Tag: healthcare

Recursively. That’s The Only Change I’d Make.

The ability to exercise good judgment is the binding constraint in development is the title of Gulzar Natarajan’s blogpost on Oliver Kim’s essay, which we’ve covered earlier here.

Almost all of doing development is about making non-technical decisions (the technical ones are easier, have limited degrees of freedom, and mostly slot themselves into place). Such decisions are invariably an exercise of judgment by taking into consideration several factors, one of which is the technical aspect (or expert opinion). The most important requirement for the exercise of good judgment is experience or practical knowledge. In the language of quantitative science, it’s about having a rich repository of data points that one can draw on to process a decision.

Source: https://urbanomics.substack.com/p/ability-to-exercise-good-judgment

This applies, Gulzar Natarajan says later on in the essay, to “industrial policy and promotion of industrial growth, macroeconomic policy and inflation targeting, and programs to improve student learning outcomes or skills, increase nutrition levels and health care outcomes, improve agricultural productivity, and so on”.

Let’s take one of these and think about it in slightly greater detail: health care outcomes. Let’s do this in the context of India. Answer these questions, for yourself:

  1. What is the best possible health care outcome you would wish for, in India’s context? Define it however you like – everybody should have excellent healthcare so long as they can pay for it is one option. Everybody should have excellent healthcare regardless of whether or not they can pay for it is another option. Everybody should have free healthcare until we reach a per capita income of x dollars (adjusted for inflation and purchasing power parity, if you prefer) is a third option. You can whistle up a million more, and feel free to let your imagination run wild. You get to define the best possible health care outcome for India – setting the standard is up to you.
  2. Microeconomists will call this the indifference curve, and ask you about the budget line. Mathematicians will call this the objective function, and ask you about the constraints. Humans will say “Haan woh sab to theek hai, magar bhaiya, kaise?”. This is the part where we encounter the bad news – what are you willing to give up in order to achieve your best possible outcome? Best possible health care outcome subject to we spending not more than 20% of our GDP on health might be a constraint you choose to apply, for example. Other people may start to froth at the mouth at the thought we spending 20% of our GDP on health, but you do you (for now). Reduce spending on defense, and pensions, and highways, and on education, you get to say (for now). In my little ivory tower, you get to say, I want India to focus on healthcare outcomes, and healthcare outcomes alone – and I’m ok spending x rupees on it. We get to not spend those x rupees elsewhere, of course – remember, opportunity costs are everywhere, including in imaginary ivory towers.
  3. Here’s another way to think about the same problem. You could also say, I’m optimizing not for healthcare outcomes in the short run, but for free markets. I’m not doing this because of my love for free markets per se, but because of my conviction that this path, and this path alone is the only way to deliver the best possible healthcare outcomes eventually. Sure there will be mistakes along the way, and sure some healthcare services will be denied to people who need it the most for now. But eventually, the market will correct all of these errors, and that in ways we simply cannot know right now. Why can we not know them right now? Well, because we are not omniscient. We don’t know what errors will crop up, and we don’t know what solutions will work best for whatever errors will crop up. If we did know this, we could have avoided those problems in the first place, no?
  4. There are, in other words, unseen consequences to Bastiatian solutions as well. That’s just a fancy way of saying there are opportunity costs everywhere, but let me make the point more explicitly: the opportunity cost of an immediate application of a completely free market solution to healthcare is poor health outcomes for at least some folks today. I might be wrong about this, so please, don’t hesitate to tell me the how and why of it.
    For example, let’s say that government stops spending even a single rupee on healthcare (no CGHS, no PMJAY, no ESIC, no Jan Aushadhi, no government run hospitals, no PHC’s, no government run vaccination programmes, nothing) at 12 pm today. Will health markets be Utopian at 12.01 pm, or will they transition to Utopia eventually? How long is eventually? What problematic outcomes will occur along the way, and do we correct for them? How?
    For example, we may learn that poor families in rural Jharkhand now do not have access to healthcare because all government intervention has stopped. Do we do something about this? If yes, what? If not, why?
  5. This cuts both ways, of course.
    For example, let’s say that government doubles its current expenditures on healthcare, at 12 pm. Will health markets be Utopian at 12.01 pm, or will they transition to Utopia eventually? How long is eventually? What problematic outcomes will occur along the way, and do we correct for them? How?
    For example, we learn that corrupt practices when it comes to invoicing in procurement departments have gone up because government expenditure has gone up. Do we do something about this? If yes, why? If not, why?
  6. Given your ideological bent of mind (and we all have one, learn to live with it), you have an urge to say “Ah hah, exactly!” and “Oh, c’mon!” to pts 4 and 5 – in that order. Or to pts 5 and 4 – in that order – it depends on what your ideology is. But if both of those things was what you ended up saying, that’s just you being bad at elementary economics, because there is no such thing as a free lunch, regardless of what your preferred solution is. You can have inequitable outcomes today and therefore a relatively more efficient outcome tomorrow, or you can have equitable outcomes today and therefore a relatively more inefficient outcome tomorrow.
    Equity today and efficiency tomorrow is like those real estate ads offering you high returns and low risk – it doesn’t happen.
  7. Which brings us back, in a very roundabout fashion, to the point that Gulzar Natarajan was making in his post. When he says that “it is not one decision, but a series of continuing, even interminable, decisions”, I interpret it as two different but very related things.
    One, if you’ve chosen to optimize for equity today, you have to be explicit about the fact that you’ve sacrificed optimized efficiency (today and tomorrow). The worst manifestations of these sacrifices must be adjusted for at the margin. And ditto if you’ve chosen to optimize for efficiency today! You have to be explicit about the fact that you’ve sacrificed optimizing for equity (today and tomorrow). The worst manifestations of these sacrifices must be adjusted for at the margin.
    Two, no matter what your favored path is (and I envy you your conviction if you know that your path is The Best One For All, I really do), there will be errors along the way. That’s just life, there will be unexpected surprises along the way. Call it risk, or uncertainty, or whatever you like (and yes, I know, comparing the two is like comparing Knight and day) – but account for the fact that your battle plan will meet the enemy, and it will not survive.
    You must adapt, and said adaptation will involve a series of continuing, even interminable decisions.
  8. Those adaptations will land you somewhere in the middle of efficiency and equity. At which point, you can adapt your will to your circumstances and say you’ve found the truth, or you can continue with your decision-making. It is, after all, interminable.
  9. “Wait, so there’s no end to this?!”, I hear you ask in righteous indignation. “What is the eventual outcome? Or are we doomed to keep making these interminable decisions forever?”. Kids these days, I tell you. They’re just like kids in those days.

