fatvegan

There are rumours that the government is going to cut the private health insurance rebate. If that happened, it might be my favourite real policy the government has done. That's is not just a regressive policy but it's totally inefficient. Not only is it getting those without private health insurance (the poor) to pay for the health care of those with private health insurance (the rich) but I'm not sure it even saved any money.

Economists from across the political spectrum understand that one of the major factors driving health care costs is our third-party payment system that insulates consumers from the cost of their health care decisions.

More Than A Theory: Medical Savings Accounts at Work (CATO)

I'm not sure what CATO considers the full range of the "political spectrum" to be, but this statement is pretty much just wrong. There are plenty of economists who don't believe this, and if I count as an economist then I am one of them.

You could conceivably argue that the reason we have "high" health expenditures is because our system "insulates consumers from the cost of their health care decisions". But I can't understand how a system that has scarcely changed in 30 years accounts for the rapid increase in health care expenditures over that same period. The US system has probably became less socialist in that time, and yet health expenditures are increasing a lot. It seems to me that it's less a problem of overconsumption and more a "problem" with the income elasticity of demand for health care. As people get richer they look after themselves better and spend more on health.

But it's still a crisis the economists will say. Health expenditures can't grow faster than income forever. It's true, but isn't necessarily a problem for a long time yet. If our income increases by 5% each year, it's really no problem if our health expenditures increase by 10% each year. Obviously that can't happen for ever, but we don't have to worry about it just now.

Using that example, we have another 60 years before we have to be concerned. If health expenditures continue to grow by 10% and total income continues to grow by 5%, the amount of money we have left over after health care won't actually drop until 2070.

And if health expenditures grow by 15% a year (instead of 10%) then we still have 30 years before our residual income will drop. At that point we'd be spending 77% of our income on health care and we'd still have more money to spend on other stuff than we have now.

Alternatively, if income only grows at 2% (instead of 5%) and health care costs grow by 10%, we also have 30 years.

So I really feel like it's not a big deal. When they make scary claims like "health care costs are rising by 15% every year" you forget that we only spend 5% of our income on health right now.

My original point was mostly just that CATO are silly. And they are. But they're not the only ones. Every research paper or news article about health insurance or health system finance seems to include some spiel about the impending health funding crisis. Sometimes I wonder if economists and bureaucrats just love having crises to make themselves feel important.

I read a paper last week which attempted to find out what aspects of a visit to their GP were most important to them. It was a discrete choice experiment and one of the attributes related to the trustworthiness of the doctor. There were two possible levels of the attribute:

• doctor is trustworthy
• doctor is untrustworthy

The conclusion of the paper was that having a trustworthy doctor was the most important issue for people.

When governments and health organisations make decisions about how to spend money on health there are a number of things they consider. One of the main ones is how much it costs to save a life. Others often include the age or wealth of the group affected or the type of disease.

Some people (maybe social conservatives) tend to consider HIV as one of those diseases it's better to do nothing about, because the more you "solve" the problem the worse it gets. I think this is a bollocks argument, but I mostly think so because it treats humans as statistics. However, that's exactly what most health interventions do - particularly in poor countries.

Perhaps we assume no one wants to spend enough money to help everyone (which seems reasonable). We could, but we won't. So then if you're someone deciding how to spend that money, do you take into consideration the secondary impact of adding a year of life to a person with HIV. Assume you can spend $100 to add one year of life. In doing that, you might also create a 2% chance of that person infecting someone else with HIV and taking 20 years (or 30 or 40 years) from their life.

$100 = (12 months - 2% * 20 years) = 7 months of additional life

If you look at people as individuals this is obscene. Imagine the conversation in the clinic: "We would give you medicine to keep you alive sir, but we just don't trust you to use a condom." However, if you're considering people in aggregate and are willing to accept probabilistic relationships (such as the likelihood of additional infections) is it something you might do. I think the assumptions I've made about the numbers are sensible, and it's the kind of reasoning that people already use in health. The very fact that you have an epidemic from a disease with a five year life expectancy suggests that the average annual infection rate is probably higher than 2%.

