Quality and Health Care

Quality is a difficult word. The current Administration ensures us we will have a quality health care system. The IOM report on Comparative Clinical Research guarantees us quality results. Is is the same word. Well I suggest we recall Alice in Through the Looking Glass:

"Humpty Dumpty took the book, and looked at it carefully. `That seems to be done right -- ' he began.

`You're holding it upside down!' Alice interrupted.

`To be sure I was!' Humpty Dumpty said gaily, as she turned it round for him. `I thought it looked a little queer. As I was saying, that SEEMS to be done right -- though I haven't time to look it over thoroughly just now -- and that shows that there are three hundred and sixty-four days when you might get un-birthday presents -- '

`Certainly,' said Alice. `And only ONE for birthday presents, you know. There's glory for you!'
`I don't know what you mean by "glory,"' Alice said.

Humpty Dumpty smiled contemptuously. `Of course you don't -- till I tell you. I meant "there's a nice knock-down argument for you!"'

`But "glory" doesn't mean "a nice knock-down argument,"' Alice objected.

`When _I_ use a word,' Humpty Dumpty said in rather a scornful tone, `it means just what I choose it to mean -- neither more nor less.'

`The question is,' said Alice, `whether you CAN make words mean so many different things.'

`The question is,' said Humpty Dumpty, `which is to be master - - that's all.'

Does a word mean whatever we want it to mean, is quality something we can define and hold true to. Quality is not objective, for what one person considers important another rejects. It is not subjective, for when we collect a group of people we can ask them does A have quality and for an overwhelming majority it does or does not. Perhaps quality is akin to pornography, we know it when we see it.

Quality health care may mean we just are treated like humans, respected and considered. Quality health care is not there when you wait to see a physician and the office help shout out your formal given "Abraham" instead of Abe or Mr. Smith. You may recall that the only time you were called by your formal first name was when your mother was seeking to reprimand you for some infraction. But alas for poor quality medical office help.

Now Pirsig, the author of Zen and Motorcycle Maintenance, ZMM, has in his writings looked closely at quality. It is not that I am a fan of the Metaphysics of Quality, his fan cub if you will, but he clearly laid out issues of quality and its problems.

Pirsig says:

"The definition was: "Quality is a characteristic of thought and statement that is recognized by a nonthinking process. Because definitions are a product of rigid, formal thinking, quality cannot be defined." The fact that this "definition" was actually a refusal to define did not draw comment. The students had no formal training that would have told them his statement was, in a formal sense, completely irrational. If you can’t define something you have no formal rational way of knowing that it exists. Neither can you really tell anyone else what it is. There is, in fact, no formal difference between inability to define and stupidity. When I say, "Quality cannot be defined," I’m really saying formally, "I’m stupid about Quality.""

This was his beginning of the non-definition. But an important beginning. For quality health care is not measured in QALYs and the like, it is how a person feels. A difficult task.

Pirsig goes on:

"He singled out aspects of Quality such as unity, vividness, authority, economy, sensitivity, clarity, emphasis, flow, suspense, brilliance, precision, proportion, depth and so on; kept each of these as poorly defined as Quality itself, but demonstrated them by the same class reading techniques. He showed how the aspect of Quality called unity, the hanging-togetherness of a story, could be improved with a technique called an outline. The authority of an argument could be jacked up with a technique called footnotes, which gives authoritative reference."

"There’s an entire branch of philosophy concerned with the definition of Quality, known as esthetics. Its question, What is meant by beautiful?...he saw that when Quality is kept undefined by definition, the entire field called esthetics is wiped out—completely disenfranchised—kaput. By refusing to define Quality he had placed it entirely outside the analytic process. If you can’t define Quality, there’s no way you can subordinate it to any intellectual rule. The estheticians can have nothing more to say. Their whole field, definition of Quality, is gone."

Indeed esthetics, and aesthetics does read onto to what quality is, it is a perception, not a measurable quantity.

Pirsig ends with:

""What moves the Greek warrior to deeds of heroism," Kitto comments, "is not a sense of duty as we understand it...duty towards others: it is rather duty towards himself. He strives after that which we translate ‘virtue’ but is in Greek areté, ‘excellence’—we shall have much to say about areté. It runs through Greek life." …Quality! Virtue! Dharma! That is what the Sophists were teaching! Not ethical relativism. Not pristine "virtue." But areté. Excellence.