And that’s why I say what I did at the start of today’s post. The only change I’d make is the addition of one word:

The ability to exercise good judgment recursively is the binding constraint in development.

Health in America (and Goodhart’s Law)

Is it better to spend a lot of money on healthcare, and not get great results, or it is better to not spend a lot of money on healthcare, and not get great results?

The United States of America tries to generate data that answers at least the first half of that question:

The country spends about $4.3trn a year on keeping citizens in good nick. That is equivalent to 17% of GDP, twice as much as the average in other rich economies. And yet American adults live shorter lives and American infants die more often than in similarly affluent places.

https://www.economist.com/business/2023/10/08/who-profits-most-from-americas-baffling-health-care-system

And if you are even remotely interested in the question of healthcare and how to get it to work for a country, you know, of course, about pharmaceutical firms and hospitals in America. But in a fascinating article, The Economist tells us about the middlemen in America’s healthcare system.

https://www.economist.com/business/2023/10/08/who-profits-most-from-americas-baffling-health-care-system

What do middlemen do? At their best, they can literally create markets. They can provide useful information to market participants, they can make markets more efficient by reducing search and transaction costs, they can lower risk and they can provide additional services. Has AirBnB made travel easier because of all of these factors? That’s what a middleman can do. So both this post and The Economist article aren’t a complaint about middlemen.

But that being said, the dose does make the poison. If middlemen make the markets more efficient, their revenue expressed as a percentage of national health expenditure shouldn’t be going up much, right? It certainly shouldn’t be nearly doubling!

So what’s going on?

  1. What does the healthcare market consist of? Doctors and patients, of course. But what connects, enables and facilitates interactions between both sides of the market? That’s the “plumbing” of this market – the middlemen. These are the insurance firms, the chemists, the drug distributors and the pharmacy benefit managers (PBM’s). As The Economist puts it, these entities don’t make drugs, and they don’t treat patients.
  2. And yet, they got to keep about 45% of America’s “health-care bill”. Those must be some fancy pipes!
  3. So here’s what happened. Back in 2010, the American government said to insurers that they could no longer eat away at all those dollars in America’s healthcare system. No more than 15% to 20% of collected premiums can end up in your pockets as profits. A measure (profitability) became a target (market efficiency to be defined by limiting profits).
  4. And in these parts, we know what comes next, correct?
  5. “But it imposed no restrictions on what physicians or other intermediaries can earn. The law created an incentive for insurers to buy clinics, pharmacies and the like, and to steer customers to them rather than rival providers. The strategy channels revenue from the profit-capped insurance business to uncapped subsidiaries, which in theory could let insurers keep more of the premiums paid by patients.”
  6. And well, these middlemen went out and bought these “uncapped subsidiaries” – some $325 billion worth of them. Or a 130 different mergers and acquisitions, if you like more than one metric.
  7. So now your healthcare market looks like this: patients go to get treated by doctors. Patients are “connected” to doctors via the plumbing provided by middlemen. But now, the plumbing “owns” the doctors!
  8. Which is when, as an economist, you should want to use the “i” word. What will be the incentive of the doctor? To give you the best treatment possible, or to reduce costs as much as possible for their corporate structure? If they can choose only one among these, which are they likely to choose?
    “For example, many studies have found that after hospitals acquire physician practices, prices increase but quality of care does not. A health-care company that controls many aspects of patient care could raise prices for rivals wishing to access its network. Some also worry about physicians being nudged towards offering the cheapest treatment to patients, lowering the quality of care.”
  9. One shouldn’t throw around such claims or hypotheses without backing it up with data. Is it actually the case that these middlemen are earning excess returns?
    “America’s health-care intermediaries are indeed unusually profitable. Research by Neeraj Sood of the University of Southern California and colleagues found that intermediaries in the health-care supply chain earned annualised excess returns—defined as the difference between their return on invested capital and their weighted-average cost of capital—of 5.9 percentage points between 2013 and 2018, compared with 3.6 for the S&P 500 as a whole.”
  10. Maybe these excess returns will attract competition, and maybe competition will make markets better? Paging Amazon!
    “Perhaps the biggest disruption to big health could come from Amazon. In 2021 its health-care ambitions suffered a setback owing to the closure of Haven Healthcare, a not-for-profit joint venture with JPMorgan Chase, the biggest bank in America, and Berkshire Hathaway, the biggest investment firm. Haven had aimed to cut health-care costs for the trio’s own staff. But despite Haven’s failure, Amazon is still expanding its health-care business. Last year it paid $3.9bn for One Medical, a primary-care provider. It runs Amazon Clinic, an online service offering virtual consultations, and RxPass, which lets members of its Prime subscription service buy unlimited generic drugs for a small fee. John Love, who heads Amazon’s pharmacy business, believes that the tech giant’s focus on customer experience, combined with its vast logistics network, makes it well-suited to shake up the industry.”
  11. But you’d be surprised at how complex any market can be. And healthcare markets are (trust me on this) a whole other story:
    “The entrenched firms have built their networks of doctors, hospitals, insurers and drugmakers over decades. Replicating that takes time and institutional knowledge. Mr Cuban admits that it is difficult to get drugmakers to list branded drugs on his pharmacy, as they are wary of upsetting the large pbms. And without branded drugs and the support of large health insurers, his firm’s reach remains small. The cap on insurers’ profits makes life tough for upstarts in that business, which struggle to compete against the negotiating power of the integrated giants.”
  12. Designing policy around healthcare markets is, as it turns out, quite the challenge. And it is very likely to be a case of one step forward and two steps back at worst, and two steps forward and one step back at best.
  13. But it is oh-so-important to take those steps, and having taken them, to ask if they are taking us in the right direction. Onwards!

