Brill - iant

Stephen Brill is a journalist who has specialized recently on critiquing the US healthcare system. The best article – by far – that I have ever read in Time magazine was by Brill two years ago. Now he has followed that up with a second article, promoting a full book he has written on the subject.

When you read Brill’s material, you don’t know whether to laugh or cry. He dissects US healthcare like a surgeon. He has a knack for investigation and follow up that can reach in to uncover the full extent of a failure, right to root causes and assignment of blame.

His writing is fully consistent with my own experience of US healthcare, explaining so much and credibly. But the real tragedy is that the way politics and the healthcare industry is structured in the US, nothing will happen to fix it.

An early shock of mine in the US was when I mentioned to my new GP that I thought I was a little bit deaf, as part of my initial discussion with her. She immediately sent me off to a hearing specialist. Two weeks later, I met him, and did a series of tests similar to those I had done in Europe before. The specialist concluded that indeed I was a little bit deaf, especially in my left ear. The good news was that he did not see any recent deterioration, and indeed that I was not unusually deaf for a male of my age. Then came the shock. He recommended that I take an MRI exam – just in case there was something involved that he could not see.

I complied, went for the MRI, and discovered that indeed there was no additional reason for concern. All of this was covered by my medical insurance, except for small co-pays of maybe $20 to each of the three parties (the family doctor, the specialist, and the MRI clinic).

Later, I reflected on the whole process. It has its good elements. There is a clear emphasis on prevention compared with Europe – another example is routine colonoscopies for men over fifty. But where was the balance? MRI’s are very expensive – surely it was more than a bit over the top to recommend one for a bit of deafness?

I started noticing that Forest Hills had several MRI clinics, and virtually every apartment block had medical specialists crammed into the ground floor. I had already concluded that incentives must be skewed, and then I read Brill to confirm all my suspicions.

As soon as I mentioned deafness to my family doctor, she had two big incentives to refer me. First, she had to protect herself against any future liability claim from me. Next, she could make money from the referral. And she knew I’d go along with it because it would cost me next to nothing and I was bound to be curious about my health. And she had already checked that my insurance would cover it. Then exactly the same incentives worked for the specialist in sending me for an MRI.

Here is another example. A month ago my wife had a routine mammogram – again, good that such preventive checks are in place. A few days later she got a letter proposing a second check up, without really specifying why. She duly went along a second time. Meanwhile she was chatting to a friend in the medical industry, telling her about the recall. The friend immediately guessed, correctly, that our insurance was with a particular company. Funny how everyone with that insurance gets a recall, she mused, perhaps it is partly because they pay for a follow up visit.

So we have what amounts to close to a scam, and a brilliant one since it appears almost victimless. In the end the unnecessary cost is borne silently by the employer of my wife, and by the US economy (since the excessive healthcare cost incentivizes firms to outsource jobs to other countries). If we had been over sixty-five or poor, the cost would be borne directly by taxpayers.

Brill dissects how this has happened. The root causes are clear. One is that we are all inclined to be cautious over our own health, have little knowledge and have historical trust in medical professionals. Another is the American hatred of state control, giving market methods an advantage even when plainly wrong. Here I might add the American reluctance to learn from other countries. And a third is the takeover of congress by lobbyists. Brill claims that the medical lobby spends four times as much as any other lobby – defence coming a distant second.

Those root causes lead to the ugly outcome we see today. Total costs are 50% higher per head than those of any other country, yet medical outcomes are average at best. The vulnerable do the worst, with outrageous fees for those without insurance. And it is administrators who get the richest, hiding away in their non-profits drawing obscene salaries. Big Pharma and equipment suppliers do very well too.

In Brill’s book, he looks at the story of Obamacare, which started as a well-intentioned and well-designed partial fix for this. The plan was to bring more people into coverage, while also correcting some of the most perverse incentives to control costs.

Once Obama gained power, he set a team to negotiating a bill past the industry and past congress. His team had some political experts and some economic ones. The industry, and congress via the industry lobbyists, would not accept any economic reform. In the end, the politicians conceded that the only way to get a bill at all, one that would offer coverage to new groups, would be to negotiate away almost all the economic provisions. That was precisely how it panned it.