Dharma! Before the Church of Reason. Before substance. Before form. Before mind and matter. Before dialectic itself. Quality had been absolute. Those first teachers of the Western world were teaching Quality, and the medium they had chosen was that of rhetoric. He has been doing it right all along…Plato hadn’t tried to destroy areté. He had encapsulated it; made a permanent, fixed Idea out of it; had converted it to a rigid, immobile Immortal Truth. He made areté the Good, the highest form, the highest Idea of all. It was subordinate only to Truth itself, in a synthesis of all that had gone before. ..That was why the Quality that Phædrus had arrived at in the classroom had seemed so close to Plato’s Good. Plato’s Good was taken from the rhetoricians."

Quality in health care is indeed the arete of Pirsig, yet indefinable, yet we know it when we engage it. The biggest problem in health care will be quality not cost. A dying patient will respect the "quality" of his health care provider based on the respect he obtains in those final moments, not by how long he survives as a result of chemicals and operations. Death with dignity means a quality death. Life with dignity is a quality life.

Aesthetics is how we see the world looking outward. Quality is how we perceive the effects of the world on ourselves. An ethical person is one who deals with others in goodness and fairness. A quality physician is one who is perceived by the patient as having been dealt with dignity and respect.

I do not sense that anyone in Congress has the slightest idea about what quality care is, cost and political gain are their sole motives. Pity!

Broadband: Expertise of Political Connections?

The Massachusetts Technology Cooperative issued an RFP for a consultant to assist the Commonwealth on its development of a broadband implementation. Like so many other states this has a short fuse, stating the schedule as:

1. June 29, 2009 RFP Issued.
2. July 8, 2009 Responses due by 3:00 p.m.
3. July 10, 2009 Contractor Selections.
4. July 15, 2009 Deadline for Execution of Master Agreement

Imagine getting a seasoned and competent group in nine days with July 4th in the middle! I guess you get what you plan for. They are seeking:

"Successful proposals will demonstrate that the Respondents are able to achieve the following high-level objectives:


• In consultation with the MBI, identify a thorough list of potential industry partners that have
relevant assets, capabilities, and interest in developing or expanding broadband infrastructure in western Massachusetts. Examples of potential industry partners include both wired and wireless retail broadband service providers, wholesale broadband service providers (including those associated with electric utilities), and broadband construction firms. Relevant assets include but are not limited to an existing customer base, “middle-mile” broadband infrastructure, wireless spectrum licenses, or access to physical infrastructure such as utility poles or communications towers in western Massachusetts. Capabilities include demonstrated operational experience in broadband construction and/or service provision.


• Produce an in-person event (briefing conference) to inform potential industry partners regarding ARRA guidelines (when available) and the MBI’s preliminary plans;


• Identify those organizations that can successfully operate sustainable business models
leveraging public sector investment;


• Determine the interests of qualified organizations with respect to structuring the MBI’s
investments and its partnership arrangements with commercial broadband providers;


• Develop specific recommendations for structuring and negotiating partnerships with qualified commercial broadband providers, and incorporate these recommendations into an eventual request for proposals for commercial provider partners;


• Develop at least two options for sustainable business models for MBI investments and publicprivate partnerships; and


• Produce an interim report with content suitable for incorporation into the MBI’s ARRA competitive grant application by the second week of August 2009..."


They then go on to describe their ideal candidate:

"The successful Respondent must have demonstrated and recent experience in the following:


• Expertise in broadband infrastructure deployment and associated business models, including
open access;


• Public-private partnership models and the general rules surrounding public procurements (e.g. disclosure, non-exclusivity);


• At least three active or recently completed projects of similar size/scale/scope;


• A highly experienced senior staff member or team assigned to this project, who have each
completed three or more projects of similar size/scale/scope."


In our experience, having been the first to obtain USDA RUS financing for New Hampshire, and then having to walk due to the intractable franchise environment, there are few if any capable entities who could do this task as they request. In fact based upon my personal experience there are most likely none. If you were to read our dozens of feasibility reports you would see how complex this issue is. The interesting result is what the Commonwealth comes up with. This is in my opinion a pre-selected deal, and that is a shame. Public Knowledge, a liberal DC think tank, also wrote concerning of projects with such a short fuse. In the PK case their concern was that the time was short to get bidders who gave the right answer, namely the incumbents. One wonders what the agenda is in Massachusetts.

