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June 27, 2009

Economist's View - 5 new articles

Are Advances in Technology the Source of Rising Medical Costs?

I'm not sure what to think of this. If it's true that medical technology increases life expectancy without increasing per capita medical expenditures, that's good news, but that result differs from other work in the area (and it leaves me wondering what is behind the actual and projected increase in health care costs if the source is something other than this):

Toles1

The quality of medical care, behavioral risk factors, and longevity growth, by Frank R. Lichtenberg, Vox EU: The cost of medical care continues to rise rapidly in the US and other industrialized countries. According to a report from consulting firm PricewaterhouseCoopers, US employers who offer health insurance coverage could see a 9% cost increase between 2009 and 2010, and their workers may face an even larger increase.

Some observers argue that rapidly increasing health care expenditure is due, to an important extent, to medical innovation – the development and use of new drugs, diagnostics, and procedures. For example, the Kaiser Family Foundation (2007), citing Rettig (1994), claims that "advances in medical technology have contributed to rising overall US health care spending."

Other observers argue that most medical innovations do not improve people's health. Lexchin (2004), for example, claims that "at best one third of new drugs offer some additional clinical benefit and perhaps as few as 3% are major therapeutic advances."

If both of these claims were true, medical innovation would result in the worst of both worlds – a large increase in cost and little or no increase in benefit (in the form of improved health outcomes). However, a study that I have recently performed casts considerable doubt on both of these claims. My findings indicate that medical innovation has yielded significant increases in life expectancy without increasing medical expenditure.

My study (Lichtenberg 2009) examines the effect of the quality of medical care, behavioral risk factors, and other variables on life expectancy and medical expenditure using longitudinal state-level data. As shown in Figure 1, the rate of increase of longevity has varied considerably across US states since 1991.

I examined the effects of three different measures of the quality of medical care. The first is the average quality of diagnostic imaging procedures, defined as the fraction of procedures that are advanced procedures. The second is the mean vintage (FDA approval year) of outpatient and inpatient prescription drugs. The third is the average quality of practicing physicians, defined as the fraction of physicians that were trained at top-ranked medical schools.

I also examined the effects on longevity of three important behavioral risk factors – obesity, smoking, and AIDS incidence – and other variables – education, income, and health insurance coverage – that might be expected to influence longevity growth. My econometric approach controlled for the effects of unobserved factors that vary across states but are relatively stable over time (e.g. climate and environmental quality), and unobserved factors that change over time but are invariant across states (e.g. changes in federal government policies).

The gains from medical innovation

The indicators of the quality of diagnostic imaging procedures, drugs, and physicians almost always had positive and statistically significant effects on life expectancy. Life expectancy increased more rapidly in states where (1) the fraction of Medicare diagnostic imaging procedures that were advanced procedures increased more rapidly, (2) the vintage of self- and provider-administered drugs increased more rapidly, and (3) the quality of medical schools previously attended by physicians increased more rapidly.

Between 1991 and 2004, life expectancy at birth increased 2.37 years. The estimates imply that, during this period, the increased use of advanced imaging technology increased life expectancy by 0.62-0.71 years, use of newer outpatient prescription drugs increased life expectancy by 0.96-1.26 years, and use of newer provider-administered drugs increased life expectancy by 0.48-0.54 years. The decline in the average quality of medical schools previously attended by physicians reduced life expectancy by 0.28-0.47 years.

The availability of data from Australia's universal health care system, Medicare Australia, allowed me to provide some additional evidence about the impact of advanced imaging technology on mortality. I estimated difference-in-difference models of the effect of advanced imaging innovation on age-specific mortality rates. Demographic groups that had above-average increases in the number of advanced imaging procedures per capita had above-average declines in mortality rates, but changes in mortality rates were uncorrelated across demographic groups with changes in the number of standard imaging procedures per capita. Estimates of the effect of diagnostic imaging innovation on longevity based on Australian data are quite consistent with estimates based on US data.

The increased fraction of the population that was overweight or obese, rising from 44% to 59%, reduced the increase in life expectancy by .58-.68 years. The decline in the incidence of AIDS is estimated to have increased life expectancy by .18-.20 years. The small decline in smoking prevalence may have increased life expectancy by about 0.10 years.

Growth in life expectancy was uncorrelated across states with health insurance coverage and education, and inversely correlated with per capita income growth. The 19% increase in real per capita income is estimated to have reduced life expectancy by .34-.43 years. The sum of the contributions of all of the factors to the increase in life expectancy is in the 0.85-1.32 year range. Consequently, between 1.05 and 1.52 years of the 2.37-year increase in life expectancy is unexplained.