You could take it further. If you treat people based on their statistical likelihood of surviving do you treat people based on their statistical likelihood of having unprotected sex? We already use statistics to decide who gets heart transplants for instance.

I have to read about a whole lot of stuff like this that makes me feel uncomfortable. I'm not sure, though, that I'm willing to abandon the idea of identifying trade-offs in health care spending. You'd think that an ad hoc system must result in a worse outcome than a system where the trade-offs are made explicit. Although since the whole issue is trying to work out what a "worse outcome" actually means, perhaps you can't even say that much.

Did you know what about 2,000 people a year die from carbon monoxide poisoning in Italy? As a comparison, about 7,400 die in car crashes. I didn't know you could actually pin specific deaths on carbon monoxide.

And 15,000 die from exposure to contaminated waste. Golly.

The overall design exclusive of follow-up prices can be described as a 2⁷ factorial. All profiles include cough with phlegm and most include one or more of the three other symptoms.

Parental altruism and the value of avoiding acute illness: are kids worth more than parents?

By convention, irrational traders and non-traders (participants who always chose the no cost option) were excluded prior to analysis.

Discrete Choice Experiment to Derive Willingness To Pay for Methyl Aminolevulinate Photodynamic Therapy Versus Simple Excision Surgery in Basal Cell Carcinoma

This is the sort of that often happens in discrete choice experiments. People whose decisions don't fit in with their assumptions are not considered worth including. In this case, people who always prefer to save money in making health care decisions (for skin cancer) are totally ignored. Those people are probably also the poorest, who may seem irrational or stubborn to comfortably off researchers, but most likely reflect the reality of not having much money. I can imagine someone conducting research on health care preferences of the uninsured and ignoring everyone whose decisions are dominated by cost.

The researchers will argue that they aren't interested in the poor and that they just want to get a general idea of what's going on. But when ignoring certain results is this arbitrary it becomes very easy to remove stuff for the wrong reasons. And when certain social groups are systematically excluded like this it's a bit troubling.

In his little editorial today on what is wrong with (can you guess) Kevin Rudd, he spends most of his time talking about how bad the public health system is. This is the same public health system that Tony Abbott, as Health Minister, presumably takes some responsibility for. He is basically saying "Politicians are incompetent. I can't run these blasted hospitals and none of the other guys can either, so please fire us."

Abbott wears his free market crush on his sleave. Rich people will do a much better job of allocating scarce health resources than the government. It would certainly be an interesting experiment to find out if we could recreate the fantabulous bargain that is the US health care system¹. But as Abbott wisely says "Hospitals are too important to experiment with."

1. US spends 15% of GDP on health - more than anyone. They rank about 40th in the world for life expectancy and infant mortality - worse than anyone with two coins to rub together. Go privatization! Go the mind-blowing economies of scale from 300 million health consumers all in the one spot!

When it comes to do without reimbursement of drugs that help against minor complaints the Swiss population even seem to exhibit a small positive WTP for such a restriction. This can be interpreted as an instance of 'warm glow', i.e. the tendency of (at least some) respondents to choose alternatives they believe to be socially acclaimed (Andreoni, 1995).

This is what is wrong with economists. They've done an experiment with people, asking them what sort of health care system they want. The economists assume the only thing that matters to the participants is what they get out of it. So they ask these people how much less they would need to pay in order to accept only getting their insurance to pay for drugs treating serious ailments. When people say they would actually be willing to pay more for a health system where only drugs treating serious ailments, they attribute this to a 'warm glow' which is just people wanting to feel good about themselves.

Isn't it possible, that people want a good health care system, and not simply the system that most benefits them personally? It's not a particularly new or original idea. But the researchers seem a little confused by it. They are later reassured when they discover that it's only healthy people who feel that way. Sick people start to become more self-interested. So homo economicus is more like the sick person unable to afford to keep themselves alive, hoping that the people living around them will pay for them.

