asks why we like highly-paid superstars in entertainment and sports but don’t like superstars in other fields, especially finance and business:

What amazes me is the public's blasé acceptance of the salaries of sports stars, compared with its low regard for superstars of business and finance. Half of all NBA players' annual salaries exceed $2m, more than five times the threshold for the top one per cent of household incomes in the United States. Because long-time superstars such as Kobe Bryant earn upwards of $25m a year, the average annual NBA salary is more than $5m. Indeed, Lin's salary, at $800,000, is the NBA's "minimum wage" for a second-season player. Presumably, Lin will soon be earning much more, and fans will applaud.

Yet many of these same fans would almost surely argue that CEOs of Fortune 500 companies, whose median compensation is around $10m, are ridiculously overpaid. If a star basketball player reacts a split-second faster than his competitors, no one has a problem with his earning more for every game than five factory workers do in a year. But if, say, a financial trader or a corporate executive is paid a fortune for being a shade faster than competitors, the public suspects that he or she is undeserving or, worse, a thief.

Sadly he doesn’t cite any evidence for this; it’s probably self-evident at this point that financiers are less well-liked than entertainment and sports figures as a class, but he cites no data that business executives are widely disliked.

But I’d make a very simple argument as to why people like entertainment and sports figures and don’t like financiers terribly much: the value that sports and entertainment superstars deliver is much more clear than that of financiers, who as Rogoff notes are possibly zero-sum (at best, some might argue). And, as for business executives, it’s not clear what their value is at any given time—after all, American business executives are much more highly paid than their European and Asian counterparts; are American business executives that much better than their international peers? There’s no data on this, but it can be argued. Meanwhile, despite the influence of stuff like Moneyball, it’s nevertheless abundantly clear that players like LeBron James, Dwyane Wade, Kevin Durant, Dwight Howard and Derrick Rose are among the best 10 players in the world—I would near guarantee that all of the preceding players would appear on all of the lists of a poll of the most informed basketball people. Now, if you tried to repeat the exercise of the most informed business people, would there be a consensus of the 10 best business executives in the world? Would someone like Carlos Slim appear on the list, despite the source of his wealth (essentially because of the cartelization of the Mexican economy)? Some nontrivial percentage of business wealth in the world has been derived because the owners of wealth have obtained it in unsavory if not illegal methods. Those business superstars who are perceived to have gotten their wealth fairly are widely admired and celebrated--see Jobs, Steve.

Rogoff tries to sidestep this problem by noting that sports teams often obtain their money by inefficient means—for example, lobbying for public money for arenas—but this is a different question than whether sports players derive their money from unfair means. In other words, his argument doesn’t hang together, from beginning to end.

The Trend is Bad Too

Matt O’Brien in The Atlantic raises concerns about hysteresis—the idea that being unemployed for long periods of time can make you permanently unemployable—by linking to the graph following his paragraph. The concern is that making a large section of the workforce permanently unemployable lowers the capacity for the entire economy for a very long time—that’s part of the reason why countries do so badly after a financial crisis. However, I’d suggest his graph actually hides part of the problem.

This graph focuses attention on the post-crisis quagmire we find ourselves in. However, the big leap in duration of unemployment hides a worrying trend. Let’s take out that part of the data and focus on the trend pre-crisis:

As you can see, going from peak to peak, unemployed workers in the middle of the aughts could expect to stay that way nearly two months longer than unemployed workers in the fifties—which implies that there were serious problems that probably need addressing besides whatever therapy is needed to get us back to trend GDP and employment growth.

The System

Bill Gardner at Something Not Unlike Research notes that Canada actually has a lot less information technology than we do and much less adoption of EMRs. This is curious, since we’ve been all told about the importance of EMRs to bending the cost curve in the right direction while improving care. Gardner hits upon the reason why this hasn’t manifested itself in explaining why Canada doesn’t have extremely high adoption rates: “A lot of US health care information technology investments are devoted to managing the pathologies of billing multiple insurers for care. Billing is simple [in Canada].”

Of course this just goes to a point I’ve made before that the usefulness of a particular technology depends on the system it’s embedded in. In a system that values fee-for-service overuse, we’ll see EMRs bent to solving billing codes and trying to microtarget advertising to patients to get them to purchase care they might not otherwise have. A system that doesn’t will try and use it to reduce tests, duplicative drugs, etc.

Sports Statistics and Numerical Arrogance

If you’ll forgive the foray into sports, there was a piece in the Atlantic Wire that I thought was interesting and worth pondering even if you’re not at all interested in sports and just interested in the policy. It’s entitled “Why people still don’t believe the best ideas in sports,” and as you might guess from the title, it’s devoted to berating those poor souls who haven’t gotten the value of advanced analytics in decoding sports.

