Reflex: September 28, 2011

High cost of cancer treatment doesn’t reflect benefits, say specialists, according to Nigel Hawkins. “Care of patients with cancer has become ‘a culture of excess’ in rich countries, says a team of specialists assembled by the Lancet.’We overdiagnose, overtreat, and overpromise. We are heading towards a crisis in medical-care delivery,’ they say.” Aaron’s comment: They go on to say that expensive new drugs are leading to high costs for only modest benefits. Worth considering, given our issues with cost and quality.

Paul Ryan wants to eliminate the employer health care tax exemption, reports Sahil Kapur. The Patients’ Choice Act was introduced in 2009 by Rep. Paul Ryan and others before HR 3200 was passed by any committee; it would set up insurance exchanges in which persons would purchase private insurance using tax credits. Don’s comment: I wrote a great deal about the Patients’ Choice Act back in 2009 because it was co-sponsored by Sen. Richard Burr of my home state of N.C. The biggest problem with the bill is that tax credits (post has many links and compares PCA with the ACA) could be spent in and out of exchanges, but pre-existing conditions are only banned inside them setting up potential adverse selection problems. The PCA is notable because it proposed unelected boardsto influence health care spending decisions that are similar in many ways to IPAB, long before they were proposed in the ACA. (H/t Wonkbook)

Beware the moral hazard of safety nets, says Casey Mulligan (Economix, NYT). “Safety-net programs have what economists call ‘moral hazard’ as an unfortunate byproduct: recognizing that the government is standing by to help, some people do too little to take care of themselves. […] [T]here can be a good economic case for mandates. While economists are often not inclined to interfere when a person knowingly risks his life for thrills or any other reason, the fact is that our government is in the safety net business, so individuals may take risks without recognizing the costs they create for rescuers.” Austin’s comment: In health care, evidence of ex ante moral hazard (due to behavior before the insured event) is scarce. According to John Nyman’s theory of demand for health insurance, ex post moral hazard (an inefficient level of care due to being insured) is also smaller than suggested by prior theories. All in all, moral hazard may not be as relevant to health care as Mulligan’s post suggests, particularly for the income-constrained populations that are caught by safety net programs.  


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