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Medical care without third party payment: the autism example
It's a common claim that health care would be more efficient and cheaper if not for third party payment. Sometimes, yes, but often these claims are overstated, especially when the link between treatment and improvement is murky.
To consider one example, for the most part autism-related services are not covered by private health insurance. Government aid is often scarce as well. Also in Canada medical benefits for autism-related services are quite limited. So when it comes to autism, this is a fee for service setting for the most part.
And what does this world look like?
1. Services are not especially cheap nor do they seem to be falling in price.
2. Market participants are not well informed about what works. Many parents of autistic children pursue hopeless treatments or unvalidated or even refuted theories. Some of the treatments, such as chelation, are harmful in many cases and yield no benefits.
3. There is lots of innovation -- in terms of advertised methods of treatment -- but it is unclear, to say the least, what percentage of these innovations succeeds. Very often it is parents "buying hope."
The point is not that insurance coverage would solve all these problems. Third party coverage would slant the relative prices toward more mainstream treatments and away from the fads; how good or bad this would be depends on your point of view as to what brings better (worse) outcomes.
Overall I don't view the autism example as a good selling point for the view that third party payment is the basic problem behind U.S. health care. Nor do I see critics of third party payment citing autism services as a model example for their ideas. (By the way, it is an open question how much autism should be an education issue and how much it should be a health care issue; de facto it is often a health care issue but this should not be taken for granted.)
Another lesson is this: the more emotional the issue, the less effective any health care system will be. Policy discussions of "health care" often require more disaggregation.
Addendum: There is, by the way, a movement afoot to require that private insurance cover some autism-related services, such as ABA. Given the costs of the treatment, and the unclear link between treatment and results, I would be curious to hear if "universal coverage" advocates would include this in their ideal public policy. I would say they should admit that any notion of "universal coverage" is value-laden rather than purely descriptive.
Posted by Tyler Cowen on May 12, 2009 at 07:01 AM in Medicine | Permalink
Comments
I pay cash for all my health care ( $20,000 deductible ) and I get at most 5-10 % discount . Often , level of service is inflated . Health cost are starving the rest of the economy and like the financial industry needs creative distruction .
Posted by: Lowrie Glasgow M.D. at May 12, 2009 8:42:32 AM
My understanding is of the education situation is that parents tend to cluster in particular districts with "good" resources for autism, and that the educational effectiveness is about as well understood and validated as the medical treatments (and not even as well validated as educational techniques more generally).
I'd note that the population of parents of kids with autism is not representative of the population at large, and that the health care market is not identical to the "health care for (my) kids" market.
Posted by: Thomas at May 12, 2009 8:58:59 AM
Another lesson is this: the more emotional the issue, the less effective any health care system will be.
Health care for people seems to be an odd market, like pet care. If I was diagnosed with a fatal disease and 12 months to live, I'd try and enjoy the time and spend more time creating loving memeories for my family and friends. However, if one of my young children got sick (or if my dog needed some relatively expensive surgery), I'd open my wallet.
Health cost(s) are starving the rest of the economy and like the financial industry needs creative destruction.
So, where will this creative destruction come from? I'm using doctor and non-doctor blogs and web sites in my effort to learn more about diabetes, weight loss, and nutrition, and I'm also using more home tests rather than lab tests for some things. And seeing many more home tests become available. For example, see http://typ.trackyourplaque.com/products/. I have no financial ties or interest in this firm, just read The Heart Scan Blog regularly.
I use an HSA plan and it does make me more conscious of how I'm spending money on health care related products and services.
Posted by: fish on a bicycle at May 12, 2009 9:01:41 AM
Also see these autism related articles:
Posted by: fish on a bicycle at May 12, 2009 9:08:14 AM
Overall I don't view the autism example as a good selling point for the view that third party payment is the basic problem behind U.S. health care.
I agree.
Services are not especially cheap nor do they seem to be falling in price.
Is it possible that prices for autism-related medical services are drawn upward by the artificially high prices of medical services that are paid for by third parties? (Perhaps because it's not worth a service-provider's while to offer autism-related care unless s/he earns something close to what s/he could earn in providing "covered" services?)