Can we stipulate that evidence is good and a well-informed statistical analysis can take the biases out of our observations? They can. But this particular piece goes too far in the statistical direction, I think:

Another project designed a "similarity network" to group NBA players by their characteristics, defining 13 different categories of players, as opposed to the traditional 2 guard, 2 forward, 1 center framework. (You can see a version of the presentation here.) Yet, seconds after it ended we heard two guys loudly disagreeing with the presenter's classification of Minnesota's Kevin Love, based on ... what exactly? Muthu Alagappan has charts and data points and a Biomechanical Engineering degree from Stanford University. You have NBA TV on your cable package. Who would you believe?

People love evidence ... when it tells them what they want to hear. Once they hear something that doesn't intuitively make sense to them, they fight back. ….

This stuff is the new Moneyball, a book that had its cover image plastered around the convention center as one of the pillars of the sports analytics movement. Yet some audience members audibly scoffed when Alagappan posited (via a big spreadsheet with lots of decimal points) that Devin Ebanks might be just as valuable to the Lakers as Carmelo Anthony is to the Knicks. As if the idea that a cheap journeyman might be able to provide skills similar to that of a overpaid superstar had not been the premise of a bestselling book and Oscar-nominated movie that gave sports analytics its cultural relevance. Maybe Alagappan's numbers are wrong, but you better bring your own numbers.

I’m not so sure this is always true. Look—what are numbers? They’re basically another language; like all language, it’s nothing but a tool. Feel free to substitute “words” for “numbers” in the previous sentence—does it still make sense to you? Of course it doesn’t.

It’s very possible to defeat a statistical argument with the use of words alone if, for example, the assumptions underlying the statistical analysis are not at all well-founded. For instance, words alone can defeat David Berri’s statistical analysis (see: here) with little to no numbers needed. (I’m still not sure why David Berri is cited so often in the media, but if you ever see his name or his statistical analysis being cited in the piece, it’s a good time to stop reading the article and perhaps writing a kindly e-mail advising the journalist as to the error of his ways. Sometimes we don’t know better.)

I worry about the wrong people brandishing numbers because they can discredit all the people using numbers responsibly; if I want to present a statistically-based argument as to why you probably should rethink your prostate exam and/or mammogram guidelines, it doesn’t help to have a large number of arrogant people who have come before you arguing that that the numbers prove everything, your common sense matters little, and thereby defeats discussion. I don’t think Bennett—the author of this piece—is that kind of guy, but the tone of the piece often tends in that direction. Let’s try and do discussion a little better, maybe?

Texas Tech Treasury Raiders

This happened a little while ago, but I found it curious:

Governor Rick Perry announced on Friday that he's giving $21 million over the next decade from the Texas Enterprise Fund to Apple, and (presumably in exchange) Apple will build a $302 million campus near Austin that will create 3,600.

Perry is giving it so that Austin can become a high-tech hub. At first thought the idea doesn’t sound particularly crazy (though Apple can obviously afford the campus—Apple misplaces greater amounts of cash under its cushions), but once you really think about it, the idea sounds weird.

It turns out that the jobs created in Austin will be “customer support, sales and accounting” ones. Jobs created are always nice, I suppose, but these jobs are not the makings of a high-tech hub—at least not along the lines of a Silicon Valley. As has been explained several times by now, the key thing that makes Silicon Valley Silicon Valley is the network of skilled workers and entrepreneurs, universities, and specialized finance. None of the spokes of the network are exactly getting established here (in the high tech sense)—it just looks like a nice corporate giveaway. That’s Texas for you, I guess…

America Probably Isn't Looting The World's Doctors

Matt McAllester of the New York Times Magazine has an article there headlined, “America Is Stealing The World’s Doctors.” Unfortunately the actual text of the article is only a little more nuanced than the headline, which is a shame, because I think the subject is far less simple than is let on initially.

McAllester’s argument runs something like this: the U.S. is the world’s biggest importer of medical talent; he cites statistics that show that, currently, one in four doctors practicing in America is trained overseas. (He notes that there’s a shortage of primary care doctors but leaves that statistic alone.) This is a remarkable set of statistics, considering the difficulty that foreign doctors have in coming to the U.S.: as I’ve mentioned before, regardless of your previous qualifications, you will have to complete residency before getting your license to practice medicine in the U.S. Doctors who come from poor or developing countries abroad are generally depriving those countries of their services, where the need for care is more acute. In fact, since those countries subsidized the training of these doctors, it’s a double debit: they lose the services and the time and money spent on their training. (One administrator quoted in the article says it’s a “show of dishonesty and betrayal” for a doctor to emigrate.) The article doesn’t propose any solutions to this problem, but given its citations of medical journal articles calling the brain drain “looting”, it’s pretty easy to imagine what sorts of things the author has in mind.