Greater coverage, lower costs

Although states with larger increases in the quality of diagnostic procedures, drugs, and physicians had larger increases in life expectancy, they did not have larger increases in per capita medical expenditure. This may be the case because, while newer diagnostic procedures and drugs are more expensive than their older counterparts, they may reduce the need for costly additional medical treatment. The absence of a correlation across states between medical innovation and expenditure growth is inconsistent with the view that advances in medical technology have contributed to rising overall US health care spending. Increased health insurance coverage is associated with lower growth in per capita medical expenditure.

References

Kaiser Family Foundation (2007) "How Changes in Medical Technology Affect Health Care Costs," March.

Lexchin, Joel (2004), "Are new drugs as good as they claim to be?," Australian Prescriber.

Lichtenberg, Frank, "The Quality of Medical Care, Behavioral Risk Factors, and Longevity Growth," NBER WP 15068.

Rettig, Richard A.(2007), "Medical Innovation Duels Cost Containment," Health Affairs (Summer 1994): 15.


"Pure Political Theater, and I Don't Like It"

Jim Hamilton:

On grilling the Fed Chair, Econbrowser: I got a bit angry at accounts of the latest appearance of Federal Reserve Chair Ben Bernanke before the U.S. Congress. ...

It is one thing to have different views from those of the Fed Chair on particular decisions that have been made-- I certainly have plenty of areas of disagreement of my own. But it is another matter to question Bernanke's intellect or personal integrity. As someone who's known him for 25 years, I would place him above 99.9% of those recently in power in Washington on the integrity dimension, not to mention IQ. His actions over the past two years have been guided by one and only one motive, that being to minimize the harm caused to ordinary people by the financial turmoil. Whether you agree or disagree with all the steps he's taken, let's start with an understanding that that's been his overriding goal.

These interrogations reveal more about those doing the grilling than they reveal about Bernanke. I see this as pure political theater, and I don't like it.

If Congress wants to explore more usefully the wisdom and motives behind some of the decisions that have been made, it might want to investigate why some legislators are now pushing for Fannie and Freddie to guarantee a riskier category of mortgage condo loans.


"The Persian Bazaars"

The Persian Bazaars of 1910 (as viewed through western eyes):

Islamic History Sourcebook: Eustache de Lory: The Persian Bazaars, 1910: Like the bazaars in Constantinople and Cairo, those of Teheran consist of an immense labyrinth of streets covered with brick vaults, forming an uninterrupted row of little domes, in the middle of each of which a round hole is pierced to let in the light. Through this hole the sun darts its rays like the flash-lights of a man-of-war amid the half-lights of the vaults, which in summer keep the air so cool.

When you enter the great central artery, which starts from the south of the Sabz-Meidan, you are in the Bazaar of the Shoemakers. On both sides of the vault are stalls, from ten to fifteen feet square, with a floor about three feet above the ground. These are occupied by the makers of all sorts of shoes. Here are pahboush, yellow, or green for the mullahs; there are the tiny red slippers with turned-up toes and metal heels which the women wear. Farther on are the ugly boots of blacking leather or patent leather with elastic sides, which are intended for those who wish to enjoy the advantages of civilization. Then come the shops where you buy the giveh, the national shoes of Persia, made of very strong white linen, with soles of plaited thongs dyed green; and the yellow top-boots, with the red rolled-over tops and very turned-up toes and thick soles, like Tartar boots, which are worn by the Persians in the mountains.

Nothing used to amuse me more than the diversity of types we met in the bazaar. All the types and all the costumes of central and western Asia elbow each other here in the most extraordinary medley.

The first thing I saw in the bazaars, riding a mule,was a venerable mujtehid, in a close-rolled white turban of a thousand little folds, wound round and round a pointed conical cap. He was accompanied by a numerous suite of mullahs, who wore turbans too, but not with the same elaborate coils, because these are reserved for the highest ranks of the priesthood; of Seyyeds, with dark blue turbans, or green if they were hadji [pilgrims], as well as descendants of the Prophet, all of them wearing long flowing robes, belted in at the waist by a Cashmere shawl, in which the calamdan and the roll of paper appear which are the badge of men of letters. The crowd made deep bows to the mujtehid, and many of them kissed the hem of his garment. He looked at them with condescension, but with a distracted attention, for his eyes seemed to be regarding in the visionary distance the series of the Seven Heavens promised in the Koran. The Persian is very theatrical; he always likes to look his part. If he is a general, he is Bombastes; if he is a judge, he is Rhadamanthus. Then came an Armenian in a low kolah, with clothes which he imagined to be European. He was careful not to brush the Mussulmans, knowing that they would curse him if he polluted them with his impure touch.