Posted by: JP at May 12, 2009 9:18:12 AM
Your assumption that "Government aid is often scarce as well" is wrong for the U.S. Schools are required under U.S. law to provide special education to autistic children. The quantity and often the quality of such education is very high.
In Massachusetts the state pays for home visits for early intervention specialists until a kid reaches three. Children can get 10-20 hours a week of service. After the child reaches three he goes to his local elementary school for special ed. Many schools have autism specialist teachers. Often there is more than one teacher for every two students in special ed classes.
In Internet groups parents of autistic children extensively discuss what treatments work. The discussions are often very sophisticated.
The problem with autism education is that there are no studies examining the long term effect of early intervention.
Posted by: James Daniel Miller at May 12, 2009 9:21:14 AM
also, as i understand it autism is a complex disease with a fuzzy definition and considerable controversy about how to treat it. if people had to pay for their own broken arms, these issues would be less of a problem.
Posted by: babar at May 12, 2009 9:23:55 AM
Autism is only half a good example. There is no limit to the amount of other peoples' money I'd spend on any false hope to cure this if my child had it, and it would be worth every cent.
Posted by: Andrew at May 12, 2009 9:28:11 AM
Wrong!
My first thought while I was reading this was that someone hacked into your account. Of course, because it is you, this is a great observation, but if you were right you might need to change some of your posts to "markets in somethings"
Here is the trouble spot for me:
"Services are not especially cheap nor do they seem to be falling in price."
I have to take that as true, not enough time in the day to out research you, but in a market does an items price have to fall? Or,as may be the case here, can a static price be thought of as a falling price? Health Care spending is increasing at 7%-8%/year when the government is involved, so compared to the rest of the market autism might be becoming more of a steal every year.
(You weren't that wrong, but I had to get people to read my piddly comment.)
Posted by: Bear at May 12, 2009 9:39:12 AM
"My understanding is of the education situation is that parents tend to cluster in particular districts with "good" resources for autism..."
-----
I believe that this is a problem in educational funding. Under IDEA, schools must provide a Free and Appropriate Public Education for everyone who comes through the door. Schools with good special education services can draw large numbers of parents with special needs kids. Since these students require more money per student, we are essentially punishing the local school district for doing a good job.
This post is not intended to be part of the debate on public education vs. privatizing the system.
Posted by: Eric in PA at May 12, 2009 9:54:47 AM
Healthcare is to autism as auto maintenance is to car bomb.
I'm hard-pressed to think of a worse analogy (it is barely even an example) than autism as related to healthcare spending and insurance coverage.
Additionally, there IS a 3rd party payer for autism. The parents. In that sense, it IS a good example.
Not to criticize Tyler. He is a genius and always right.
Posted by: Andrew at May 12, 2009 9:56:04 AM
I think moving the market for heroic efforts to add days or hours to the end of terminal cases to a fee-for-service model may not lower the cost of such measures but may lower demand quite a bit. "Playing with house money" is a big motivation in overspending, and a tremendous amount of health expenditures are made in cases where they arguably do no good.
Posted by: Eric at May 12, 2009 10:02:46 AM
As a parent of a child w/ autism, i couldn't agree more. Your post is exactly on the money.
Posted by: TW at May 12, 2009 10:04:01 AM
Part of the problem with measuring the efficacy of autism treatments is that autism doesn't seem to be a single disease. It's sort of like saying that a certain drug doesn't work for cancer -- WHICH cancer?
So, while something may be harmful or have no effect on one child, for another child there seems to be a major improvement (Is it due to that treatment or to something else? We can't really tell. Right now, I don't know if we know everything to control for in an autism study.)
Posted by: Jo at May 12, 2009 10:17:59 AM
Many parents of autistic children pursue hopeless treatments or unvalidated or even refuted theories.
That's what experimentation looks like. In the short term, it's certainly possible that outcomes would be improved if everyone were provided with (read: forced to accept) the best-yet-discovered treatment, as defined by the medical establishment. But in the long run, it's usually a good thing if lots of people try lots of different things; someone may discover something new. And in the case of something like autism, where the mainstream treatments aren't exactly head and shoulders above doing nothing, the cost of letting people experiment is not that high.