I read a bit more of that paper and they're arguing that you shouldn't regulate health insurance because everyone wants something different, and if you restrict everyone in the same way you get a bad outcome. One of their examples of this is that people who are sick or have been recently put more value on unrestricted choice than others. This isn't particularly remarkable, because these people are probably using far more health services than the average person. So they'll probably be more upset if you restrict what they use. That definitely isn't an argument against regulation. Regulation might be a bad idea if some people are willing to pay much more for some aspect of health care than other people are. But the sickest people are willing to pay slightly more in return for much better health care, much of the cost of which is borne by other people. I'm not suggesting that society shouldn't pay for sick people, just that differences in preferences between high users of health care and low users isn't sufficient to make regulation inefficient.

Silly neoliberal economists. They're just setting out to find evidence for their existing agenda. Like all economists of course, but it's worse when the neoliberal ones do it because they have the wrong existing agenda.

I'm reading a journal article about testing for Down's Syndrome. They ask pregnant women about what aspects of the test is most important. The effectiveness of the test is one attribute and another is the risk of miscarriage. Except the risk of miscarriage is defined as "the percentage risk of miscarrying a pregnancy unaffected by Down's Syndrome" as a result of the test. This implies that carrying a baby with Down's Syndrome to full-term is of such little value to mothers that the authors believe it's more accurate to exclude them entirely from the decision. They've effectively rounded the value of those babies to zero.

I'm starting to write it properly. That is a good thing.

Babies who are born heavy and grow quickly have a 150-per-cent chance of being overweight or obese by the time they are seven years old, a survey of more than 8,000 children in Hong Kong has shown.

Big birth weight predicts later obesity, study finds

150% chance of obesity. Golly. That's pretty serious. 150% is more than 100%, and 100% is already pretty damn high.

Jo and I (and little bit of Emily) went for a giant run just then. I thought it would be about 4 or 5 kms, but I reckon it ended up being closer to 7 or 8 km. We ran non-stop for about 40 minutes. I haven't been for a job in a good while, and I'm starting to feel seedy. I was reading today about the different sorts of fats. Fat makes me feel a bit gross, and I was reading that some sorts of fats are really hard to get rid of. There is this fat called "visceral fat" which lodges itself between all the organs in your stomach. It's what gives people beer bellies.

So apparently I read this paper and I have to run 33kms a week for six months. I will lose 7% of my visceral fat and 8% (or something) of my subcutaneous fat on average across the sample (of one). I reckon they give the fats such disgusting names because they want us to be disgusted and start exercising. Jogging for an hour seems far more appealing than have a belly full of visceral fat, even if you hate exercise.

I give my new regime about three days. Luckily I forget nearly every paper I read in about that long.

As hypothesized by researchers, both lean and obese AAW possess a lower capacity for skeletal muscle FAO, but EET increases FAG similarly, in both AAW and CW.

Just as I always suspected.

Are there any arguments for selling soft drinks in school tuckshops (or have drink machines)? In theory, I would say that tuckshops are there to make life easier for the parents rather than to cater to children's demand for food. School is probably the place where children have the most control over what they eat. They are given money to buy lunch, but can spend it on whatever they want. Especially for young children, in other situations disposable income is likely to be low and often there will be an adult present. You could argue that an adult is present at the tuckshop, but if they are selling soft drinks they obviously aren't going to prevent children from buying them.

I'd be interested if anyone can think of a reason to have soft drinks at school.

This article is from the Border Mail. I don't like to point fingers at newspapers because they are all equally crap, but this is really crap. The title is crap. The photo is crap and meaningless. The whole idea that parents are basically to blame for child obesity is not well supported and in my opinion also crap.

Update: I just noticed that the government report was called "Weight of Opinion". What is it with obesity researchers and smug word plays in their titles?

It reminds me of a presentation a couple of years ago about contraceptive usage. It wasn't a wordplay, but it was called "A Rising Tide?" The final punchline of the presentation was "... and the data shows that the tide will rise." It managed to make safe sex practices sound quite frightening.