The men with flashing eyes and mustaches like a walrus's, wearing a sort of bolero made of plaited foals' hair, and a round white cap encircled with striped silk, whose fringe fell over their faces, were merchants from Kurdistan. Their rifles, slung over their right shoulders, and bandoliers full of cartridges, showed that even Mercury could not go out without being armed in their "charming" country. The man with a square beard, with a blue-and-white striped cloth on his head, held in its place by a crown of camel's-hair cords with gold knobs, was a merchant of Baghdad; he was positively glittering in his sky-blue abba with golden stripes like sun-rays. As he passed by, the Orthodox Persians cursed him, for he was a Sunnite, and his dress was like the one that the assassins of Kassem wear in the religious procession of Moharrem. The young Negro who followed him was a Somali slave that he was probably going to sell.

Then came a water-carrier, dressed in nothing but a dirty shirt, bowed down by the weight of his goat-skin full of water, which swayed about on his back. He held in his left hand one of the legs of the skin, which is the tap through which he draws the water, and in his right, a brass cup engraved with sentences from the Koran and verses of poetry, reciting the praises of the liquid that he was selling. He-was watering the front of a shop. There were interminable files of black phantoms gliding from shop to shop, bargaining noiselessly, and disappearing like shadows. This is all that one sees of the fair sex, with the exception of a few Armenian women, half-veiled, with round caps of embroidered velvet on the tops of their heads, from which fall a quantity of plaits, concealed in the folds of the chader, which they wear like their Mussulman congeners.

Horsemen were riding about, and there were strings of little gray donkeys loaded with bricks for building, and interminable caravans of camels with deafening bells. Their heads, ornamented with tufts of red, green, and yellow, were balanced in a bored and supercilious sort of way on the top of their long swans' necks, encircled with collars of red leather ornamented with little white cowries. Their india-rubber-like feet flattened out as they touched the ground with the regularity of a clock; the loads hanging from each side of their humps, swaying and knocking against the walls, were a perpetual menace for the foot passenger. Suddenly there was a pandemonium: two caravans coming in opposite directions had met, the camel-drivers shouted to make their beasts give way to each other, but in vain; for the beasts were locked together as their loads caught, and dashed the foot passengers into the walls. The cries of fury and the oaths of the camel-drivers were blended with the growling of the camels, the yells of the people, and the howling of the dogs which were run over, and the screams of the frightened women.

The entire traffic was suspended, and it took more than half an hour to reestablish order. This incident, during which the mirza and I took refuge in a shop in order not to be crushed, gave me the opportunity of bargaining for a pair of exquisite little pahboush of gazelle skin, embroidered with golden palms and mother-of-pearl dates. One of these was still in the hands of the workmen. The merchant asked a ridiculous price, as if the pearls had been real; and to give them more value in my eyes, he assured me that they belonged to one of those mysterious phantoms whom fear had driven into the corner of his shop, and who, he said, was a khanoum [i.e., lady] of importance. The mirza drew my attention to a chader of black silk fringed with gold lace in the middle of some cotton shaders. Who knows? it might have been a princess shopping with her maids. How exciting it would have been to have carried off the pahboush of the trembling phantom, who, seated in that corner, looked like a half-filled balloon in the middle of other half-filled balloons. All sorts of ideas passed through my mind: I had visions of a Cinderella of the "Thousand and One Nights," or else perhaps this mignon slipper that I was holding in my hand had been used by the lady to chastise her unfaithful husband, for the heel of the pahboush is a favorite weapon in the harem. But the mirza frowned at me, and I understood that all this was the Eternal Persian Mirage, and must go the way of all mirages.... So I ran away laughing.

We passed through the bazaars of kalyans, chibouks, and other pipes, which were crowded with pilgrims from Kashgar, easily recognizable by their high cheek-bones and narrow eyes, laying in supplies for their journey to Mecca, and went to the Tobacco Bazaar. It is a very quiet place, full of the fragrance of nicotine. On the counters were bricks of amber-colored tobacco, almost as closely pressed as wood---some a yard high and long and wide, some still sewn up in goatskins. There were also beautiful long leaves of tobacco of Shiraz for the kalyans, and tobacco of Kachan, shredded into fine flakes like curls of fair hair, for making into cigarettes.

Flint and steel are still much used, but are being driven out by Japanese and Russian imitations of Swedish matches---the Japanese being incomparably better. There was an attempt to start a match factory in Persia, but it failed.

Seeing some very beautiful sheets of tobacco for the kalyan, I asked the price, and was told a price which came to about two francs---four krans---the pound. I ordered two pounds. "But you put your thumb on the scales!" I exclaimed, seeing that the merchant was cheating. He looked at me---there was a pause---and then he said, in the most unabashed way, "Do you imagine that I am going to give you tobacco of that fineness for four krans the pound if I did not put my thumb in the scale?" I was so pleased to find a Persian so Persian that I could do nothing but take the tobacco and add a little backsheesh to the price he asked.