Why the rush, they have been playing with this for years!

Global Warming and an Economist

In the 1960s I did work with Professor Reginald Newell at MIT. We used data from the X15 and the SR71 to determine the chemical dynamics of the upper atmosphere. I published the results in 1971. Although my specialty at the time was the "inversion problem", solving such things as what the brain looked like inside by measuring X rays passing through it and where a small nuclear explosion was based upon seismometers placed around the world, I was called upon to assist Newell.

He truly was a brilliant man, a true English gentleman. I enjoyed his research teas on Thursday afternoon, the few times my American work ethic allowed me to "waste precious time" on talk and thought.

He spent years examining the meteorological history of the earth. He understood the complexities of the atmosphere as well as the extreme complexities of the ocean and how the ocean was ofttimes the controlling factor and how little we truly understood. Finally he understood the complex issue of measurements and the many incorrect ones that existed.

In an article concerning a paper published by Newell in MIT Technology Review it states:

"Since the mid-nineteenth century, merchant-marine captains of all nations have been required to log air and water temperatures every six hours for weather services such as the British Meteorological Office. Crews on each watch have hauled water from the sea in standard buckets, dipped in standard thermometers, recorded the data, and, generally, radioed it back. The result is an incredible storehouse of information about global temperatures since the Industrial Revolution.


Reginald E. Newell, Jane Hsiung, and Wu Zhongxiang of MIT, along with colleagues from the ``British Met,'' as they call it, have collected and analyzed these data. MIT Press intends to publish them in the Global Ocean Surface Temperature Atlas. One of the most striking results suggested by the data is that there appears to have been little or no global warming over the past century. The advantage of ocean readings is that they are not contaminated by urbanization: the growth of structures and roads even in the small towns where many weather stations are located can raise temperatures, Newell explains. Unfortunately, ocean readings are not entirely reliable either.


One of the chief problems is that prior to World War II, the buckets for collecting water were made of canvas. As it was hauled onto the deck, the water could be cooled by wind and heated by sun. Christopher Folland of the British Meteorological Office and Jane Hsiung attempted to correct for such problems, for example by measuring the cooling of the buckets at different wind speeds. Gauging long-term temperature change required more analysis. First, Newell, Hsiung, and Wu needed to measure the cooling caused when volcanoes inject dust and gases into the atmosphere.


They discovered an intriguing piece of work that measures the atmospheric ``turbidity'' from the dust over the past century. Beginning in the late 1800s, weather stations have used devices known as Campbell-Stokes sunshine recorders that burn a track in a paper card each day, indicating how long the sun was up. Researchers at the University of Mainz in West Germany collected and analyzed numerous such cards, noting particularly the beginning and end of the burn, which correspond to sunrise and sunset. Whenever atmospheric turbidity rose, the burn started later and ended earlier. The weather station in Sonnblick, Austria, almost unaffected by urban pollution at an elevation of 3 kilometers in the Alps, provides a record of turbidity back to 1887.


Newell, Hsiung, and Wu also assessed the periodic change in tropical temperatures caused by the El Nino-Southern Oscillation, a complex of ocean and air currents. Factoring out the effects of the El Nino-Southern Oscillation and the cooling caused by volcanoes, they found that global temperatures have warmed by only 0.2xC over the past century, which is within the estimated margin of error. In other words, the results leave open the possibility that there has been no warming at all.


In a paper based on the same data in Geophysical Research Letters, Nicholas E. Newell (Reginald Newell's son) joins the other researchers to examine a third temperature variation: a roughly 22-year cycle of warming and cooling that has occurred since 1856, when the marine data begin. This may be caused by the 22-year solar magnetic cycle, during which the sun's magnetic field changes polarity and then returns to its original state. The magnetic cycle
is reflected in changing sunspot patterns. When the authors subtract from the basic temperature record all cycles of less than 26 years -- the chief one being this 22-year warming-and-cooling pattern -- they find ``no appreciable difference'' between temperatures in 1856 and 1986.


Both studies are at odds with some other research. For example, using land data that attempt to factor out effects of urbanization, James Hansen of NASA Goddard Space Flight Center and Sergej Lebedeff of Sigma Data Services Corp. conclude that the globe has warmed 0.5 degrees C to 0.7 degrees C over the past century.