One very good argument against free public health care is that the people who benefit the most from it are going to be the rich. The rich will live much longer, and probably die more slowly, and so consume more public health resources than the poor. You have poor young workers paying tax to fund the very expensive health care of rich old people.

But I think you can probably just make the tax regime more progressive. Make it progressive enough that on average the rich pay for their own health care, and then some. Things like the Medicare levy are an attempt to increase that progressiveness. I love the Medicare levy. I'll give it three cheers.

But three boos for the government letting rich people stop paying it when they buy heavily subsidised disfunctional private health insurance. So lame.

One of the problems with life annuities is they are trying to provide insurance, and to smooth out income. And providing that sort of insurance is super hard. I'd tell annuities to go suck an egg, but if you want private superannuation you kind of need them. I want to know if there's a role for annuities that aren't insurance, but provide a neat way of smoothing income. At the moment annuities are inequitable because rich people end up getting a lot of the money that the poor throw in, and unappealing because no-one wants to give their retirement money to other people if they can help it.

The other problem is that insurance companies need to give us much less than they really should just in case we accidentily all end up living until 90. Insuring a whole nation against the possibility of everybody living an extra 10 years is, and always will be impossible to insure against. Insurance works using the law of large numbers and spreading out risk across large numbers of people. But it only works if there is a reasonable sort of average that the insurance company can figure out ahead of time. If everyone is dying later and later, then the average is a moving target, and the law of large numbers is not so useful. So if this is happening our only options are to ask our kids for more money or reduce our expenditure. Neither of these options are related to annuities at all. The age pension provides the first option, and takes money from the young and gives it to the old if they need it for some reason.

So I've blathered on about what that was. But my idea is to let insurance companies update their expectations as time goes on. Insurance companies should be able to use additional information about the population and individuals as it becomes available. So if you have cancer so they give you a great deal on your annuity, but then you are cured, they should be able to reduce your yearly payment.

I did some fiddling in Openoffice, and made this. The expectations are initially that the person will live for 15 more years but they end up living for 25 years. The jitters in the tapered income line represent points where the insurance company readjusts their expectations of how long the fellow is going to live for. With the flat annuity, either the poor old chum runs out of money at 79, or the insurance company has to pay out. I haven't done a very good job of accounting for growth in the capital base. I've assumed 3% real growth, but that isn't really what's important.

Does anyone have any ideas about how to stop insurance companies from abusing this system? You'd probably need some sort of transferability between companies to ensure competition. Or perhaps they sell you an income formula instead of an income quantity when you first buy the annuity. There could be some independent institution responsible for working out average and individual life expectancies and the insurance companies could be forced to use those estimates perhaps.

I have a business idea. That's an unusual thing for me. Most of my ideas involve breaking other people's business models. Or my better ideas anyway. But this idea is a business idea, and it's an idea that would make money, and solve some problems for insurance companies, and solve some problems for the government, and even solve some problems for vulnerable old people. Actually the bit that solves some problems for insurance companies is a separate idea that could motor along on its own if it felt so inclined.

So the main idea is simply property-backed annuities. Retirees can sign over their houses to insurance companies in return for a guaranteed pension and the guarantee that they won't be kicked out. Capital growth in the house goes to the insurance company - who eventually sells it - but they can use the assumption of eventual profit to subsidise the pension. The retirees don't have to worry about land taxes or managing cash flow, or having to get a mortgage on their house to pay for food. It means the government won't have to pay pensions to asset-rich retirees - who then just leave the in-tact house to their children when they die. Unless you have some funny system like I've suggested I suspect there would be a lot of pressure for the government to give pensions to people who are actually very rich, but appear poor when plastered on the front of The Australian.