What a disgrace! Yet what else could Obama do? Even with the bill that was passed, opponents (sponsored by lobbyists) have tried to undo things. That way further reform will have to wait for another generation. The same politicians that argue against a decent minimum wage on the grounds that it would destroy jobs also argue for bloated health care costs that have precisely the same effect.

The only part of this story that I sometimes struggle to understand is the absence of popular revolt. The lobbyists just seem to have control of public opinion, no matter how hard Brill and a few other brave journalists work to educate them. Part of the explanation for this may lie in the media itself – the same lobbyists also seem to control what passes as news for most of the USA.

Much though I love Brill’s articles, I am not sure I could wade through his book. I suspect his style would become quite tiring in longer format. Further, in the book he feels obliged to offer solutions as well as problems. He comes up with one whereby hospital trusts would be allowed to expand into health insurance. This feels rather a desperate attempt at a solution to me: at least it might be politically feasible, but would it not create even bigger problems than the ones it solved?

Another excellent article last week, by Amartya Sen and a colleague in the Guardian Weekly, puts a global perspective on this disaster. I learn that Sen was the master at Trinity Cambridge for many years, my alma mater. If this article is typical, I can understand how he rose to such heights.

Sen makes a compelling argument that a developing state should concentrate resources on achieving universal basic healthcare for citizens. The investment pays for itself through jobs created, and leads to smaller families, female emancipation, and longer productive lives. He supports his arguments through case studies, including Rwanda, Thailand, China, and some states in India such as Kerala, by drawing correlations between universal healthcare provision and other positive developments.

Now wouldn’t it be great if the next UN development goals, to be set this year, would include universal basic healthcare provision? And here is the real tragedy: the main reason why they probably won’t is that the US will probably not let it happen. How can they, when their own system has such opposing priorities?  So the scandal exposed so well by Stephen Brill doesn’t just hold back his own country: it can block development across the whole globe.     

Macro Economics: Time for a Rethink

You would expect the Economist to support economists. Presumably, several of the writers studied the subject. One day, they might want other economists to give them a job. Yet in the last couple of weeks, the magazine has gone a long way towards decrying their own profession. And I think they are right.

To be fair, one way they have been having a side-swipe at macro economics has been to praise micro economics. For years, the micro cousins did not get much of a look in, as the macro sort held court with politicians, businesses and social sciences. Models were in vogue, and macro economists thrive on models. Meanwhile, the nerdy micro sort, who ponder individual relationships between variables and look at smaller units such as industries or firms, were considered interesting to technical sorts but not likely to change the world.

There is something of a parallel with maths, which was my subject. The micro economist is the pure mathematician. I spent most of a term at college learning to prove that a path between two infinite parallel lines would at some stage have to cross any third parallel line in between the two. Well, duh. Like, er obvious man. Beautiful it may be but so what?

Meanwhile applied mathematicians got to learn how objects behaved in the physical world, and applicable ones could calculate useful probabilities. They actually used the pure maths proofs to do these things, but usually they started from them as premises and moved on.

Now, the pure mathematician is like the micro economist, while the applied one works in macro. So why are micro economists top of the pile right now?

The first part is what micro economists are doing well. They are thriving in the era of big data. Before, behaviour of individual customer groups might have been interesting, but there was no money in it. A firm might employ a macro economist to try to predict how a market would develop, but a micro economist would be an expensive luxury.

But this has changed. Now, firms using the web can understand each of their customers to a valuable extent. When I log onto a travel website, how long do I stay on each page, and which pages do I visit together? That information can be a good guide to how likely I am to buy – am I shopping to buy or just browsing? If I am a buyer, I can be steered towards information and value added products. If I am a browser, I can be sent to advertising screens. All this can happen within fractions of a second. In this way the firm can maximize its chances of a sale from buying me, while using browsing me to make itself more popular with its other paymasters, firms using their site to advertise.

In this way, internet firms large and small are growing their revenues, one customer at a time, and to do this they need micro economists, to work out which connections are relevant, build models, and create algorithms. As a customer, I find it all as rather creepy, as though people are looking over my shoulder all the time. But as someone interested in economics and value creation, I find it fascinating.

So someone coming out of economics school can build a career from their micro economic expertise now. But there is another reason macro economists are floundering. It is because they are doing such a bad job.