The conflict is far from resolved. Unfortunately, despite all the models of how global climate may change, there is relatively little funding for research on the actual record."


In my work with Newell, short as it was, we also examined models, models of the atmosphere and models of global circulation. We knew that often the models were themselves inherently unstable. The would go off into cycles and would explode from time to time. These were artifacts of the mathematics of the models as well as demonstrations of the lack of correctness of the models as well. Nature is ofttimes self correcting and sometimes surprising. It frequently self corrected but infrequently slipped a cycle with some form of instability.

He had not yet understood the details and were quite a distance from doing so. The conclusion was that we mus work on better understanding and not become some type of religious zealot. The latter behaviour will always lead to distortions and lies.

Now from MIT to Princeton.




















In a recent article by Paul Krugman he states:

"And as I watched the deniers make their arguments, I couldn’t help thinking that I was watching a form of treason — treason against the planet...

The fact is that the planet is changing faster than even pessimists expected: ice caps are shrinking, arid zones spreading, at a terrifying rate. And according to a number of recent studies, catastrophe — a rise in temperature so large as to be almost unthinkable — can no longer be considered a mere possibility. It is, instead, the most likely outcome if we continue along our present course.

Thus researchers at M.I.T., who were previously predicting a temperature rise of a little more than 4 degrees by the end of this century, are now predicting a rise of more than 9 degrees. Why? Global greenhouse gas emissions are rising faster than expected; some mitigating factors, like absorption of carbon dioxide by the oceans, are turning out to be weaker than hoped; and there’s growing evidence that climate change is self-reinforcing — that, for example, rising temperatures will cause some arctic tundra to defrost, releasing even more carbon dioxide into the atmosphere.

Temperature increases on the scale predicted by the M.I.T. researchers and others would create huge disruptions in our lives and our economy. As a recent authoritative U.S. government report points out, by the end of this century New Hampshire may well have the climate of North Carolina today, Illinois may have the climate of East Texas, and across the country extreme, deadly heat waves — the kind that traditionally occur only once in a generation — may become annual or biannual events....

Yet the deniers are choosing, willfully, to ignore that threat, placing future generations of Americans in grave danger, simply because it’s in their political interest to pretend that there’s nothing to worry about. If that’s not betrayal, I don’t know what is."

Well to the good Mr. Krugman, he should be reminded that the facts are still at play. The oceans dominate the dynamics of the atmosphere and they have yet to be adequately understood if not modelled and the upper atmosphere is a partially solved problem and the past and its temperatures are hardly closed for debate.

It was Newell and men like him who were willing to stand up and deal with facts. It is the Krugmans of the world who pontificate with words that are both harmful and false. Science is not like macroeconomics, it must deal with the facts.

Macroeconomists are what we see now in DC, spinning tales with no rhyme or reason. One need look at the problems at Harvard and it financial mess and look towards its most recent past President, we have moved hims from Harvard and its problems to the country and our problems. Thus when a macroeconomist talks one should not only be wary but run for the hills.

Back to Newell, as he reached the end of his life he spoke out but ever so softly because of the pressure of the evils of the political correctness. In many ways the school of global warming is akin to genetics in Stalinist Russia, it disavowed Marxist thought of a dialectical materialist. The same goes for the school of global warming. The truth is that we really do not know, and if we believe the "treason" logic of Krugman we will unfortunately never know. Perhaps when we look back on this history in a few hundred years we will see the mania of the macroeconomists, the Romer and her roaming multipliers and the Krugman and his dialectic.

One final point, using charged words like treason as Krugman does debases it for when it must be used. Men of wisdom and judgement do not use words lightly, perhaps being a left wing media star has gone to his head, or perhaps it is Princeton.

Two Interesting Observations

In thinking of the potential change that could occur in electrical power distribution I am reminded of two tales. The first relates to the birth of the Internet and the second the birth of the electrical industry as we know it today.

Let me start with the Internet tale. Bob Kahn had related a tale to me concerning the early days of the Internet and I relate it here as best as I can remember, so my apologies to Bob if I am in error in some parts. I had left MIT and was at Comsat where we were providing the first international link in what was the ARPA net in 1975. Just a short while prior to that Kahn tells how he went to AT&T Bell Labs at Murray Hill to seek their help. He needed a modem to work over the telephone network and he thought rather than building his own he would do what was the most logical thing and get Bell Labs to provide assistance.