Part of the problem we have is that my parents generation have accumulated large amounts of property, partly because they haven't paid anywhere enough tax over the past few decades. While it's probably too hard to collect back-tax (not to mention a little unfair), and a lot of that wealth has disappeared as consumption, there is still a lot of that unpaid tax holed up in houses and such. You could argue that if the property just gets left to their children then maybe it doesn't matter that much. My generation won't have to pay that much rent or much of a mortgage, because the average 1.7 children is probably close to the average 1.7 investment properties. So all us kiddies get our own house, but the flipside is that we have to pay 60% income tax or something so the government can feed and medicate our ailing property mogul parents.

One reason not to do that is that it's probably better to get the capital markets to put up the the cash for food and medication, rather than the government. Another is that those nice houses would have been effectively partly owned by the government if taxes had been at the right level, so it's not really fair that those assets are passed on to those people lucky enough to have parents wealthy enough to really benefit from low taxes. So it might be better than those assets get redistributed around the place when that generation dies, and that the government saves a whole bunch of money on pension payments.

So people with property are guaranteed a pretty nice income, which could be subsidised by the government possibly if it's not quite nice enough. People without property get a less nice (probably) government pension. The insurance companies get houses and capital growth for as long as our parents are alive. Children of rich parents get nothing. Children of rich and poor parents get a government with a balanced budget and income taxes somewhere below 60%.

There is still the problem of healthy people being more likely to take up the offer than sick people. Insurance companies have to break even so the more healthy people there are, the less of a bargain the deal looks like to sick people. Because sick people might have to put up their whole house and then die 12 months later.

I think maybe that can be overcome, although not because of anything special about my idea. The government can insure very healthy people, or subsidise people who end up living for a long time. The government would have to pay pensions to those people anyway, if the insurance companies don't, so the government doesn't lose. I suspect maybe it will generally seem like a good deal to health and sick people alike, just because they don't have to worry about stuff.

I had this other idea, that people could choose a number of years, after which they want to have a reduced payment. A sick person might choose 12 months, and get a lot of money early on, but less afterwards. A health person might choose somewhere way down the line, because they expect to live a long time. They'll want to spread out their pension. The insurance company can use that information to give sicker people a better deal for their house. The cost of trying to pretend to be sick in order to get the better deal is that healthy people might live for 20 years on a reduced pension. I'm not very good at those sorts of numbers (or most sorts), so I'm not positive that will work as I'm expecting.... I just had a little fiddle in Excel and I think it does work. You need to pay sick people more at the beginning, and healthy people more overall, but not pay sick people so much more at the beginning that healthy people are better of pretending to be sick and putting their extra money in the bank. I don't know if that makes sense. I'd post the Excel spreadsheet, but everyone who had got this far would truly want to stop being my friend.

I reckon maybe that thing I just talked about might work for all insurance pension sorts of things. You just have to wangle the numbers the right way. Give healthy people an incentive to tell you they're healthy, and sick people no incentive to pretend to be healthy, and you're all set. You can work out who is who, and give them all the right amount of money. At least I think so.

I've forgotten if there were still other things I needed to talk about. Insurance companies are happy... yes. Old people are happy... yes. Government is happy... yes.

Except bugger. It started out being a business idea, where I would make lots of money. But it ended up being another rant about how if everyone does what I tell them to, things will sort themselves out nicely.

Unless I go start my own insurance company, which was my original plan I think.

So then so far on my list of things to do this life:

• Start microfinance bank with consumer retail arm
• Start global superannuation behemoth that dominates all political decision-making
• Start an insurance company large enough to pay out billions of dollars in pensions every year
• Be an astronaut
• Start a cheese farm

Denzil (and some other guys from CHERE) did some research on the private health insurance market. Abbott doesn't like it, so they must have done something right. Apparently, a lot of Australian's get private health insurance but don't use it. The tax incentives to buy insurance mean that it's sometimes worth getting even if you never intend to use it. So what really happens is the insurance companies and the insurance "user" divvy up the tax refund, but nothing else actually changes. At least in high number of cases.

I think the real issue is that the only way you can have an effective private health insurance system that people want to use is by having a crap public health insurance system. And despite what everyone is saying, I just don't think public health care is crap enough yet. Give us time though.