The most glaring example of this came with the financial crisis. Barely a single economist predicted this, beyond a few private Frazer’s who cry doom every year. Their models simply and utterly failed. And since the crisis they have been scrambling to try to explain it and to build new models, with a singular lack of success. The whole field seems broken just now. I have some sympathy for people like Christine LaGarde and Janet Yellen, who seem to be doing a great job simply by following gut principles. We should also be careful before condemning politicians like Angela Merkel. Austerity may be wrong-headed, but most of the so-called experts were advocating it until very recently.

I have a couple of bits of advice for macro economists, ideas which might help understand how they got into the mess in the first place.

First, it seems to me that many macro economists have forgotten whom their customers are, or at least become to closely allied to the biases of too small a customer group.

Who are they trying to please? First, their own profession, which has ingrained bias towards established principles even when these have been proven inadequate by events. Next, and more insidious, economists are closely related to businesses and think tanks, often allied to political ideology. So instead of the flow going from analysis to model to policy, it seems to go the other way. Some vested interest wants a policy, comes up with a supportive model and produces selective analysis to back it up.

In this way, macro economics can become like politics itself, in thrall to big money and powerful interests. I am sure there are many economists out there trying to do a good job without such bias, but perhaps they are swimming against a strong tide.

Linked advice is to focus on metrics, including challenging existing metrics. A classic one is GDP, long quoted as almost the first predictor of health of an economy.

Yet GDP is plainly a flawed measure. The Economist pondered how the softer gains from modern technology, such as speed and range of choice, could be measured, since GDP fails. In the same issue, we learn that the British economy is hamstrung by something technical about a gap between performance of British firms overseas and foreign ones in Britain, again missed in GDP.

GDP itself strikes me as a measure more for businesses than people. If you are an investor or run a business, you want the total economy to grow, since that will create more demand. But as a measure of well-being, worthy of trumpeting by politicians, surely GDP per capita is better. If GDP grows 10% but population grows 10% too, then people are no better off. Look at GDP per capita, and China does not look so smart, Europe and Japan not so hopeless.

Then, it matters where GDP comes from. Does it all go to wealthy investors? At least someone had the smart of idea of measuring median income a few years ago, since that feels a good measure for Joe public. There must be more such innovations available, if only economists were to actively look for them.

Not all GDP supports competitiveness either. We read that the cost of corruption and poor investment choices in autocratic regimes hamper competitiveness. But market economies have “bad GDP” too – look at the massive legal and healthcare costs in the US. Why has no-one tried to understand how GDP could be segmented?

Other well-used metrics seem to be past their sell-by date as well. Unemployment rate is an example. Work has changed: some choose to work less, while others are forced to work multiple part-time jobs. Metrics should be developed to understand this better, and such models could help drive good policy.

To be fair, the Economist does as good a job as anyone in challenging shibboleths. I just wish the profession it represents to follow its lead. That way society could benefit.

Come on macro economists, rise to the challenge! It is a wonderful subject, loaded with uncertainty and potential. It is a regret of mine that I did not divert from maths to economics – I have never really used my college maths. I hope a new generation can lead the dismal science to somewhere less dismal. Escaping the pockets of vested interests and seeking smart new metrics would be good places to start.   

Look back when angry

2014 was not a good year internationally. We have a new cold war on our hands, and let us not pretend that the plummeting oil price is anything but a cynical play against Russia, one that might provoke a desperate response. Across Asia, nationalism and suspicion are on the rise as China flexes its new-found power and others try to react. The Syrian civil war is left to fester by outside forces, despite the immediate tragedy and the likely longer-term consequences. The post-war European consensus is breaking down rapidly and no relief from economic gloom is in sight. Meanwhile, democratic accountability seems weaker than ever in the US, while inequality continues to grow.

At times like these, it is tempting to be angry and to despair. My last blog in 2014 was an angry one, provoked by the horrible cynicism of the congress budget agreement and other erosions of democracy.

One response that I try to follow is the opposite of the advice of John Osborne in the play that took London by storm sixty years ago, Look Back in Anger. I also try to look back, but in attempt to mollify anger. Because, in general, even if things seem terrible now, they were worse in the past. Despite all the setbacks and the apparent unstoppable march towards doom, actually humanity has made remarkable progress. Looking backwards helps to remind us of this. There are examples everywhere we look.