Bob arrived with perhaps one other person and in classic old AT&T style was met by a conference room filled with Bell Labs people including what was perhaps VPs and the like. Bob explained his intentions and he was then regaled and lectured by the Bell Labs folks that he had no right to do this, it was their network, remember Whittaker at the new ATT and his demands on the current Internet, he is now Chairman of GM, what a choice, and Kahn just sat there and submitted to the arrogance of the "owners" of the network. This lasted an almost interminable time. The answer put to him by ATT Bell Labs was that they would do this for the Government and in the manner and they would retain monopoly control. Kahn said thanks and retired to a place outside of Murray Hill.

From this Bob funded the work for new modems, packet switching, VLSI chip and what we now know as the core elements of our information society. The impetus was the arrogance of Bell Labs. Also their incompetence. For today I drove past the old Bell Labs Holmdel, a dead and decaying corpse of a building, the entries blocked, the grass growing like corn, and the place acres of desertion.

Lesson 1 is that the incumbents in a monopoly position are driven by maintaining their control despite the changing technological environment. Kahn was a gentleman and a genius who left the old and dying Bell System to its own demise and created by his insight and personality and leadership an Internet which is the example of a distributed network with a community of developers in an open environment.

Now to the second tale. In the book, The Forgotten Man by Shales is the tale of San Insull and the creation of the power industry as we know it today. The key for Insull was scale economy. Shales states that at the beginning every person was envisioned to have their own power plant, and indeed some did. However Insull saw that at the time there could be great scale economies in have a few large plants and a distribution network.

Lesson 2 is that there are times when scale has value, but the corollary is that there are times when the scale disappears. Scale is not an unchallengeable assumption. The Internet is distributed and has scale only as a result of its connectivity not because of a single ownership. The openness and distributed control enables the elimination of scale.

The conclusion from these two lessons is that first change is unending, remember Parmenides, and the only thing that remains constant is change. At the beginning scale has merit but there is a time when scale is a detriment. Microeconomists have no clue about this issue. They seem stuck in the 19th century. I wrote about this phenomenon in telecom networks twenty years ago.

Now to apply this to two areas of current interest is worthwhile.

First, electrical power generation. The GEs, IBMs, and others as well as all the incumbents will have the same response as Bell Labs had to Kahn and the ARPA Net proposal. Namely they will not only reject it but the will further institutionalize the past. Second, scale may no longer have merit especially if power can be generated in a distributed manner as we have argued and the intelligent grid can redistribute it effectively. But the question is who will do this? As I have said before, where is the Bob Kahn of today. Kahn did not want the Government to define and control this, he understood that the intelligence was in the universities and start up companies, like Linkabit and others, to do this. It was an entrepreneurial venture with an business and not Government backbone. He and ARPA facilitated this. He did so despite the troglodytes at Bell Labs.

Second is health care. The same logic applies. Except in this case the Government wants to control everything, ultimately through a plan managed by the Government.

What we need is a Government facilitator who knows how to work the system and not have an ego to control the system. This means frankly that Congress and the White House just get out of the way for they can contribute nothing but confusion, and bad deeds.

Waxman Markey Bill Passes

The Waxman Markey Bill passed 219 to 212. Where were the missing 4 votes? As we have been arguing for months in great detail detail this will provide the Congress with an everlasting goody bag to hand out pork far into the future. I sit here writing this after another 3 hour blackout in New Jersey. We get them every 2 to 5 days. It is Jersey Central Power and Light. The lack of competence in the power industry drove me to move my headquarters to Prague, Czech Republic, the power worked there and not here in New Jersey. So what have this brains in Washington done, well we just will move everything to Prague.

The Senate will have their bite of the Apple but alas we will watch energy costs sky rocket and industries move. Higher unemployment and there will never be any chance to catch up with the exploding budget.

There were so many other ways to have achieved this but given my experience with Markey, the Father of the 1996 Telecom Act, facts were never in his strong suite.

The Elgin Marbles

Notice anything missing? The facade below the top is what is in the British Museum in London. The Economist argues that the Brits will "loan" them back to the Greeks to put on display in their new museum, or loan just one little piece. How English of them.

Did they loan India back to the Indians, perhaps Pakistan, most of Africa, and yes how about that spat we had here in the US a couple of centuries ago.

