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Health Economics 101Improving the health care system, one algorithm at a timeby Ross Tomlin 
Vivian Ho, Ph.D., is among a small cadre of health economists who regularly weigh tradeoffs between mortality rates and health care costs. Slice them any which way, and the numbers are hard to swallow: 47 million Americans uninsured, health care expen-ditures at $2 trillion and climbing, 5 percent of Medicare patients accounting for more than 40 percent of Medicare spending. Some folks, including no shortage of 2008 presidential aspirants, say universal health insurance for all Americans is the answer. But who will foot the additional billions of dollars per year to make that happen? Is the answer more government regulation or less? Should the balance vary depending on the kind of health condition and treatment at hand? Vivian Ho, Ph.D., is among a small cadre of health economists in search of tangible answers to these tough questions. Holding a dual appointment as Associate Professor of Medicine at Baylor College of Medicine and the James A. Baker III Institute Chair in Health Economics at Rice University, Ho came to Houston in 2004 to fill a void at both institutions. "You have to think very carefully when designing policies to get providers and patients to respond in the way you hope," said Ho. "Then you actually have to go back and take a hard look at them once they're out there to see if they actually have the benefit that you had predicted." Unlike most health care-related Ph.D.s who work in laboratory settings, Ho spends most of her days wrestling with heavy-duty sets of data and mathematical computations. Her occupation with such abstractions may hold the key to finding the balance between providing health care more safely and in a more economically feasible fashion, a balance that has thus far eluded policymakers. Numbers GameOn the surface, the kind of number-crunching Ho does might seem a little strange, given that she regularly weighs tradeoffs between mortality rates and health care costs. That means she must assign a dollar figure to the value of a human life in order to help gauge the effectiveness of a health regulation or surgical procedure. Putting a price tag on the priceless, as it were, helps Ho assess the costs and benefits of various health care services to hospitals and patients. "We are constantly making economic decisions of this kind in so many regulations in our society, and we do need them to make choices that are fair and rational," said Ho. "For example, when the government mandates that every car has to have antilock brakes, it's imposing a value on a life, and we all have to pay more for cars that have antilock brakes." Her most recent study showed that Certificate of Need (CON), a form of state gov-ernment regulation designed to keep mortality rates and health care costs down, appears to do neither with regard to two widespread heart procedures. Only by synthesizing and comparing reams of information about patient outcomes at several hospitals around the country was she able to reach a verdict. "There's a law of unintended consequences that applies when something like Certificate of Need regulation, which should make patients better off, doesn't quite do what you were hoping it would do," said Ho. Meanwhile, one of Ho's previous studies showed that the certificate does do its job when it comes to certain kinds of cancer surgery—that is, centralizing those high-volume hospitals that perform these procedures not only saves more lives (practice makes perfect) but also reduces costs (practice makes efficient). If anything, these mixed results are indicative of the evasive world of economics that Ho inhabits. Forum of IdeasAs challenging but crucial as it is to tease out the right numbers from the jumble of health care information out there, a shortage of much-needed health economists like Ho presents a supply-and-demand conundrum that she attributes to the usual suspect: lack of funding. "We don't spend enough time figuring out exactly what we are doing right and what we are doing wrong in terms of the delivery of health care to the patient and access to consumers for health insurance," Ho said. "There's a lot of heavy number-crunching that is required, but we don't have a lot of resources to do it." To encourage further health economics studies, Ho organized and hosted in February the Baker Institute's first health care reform forum, "National Health Care Reform: Policy Options and Imperatives," which is intended to become a biennial event. The conference brought together several leading national health economists and policy experts to explore options for controlling health care costs and improving access to high-quality health care, fostering critical debate in the process to help shape future health care policy. Part of the discussion centered on the impending juggernaut of chronic diseases associated with the rapid rise in obesity and the need for primary care to keep costs down before health problems get worse. Prevention, in other words, may not only be the best solution, there may not be any other choice. Furthermore, several speakers agreed, patients need to become smarter shoppers with the help of their insurance providers. "Suppose we could present to the consumers information describing the value they could receive in terms of different medical technologies in case they get sick and then allow consumers to choose health insurance policies based on that," Ho said. "If consumers were willing to decline beforehand a lot of technologies that are very expensive and provide little health benefit, then perhaps they could get a lower insurance policy. We need to start figuring out a way to get insurance that provides valuable health care to patients rather than just present everything that's out there." After the one-day conference was over, Ho felt the forum achieved its stated goal, which was to compare proposals side-by-side in a constructive fashion, a discourse she hopes will be emulated by sometimes-combative policymakers. "There are plenty of good ideas out there," said Ho. "Let's try to put them together and figure out a solution." |
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Volume 3, Issue 2, Summer 2007 |
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