• Two things we learned from the Hobby Lobby decision

    Thing 1: The majority of the Supreme Court doesn’t get science.

    Thing 2: The majority of the Supreme Court doesn’t get economics.

    On the merits, I’m not in agreement with the decision, but I’m actually more favorable to it than this bit of snark would suggest. There certainly must be some limits to what the government can compel “closely held” corporations (and people) to do. I’m just not convinced that this is where the line is, particularly given the evidence.

    But, back to my main point: It’s deeply troubling when any branch of government (or anyone at all) makes policy decisions that turn on arguments in contradiction with evidence. That doesn’t make such decisions wrong, but it makes them improperly justified. Find a less obviously incorrect argument or rethink your position. This, perhaps, is too much to ask in America or of people in general. And if so (either one), it’s sad. Deeply sad.

    UPDATE: Be sure to read Nicholas Bagley’s follow up and Jonathan Adler’s.


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  • Opioid dependence

    From “Improving Care for Hospitalized, Opioid-Dependent Patients: A Promising Start,” by Margot Kushel (JAMA Internal Medicine):

    There are 2 evidence-based treatments for opioid addiction: methadone and buprenorphine. Both of these opioid agonists have been reported to markedly reduce morbidity and mortality. The requirement that methadone be dispensed in hospitals or certified methadone clinics has limited its availability, created a stigma for patients, and separated the treatment of opioid addiction from general medical care. The Drug Addiction Treatment Act of 2000 allowed physicians, on completion of a short training course, to prescribe buprenorphine for the treatment of opioid use disorders. By creating an avenue for office-based opioid treatment, the Drug Addiction Treatment Act allowed for the expansion of opioid agonist therapy (OAT) and the integration of opioid addiction treatment into primary care. For patients, this has the benefit of increasing access and reducing the stigma associated with OAT.

    Buprenorphine enables primary care physicians to manage opioid addiction as a chronic disease. In a consensus statement, the American Society of Addiction Medicine stated that the “optimum duration of maintenance is unclear, but may involve lifelong use…similar to other chronic diseases such as diabetes or hypertension.” The full potential of engaging individuals who struggle with opioid abuse disorders into treatment has not been realized. There are multiple structural barriers to engaging those who want it into treatment, including a reluctance of physicians to become buprenorphine prescribers, lack of counseling resources, financial barriers, and regulations for physicians, including additional training requirements and limits on the numbers of patients for whom physicians can prescribe buprenorphine. In addition, there are many wasted opportunities to engage those who need it in OAT. We have learned from other health behaviors, such as tobacco use and risky drinking, that health care professionals’ provision of routine screening and referral to treatment can reduce use and improve outcomes. Not using every health care encounter to intervene with opioid addiction, considering its morbidity and the existence of effective treatment, represents a lost opportunity.

    The issues I’ve emphasized in bold above are among those that arose at the recent meeting of the Comparative Effectiveness Public Advisory Council, which focused on opioid dependence. I’ll write more about that meeting after the final report is published.

    Kushel goes on to summarize results from a recent study on the effects of buprenorphine administration during hospitalization with linkage to outpatient treatment. Also recently published in JAMA Internal Medicine is a research letter on pain and opioid use by U.S. soldiers after deployment and a related commentary.


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  • On an administrative fix to the Hobby Lobby decision

    Since I spent a bit of time talking to colleagues this morning about what the administration might do in the wake of the Hobby Lobby ruling, I figured I’d share what I’ve learned. But, fair warning, the following is not based on extensive reading. There’s a lot I don’t know, as acknowledged below.

    Premise: You know what the Hobby Lobby ruling is. If not, go read this.

    Next: You know that the administration previously provided a way for non-profit, religious organizations to not cover contraception but for the employees of such organizations to still be covered for them. How? Via Tim Jost:

    The Departments of HHS, Labor, and Treasury attempted from the beginning to accommodate the objections of religious organizations. In 2011, the agencies published interim final rules exempting from the requirement religious employers, such as churches and other houses of worship. These rules were made final in 2012.

    The 2012 rules, however, did not exclude religious organizations other than houses of worship — such as hospitals, universities, and charities — from the contraceptive coverage requirement. On June 28, 2013, the Departments issued final regulations exempting certain religious organizations and employers from having to provide themselves contraceptive services to their employees. This final rule provided an accommodation under which contraceptives would instead be made available independently through insurers or third-party administrators to the employees of these organizations.