Theory is one thing, implementation is a whole other story

In a paper written earlier this year, I and my co-author, Murali Neelakantan argued for unifying India’s (many) healthcare markets. Part of our proposal touched upon the need to unify a crucial aspect of these markets: procurement.

Furthermore, to ensure cost eff iciency and streamlined operations, the government will act as a monopsony buyer, procuring medical goods and services for all empanelled hospitals. This centralised approach will enable economies of scale, reduce costs, and guarantee steady demand for healthcare providers. By taking on the responsibility of procuring medical supplies, the government can negotiate better prices and allocation of resources within the healthcare system. We recognise that the healthcare requirements will vary across the country and even across states but we argue that there can be central procurement nevertheless. The local hospital or health authority will purchase based on the price notified by the central procurement agency.

https://ippr.in/index.php/ippr/article/view/213/92

It is one thing to say this as a theorist. As any public policy analyst will tell you, it is quite another to actually implement a scheme such as this. There will be teething troubles, there will be glitches. There will be leakages and pilferages. There will be stumbling blocks and unforeseen issues. Why, where will you start even, leave alone the question of actually making the whole thing work!

All good questions, of course. Entirely valid points. But we did point out that at least one state in India has already taken steps in this direction. Tamil Nadu already does centralized procurement of medicines, among other things worth emulating:

Another instance of successful healthcare reform at the state level can be found in Tamil Nadu, where the state government has implemented a range of innovative measures to improve the accessibility and affordability of healthcare services. These initiatives include the Tamil Nadu Medical Services Corporation (TNMSC), which centralises the procurement and distribution of drugs and medical equipment, resulting in more efficient and cost-effective processes (Parthasarathi and Sinha 2016).

https://ippr.in/index.php/ippr/article/view/213/92

But then, about two weeks ago, came news of a most excellent paper, written by CS Pramesh et al. Allow me to quote the abstract in its entirety:

In health systems with little public funding and decentralized procurement processes, the pricing and quality of anti-cancer medicines directly affects access to effective anti-cancer therapy. Factors such as differential pricing, volume-dependent negotiation and reliance on low-priced generics without any evaluation of their quality can lead to supply and demand lags, high out-of-pocket expenditures for patients and poor treatment outcomes. While pooled procurement of medicines can help address some of these challenges, monitoring of the procurement process requires considerable administrative investment. Group negotiation to fix prices, issuing of uniform contracts with standardized terms and conditions, and procurement by individual hospitals also reduce costs and improve quality without significant investment. The National Cancer Grid, a network of more than 250 cancer centres in India, piloted pooled procurement to improve negotiability of high-value oncology and supportive care medicines. A total of 40 drugs were included in this pilot. The pooled demand for the drugs from 23 centres was equivalent to 15.6 billion Indian rupees (197 million United States dollars (US$)) based on maximum retail prices. The process included technical and financial evaluation followed by contracts between individual centres and the selected vendors. Savings of 13.2 billion Indian Rupees (US$ 166.7million) were made compared to the maximum retail prices. The savings ranged from 23% to 99% (median: 82%) and were more with generics than innovator and newly patented medicines. This study reveals the advantages of group negotiation in pooled procurement for high-value medicines, an approach that can be applied to other health systems.

https://www.ncbi.nlm.nih.gov/pmc/articles/PMC10452934/ (Emphasis added)

There is an important difference between what was attempted here and what we are suggesting in our paper. Our paper talks of centralized procurement, while this paper speaks of implementing a pooled procurement approach. As they go on to say in their paper, “…centralized procurement systems require considerable administrative and managerial resources. A pooled procurement approach that is less resource-intensive and sustainable without significant investment is the WHO-suggested group contracting approach”.

