Best of xkcd: Correlation
(Terms of use.)
Regular readers will recall my many posts on correlation and causation.
Health Care Administrative Costs, Continued
I’ve received considerable feedback on my prior post on the size of health care administrative costs, some by e-mail and also in comments to the post itself. Those of you who read it earlier may want to go back and take a another look. The tone has changed a bit. But more importantly there are links to some other papers of relevance. If all you’re interested in is the literature, then the following list is what I’ve learned of to date. I’ll update it if folks send more. So check back here (this post).
Relevant Literature
- Himmelstein, Campbell, and Woolhandler, New England Journal of Medicine, 2003.
- Danzon, Health Affairs, 1992.
- Aaron, New England Journal of Medicine, 2003.
- Casalino, et al., Health Affairs, 2009.
- Sakowski, et al., Health Affairs, 2009.
How High Are Providers’ Admin. Costs?
A post by M.S. on The Economist’s website makes some of the same points I’ve made about the fact that we shouldn’t expect to save a lot of money by squeezing health insurers or increasing competition in that market. But M.S. devotes considerable attention to the profit and administrative costs associated with providers, which is not something I’ve explicitly addressed.
If M.S. is reading the literature correctly (and if that literature is itself correct), then provider profit and administrative costs are higher than those of the insurance industry. M.S. quotes the Physicians for a National Health Program (PNHP),
The estimate that total administrative costs consume 31% of U.S. health spending is from research by Drs. David Himmelstein and Steffie Woolhandler and published in the New England Journal of Medicine in 2003. The figure would undoubtedly be higher today. Insurance overhead accounts for a minority of the overhead. Much more occurs in physicians’ offices, hospitals, and nursing homes—driven by our current fragmented payment system.
Sensibly, M.S. is looking for confirmation of PNHP’s assessment of administrative costs in the health care system and its allocation to insurers and providers. He hasn’t been able to find anything, and he isn’t sure he buys the 31% figure or the notion that most of it can be attributed to providers.
And there are a lot of grounds on which you might argue that the Himmelstein-Woolhandler figure of 31% administrative costs is exaggerated. You might critique their decision to allocate one-third of doctors’ office rent as an administrative cost. Are American doctors’ offices commensurately larger than Canadian ones? Are physicians’ self-reports of time spent on administrative tasks accurate? But the curious thing is, I’ve hunted around for critiques of the Himmelstein-Woolhandler numbers, and I can’t seem to find any. I also can’t seem to find any alternative studies that also tried to measure all of the administration costs incurred by providers, to get a sense of how much the fractured private insurance system really costs.
Note there are two issues here. One is the size of U.S. providers’ administrative costs. The other is that size relative to that of a single payer or national health care system (e.g. Canada’s). At the moment I’m more interested in the former than the latter. We’re not going to a Canada-style system anytime soon. But perhaps other more politically feasible reforms could reduce provider overhead. How big is that overhead and what are its components?
In fact M.S. contacted me before publishing his/her post looking for some other evidence, papers, or reports on this topic. I’m not aware of any. But maybe you are. If so, please let me know.
Later: A reader suggests that the 1992 Health Affairs paper by Danzon serves as a response to Himmelstein and Woolhandler. Clearly it isn’t a direct response to their 2003 paper. But it does cite earlier work by Himmelstein and Woolhandler that may be similar or use similar methodology and assumptions (I’m speculating). I gave the Danzon paper a quick skim (so take the following is my initial impression and not necessarily my final opinion). It seems to me that it suggests that U.S. provider overhead is greater than insurer overhead. So, while it may differ from Himmelstein and Woolhandler on some points, it might also corroborate what M.S. was seeking to confirm.
And later still: Another reader suggests taking a look at the response article by Henry Aaron in the same NEJM issue as the Himmelstein and Woolhandler paper cited above.
Improving Alexa Rank Is Embarrassingly Easy
I’m interested in many more things about the internet than I think are actually important. Two examples: (1) I like to learn about how social media services are used, though I am a very light user of them. (My Twitter and Facebook presence are dominated by my automatic blog feeds, so I’m “there” without ever really being “there.”) (2) I think Google AdWords is an ingenious idea, so I permit them on my site so I can see how they work even though they don’t actually generate much revenue. (What it does generate above costs goes to charity.)
And then there’s the world of domain ranking, of which Google’s PageRank is perhaps the best known and widely used since it informs every Google search. The Alexa rank was unknown to me until I noticed that some lists of blogs and sites are based on it. (There are many other types of ranks: Compete, mozRank, Technorati, and no doubt others).
With each type of rank there are websites and blogs that offer advice on how to improve your site’s score. In general I’m skeptical such techniques work, or was. Then, for fun, I tried some very simple approaches suggested on Dosh Dosh to boost this site’s Alexa rank, and they worked. Here’s what I did:
- On all four computers I use, I installed the SearchStatus Firefox plug-in, an Alexa toolbar for Firefox (*).
- I asked my family and a few friends to do the same, though I am only aware that two other individuals did so.
- I placed an Alexa rank meter widget on my site (scroll down and see it at the bottom of the middle column).
- I wrote this post.
That’s it. And in four month’s time this site’s Alexa rank improved by an order of magnitude. (Because it includes the same link as the Alexa rank meter widget, this post may have helped too, but I published it after the rank improvement just described had already occurred. For the same reason, item 4 can’t explain the rank improvement to date either.)
I roughly know why these techniques work. Alexa uses data sent by their toolbars and from users who click on the meter widget to estimate the proportion of all toolbar users and meter widget clickers that go to one’s site. So, by increasing toolbar users who visit this site (mostly just me and a few family members and friends) and thanks to the (likely very few) individuals clicking on the meter on my site, I am influencing Alexa’s statistics.
The fourth item in the list above also improves Alexa rank to the extent it draws other Alexa toolbar users to one’s site. The theory is that many Alexa toolbar users are hunting for ways to improve their own site’s statistics so they will visit sites with a post that screams: “How to Improve Your Alexa Rank” or “Alexa Rank Boosting.” Now, that’s not why I wrote this post, but I know that there may be Alexa-rank improving consequences, which will be fun to watch. (Like I said, sometimes I find even the useless somewhat interesting.)
What I find most interesting and surprising about all this is that the basis for Alexa ranking is so stupid. Clearly until today (with item 4) I have not changed traffic patterns to my site one bit via these techniques. Yet my site’s ranking dramatically improved. This is gaming, pure and simple, and shows what a joke the Alexa rank is. I’m not sure why anybody believes it is of value. It is a bit like fiat currency. It is of value because people think it is. That it is so easily manipulated is, frankly, embarrassing. Knowing this I mentally devalue Alexa ranks. I think they’re worthless except for the value others place on them.
Still, it seems to matter for some purposes so there is no harm in obtaining a better rank. And, clearly, it is not so hard to do just that.
(*) I’ve read that some Alexa toolbars send more than just the standard URL visitation and browser data to Alexa. Some blogs say that some toolbars send Alexa the data one types into online forms. That’s a bit frightening. But it seems the Firefox SearchStatus toolbar doesn’t do that.
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