The Elgin theft should be returned in toto with an apology. When you take the teeth out of a defeated warrior as they lie wounded upon the ground, you may not expect them to arise, but these are the Greeks my British friends, they have arisen for three thousand years again and again. Salamis saved the very basis of civilization, and for that we owe them a great debt. Thus the Brits should return their ill gotten gains promptly to where they belong. Besides having seen them in the stuffy British museum one does not come away with the glory of Greece. Seeing the Parthenon at night, lit upon the hill, white against the night sky, a sight to behold. The stones must be returned.

Insanity, A Reasonable Definition

In 1965 in Massachusetts there were 25,000 people hospitalized in mental hospitals and 20,000 at any one time in non mental hospitals, for all sorts of problems from cancer through delivery. By 1975 the mental hospitals dropped to about 5,000 and today it is just above 1,000 for the full time residents. Thanks to Thorazine and the like.

But as any medical student in that period remembers it was less finding out the problem and more bringing the patient to a cost effective controllable state. Drugs helped. But a second thing one noticed was that the insane had the very specific habit of trying the same thing over and over, despite the omnipresent and consistent past negative outcomes, assuming that this time it would work. Sound familiar, well it is and we call it a Government health care alternative. Why if you decry Medicare and Medicaid would you ever assume that a Government plan, if operated on a "level playing field" to other plans would ever be a true competitor. Yet we know that first the Government will cheat, and prevaricate, and secondly if the plan were truly a level playing field plan it would deteriorate quickly.

Remember my arguments on Medicare. First those who make it to 65 and have on average 12 more years have contributed an amount to the Medicare fund well in excess of the cumulative costs on average that they will incur over the remaining 12 years of their life. The question should be, where did the money go! The Government collected it and spent it! Now they blame the Medicare recipient for their incompetence and in some ways theft of the recipients own funds.

In the New York Times today is another shot at trying to patch the leaking craft. They say:

"A better public plan would not be a new government-run insurer at all, but rather a government-chartered mechanism that would let employers and individuals buy health coverage from private insurers in a manner that uses the three most essential market forces — choice, competition and incentives — to reduce the price and improve care.Congress is already looking to create federal or state “exchanges” through which individuals could comparison shop for health insurance. Exchanges pool large numbers of people and give them access to various health care plans — so that individuals can enroll in the plan of their choice, and so that risks and administrative costs can be spread widely."

The issue is not an exchange, it is a restructuring of payments, eliminating the company sponsored plans and then having people buy their own from private entities. The states may control rates as is done in auto insurance but it is essential to eliminate the collusive behavior of the insurer and large corporation. That collusion leads to the costs being off loaded to those who are in small companies or self employed. Combine this auto insurance approach with a demand for universal coverage and you get what we have already in many other insurance plans. The perhaps this cooperative may function.

A similar set of remarks is made by Cutler, the Harvard based economist Administration mouth who states:

"...Second, creating insurance “exchanges,” local or national organizations designed to act as clearinghouses for health insurance policies, could foster competition and drive down administrative costs for individual and small group policies. We estimate these reduced costs could bring in additional federal revenues of $64 billion over the next 10 years..."

The same problem exists in that the large companies will still control the push down costs.

Finally Roberts at Cafe Hayek speaks of a blog by Mankiw. The issue is why are physician salaries so much higher here in the US as compared to elsewhere. Well guys why not deal with the facts. In countries like Israel, Italy, Czech Republic there is no undergraduate training and there is no capping of the number of physicians, and there is limited vetting of physicians. In the Czech Republic for example there are probably four to five times the number of physicians as compared to what would be needed. The rich get German specialists at Spas and the rest get a somewhat limited capacity GP. Also all of these countries charge little to no tuition for the education. You are comparing apples to oranges. Getting to Med school is not the same as getting into a teaching program at a state school. Having spent time in these other countries I see the difference. If I were ill in Russia I would take a flight back to Boston and possibly die on the plan than go to a Russian hospital. Have you ever seen Russian dentistry, steel not gold!

What seems to be happening is that the mouths are spouting off with little or no knowledge. If these academics spoke this was as an MIT EECS student about some project they would likely find themselves installing cable boxes in Medford.

Smart Grids, Local Power

Bob Metcalfe wrote an article in the Wall Street Journal extolling the use of small nuclear generators. The principle if one extends it a bit is akin to the use of Japanese mini mills in the 1980s for steel production. Use 100 MW generators but use many of them in many locations. A good idea but well we face the Government again! The NRC is the great "NO!" and if they don't do it just wait for the EPA.