Finally, something I rarely see addressed when healthcare is discussed: economists love to proclaim that 'incentives matter', and certainly most of them are aware of the problem of asymmetrical information. So it would seem rather obvious that
a) your doctor (or if you prefer, 'the medical establishment') has no real incentive to make you well, so long as
b) they are acting to maximize their profits, and
c) they can convince you to continue paying to be treated
But for some reason economists prefer to focus on the problem of third-party payers rather than the simpler issue that no one can make much money off of healthy people.
Posted by: bbartlog at May 12, 2009 10:43:45 AM
bbartlog,
Good points, and what are the incentives of the economists who tend to focus on thrid party payment?
Why don't they instead talk about the ridiculous nature of modern IP law. Why don't they talk about the ridiculous licensing laws passed by governments at the urging of doctors unions...the laws that severely restrict competition and artificially limit the supply of many specialists?
What are the incentives of health care economists to reduce the percentage of GDP that is spent on health care? do many of these economist gain status by recommending that government power/insurance company power and big biopharm power all be increased? do they really prefer that health car spending INCREAESE? Is that the path to a big career in "health economics"?
Posted by: Gabe at May 12, 2009 11:10:32 AM
Now what happens if the government denies their little precious the treatment THAT MIGHT JUST SAVE HIM from autism? Are the technocrats going to hold the line, and say, "No, no, sir, that is not efficacious medicine" or instead, is some politician going to see a chance for profit and power? The entire thesis of universal health care rests on the idea that the government can effectively cost control, when it can't even control its appetite on a single fiscal year budget. I have repeatedly asked Matt Yglesias what precludes this scenario, especially in light of the empirical results we are seeing reported from Massachusetts, but everyone wants "la-la-la" their way past this obviousness and pretend that the economic fascist Orzag with his creepy smile is going to lead us to Promised Land where people just accept the medicine the government prescribes and don't chafe at the yoke.
Posted by: Billare at May 12, 2009 11:16:27 AM
As a parent of a child on the spectrum & someone connected with the Autism community I think this is an excellent post in a number of respects. There's probably a thesis to be written in this area.
First, the price of treatments & services is in general not coming down. The treatments tend to be labor intensive & suffer from cost disease. This is true in both the education & "medical" side. Classroom aides and ABA/RDI/Floortime therapy will never scale much.
As drugs become generic, those treatments do come down in price. Ritalin & it's relatives plus other psychoactive drugs are used and can be effective for some kids. I'd love to see someone thinking hard about the optimal patent regime for non-rival goods in general, but this is not a big cost compared to the labor-intensive side.
There are obviously distortions created by the availability of benefits and services. Microsoft is one of the few companies with a defined Autism benefit. The benefit is large, but not unlimited. I know parents working there that would be working elsewhere without the benefit. And I know parents who have flirted with bankruptcy paying for treatments out of pocket.
The costs on the educational side are high, but inconsistent. Legally there is a requirement for free & appropriate education. Educational plans are individualized,but that's not the only (or perhaps main) driver behind the varying costs. Here in Washington the level services provided for similar kids varies from school district to school district, school to school within a district and student to student within a school. Costs are contained via the squeaky-wheel principle. Parents who have the knowledge, time and persistence receive more services (and I believe better outcomes) for their kids than other parents. But given state funding mechanisms it's a zero-sum game.
For my kid, the best "treatment" has been to be in classrooms where he can interact with typical peers. But for now at least he needs support, which is expensive. I would claim that the costs to society for not providing this support will be higher. I know that the costs to him and my family of not having a path to normalcy this would be unbearable.
Posted by: msi at May 12, 2009 11:21:32 AM
I don't think that autism is a good example of the weakness of direct payment for health services. Jo is right above to point to the spectral nature of autism (it's not one discrete disorder). We also know very little about the disorder. So is there enough information about autism treatments to allow for a functioning market, where patients can weigh competing options and choose accordingly?
Third-party payment is weakest where doctors and patients know about potentially successful courses of treatment and cover all their bases because there are no monetary consequences for the interested parties. Direct payment can seriously limit overconsumption of care, which seems to be the primary driver of increasing health costs. If we don't reform third-party payment for care, we'll be forced to use more third-party rationing of care.
Posted by: Robby at May 12, 2009 11:26:23 AM
The market for plastic surgery (other than for correcting defects caused by disease or trauma) might serve as a better example of how a market works for one aspect of medical care.Cosmetic plastic surgery is readily available for a price,is generally high quality and apparently the prices are falling.