But note that they did not give up on centralized procurement – they thought it easier to begin with pooled procurement, before tackling the much bigger beast that is centralized procurement. (Also note that there is academic research on how centralized procurement can be of benefit, especially in developing nations.)

And they’re quite right, of course. Beginning at a relatively smaller scale and then attempting more ambitious targets is unglamorous, perhaps – but it is also a much more sensible way of doing things. These four paragraphs in particular make for fascinating reading in terms of actually working through the nitty-gritty of implementing pooled procurement. And if you are going to spend time reading those four paragraphs later, please also do spend time on Fig.2.

What were the key takeaways?

  1. Considerable savings, both on generic drugs, as well as on innovator drugs.
    “This outcome suggests that the concentration of demand significantly strengthened our negotiating power, while the centralized negotiation approach, combined with larger purchase quantities, allowed us to secure substantial price discounts.”
  2. Opportunity costs matter!
    “The potential impact of cost savings is huge, in not only improving the affordability of care and decreasing out-of-pocket costs for patients, but allowing for the re-allocation of drug procurement funds towards other initiatives to deliver high-quality care”
  3. Enforcement of quality standards became easier, because of pooled procurement.
    “These savings are notable because they were achieved without compromising on quality, due to strict standards imposed on both the drugs and the companies.”
  4. Pooled procurement helps individual patients across India, regardless of region-wise differences.
  5. Lower treatment abandonment rates (yay!), and therefore higher survival rates (double yay!).
  6. Lesser financial burden on the patients!

And to end, the paragraph that I hope will launch a thousand studies, and eventually, the implementation of centralized procurement of drugs and consumables in India:

Based on the success of our piloting of pooled procurement in the network, conducting such negotiations may be relevant at a larger scale for oncology drugs, such as through the national health authority, as that will enhance the bargaining power as well as have far-reaching impact on access and affordability across the entire national network. Negotiation on a national level could also address the challenges of vendor monopoly or patented drugs supplied by a single vendor. Furthermore, to determine the final price for innovator and single vendor drugs, a comprehensive evaluation of the available literature on efficacy and safety data is crucial. If a drug meets the threshold for significant clinical benefits, cost-effectiveness assessment using adaptive health technology can provide guidance for negotiating prices.

https://www.ncbi.nlm.nih.gov/pmc/articles/PMC10452934/

Unifying India’s Healthcare Markets

When I teach introductory macro, I like to begin by telling my students that a good framework to keep in mind is these three questions:

  1. What does the world look like?
  2. Why does the world look the way it does?
  3. What can we do to make it better?

This is regardless of the class I’m teaching. If it is undergraduate students, we spend a lot of time on these questions, without getting as much into the intricacies as I would in, say, a Masters programme. But I find the framework to be a very powerful one, precisely because it is so simple.

Another advantage is that the framework can be used to analyze slices of the economy.

Health, for example. Only for the Indian economy, for example.

  1. What does the market for healthcare in India look like?
  2. Why does it look the way it does?
  3. What can we do to make it better?

About three years ago, I learnt that the answer to these questions wasn’t simple at all.

Think about the first of these questions. What do we mean when we say “the market”, for example? Is it the same market if you are a government employee as opposed to a private citizen? Is it the same market if you are a state government employee as opposed to a central government employee? Is it the same market if you are a rich private citizen as opposed to a poor private citizen?

What do we mean when we say “the same market”? Well, can all these categories access the same services, from the same service providers, at the same prices? If not, why not?

Of course, when you ask these questions, you are in Second Question territory. Why are these markets different? What was the reasoning behind making them different? Has that purpose been served, or not? If it has, can we unify these markets? If it has not, should we not be asking why not? Should we not be thinking about how to reform or unify these markets?

Of course, when you ask these questions, you are in Third Question territory. If you agree that the healthcare market in India isn’t perfect just yet, then you should be thinking about ways to make it better. But better might mean different things to different people! Some people might say hey, if only government got the hell out of this market, outcomes would be so much better. Other folks might say hey, if only government stayed in this market, but with the following tweaks, outcomes would be so much better.

Trouble is, both sides of the argument have a point. Some markets do, indeed, function better with minimum government. But that is only under certain conditions. And some markets do, indeed, function better with more government. But that too, is only under certain conditions.

The trick is in getting everybody to agree on what these conditions are, and to get everybody to agree about to what extent they’re applicable for a given economy at a given point of time. I doubt that we will ever get everybody to agree about everything for all countries for the foreseeable future. But then again, if we did, life would be pretty boring, and people like me would be out of a job.

By the way, I asked ChatGPT these questions. Here are its answers.

But for our country (India), and for the circumstances that India finds herself in today, Murali Neelakantan and I have answers to the first and the second questions. And we have a proposal for the third. These answers can be found in a paper that we’ve written, called Unifying India’s Healthcare Markets. Please go through the paper, and I hope you find stuff to disagree with. I also hope you’ll tell us why you disagree with it, and how we might go about resolving these disagreements.

Because you see, our hope is to not win an argument with you. It is to learn how to best answer the third question. Because what could possibly more important for India?