    As expressed in Justice Alito’s opinion, the administration could extend the same accommodation to the types of organizations (closely held for-profit corporations) germane to the Hobby Lobby case. How does this accommodation work, exactly? As I understand it, it’s weird.

    For fully-insured organizations, the government makes the insurer just pay for contraception even though its premium is (presumably) based on no contraceptive coverage. The assumption seems to be that contraception coverage pays for itself in avoided pregnancy cost. So the collected premium is actually higher than it need be. So, no direct government cost here. But, since premiums are potentially higher than they should otherwise be, there would be a loss of government tax revenue (because employer-sponsored premiums are tax exempt). Plus, what is the insurer doing with the extra premium revenue it (maybe) doesn’t need?

    Self-insured organizations have to find a third-party insurer to cover contraception. That insurer would pay the third-party administrator for contraceptive costs out of a government-imposed fee they would otherwise pay exchanges. So, there’s a direct government cost. Maybe. If you go back to the prior paragraph, however, there really shouldn’t be any (net positive) cost of contraception. So is the government (via forgone fee to exchanges) paying something here or not? I don’t know.

    How this will actually work out depends on how exactly the costs of contraception are calculated. Are they net the cost of avoided pregnancies or not? Is this in the regs? Where? And what is that net cost anyway? One round-up of the evidence says that it’s a bit cloudy. Maybe contraceptive coverage (as opposed to contraception) doesn’t pay for itself in avoided pregnancies.

    It’s possible I don’t have things exactly right, so point me to a correction if you see official language that contradicts something I wrote. (I’ll include updates below.) Is there more to this story? New evidence on whether contraceptive coverage pays for itself? Any researcher have data that would shed light on this? Let me know via email or Twitter.


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  • One journal’s web 2.0 strategy

    Edward Alan Miller in an editorial in the forthcoming issue of the Journal of Health Politics, Policy and Law:

    Our long-range goal is to aggregate a variety of Web 2.0 technologies—blogs, microblogs, social networking sites, file-sharing sites, mobile applications—into an integrated platform that facilitates an ongoing interactive dialogue among the journal’s editors, board members, authors, and readership.

    The potential role of social media in heightening journal impact is reflected in several recent studies. One example is a report that social media may represent a largely untapped postpublication review resource for assessing paper impact since articles that appear in Wikipedia have significantly higher citation counts than those that do not (Evans and Krauthammer 2011). Another example is a report that tweets within the first three days of article publication can predict citations, which normally take years to accumulate, with social media activity either increasing citations or reflecting the underlying qualities of the articles that also predict citations (Eysenbach 2011). In short, there appears to be a mutual interaction between social media and scholarly impact. On the one hand, social media ‘‘buzz’’ can lead to citations—that is, researchers being influenced by growing interest on social media. On the other hand, use of social media by researchers can lead to ‘‘buzz’’—that is, researchers creating interest, say, through Twitter, Facebook, Linked In, and other websites.

    Our near-term goals are manifold. First, we would like to increase awareness of the journal and its content—that is, engage in more effective outreach. Second, we would like to engage readers, editors, political scientists, health policy researchers, and others in an ongoing conversation, either continuing discussions begun in the journal, say, in the journal’s Point/Counterpoint section, launching new discussions stimulated by what was published, or enabling real-time immersion into current issues and debates in health policy and politics. Third, we would like to broaden the scope of social networking opportunities available to members of the JHPPL community.

    Though some of the details of this strategy aren’t clear to me, the general thrust appears sensible. The way I’d organize thinking in this area is as follows:

    1. The quality and importance of the journal articles themselves comes first. Without high-quality, scholarly work, one has little to blog and tweet about. Put another way, if you want people to get excited about your content—excited enough to blog and tweet about it—you’d better bring the good content first! Yet another way to put it is, don’t fall into the clickbait trap. That won’t cut it for a research publication, for which credibility and reputation for something other than “sensational” is paramount.
    2. It would seem foolish not to leverage the existing community favorably predisposed to the journal and active in social media. (Bill wrote about this here.) Clearly this requires purposeful outreach. That could be more than just emailing existing distribution lists to say, “Hey, we have a Twitter account!” It might include, for example, sharing embargoed copies of key, forthcoming papers with social media-active scholars so that they can be prepared to help establish the sought-after “buzz.”
    3. To the extent possible, every product of the journal should be maximized for social media dissemination. This includes, for example, ungating key papers (perhaps for a limited time) and including share buttons wherever possible.
    4. Do not overlook re-disseminating older work that becomes relevant as the policy debate shifts. A big mistake that most organizations make is to only (or mostly) promote what is new, not necessarily what is relevant. Just because it came out last year doesn’t make it obsolete, particularly when it’s still one of the latest and greatest papers on whatever policy issue is being discussed right now!
    5. Finally, if possible, be a source of good content that is published elsewhere. This adds credibility and is a way to demonstrate that one is about the ideas not just the brand. (But, yeah, it builds one’s own brand too.) Heck, if JHPPL or some other journal had a blog, why not blog on great work that appears elsewhere? Become a go-to curator, not just a journal article publisher. The wider audience you develop doing so will still be there when you blog on your own journal’s work. That’s good!


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  • Bigger health companies: Good for Medicare, maybe not for others

    The following appeared on The Upshot while I was on vacation (copyright 2014, The New York Times Company).

    Although Obamacare’s health insurance expansion has directly provided coverage to only about 4 percent of Americans, changes embedded in the Affordable Care Act could affect many more people, and not always in good ways.

    One such change is a provision that allows organizations that join forces to manage care for a large population to receive bonuses from Medicare for controlling costs and hitting quality targets (or face penalties if they do not). Medicare’s Accountable Care Organization model, as it’s called, favors larger health provider organizations that can manage the costs and quality of all types of care Medicare pays for, from primary care to high-intensity hospitalization and everything in between.

    If that model works, it’ll be welcome news for Medicare and its beneficiaries. But health economists, myself included, have long worried about what larger provider organizations mean for private health insurance plans, the ones that serve most Americans under 65, through employer-based coverage or policies purchased on the Obamacare exchanges.

    Larger organizations have greater market power to demand higher prices from those plans for doctor visits and hospital stays. And higher prices paid by plans translate into higher premiums for consumers. (This doesn’t apply to Medicare because its prices are set by the government, and no provider organization has so much market clout that it can force Medicare to raise prices.)

    The competitive advantages of greater size and scope are not lost on health care organizations: Bigger is better for the bottom line. In the past, hospitals and physician groups have merged with one another and with insurers to form larger organizations that command greater market clout and drive up private prices and premiums. A wave of hospital mergers in the 1990s was followed by accelerated costs of care in the 2000s. Researchers have generally found that hospital consolidation has increased price without commensurate increases in quality.

    hosp bulk

    A more recent trend has been the direct employment of physicians by hospitals. When hospitals hire physicians or assimilate physician practice groups, they seek to capture more physician referrals and gain greater leverage over insurers in negotiating prices for access to both hospitals and doctors.

    Recent work by scholars from the University of Pennsylvania highlights the trend in hospital employment of physicians. As the chart shows, the number of doctors employed by hospitals increased to over 120,000 from 80,000 between 2003 and 2011. About 13 percent of all doctors are now employed directly by hospitals. Other work by Stanford researchers shows that the integration of hospitals with physicians in this way has increased the prices paid to hospitals by private plans. Though these studies predate the law encouraging larger organizations, it’s a reasonable bet that the consolidation trend has continued.

    So while some provisions of the health reform law — like penalties on hospitals that have a high proportion of Medicare patients who must be readmitted within 30 days of a hospital stay — may already be improving care and health system efficiency, others, like this one, bear watching. What is good for Medicare and its patients may not always be good for the rest of Americans.


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  • I’m almost back (notes from my vacation)

    kneesOur four days of hiking in the White Mountains was spectacular, though it kicked my butt. Actually, it was my knees that felt kicked. For the first time in my life, they revolted, refusing to take the downhills pain free. It started on day one, and by the end of the third day, I could only manage about one mile per hour on rocky downhills. Each step felt like a hammer blow to the knee.