As I said I think the article is insufficiently nuanced and gains quite a bit of its rhetorical force from the framing: it starts with the patients affected by the decision, and makes a compelling argument that they need the care the most. But the decision of a doctor to leave is a much bigger story. For one, the doctor is not a robot—she has desires of her own. She may have become interested in research while studying in school and want to do something about, we’ll say, malaria. Is it not possible that she could make the greatest impact in blunting malaria—perhaps the greatest scourge to Africa’s health—in a richer, more developed country where she could leverage much greater resources there? Once in a richer, more developed country, she might well send money home to her family, which might well use the money to upgrade its life or to start a business that employs additional people. And our original researcher might well be able to use connections gained in the more developed country to steer business or other resources to her home country. And after some time during her career she might decide she wants to return home, where, having acquired additional skills, resources, and connections she is a more effective doctor and leader than she would’ve been had she stayed in her home country the entire time. This is another story that could’ve been told about this alleged looting, one that doesn’t ignore that the thing being stolen is a person with agency.

That said, the specific situation of doctors leaving poor countries for richer ones is best changed by two things: first, making poor countries richer and second, changing the U.S. health care system so that there’s less demand for doctors, whether trained abroad or domestically. The author himself notes: “Doctors from Ghana once fled to the United States almost as a matter of course. But its retention rates of doctors and nurses in recent years have greatly improved as salaries rose enough to weigh the scales in favor of staying.” The author doesn’t note that Ghana has had a strong economy, one of the strongest economies on the continent—it had double-digit GDP growth in 2011. No solutions needed for the health care market as such.

Solving the demand for doctors in the U.S. means solving the problems of overconsumption in the health market, or at least figuring out how to leverage the existing labor force better—perhaps by making individual doctors more productive (e.g. telemedicine) or perhaps by expanding scope of practice regulations.

So I think by framing the situation as “America looting the world’s doctors,” you’re likely to be looking in the wrong places for your progress.

The Free Market Utopia, in deceptive arguments

Today on Megan McArdle’s blog there’s an argument from Avik Roy as to why the U.S. isn’t really a free market health care system. It uses the familiar arguments but takes it too far, in an entirely deceptive direction:

In reality, per-capita state-sponsored health expenditures in the United States are the third-highest in the world, only below Norway and Luxembourg. And this is before our new health law kicks in.
…
In 2009, according to these statistics, which come mostly from the OECD, U.S. government entities spent $3,795 per person on health care, compared to $3,100 per person in France. Note that these stats are for government expenditures; they exclude private-sector health spending.

Of course, he carefully omits the private health care expenditures, which are surely number one in the world. Since it probably sacrifices too much rhetorical power to describe the U.S. as simultaneously the world’s biggest free market health care system and its third-biggest government-run health care system, it’s probably most fair to describe the U.S.’s health care system as a bloated chimera. (Roy also points out the tax expenditure that subsidizes private insurance, but of course all economic transactions are at a certain level government-subsidized. The tax expenditure subsidizing private insurance isn’t a bad idea because it’s a cobblestone in the road to socialism, it’s because it encourages over-consumption of health care.)

Roy feels that health care would be better off in a free market state (“…health-care spending is most efficient when that spending is executed by individual patients, rather than third parties”), so you’d imagine he’d be cheered by the growth of HSA accounts. Of course the theory of price discipline on the individual producing efficiency sounds wonderful, but the practice is considerably different—individuals subjected to price discipline tend to cut out preventative care, and of course it enshrines fee-for-service as a central feature of the health care economy.

The College Troubles

This report got a fair bit of attention on Twitter, for obvious reasons:

In data compiled for a coming report, the Economic Policy Institute, a center-left think tank in Washington, found that the average inflation-adjusted hourly wage for male college graduates aged 23 to 29 dropped 11% over the past decade to $21.68 in 2011. For female college graduates of the same age, the average wage is down 7.6% to $18.80.

There are a few salient points here. One: how much of the skills-based critique of why there’s so many labor troubles can be true when young college graduates—the group that should be most competitive in the marketplace—are suffering so with their paychecks?

Two: it’s also striking that the gender pay gap remains so large. Again, we have a case where these should be the most skilled of the entire workforce, and yet the pay gap persists. That’s highly unfortunate.