So please, read the paper, and let us know what you think – especially if you disagree with us.

Respectful disagreements are underrated!

As always, thank you for reading.

Two Typically Tylerian Takes

Allow me a quick pat-self-on-the-back for the alliteration before we proceed, will you?

Right, so how to think about too much (or too little) government in healthcare? Some of us might say one, and some of us might say the other.

How many of us will say “neither”?

I observe also that Obamacare passed, and American life expectancy fell. I do not blame Obamacare for that, but I do notice it. As a result, I have grown increasingly interested in “how can we boost biomedical scientific progress?” and increasingly less interested in “how can we reform health insurance coverage again?” All the more because we seem to be living in a biomedical progress of science golden age.

https://marginalrevolution.com/marginalrevolution/2023/07/the-amy-finkelstein-and-liran-einav-health-care-plan.html

Many of us can say “both”, and I very much do. But this specific way of saying “both” I find fascinating:

…imagine a health care policy that stated individuals have a true right to access any health care technology invented up through say…2004 or so. Individuals would be guaranteed “2004 value health care lives.” (In 2004 that certainly seemed pretty good.) But for subsequent health care developments, a free market will reign. Is not guaranteeing basic needs an essential part of the egalitarian argument? Surely not everything needs to be equalized? Anyway, no one believes in guaranteeing individuals protection against all the rare diseases out there, as that would cost too much. So a line will be drawn somewhere.

https://marginalrevolution.com/marginalrevolution/2023/03/a-view-that-hardly-anyone-embraces.html

Some points I would like to note here:

  1. Thinking out of the box is hard to do, and needs a lot of reading, and then a lot of thinking. I’m not very good at all three things, and practice is key.
  2. If an issue has remained intractable for a long time, and the debate seems to only get shriller without any resolution, perhaps it is time to consider a solution that lies outside of the framing of the debate.
  3. How do we know when this becomes applicable? See pt. 1
  4. Write every single day. Or train like an athlete, if you prefer.
  5. Read MR every single day. I’m quite serious about all of these, but this last one is the easiest to achieve.

Too Much Government in Healthcare

This is a continuation of yesterday’s post, and in this post, I seek to come up with the best libertarian arguments for why healthcare markets should have as little government as possible.

Three questions for you to consider:

  1. When patients receive a healthcare service, how much should they pay for it?
  2. When doctors and other providers deliver a healthcare service, how much payment should they receive?
  3. How should these amounts be determined?

These questions aren’t mine. They’re taken from John C. Goodman’s book, “Priceless: Curing the Healthcare Crisis“. These are excellent questions, and as an economist, I do not find them remotely objectionable. Were I to analyze (or teach somebody how to analyze) a market for a good or service, this would be a very good place to begin.

You may be tempted to ask questions about externalities, moral hazard etc., and how these affect the provisioning and pricing within these markets, but I would argue that this really is the third question at play. In other words, I find this list fairly comprehensive.

What are the author’s own answers to these questions?

  1. Patients should pay a price for care equal to its marginal social cost.
  2. Providers should receive a price equal to the marginal social value their care creates
  3. Wherever possible, these prices should be determined in competitive markets.

Again, as an economist, I find this unobjectionable. Note that our concerns about different forms of market failures are accounted for by using the phrase “wherever possible”. Presumably, if markets are not competitive, price determination should happen by other means.

As an Indian economist, I need to ask what happens if patients are unable to pay a price for care equal to its marginal social cost. And I also need to ask what these other means for price determination might be, in case the market for healthcare isn’t competitive. Note that I don’t mean either of these as criticisms of what has been said. I simply wish to state that different countries will have different constraints and features, and at least in the case of India, I think both of these are truly important and relevant questions.

John Cochrane has a nice paper in which he answers the first of these questions:

“What about the homeless guy with a heart attack?”
Let’s not confuse the issue with charity. The goal here is to fix health insurance for the vast majority of
Americans –people who have jobs, people who buy houses, cars, and cell phones, people who buy
insurance for their houses and life insurance for their families.
Yes, we will also need charity care for those who fall through the cracks, the victims of awful disasters,
the very poor, and the mentally ill. This will be provided by government and by private charity. It has to
be good enough to fulfill the responsibilities of a compassionate society, and just bad enough that few will choose it if they are capable of making choices. I wish it could be better, but that’s the best that is
possible. For people who are simply poor, but competent, vouchers to buy health insurance or to refill
health savings accounts make plenty of sense

Cochrane, J. H. (2013). After the ACA: Freeing the market for health care. Available at SSRN 2213027. (pp 23-24)

In other words, government intervention is necessary, unless the provisioning is entirely and always possible via private charity. At least in India’s case, I feel fairly safe in assuming that private charity is simply not going to be enough, now or in the foreseeable future.

As regards the second question: why isn’t the market for healthcare competitive?

I ran a simple Google search for “Assumptions of Competitive Markets“, and clicked on this link. Pick any other link that you prefer, but I would assume that the list won’t change all that much.

Competitive markets will have price takers, identical goods, a large number of buyers and sellers, easy entry and exit, and complete information. Some other websites may talk about zero search costs and zero transaction costs, but you can argue that this comes under complete information.

Is the market for healthcare in India competitive? Ask yourself which of these assumptions are met in the context of healthcare in India.