But the use of distributed power generation combined with smart grids makes sense. Consider the following propositions. First regarding the classic energy approach and then the fully distributed approach.

I Classic Energy

In the world of classic energy or power generation the assumption is that there is great scale economy in building a super large plant which has a maximum capacity of say 500 MW. We run the plant up to the max depending on the demand. If the demand exceeds the plant capacity we literally call to others to shift their capacity to us so we can meet the demand. If we cannot get the excess capacity shifted then we start a brown out. If we produce too much electricity it just disappears. Yet we always try to stay ahead of the curve by over building and over producing. There is not smart national grid. Remember you are dealing with power engineers, they stopped making them fifty years ago!

II Smart Grid Big Plants

This is the next step. This takes the large power plants and then connects them with a "smart grid" which automatically estimates demand and is continually load balancing. Each plant runs at the most efficient level and the power is distributed where it will be used with the least waste. Waste is still there.

This is shown below as a classic model.




















III Local Generation and Smart Grid

Now consider the Metcalfe idea but move it down scale even more. Assume we let everyone have solar roofs, windmills, and maybe even small nuclear generators! I am kidding o the last one, I think. But we can reduce generation to local levels, and we then like in the Internet move the intelligence, in this case the generation, to the edge of the network, in this case the grid. Consider the picture shown below:



















I have used "routers" here metaphorically to show how they could be connected. The local grid has many small generators, moving down scale as much as we want. Take the solar program in northern New Hampshire. A 1,200 sq foot roof can generate enough power, 2 KW, to power several homes for basic use. Then this may cost $20,000. But the Feds pay $6,000, the state $8,000 and the electrical company $4,000. It costs the homeowner $2,000! The excess power goes onto a smart local grid and if there is no power it gets power from the grid. If you had a really smart grid you could dramatically reduce you excess peak requirement. And the solar has no CO2!

IV Local Power, Smart Local Grid, Super Smart National Grid

Now think of the next case where we interconnect these little guys and create a national grid, using wind where there is wind and solar where there is solar. We get what is shown below.



















This is the power version of the Internet. Will this work, certainly. But I really doubt that the GEs and IBMs will ever conceive this. This is an Internet metaphor. Remember SNA and IBM, you do if you ever tried to network thirty years ago. SNA no longer exists. And GE, good diesels and washing machines but not a state of the art shop. I remember after my PhD from MIT speaking to someone at GE ho suggested I consider going there, for what reason I really never knew, but I was told I would have to be trained on how to design, the GE way, a washing machine. Perhaps of some use if you did that but not what my multiple degrees would stand.

The challenge is to find the creative "team" to do this. We need to find a Bob Kahn of the smart grid. Does he even exist in today's world, could he ever do at ARPA now what Bob did at ARPA then. Would not the powers to be at GE and IBM and the power companies kill whatever chance they would have in the political environment we have in Washington. Perhaps this is what one could do in Finland, or the Czech Republic, two good sized smart countries which could be catalysts for this opportunity. Just a thought, I hope my old friends in Prague are listening, if you did this the world would come knocking!

Thanks to my good friend Lloyd Nirenberg for insights in this area.

Health Care Privacy

On the Google Policy Blog there was a recent post advocating their position regarding privacy of health care records. The Blog states:

"From its inception Google Health has been about giving patients control over their medical data. For starters, that means we help people access their health information, give them a safe and secure place to store it, and let them share it with others if they wish. Over time our goal is to help consumers play a larger role in their own health care by empowering them with the information they need to make better health care decisions.

As part of this effort, we're endorsing an industry-wide Declaration of Health Data Rights. Unveiled today at HealthDataRights.org, the Declaration aligns with the principles behind Google Health: consumer empowerment, privacy protection, and data portability. We've joined a diverse group of stakeholders -- including doctors, researchers, technology companies, writers, entrepreneurs, health economists, and others -- that have come together to support this effort to promote greater patient access to personal health data.

While most of the rights outlined in the Declaration are already included in the Health Insurance Portability and Accountability Act (HIPAA) and the recent American Recovery and Reinvestment Act (ARRA), there are still practical challenges to acting on these rights. For example, getting access to your medical records today often requires that you fill out a form at your doctor's office, pay a $35 copying fee, and then wait a month or more to receive your records in the mail. Under the law, this is your data, and we believe you should have it the day you visit your doctor."