Least Surprising Study Results

Today in non-shocking results:

Medicare’s seven-year public reporting initiative for hospitals, Hospital Compare, had no impact on reducing death rates for two key health conditions and just a modest effect on a third. That’s the conclusion of a just-released study that raises questions about the initiative’s ability to improve the quality of care provided by the nation’s hospitals.

I’m kind of surprised this would be found surprising. Hospital Compare is a dreadful website, as I’ve explained before. It’s hard to navigate, gives you no indication of what information is relevant and important, and makes it difficult to, you know, compare hospitals. On the scale of government-run statistics websites, FRED is a 10 and Hospital Compare is maybe a 1.5. If the idea was that patients would select high-quality hospitals and thereby bring down the error rate, it’s typically a good idea to make it easy to compare and thus select hospitals.

If information is hard to use, you shouldn’t be surprised to see it unused. Since patients find it difficult to select on the basis of quality, and insurers are only taking tentative steps on selecting on that basis, hospitals have little incentive to improve.

Permanent Mark on Your Record

An important post by Sarah Kliff about electronic medical records demonstrates that sometimes reforms don’t work quite the way we anticipate—contrary to story, it turns out doctors with electronic medical records that share digital imagery or tests order more tests rather than fewer ones. You’d think that the ability to share tests would decrease the number of duplicate tests; sadly, this isn’t the case. The study’s authors’ speculation:

What about digital record-keeping that gets doctors to order additional care? The authors here think it has to do with the immediacy of results. “In borderline situations, substituting a few keystrokes for the sometimes time-consuming task of tracking down results from an imaging facility may tip the balance in favor of ordering a test,” authors Danny McCormick, David Bor, Stephanie Woolhandler and David Himelstein conclude. “This ‘convenience’ effect of computerized access might cancel out the potential decreases in ordering due to reductions in duplicate or unnecessary testing.”

It just goes to show you that the importance of any one tool is probably a bit overstated—it’s all about the context of care. (This isn’t the first story we’ve had about EMRs being used in a way we wouldn’t necessarily like—take also the story about hospitals using EMRs to microtarget advertising for various procedures and/or tests recently.) In both cases, we can see that a potentially promising tool is just that—a tool, which is used in a context which can make it helpful or unhelpful. If you don’t make the incentives and culture right, any given tool will tend to get used according to the priorities of the system—which, generally speaking, is in favor of intensive use. It’s in this spirit that Austin Frakt’s rumination that an “Amazon checkout” feature showing how much a test would cost should be taken—that is, that it’d be helpful in the context of a system that cares about cost and efficiency.

Furthermore, we should keep in mind that eliminating unnecessary imagery has important second-order consequences beyond just the saving of time, money and manpower. An interesting article worth reading in the journal Environmental Health Perspectives notes that unnecessary imagery implies the exposure of radiation to patients, which means that we’re increasing the cancer risk for the patients in question. (One study cited in the article estimated 29,000 cancers as a result of scans in 2007; that drew some fire, naturally, but gives you an idea of the potential implications. Also note the reality that some proportion of scans are poorly executed and end up delivering more than the intended dosage of radiation.). For scanning, then, more might mean less.

Oregon Wins, For Once

The Oregon/Washington rivalry extends even to the world of public policy, apparently. Where we have Washington’s somewhat punitive approach towards dealing with Medicaid costs (to say nothing of the cost shifting involved…), Oregon seems to be trying something completely different:

Oregon Gov. John Kitzhaber signed a bill Friday implementing his plan to redesign health care in his state, which the former emergency room doctor said would reduce costs so significantly it could help fix the federal budget.

The new law will allow novel ways of paying for and delivering health care, such as assigning the costliest Medicaid patients caseworkers to manage all aspects of their care, from medical to mental, with the goal of eliminating redundant tests and procedures and reducing expensive hospital stays.

The idea here—extended in Atul Gawande’s New Yorker article “The Hot Spotters”—is that you assign workers to help certain patients to help navigate the obstacles of the health system. It’s something that should absolutely work in theory, which is why it’s nice to put it into practice.

There’s a portion where proponents say the program could—if applied nationwide—save about $1.5 trillion over 10 years, which is quite a bit of money. If it ever materialized I wonder whether we’d be better off just plowing the money right back into Medicaid and raising reimbursement rates (so as to increase access), but that’s a thought for another time. It’s good to see a try. Well done Oregon.

Tail Risks

From The Economist, an argument that things are getting better from at least one perspective—the number of desperately poor has been halved since 1990; the effect is predominantly due to China’s huge growth. This welcome fact made me think of the argument circulating recently that the human propensity to violence and war had dramatically decreased in recent times and (apparently) can be expected to decrease further time goes on.