Where we lie on the spectrum between “hell yes” and “gawd no” may differ, but I think it is safe to say that most of us will be closer to “gawd no”. If your answer differs from this, I would love to know why.

But long story short, here would be my summarization of the libertarian approach to healthcare in the abstract:

As long as markets are competitive, and most people are above a certain income threshold, healthcare is best served by having as little government intervention in regulation and provisioning of healthcare as possible.

If that is not an acceptable statement for a libertarian approach to healthcare, please let me know how and why you would rephrase it.

If, on the other hand, it is an acceptable statement, then I have follow-up questions:

  1. If markets are not competitive, are we better off trying to make them competitive, or are we better off provisioning healthcare with government intervention? I ask this question specifically in an Indian context, but feel free to think about other nations while answering as well.
    Why does this matter? Because of opportunity costs. A resource that is spent on making markets competitive is a resource not spent on the provisioning of healthcare. Given the amount of poverty in India, this is an important question to think about.
  2. What is a good income threshold to keep in mind, and how do we know the answer is mostly correct?
  3. How many people need to be above this threshold for government to mostly withdraw from regulation and provisioning of healthcare?
  4. What does “as little government intervention as possible” mean? What should the government move out of first (regulation or provisioning), and why? Also, how?

I look forward to your answers!

Information about the Coronavirus in India

What is the corona virus?

There isn’t one specific coronvirus.

Coronaviruses are a large family of viruses which may cause illness in animals or humans. In humans, several coronaviruses are known to cause respiratory infections ranging from the common cold to more severe diseases such as Middle East Respiratory Syndrome (MERS) and Severe Acute Respiratory Syndrome (SARS).

By the way, the’re called corona viruses because they look like coronas, or crowns.

Coronaviruses are named for their appearance: Under the microscope, the viruses look like they are covered with pointed structures that surround them like a corona, or crown.

The most recently discovered virus causes the disease COVID-19.

How does it spread?

People can catch COVID-19 from others who have the virus. The disease can spread from person to person through small droplets from the nose or mouth which are spread when a person with COVID-19 coughs or exhales. These droplets land on objects and surfaces around the person. Other people then catch COVID-19 by touching these objects or surfaces, then touching their eyes, nose or mouth. People can also catch COVID-19 if they breathe in droplets from a person with COVID-19 who coughs out or exhales droplets. This is why it is important to stay more than 1 meter (3 feet) away from a person who is sick.

WHO is assessing ongoing research on the ways COVID-19 is spread and will continue to share updated findings.

 

 

When and how did it reach India?

As best we can tell, 30th January, 2020. This chart below shows you the spread since then.

Data and visualization can be tricky, and later on in this post, keep an eye out for another visualization about the corona virus.

Where does one get official data from in India?

The Ministry of Health and Family Welfare (MoHFW) is the official source that you should begin with. This is their website, this is their Twitter ID. At the moment of writing, the website reports 110 confirmed cases in India.

How is testing being done in India?

On the MoHFW website, there is a link about when to get tested for the corona virus in India. Shown below is a screen grab of that link.

Two things stand out:

  1. The second bullet point uses the word “and“. Having the symptoms is not enough, you must necessarily have traveled to any of the countries listed above. Other than whatever has been said in the previous sentence, you qualify for testing if you are a contact of a laboratory confirmed positive case. Unfortunately, “contact” isn’t clearly defined, at least on this page.
  2. Testing will currently be done by government laboratories only.

Which immediately leads to the next question:

What is our capacity to test for the coronavirus?

India has activated 67 laboratories for conducting the first test, and 51 of those are equipped to conduct confirmatory tests, which is not even one lab per district. India has 732 districts.

At present, cases are being reported from 13 States and Union Territories. In a country with a population of 1.3 billion, till now, only 6,500 throat swab samples from 5,900 individuals have been sent to these labs; at least 107 have tested positive.

That is from the Hindu Business Line, in a report that came out yesterday.

This is the COVID-19 page on the ICMR website. These are the locations of the testing laboratories in India. These are the locations of the sample collection laboratories.

 

 

OK, but 110 cases, how bad can that be?

Exponentials are hard. Anybody who has taught math or statistics will tell you that. Look at the graph(s) below:

A golden rule that I always teach my students in statistics: first look at the axes! On the horizontal axes here, we have the lag in days behind Italy. But the vertical axis is the more important thing to look at, because it is not linear. We go from 1 to 10, from 10 to 100, and from a 100 to a 1000 (and so on). Each tick on the vertical axis is a 10x increase.

In English? Every country where the virus has spread has seen a 10x increase. If you ask a data scientist to take a look at these data points, and then ask the about the trajectory in India, there’s only one possible answer: we probably go from a 100 to a 1000, and from a 1000 to 10,000. I hope not, of course, and mitigation is possible – social distancing is key!

By the way, if you want to play around with the data, click here to go to the Github page.

OK, so the numbers will go up rapidly, maybe. But the fatality rates are low, right?

Two important things to note:

Two numbers that you need to keep in mind when you think about the corona virus. The R0 and the fatality rate. The R0 for the coronavirus seems to be about two, although of course that number can vary because of a lot of factors. But a baseline R0 of 2 seems to be a reasonable estimate.

In English? If you get it, you will on average spread it to two other people. That’s why the quarantine and the social distancing measures are so very important. It’s not just because you shouldn’t get it yourself – it is more because you shouldn’t be giving it to others.