Posted by: james gaulte at May 12, 2009 11:47:55 AM
As a parent of a child with autism, I want to thank you for a well written article, though the 'autism as a case for healthcare' analogy is not a good one at this time because of wide-ranging misconceptions and disagreements about the the causes, effect, treatment etc.
For starters, the most common defition of autism seen in print -- "devastating neurological disorder... etc etc" is outdated as it has by now been established that autism is parts neurological, biological, physical etc. Meaning, several of the underlying causes symptomatic of the disorder are treatable. This is the argument that needs to be made to bring autism spectrum disorders into the realm of medical insurance companies, and to make them pay for the symptoms that could benefit from medical intervention.
My other point has to do with your 3rd statement : "There is a lot of innovation in the field". True. Here the big elephant in the room is the American Medical Association and the CDC, who refuse to bring biomedical treatments for autism disorders into the mainstream, so that they can be vetted and validated in controlled studies, rather than continue to be fringe treatments, even after it has been proven that a handful of these treatments have benefitted a large number of children.
Ultimately, autism is not a one-size-fits-all disorder. You cannot prescribe antibiotics against it, which is all that physicians are comfortable doing. The medical comminuty needs to wake up to the fact that this involves a 'web' of disorders, rather than a straightforward cause-effect path. Behavioral treatments thru private and state (education) means are part of the treatment, but not all. Ultimately, the AMA needs to champion and throw their weight behind all the possible types of treatments, othetwise the insurance companies have a free pass to deny coverage. In which case the next wave of bankruptcies will be among the parents of the children on the spectrum.
Posted by: Nancy at May 12, 2009 11:54:54 AM
MSI,
I don't mean to be insensitive, but you would claim that. Many people with different and serious ailments would also make the same argument for themselves straightforwardly. But here's the thing - this beneficence is extended on the premise that State technocrats are going to be cool-headed rationalists about deciding effective treatment for the spectrum disorders. Yet the primary justification for the continual extension of myriad health benefits are these personal anecdotes and emotional stories! I have seen where the future is headed, there is nothing in my power to do much, but the iron law of trade-offs will rear its ugly head one way or the other, no matter which road we choose. If we provide quality and access beyond the price required, rationing surely occur - and the government will uninformedly choose the most fashionable treatments before we've done the real genetic legwork (financed by billionaires like Jim Simons) - and you of all people, should realize how desperate people can be to trust in a cure-all who will be let down. Moreover, whether you, msi or your alter ego persona, nsi, receives those funds will be decided capriciously and politically. And someone else who could have had "some" will end up with no help at all.
Posted by: Billare at May 12, 2009 11:56:54 AM
As yet another long time reader and parent of a child with autism, I must agree that Tyler's analysis rings (almost) perfectly true.
However, the only exception is glaring:
By the way, it is an open question how much autism should be an education issue and how much it should be a health care issue; de facto it is often a health care issue but this should not be taken for granted.
It is certainly an "open question," but in my experience the "de facto" answer runs almost entirely in the other direction; autism in the United States is treated almost exclusively as an education problem, not a medical one.
Posted by: Stephen Humphrey at May 12, 2009 12:41:42 PM
The entire thesis of universal health care rests on the idea that the government can effectively cost control, when it can't even control its appetite on a single fiscal year budget.
It's almost as if universal health care is some abstract idea that has never been tried anywhere on the planet. We can only speculate as to what it would be like.
Posted by: Barbar at May 12, 2009 1:39:41 PM
Even yet another l.t.r. and parent with autistic child.
The challenge is that, so far, there is no pure medical solution (a la antibiotics). The most scientifically validated approach is intensive, constant one-on-one ABA which requires (lots of) specialized work from professionals who are well trained (and, therefore, expensive.) That's outside the budget of almost all parents and school districts as well. So, right now, parents and schools are locked in battle about who should pay for what and what amount of support is reasonable. This battle over cost allocation and product quality is not generating or likely to generate efficiency or net cost reduction.
Meanwhile, healthcare insurance companies avoid getting involved because they can.
Posted by: Martin Bishop at May 12, 2009 2:03:05 PM