Start with democratic accountability in the US. I had three examples: unaccountable police, CIA torture and congress swallowed by money. Well, the police may have many weaknesses, but the laws they are trying to uphold are much stronger than they were a generation ago. We forget that African Americans did not have a vote until surprisingly recently, while workplace and school discrimination was normal practice. If the CIA erred under Bush, then let’s also remember agent Orange, and the utterly cynical participation in proxy cold wars all over the globe, and the murderous regimes propped up by CIA money and weapons. As for congress, Robin Williams was right when he suggested they all wear sponsorship logos on their jackets, but at least now there is a modicum of diversity in congress, and a lot more openness: they may not be acting in our interests, but at least now we can see that if we care to look.

Over Christmas, my family enjoyed a holiday in Peru. There were things there to get depressed about. In common with other places with Spanish then American colonial history, such as the Philippines, institutions seem weak, while exploitation is apparent, as are the less salubrious consequences of free markets, such as Casinos and brothels. Especially in the mountains, there is something in the economy that didn’t add up. With two thousand visitors paying top dollar every day, Cusco should be a rich city. But outside the centre we saw only deprivation, and a lack of basic services such as rubbish collection. I could only conclude that some mafias were creaming the incomes due to the general public.

But as I was getting angry, I chose to look back, helped in this case by our young guide to Cusco cathedral. He told us that the former Pope had visited Cusco in the 1980’s – but had never made it to the cathedral, because it was not deemed safe. Then I recalled the shining path guerillas, one of many groups fighting the corruption across Latin America at the time with their own indefensible campaigns. The Pope could travel pretty freely around South America now, indeed even President Obama could. Things are not perfect, but they used to be worse.

There were other examples of a half full glass from the trip. Clearly in Lima and in Cusco there is a generation coming through with education, ambition and opportunity. And also consider the holiday itself. I booked it through a web group called Tripmasters.com, whose service was magnificent. Twenty years ago, that would not have been possible except at crazy prices.

Looking back when angry is a reliable tonic. Over Christmas, Jeremy Thorpe died. He was a former leader of the liberal party in the UK, quite successful until his career was derailed when his undercover homosexual life was revealed. Now we have a few openly gay politicians. But what I remember most about Thorpe was the court case that gripped the nation in 1978-79, featuring some heavies reputedly hired by Thorpe to silence a former lover (and his dog). For the trial, the entire establishment rallied behind Thorpe, and a favourable verdict was dutifully delivered – though his career was ended by the disgrace anyway. That was only thirty-five years ago. We easily recall that the place was a stitch up in the era of Suez and before, but this was much more recent. Such anti-democratic behaviour by agents of the state would not be possible now, and we should celebrate that.

One smaller example comes from sport. One evening in Peru, I happened to end up watching a re-run of a Brazil-Argentina soccer match from the 1990’s. It was terrible! The pace of play and level of skill was chronically inferior to today’s games. Greats such as Simeone and Veron were playing, and were indeed slightly less bad than the others on display. When we fall into the trap of complaining about games today and deifying former players, we should look back to remember how much progress has been made.

The greatest progress has come in the social sphere. Older folks, kids and women have much better chances nowadays, and, in our watery eyed nostalgia, we should remember the dysfunction that used to be tolerated in families. Court cases against pedophile priests, and also against former icons like Savile, Harris and Hall can help us to count our modern blessings even as they appall us.

Even in more personal situations, looking back can help. Learning to sing is one of those frustrating journeys in which the goal always seems to be getting further away. The more I sing and the more I know about singing, the more I realize how limited I am as a singer. Especially at my age, such thoughts could be very dispiriting. So every so often, I get out a piece that I learned a couple of years ago. Invariably, I find I can sing the piece more easily and strongly than I ever could at the time I learned it. That way my spirits are restored. Yes, the goal is further away, but I’m heading in the right direction.

So, in my faltering quest for optimism, I resolve to look back this year whenever I get angry. Most of the time, I expect this to help temper the anger. I recommend you try the same.

As with most anger, the goal should not be to remove it completely. We have to be careful to avoid complacency, and anger can help us to do that. Dammit, we should be angry about the bahaviour of congress and the CIA and even the police. If none of us got angry, progress would be even slower. But, especially after a depressing year like 2014, we can also reward ourselves by looking back, and celebrating the progress humanity continues to make.

I wish you a healthy, thoughtful and optimistic 2015.