Now, the answer to the question itself: are the fatality rates low?

The Case Fatality Rate (CFR) for COVID-19 is 3.48 percent.

But as an statistician, it is important to state that the correct answer is it depends!

Unfortunately, it is common to report the CFR as a single value. But the CFR is not a biological constant. The CFR is not a value which is tied to the given disease, but is instead reflective of the severity of the disease in a particular context, at a particular time, in a particular population.

The probability that someone dies from a disease is not only dependent on the disease itself, but also the social and individual response to it: the level and timing of treatment they receive, and the ability of the given individual to recover from it.

This means that the CFR can decrease or increase over time, and that it can vary by location and by the characteristics of the infected population (age, sex, pre-existing conditions).

The real problem is rapidly overwhelmed medical facilities

Read the entire thread, not just the tweet quoted above. The point of sharing that tweet is to help you realize that opportunity costs will come into play very, very quickly at medical centers in India. Whom do I treat – patients with the coronvirus or other patients? And soon enough, it’ll be whom do I treat, this coronavirus patient or that one?

Worst of all, there is no treatment per se, yet. There’s encouraging news on the front from all over the world, India included, but there’s time for a recognized cure to be acknowledged and made widely available. Best to proceed on the assumption that there won’t be one, and prepare accordingly. That’s just good strategy in times like these: budget for the worst case scenario.

OK, so what can we do?

Follow government instructions! We’re all in this together, so whatever your local/state/national government is telling you ought to be followed, no questions asked.

Social distancing is key, and that’s fancy English for avoiding going out. Stay at home as much as possible over the coming days, and cooperate with local authorities. Classes, colleges, schools, clubs, restaurants, malls, gyms – anything in the nature of a public gathering ought to be avoided as much as possible.

Panic is not going to solve anything, but precautions will go a long way towards helping.

Stay home, stay safe!

Where can I learn more?

Here’s a list of resources:

Myth-busters from the WHO.

WHO’s advice for the public.

The Situation Update Report from the WHO (I have posted the latest update at the time of writing, but keep checking for more up to date ones as the days go by)

The WHO dashboard.

Read the Wikipedia article on the Epidemic Diseases Act.

A useful article about the how to think about exponentials.

A request: please email me at ashish at econforeverybody dot com with any resources that you think may prove useful. I’ll do my best to share the more useful ones with everybody.

 

Coming up tomorrow: technology in the times of COVID-19.

 

 

 

 

Agriculture in England and India, Immigration, Water and Healthcare

Five articles I enjoyed reading this week – and hopefully you will as well

The change that is coming over farming can be summarised in simple economic terms. Intensive agriculture prioritises a bumper harvest – the annual dividend – while the new approach emphasises the preservation of the initial capital – the land itself. For a glimpse of how this new investment priority will affect British farming, it suffices to visit those progressives who have already, to varying degrees, made it their own.

The Guardian Long Read on agriculture (in England). Horizons (one out of choices, horizons, incentives and costs) remain underrated in economics classes, as this article points out. But there is much more to read here: recommended!

It developed an app-based platform that registers orders directly from buyers, analyses category-wise demand, fixes dynamic prices depending on daily demand, and transfers the orders to its network of 1,000+ farmers. Farmpal’s price comparison feature ensures that farmers can sell their produce at rates higher by 20 to 30 percent than what they would normally get in the mandis.
“This is one of our main promises to the farming community. We are able to offer them premium prices because technology eliminates at least four to seven middlemen from farm to fork,” the founder explains.

While on the topic of agriculture, this from Maharashtra, India: Farmpal.

Caplan’s case isn’t entirely about economics: he also makes a moral appeal. Consider the case of “Starving Marvin,” who needs food and is prepared to purchase it legally. On his way to the market, he is turned away by an armed guard. If Marvin subsequently dies of starvation, Caplan asks, is the guard guilty of murder? The philosopher Michael Huemer, who first introduced this hypothetical, in 2012, concluded that the answer was yes. He writes, “If a person is starving, and you refuse to give him food, then you allow him to starve, but if you take the extra step of coercively interfering with his obtaining food from someone else, then you do not merely allow him to starve; you starve him.” Caplan doesn’t go that far, but he does argue that the guard is wrong to prevent Marvin from feeding himself.

Read the paper, read the book, read this profile of Bryan Caplan, and his quixotic quest to get all of us to accept a world without borders.

Geologists and hydrologists, who worked on implementing the project, shared similar views and hailed Jalyukta Shivar. This was mainly due to the interventions undertaken in the existing water reserves, planned de-silting activities, among many others. However, experts agreed that the scheme was not appropriately implemented. Now with Jalyukta Shivar no longer in existence, focused efforts of the past five years, in most likelihood, will go down the drain unless a similar scheme is introduced. With rainfall variations getting more pronounced, in addition to depleting groundwater reserves, the state will need concrete interventions to tackle future water requirements, experts recommended.

As Tyler Cowen is fond of saying, solve for the equilibrium. On the politics of water conservation in Maharashtra.