    Still, I made it through with the help of some route changes, bandages, poles, technique adjustment, grimacing, and cursing. It wasn’t the challenge I anticipated, but I was tested. Nevertheless, I ended the hike happy and pain free, having missed a few summits, but none on the days with decent views.2014-06-22 12.42.04

    The smartest move of the week was my wife’s brilliant idea to bring our bikes to Montreal, which we visited after hiking. We rode many miles daily (no knee pain), seeing far more of the city than we would have otherwise. The network of dedicated (and often median-separated) bike lanes is vast.

    cauliflowerAn additional benefit of lots of biking is we burned more calories and, so, could eat a lot more. Everyone told us Montreal has a lot of great food. They were right. Our best meals were at Laurie Raphael (h/t Marie Ventrone) and Robin des Bois (which my wife found in a guide book), though the Chinese tea house in Old Montreal was also delightful. St. Viateur Bagels (h/t Tyler Cowen) was also good. The bagels were slightly more like dense, soft pretzels than are New York style bagels.

    Old Montreal and other parts close to center city were fun enough, but our favorite destinations were further out: the botanical gardens, St. Helen’s Island, Parc Jean-Drapeau on Notre Dame Island, Mt. Royal Park, and Jean-Talon Market.

    Rufus Wainwright was the highlight of the acts we saw at the Jazz Festival.

    I’ve got some catching up to do so blogging, tweeting, and email will be slow for another day or so.


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  • Stairway to heaven

    More than a rock ballad.



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  • Hard disk, circa 1956

    Via David Grann, the specs are 5 megabytes and over one ton.

    hard disk


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  • Instead of blogging

    Instead of blogging, and other, regular work, I’m spending today at the Comparative Effectiveness Public Advisory Council (CEPAC) meeting in Burlington, VT. Our topic: treatment for opioid dependence. You can download meeting materials here and read some background here.

    Then, this weekend through next I’ll be largely off-internet, hiking in the White Mountains of New Hampshire and being a tourist in Montreal. Apart from some a pre-scheduled thing or two—one of which will be at The Upshot—you won’t hear from me, and I’ll be largely unreachable.

    (No, this isn’t my annual week off the internet. That’s in July. This is an extra week off the internet, something I still recommend everyone do, particularly those of you who are afraid to do so!)


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  • Literature update: Reference pricing and the effect of cuts to Medicare hospital prices

    Here are some notes from a couple of recent papers in areas I’ve blogged about in the past. They’re worth knowing about.

    1) Reference Pricing: “Paying on the Margin for Medical Care: Evidence from Breast Cancer Treatments,” by Liran Einav, Amy Finkelstein, and Heidi Williams (NBER)

    Medical expenditures in the US are high and increasing. [...] A natural economic solution which has not received much attention is a “top-up” design in which health insurance contracts would cover the cost of a baseline treatment, and patients could choose to pay the incremental cost of more expensive treatments out of pocket.

    This is also called “reference pricing.”

    [T]o our knowledge, [top-up design] has not received much attention in discussions of insurance coverage for different treatments, with the exception of a recent paper by Baicker, Shephard and Skinner (2012) who use a calibrated simulation model to explore this idea.

    See also Robinson and MacPherson (2012)Robinson and Brown (2013), and Pearson and Bach, Health Affairs, 2010.

    [E]vidence from randomized clinical trials has suggested no average difference in survival between mastectomy relative to lumpectomy with radiation (Fisher et al., 1985), mastectomy tends to be less expensive (Polsky et al., 2003).

    The approximately $10,000 difference in price between lumpectomy and mastectomy is primarily the cost of post-lumpectomy radiation.

    Using data on over 300,000 breast cancer patients in California diagnosed between 1997 and 2009, combined with data on the location of radiation treatment facilities, the authors estimate the welfare (consumer surplus) loss* of full coverage for lumpectomy and no coverage for lumpectomy relative to using mastectomy as a reference price for lumpectomy. To estimate the demand curve for lumpectomy, the authors convert travel time to a radiation treatment facility to price, monetizing by average hourly wage from the Bureau of Labor Statistics.

    A standard course of post-lumpectomy radiation therapy requires 25 round-trips to a radiation facility, spread over 5 weeks. Our key economic assumptions are that travel time can be monetized and that preferences for reduction in travel time are analogous to preferences for any other equivalent price difference. These assumptions allow us to use the variation in distance to the radiation facility as if it were variation in the relative price of lumpectomy, thus identifying the demand curve. [...] [We also assume] that there are not omitted patient characteristics correlated with both distance and demand for lumpectomy.


