Posts Tagged ‘economics’

Health as Currency

Tuesday, October 6th, 2009

An interesting idea from this Slate article on the relationship between health and wealth:

The “health-wealth gradient” refers to the fact that, as a general rule, the richer you are, the healthier you are. This applies across different countries and across the full range of social classes within the same country. (It’s not just that the very poorest people are sick.) No one knows exactly what causes the health-wealth gradient or why it’s so resilient. It may be that rich people have access to better health care. Or, as we’ve seen, it could be that being sick costs you money. Then there’s the possibility that poor people have a greater incentive to behave in unhealthy ways: Since they don’t have as much money to spend on happiness, they “spend” their health instead. (The pleasures of smoking and eating, for example, are easy on the wallet and hard on the body.)

Specifically it’s that last sentence: I had never thought of health as something you spend, but of course it is. I, for one, know that I go to the gym at least in part so that I can eat whatever I want. I am essentially purchasing health credits at the gym which I then spend on less healthy activities that I enjoy. Wow.

Turning Around the Economics of Going to the Doc

Tuesday, August 11th, 2009

One of the more interesting parts of the conversation we had with David Lee was around thinking about changing the economics of going to the doctor. As David explained, a regular doctor visit has a bad risk/reward situation: There is a low liklihood anything is wrong but good chance that if something is wrong that it’s serious. On top of this, people have a tendency to overestimate small risks and devalue the future, all leading to a situation where it’s hard to get people into a regular routine of visits.

So how can this be fixed? Well, it’s counterintuitive, but first off you’d need to accurately communicate to people the low risk of the situation by letting them know just how unlikely it is that anything is wrong with them. Then, in the case that something actually was, you’d have to be prepared with a good explanation of how to approach the issue and the liklihood of success (again, people will tend to think that the risk is higher than it really is).

Healthcare as a Reflection of Culture

Sunday, July 26th, 2009

In his review of the upcoming book The Healing of America, Jacob Weisberg makes some interesting points about healthcare policy being reflective of the country’s culture. The point I found most interesting was how off the current system is on a sociological level, as he explains in this paragraph:

It is on the sociological level, though, that we’re missing the boat most completely by sticking doggedly with a workplace-based system that no longer makes sense. America has always been a mobile society with a labor market that grows more fluid over time. Once, the norm was to work for a single employer for one’s entire career. Today, people change jobs an average of 11 times before they reach 40. Fear of losing health coverage keeps people in jobs they would otherwise leave, creating a drag on economic efficiency.

I hadn’t thought about how the trend of people being more transient in their jobs effects our healthcare policy, but it makes sense it should.

QALY: Quality Adjusted Life Score

Friday, June 12th, 2009

So a big part of our conversation with David Lee (one of GE’s health economists) last week was talk about QALYs:

QALY: Quality adjusted life year, a year of life adjusted for its quality or its value. A year in perfect health is considered equal to 1.0 QALY. The value of a year in ill health would be discounted. For example, a year bedridden might have a value equal to 0.5 QALY.

Much of David’s work is in this realm, as he explained:

We try and evaluate benefits and costs. The way we measure that is a QALY, quality adjusted life year, we try to figure out what the QALY for certain technologies are. Is the gain in QALYs to the gain in costs worth it. The UK has something like £30,000 per QALY. If the technology can deliver at less than that they’ll pay for it, if it’s more than that they won’t. … What it’s telling technology developers is that if you’ve got a high cost with low medical benefit product your chances of getting into market are lower. If you’re a cancer patient that stands to benefit from an additional three months of life that will cost the NHS $70k is it worth it or not?

This is especially interesting to me because it’s puts a value on human life. In some cases it’s going to be decided that the treatment isn’t worth the cost and while that’s a tough decision to make, it’s an understandable one (at least from an outsider rational standpoint … imagine it’s a different story if you’re the one who wants the treatment). Basically there has to be some way to measure this stuff otherwise it would all spiral out of control. Anyway, lots to think about.

I’ll continue digging into our chat with David over the coming days, going to try to break it down into bite-sized chunks.

The Effect of Knowing Your Irrationality

Saturday, May 30th, 2009

The other day we had an hour call with David Lee, one of GE’s health economists (who we mentioned the other day). Anyway, I have about six pages of notes I need to parse and start posting, but this morning I was thinking about something very specific he said: People tend to overestimate small risks. A perfect example is cancer, while any individual’s chance of having it is relatively small we don’t tend to think about it that way. This overestimation can keep us from doing things like getting cancer screenings because we’re afraid of what we might learn.

So … In bed this morning I was wondering whether anyone had studied the effect of knowing this human trait on decision making. Like what happens if you remind people right before you ask them whether they’d like to be screened that all humans tend to overestimate the chances of something that is actually quite rare? Will have to ask David this next time we speak (and if it hasn’t been done maybe we can get someone to do the study). In some ways this feels like exactly the kind of intersection between marketing, health and economics that we can really be helpful in (as marketers).