I do wonder, in both cases, whether we’re just moving around the risks to a certain extent. In the violence and war category, it’s clear that while war and great power war has decreased, that any potential outbreak of war might have catastrophic consequences—i.e. nuclear weapons exploding, to say nothing of chemical or biological warfare. While there may be some element of mutually assured destruction involved in preventing war, it does mean that whenever the statistically improbable event of war happens it could be awful.

The lessening of poverty is similarly welcome but the ecological consequences of many more people commanding more resources are awfully worrisome—besides global warming you also have to think about risks like rapidly depleting freshwater or oil (both of which can be finessed to a certain degree but involve permanent unpleasant costs). It’s also very possible that the interaction of such pressures might combine into something worse and unforeseen. So I’m worried we’re neglecting the tail risks.

The Irony

Catherine Rampell has a very good article in the New York Times about the way states have disinvested in higher education, particularly at disadvantaged schools teaching majors and professions of high importance—particularly nurses. Some anecdata:

At one community college in North Carolina — a state with a severe nursing shortage — nursing program applicants so outnumber available slots that there is a waiting list just to get on the waiting list.

That’s a troubling data point since, as we know, there’s a nursing shortage and a primary care physician shortage too (to the tune of about 20,000 physicians at some point in the near future).

It’s ironic, also: one of the important pressures on state budgets is health care costs, particularly Medicaid. In essence, in a very direct way, our health care cost problem now will strangle our care later.

All the Cash

Optimism about the economy has deservedly bubbled up and seems set to percolate even higher once the latest economic statistics are processed and disseminated. Of course there’s more than a bit of a self-fulfilling prophecy about the economy—optimism generates economic activity generates more optimism and so on (or what Keynes memorably called “animal spirits.”)

I do think the possibility of animal spirits asserting themselves with corporations is underexplored. There have been a ton of media stories arguing that there are around $2 trillion in cash reserves sitting around collecting dust in corporate coffers (or earning low interest rates in Treasuries, which these days must be like getting dust for interest). I just saw a study recently arguing that actually there are $508 billion in spare corporate reserves; whatever the figure, there are large sums waiting to be used once they feel sufficiently confident to do so.

At any rate, we can be reasonably sure there’s a large amount not doing much. Here’s corporate profits after tax since 2007:

Rising higher, naturally. They’re not returning to investors via dividends:

So where’s it gone? Certainly not into fixed private investment:

If that returns well, we could be in very good shape.

eBay for Health Care? NBD.

From John Goodman, a piece celebrating the advent of a website called MediBid, which apparently acts as—to use the elevator pitch shorthand—a sort of eBay for medical services. Patients put out a request for a service, along with the medical records, questionnaires, etc.—and they have to pay in cash. It’s Goodman’s belief that the implications are “staggering” but I find it hard to agree with him.

Here’s what Goodman describes as key:

…the willingness to travel. If you ask a hospital in your neighborhood to give you a package price on a standard surgical procedure, you will probably be turned down. After the government suppression of normal market forces for the better part of a century, hospitals are rarely interested in competing on price for patients they are likely to get as customers anyway.

A traveling patient is a different matter. This is a customer the hospital is not going to get if it doesn’t compete. That’s why a growing number of U.S. hospitals are willing to give transparent, package prices to out-of-towners; and these prices often are close to the marginal cost of the care they deliver. Interestingly, a lot of the out-of-towners getting the cut-rate prices are foreigners.

Goodman cites a lot of successful examples of low-price care being delivering via the MediBid system. Of course there’s the very relevant issue of how much selection bias there is in this particular system: the population of people who know about MediBid, who are willing to trust in such a newfangled system, who have the spare cash and inclination to travel for whatever piece of care it is, is an exceedingly idiosyncratic one—and one that’s hard to draw many conclusions from, let alone the possibility of “staggering” ones.

This particular system is biased towards episodes of care rather than a longterm relationship; it raises questions of follow-up afterwards, for example. Given what we know of demography, health trends, and what the health care system is currently good (and bad) at, we would expect any particular solution to the health care system to be biased towards solving long-term care rather than episodes of care.

Any “staggering” implications of this particular system are predicated on people having large reserves of cash to use in for their health care. Of course this is a rather optimistic reading of our economic system, which hasn’t been producing wage growth or savings at anything resembling a satisfactory rate (without the apparently-staggering implications of health care becoming a cash system):

I wouldn't necessarily say MediBid is a bad thing, only that it's more likely to remain a niche service than anything else.