America’s mediocre health outcomes can be explained by rapidly diminishing returns to spending and behavioral (lifestyle) risk factors, especially obesity, car accidents, homicide, and (most recently) drug overdose deaths. [Please read this post for the full explanation]

The diminishing returns are evident in cross-sectional analysis. Higher-income countries like Norway and Luxembourg spend twice as much as the likes of Spain and Italy and probably experience worse average outcomes.

Via the excellent Navin Kabra, a very, very long article on healthcare in America. Excellent if you are a student of America, healthcare or microeconomics. At the intersection of the three, it becomes mandatory reading. Pair up with Baumol’s Cost Disease (although the name is misleading, it is the most popular way to this phenomenon is referenced)

 

Links for 25th April, 2019

  1. “Singapore appreciates the relative strengths and limits of the public and private sectors in health. Often in the United States, we think that one or the other can do it all. That’s not necessarily the case.”
    ..
    ..
    It is always a good idea to learn about Singapore’s healthcare system, and this Upshot column from the NYT helps in that regard. Each of the links are also worth reading. If you spend time reading through the article and all the links therein, you might be a while, but it is, I would say, worth it.
    ..
    ..
  2. “With Nobel laureate Daniel Kahneman, he collected evidence on happiness that remains my benchmark for social scientists’ ability to shed light on wellbeing. Prof Kahneman once warned me that expert advice can go only so far. Much happiness and sadness is genetically determined: “We shouldn’t expect a depressive person to suddenly become extroverted and leaping with joy.” Those words are much on my mind this week.”
    ..
    ..
    Tim Harford remembers Alan Kreuger, and helps us understand a lot about the man, his work, happiness and much else in the process. Entirely worth reading.
    ..
    ..
  3. “The Captain Swing riots are thus one more example, an especially vivid one, that new technologies which cause a lot of people to lose a way of earning income can be highly disruptive. The authors write: “The results suggest that in one of the most dramatic cases of labor unrest in recent history, labor-saving technology played a key role. While the past may not be an accurate guide to future upheavals, evidence from the days of Captain Swing serve as a reminder of how disruptive new, labor-saving technologies can be in economic, social and political terms.”
    ..
    ..
    One, because reading something you hadn’t read before is always interesting. Two, because unemployment because of automation isn’t new. Three, makes for very relevant reading today (in multiple ways: automation itself, but also untangling causality.)
    ..
    ..
  4. “He says he was inspired by the depth of the nun’s commitment to India’s least fortunate—but he was unwilling to emulate her approach, and not simply because of its material sacrifices. Although Shetty often performed free surgeries for the poorest of the poor, he reasoned that the only way to sustainably serve large numbers of people in need was to make it a business. “What Mother Teresa did was not scalable,” he says—perhaps the first time venture capital jargon has been applied to the work of the Angel of Calcutta.”
    ..
    ..
    Interested in healthcare, or economics, or both? A lovely read, in that case. Also a good explainer of the challenges in front of Modicare.
    ..
    ..
  5. “The argument in favour of having Tribunals is that they offer a specialised and dedicated forum for settling specific categories of disputes which are otherwise likely to get stuck in the regular judicial channels. But this assumption holds only if the regular judiciary exercises restraint and does not insert itself into the proceedings pending before Tribunals. ”
    ..
    ..
    The problem with laws in India isn’t their framing – it is their implementation. Read this to find out more.

Links for 13th February, 2019

  1. “The trick in a busy trauma bay is to look at a patient, decide whether he or she is dying in front of you. The way you make that decision is basically trauma poker: You’re looking for the tells that their body, the remarkable machine of the human body, is compensating to keep them alive, or refusing: heart rate, respiratory rate, blood pressure, the color of the skin. The body, if you listen, will tell you what’s going on.”
    A harrowing read on life as a trauma surgeon in Chicago. Lessons on opportunity cost, development, conflict, retaliation, game theory and much more. Great read.
  2. “Bundled pricing is one reason why subscription models like Spotify should ultimately win out over à la carte models like iTunes. Subscription commerce can also be thought of as a form of bundling.”
    Or put another way, in the age of the internet, why does Netflix exist? There are many textbooks that do a better job of explaining this, but for a good primer on bundling, this is a good place to start. Note that this was written in 2012!
  3. “Mature fiscal systems create checks-and-balances which reduce the extent to which debt or off-balance-sheet liabilities can surge. Perhaps less developed countries have weak institutions, and then the political leadership sees a different optimisation. Short bursts of GDP growth can then be achieved in many bad ways, such as a surge in debt, piling up off-balance-sheet liabilities, etc. But this is not sustained growth: We get a spurt of high growth, and then things go wrong.”
    What do I think of this year’s budget? is a question I often get in classes – every year. This blog post is a good way to think about budgets – every year, and irrespective of who is in power.
  4. “The data means that the five warmest years in recorded history have been the last five, and that 18 of the 19 warmest years have occurred since 2001.”
    I’ve said it before, I’ll say it again, and I’ll reiterate it repeatedly. We do not worry anywhere near enough about climate change.
  5. “What is more interesting, though, is the story of Windows’ decline in Redmond, culminating with last week’s reorganization that, for the first time since 1980, left the company without a division devoted to personal computer operating systems (Windows was split, with the core engineering group placed under Azure, and the rest of the organization effectively under Office 365; there will still be Windows releases, but it is no longer a standalone business).”
    Ben Thompson on something that I while growing up would have considered absolutely impossible – the end of Windows.