The bazaar into which one goes oftenest in Persia is the Bazaar of Carpets. This suggests much to the European mind, which at once thinks of a vast display of rich hangings and gorgeous colors. In Persia one sees nothing of the kind. The carpets are all piled up, one over the other, and when you want to buy a carpet, the men of the shop pull them out one after the other in front of you, and build them into fresh piles on the opposite side. It is very difficult to make up your mind, for you never see more than two displayed at the same time. It takes a very long time; for, carrying in your head as well as you can the remembrance of those you like best, you are always having another one pulled out, and before you manage to get the three or four you really like best all shown at the same time, several hours will have gone, and pounds of dust, coming from all parts of Persia, will have been swallowed. However, you need not regret the time expended, so many precious articles will have been exhibited before you, each more beautiful than the other.

The first carpet that struck me was one from Kerman, woven with extraordinary fineness. Its pattern represented a tree on which parrots in great profusion and every attitude ate extraordinary fruits. Under that tree, which took up nearly all the carpet, were some very small gazelles, a quarter of the size of the parrots, and round it was a very delicately drawn border. The next carpet was from Turkestan. On a background of Venetian red, dark blue geometrical drawings were repeated at regular intervals. But this one, which was made of very good material, had a hideous design. It was a bad copy of the Early Victorian carpet, representing a tiger eating an apple under a rosebush. Then the merchant brought out a beautiful dark blue carpet, decorated with narcissi, tulips, and hyacinths, white, red, yellow, and green, of a pre-Raphaelite pattern which came from Kurdistan. It was an old one; they are not made any more. Directly after this, he showed me a carpet with a regular pattern of henna flowers, which was the modern representative of the same school. The next, of the same pattern, but with very crude colors, showed that in spite of the new laws forbidding aniline colors, these chemical dyes are spoiling the manufacture of modern carpets. Happily this was the exception, and it is to be hoped that the laws by which aniline dyes have recently been prohibited from entering Persia will be enforced with Draconian severity.

After many notable examples from Faraghan, Khorassan, Turkestan, Khoi, and Daghestan, I was shown one very curious carpet, with a white background, on which was drawn with black lines an Assyrian king with wings, copied from the bas-reliefs of Persepolis. His name, Nebuchadnezzar, was written under it in Roman letters. I regretted to see such good work and such fine materials wasted on such a miracle of bad taste. It was executed in one of the best workshops of Kerman.

Silk carpets are very much appreciated in Persia. They are generally of the type of prayer carpets, representing two columns, a vault, and in the middle a mosque lamp hanging down. Another usual pattern for the silk carpets is a vase of flowers with birds. The Persian weavers receive orders, especially from Cairo, for very large silk carpets.

The wily Persian has discovered the secret of making new carpets look ancient. He smokes them over a fire made with special herbs, and this gives the carpet a used appearance and fades the colors. It is nearly impossible, when this is well done, to distinguish between a genuine antique and a forgery. A commoner way of aging a carpet (very common in the bazaars) is to spread it out on the street, in order that every passer-by and animal may trample on it.

In Tabriz, an Englishman, Mr. Stevens, conceived the happy idea of starting a carpet-weaving industry, where only old patterns are made. He tries to revive the old traditions, and has succeeded very well. I went to see his workrooms in the bazaars. They were established in a large sort of shed with mud walls and roof, lighted by mere holes of windows and skylights. The weaving was done on old-fashioned hand-looms, some of them eight or ten feet high. Little boys of ten to twelve were perched on planks in front of the looms; a man, holding in his hand the pattern of the carpet with all the colors marked in squares, like our Berlin woolwork patterns, sang to a popular tune the number and color of each thread---one blue, two red, one yellow, etc.---which was repeated in chorus by all the little boys, and accompanied by the noise of the bobbins which go through the warp threads, and the rhythmical swish with which the boys cut the thread after making the little knots.

These little apprentices, dressed in a variety of colors, perched on their planks and singing at the tops of their voices, were like love-birds sitting on a branch. Interesting as it all was, the mirza and I were tired out before we made our escape, and nearly smothered by the dust we had to swallow.


Source

From: Eva March Tappan, ed., The World's Story: A History of the World in Story, Song and Art, (Boston: Houghton Mifflin, 1914), Vol. II: India, Persia, Mesopotamia, and Palestine, pp. 421-429.

Note: Many Western sources about Islamic countries exhibit what has come to be known as orientalism. The terms used ("Mohammedan" for instance rather than "Muslim"), and the attitudes exhibited by the writers need to be questioned by modern readers.


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