    We estimate, for example, that the efficient “top-up” policy – in which patients pay $10,000 on the margin for a lumpectomy – increases the lumpectomy rate by 15-25 percentage points relative to the UK-style “no top-up” regime, and decreases the lumpectomy rate by 35-40 percentage points relative to the US-style “full coverage” regime. Our estimates suggest total welfare gains from the “top-up” policy of between $700 and $1,800 per patient relative to a “no top-up” UK-style policy and between $700 and $2,500 per patient relative to a “full coverage” US-style policy.

    Those are the “ex-post” results, after onset of breast cancer. Considering ex-ante welfare, before onset of breast cancer, things change:

    The results indicate how the (total) efficiency ranking of the top-up policy relative to the US-style full coverage policy depends on risk aversion. For the lowest value of risk aversion we consider, social welfare is higher under the top-up policy, but for higher values of risk aversion it is higher under the US-style full coverage policy. The full-coverage policy always delivers higher total welfare than the UK-style “no top up” policy for our calibrated values. This illustrative analysis suggests that focusing solely on ex-post efficiency analysis could miss an important part of the picture, and that the ex-ante risk exposure generated by top-up policies could be much more costly than the allocative efficiencies these policies may provide.

    This makes slightly more formal the general knock on reference pricing—that it exposes consumers to greater risk. The paper’s charts are excellent. Here’s just one for the ex post consumer surplus analysis.


    “L” in the axis labels is for “lumpectomy.” Area DEC is the consumer surplus loss of full lumpectomy coverage, relative to reference pricing. Area AEB is the consumer surplus loss of no lumpectomy coverage, relative to reference pricing.

    But, see those seven dots in the lower right? Those are the data points from which the entire demand curve is estimated. As the authors are fully up-front about, this is an extreme, out-of-sample extrapolation: variation in the travel-time-cost of radiation therapy doesn’t come anywhere near the full range of price over which the demand curve extends. In light of this, what I like about the paper is that it makes explicit some welfare issues pertaining to reference pricing. In terms of leveraging data to actually estimate the size of consumer surplus gain/loss, there are significant limitations.

    2) Medicare Hospital Price Cuts: “Cutting Medicare Hospital Prices Leads to a Spillover Reduction in Hospital Discharges for the Nonelderly,” by Chapin White (Health Services Research)

    A demand inducement spillover occurs when one payer reduces the prices it pays and providers respond by increasing the volume of services provided to other payers’ patients. [...] A capacity spillover occurs when payments for one group of patients become more or less generous, and, as a result, providers adjust their capacity and change the volume of services provided to all patients. [...] Providers appear to adopt a general treatment style that they apply to their patient populations, rather than tailoring treatments based on each patient’s coverage [a treatment pattern spillover].

    Using data for 129 markets in ten states over years 1995–2009, White studied the effect of changes in Medicare hospital prices on

    the number of hospital discharges and days provided to the nonelderly by hospitals located in each market, and the mean nonelderly length of stay. We also measure the share of discharges for the elderly and the share of days provided to the elderly—these shares capture any possible shifts in hospital output away from the elderly.


    [R]egression results show that decreases in Medicare prices are associated with decreases in inpatient hospital utilization among the nonelderly. A 10-percent Medicare price cut is associated with around a 5-percent decrease in discharges among the nonelderly and an even larger decrease in hospital bed-days. Changes in the Medicare price are not associated in any statistically robust way with changes in the nonelderly length of stay, nonelderly case mix, or with changes in the share of utilization provided to the elderly. These findings suggest that hospitals have only limited ability or willingness to shift their inpatient services away from the elderly in response to Medicare price cuts.

    To give a sense of the magnitudes involved, we extrapolated our results to simulate the nationwide utilization effects of a 10-percent decrease in the Medicare price in 2012. That price reduction roughly matches the accumulated 10-year effect of the ACA on Medicare hospital prices. The reduction in the Medicare price leads to more than 1 million fewer discharges, and more than 9 million fewer hospital days, with the utilization reductions roughly evenly split between the elderly and nonelderly.

    Unless hospital prices for the nonelderly go up considerably in response to Medicare cuts (and prior work shows they don’t) or utilization is shifted to other settings, this work suggests that Medicare price reductions might reduce health care spending beyond the Medicare program.

    * If “consumer surplus” is a foreign concept, I recommend this short, accessible book.


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