Just a thought.

Misaligned Incentives

Thursday, May 28th, 2009

There is a really good article in The New Yorker about healthcare costs and their inverse relationship with the level of care patients recieve. Just a quick quote to get you excited about reading it:

There is no insurance system that will make the two aims match perfectly. But having a system that does so much to misalign them has proved disastrous. As economists have often pointed out, we pay doctors for quantity, not quality. As they point out less often, we also pay them as individuals, rather than as members of a team working together for their patients. Both practices have made for serious problems.

The Working Sick

Wednesday, May 20th, 2009

Just ran across an interesting chart that shows the number of guaranteed sick and leave days in different countries (sick days are like you have a cold, leave days are like you have cancer).

Sick Days by Country

This relates to my post about the role of companies in the health of their employees (and the country as a whole). The sick leave entry suggests that the government mandate some number of days. I’ll avoid that question for politics sake, but I do generally think that this speaks to the misaligned incentives in health in this country. As a sick person I’m encouraged to go to work because otherwise I won’t be paid. When I go I am spreading that sickness to all the other folks in the office, ultimately creating a larger loss in productivity than if I had just stayed home for the day (not to mention I’m less likely to get better than having rested).

Yup, misaligned incentives seems to be where it’s at. Excited to speak to David Lee, one of GE’s health economist about some of this stuff.

The Role of Companies in Health

Tuesday, May 12th, 2009

One of the things that struck me at Thursday’s health briefing was the trend of companies taking an active role in the health of their employees. As we’ve been thinking about preventative health (which we’ve been tending to think of under the heading life optimization), it’s pretty clear that people aren’t so good at taking care of themselves. For better or worse, they tend to value today over tomorrow. The same isn’t true for businesses, however, where a sick employee can carry a hefty price tag. With that in mind, some businesses are beginning to invest in the wellness of their employees in all sorts of different ways.

One of those companies is General Mills, who were actually represented at the event. On one of the panels they mentioned an article about them in the New England Journal of Medicine which I quickly pulled up and purchased. It was super interesting and actually started to put some meat on the bones of some of the preventative health ideas we’ve been throwing around.

Essentially these companies are putting rewards (and sometimes penalties) for not keeping healthy. While I’m sure that sounds a bit big brotherish for some, I have to say it doesn’t bother me a whole lot (after all, employment is an agreement between both parties). What’s more, it reflects some of the stuff going on in government with cities all over the world banning smoking (and even trans fats in New York City).

Anyway, one of the core features of the General Mills program s a thing called the “health number”:

Employees at General Mills assess their risk factors and compute their “Health Number” by answering seven behavior-related questions — concerning exercise, diet, alcohol intake, tobacco use, stress management and mood, seat-belt use, and cancer screening — plus three questions concerning body-mass index, blood pressure, and blood lipid levels. Employees with a Health Number indicating intermediate risk are advised to consider lifestyle changes, and those with high risk are urged to initiate such changes, either on their own or with the company’s help.

This was especially interesting as we’ve been thinking a lot about how you begin to make health a little bit more like a game. Actually one of the conversations we had at the briefing was about just this, where we were told about some company (whose name I can’t remember) that does something similar and then creates an anonymous leaderboard for you to see how you stack up against the competition. Not sure how effective this stuff is, but would love to find out more.

Anyway, lots of good stuff to think about.

Making a Case for Wind

Thursday, April 30th, 2009

Ran across an interesting article over at The Oil Drum: Europe that defends wind energy as a viable option for our energy needs. (As a side note I’ve been working on a longer entry about some of the stuff we learned about the economics of wind power that hopefully I can get finished this week.) Anyway, I found this chart comparing the growth of nuclear energy in the 60s and 70s to the growth of wind over the last 15 years particularly interesting:

wind vs nuclear

Interesting.

Psychology of Saving

Wednesday, April 29th, 2009

So I may be a little obsessed with behavioral economics, but this article about how Obama is using it had some gems for both energy and health.

Which message would persuade homeowners to save electricity: a call to their environmental conscience, or an appeal to their wallet? Cialdini tested those approaches in a San Diego experiment, and the answer was neither. What worked was an appeal to conformity. Residents used less power when they were told their neighbors were using less power. We’re a herdlike species, more likely to be obese if our peers are.

Interesting to think about, especially as part of smart-grid applications. Maybe just showing savings isn’t enough.

And this quote about health data, while not exactly about behavioral economics is worth sharing/thinking about:

More information can make us healthier too, which is why the stimulus poured $1.1 billion into “comparative effectiveness” research. Orszag has reams of charts showing that medical tactics and costs vary wildly across the country, with little regard for what works. He’d like to document best practices — from emergency-room to-do lists that dramatically reduce infections to protocols for when pricey tests and surgeries really help — and then have all medical providers adopt them. This approach has helped American anesthesiologists reduce deaths as well as costs.

How can GE help to make more of this data public, available and easily sharable between both medical organizations and individuals?