First let us examine the HIPPA requirement. It states:

"The Privacy Rule allows covered health care providers to share protected health information for treatment purposes without patient authorization, as long as they use reasonable safeguards when doing so. These treatment communications may occur orally or in writing, by phone, fax, e-mail, or otherwise.

For example:

• A laboratory may fax, or communicate over the phone, a patient’s medical test results to a physician.
  
• A physician may mail or fax a copy of a patient’s medical record to a specialist who intends to treat the patient.
  
• A hospital may fax a patient’s health care instructions to a nursing home to which the patient is to be transferred.
  
• A doctor may discuss a patient’s condition over the phone with an emergency room physician who is providing the patient with emergency care.
  
• A doctor may orally discuss a patient’s treatment regimen with a nurse who will be involved in the patient’s care.
  
• A physician may consult with another physician by e-mail about a patient’s condition.
  
• A hospital may share an organ donor’s medical information with another hospital treating the organ recipient.
  

The Privacy Rule requires that covered health care providers apply reasonable safeguards when making these communications to protect the information from inappropriate use or disclosure. These safeguards may vary depending on the mode of communication used. For example, when faxing protected health information to a telephone number that is not regularly used, a reasonable safeguard may involve a provider first confirming the fax number with the intended recipient..."

HIPPA was written at the beginning of the Internet era and thus focuses on the use of fax. I no longer have a fax and I find it still pervasive in just one area, medical records. On a physician to physician basis an email may still get you into trouble, you must by law fax. To a patient you must set up a secure password protected system to retrieve records, you cannot email a patient a record outright. This applies for providers only. Google is not a provider just a depository, but a powerful depository.

The aforementioned Health Rights states:

"We have the right to access all health data about ourselves, so we can make the most effective health decisions using the resources we feel are most appropriate. Having and understanding one’s health data is as crucial to lifestyle decision-making as accessing one’s bank account. Our goal is to make these concepts an everyday reality.

If we collectively assert our health data rights, we’ll impact care, engagement, quality, errors, outcomes, and meaning; we’ll move our current unaffordable and dysfunctional health system to one that more effectively serves patients by allowing them to have the information they need to fully participate. We believe that this flow of information will drive more engaged patients, better health decisions, lower costs, and better medicine."

This raises several interesting issues.

First, who owns your patient information? If you volunteer it to Google perhaps they take ownership, especially if it is processed and value is created therefrom.

Second, what guarantees of veracity does one have on patient supplied information. Taking a patient history is one of the first contacts a medical student will have with a patient. All too often it is not what the patient says but how they present themselves which is all revealing. Do they walk well, the color and texture of their skin, and the like, patients sometimes lie, often forget and almost always get things wrong. This is a challenge in any medical history taking. The issue is the time spent talking with the patient for from that comes other issues. Reading a history is nice, and perhaps less error prone but it often fails to reveal the patient and their problem.

However getting information to the patient is essential. Patients often do not listen. They do not hear what the physician is telling them, especially if the news is less than happy news. The issue of obesity, blood sugar and glycemic control, hypertension, and the ears of patient often close.

HIPPA was well intentioned but like all Government plans it institutionalised the past, the fax, just at a time when the Internet was exploding, the mid 1990s! That should tell all those who look for Government intervention in Health Care something.

Health Care: Another Letter to Senators and Congressmen

The following was sent today to several Senators and Congressmen:

June 17, 2009

Dear Senator ,

I am writing your office again to stress several issues which I believe you should consider as the many health care bills seem to be reaching resolution. The following are several points which have arisen as I have spoken with a great many physicians around New Jersey, New York, Massachusetts and New Hampshire. There seems to be a consensus amongst many practicing physicians that they may just become victims of an ever costly and oppressive health care regime run by Washington. I believe that in my conversations there is a great level of demoralization amongst the professionals who feel totally helpless. However this is too serious an issue to be left uncommented upon.

Now let me address several key points:

1 UNIVERSAL COVERAGE IS ESSENTIAL: I have been arguing for this for over twenty five years. There are many who get a free ride and many who suffer due to the lack of coverage which results in a small problem becoming a life threatening problem. This time, as compared to the early 1990s with the poorly presented Clinton Plan, there appears to be unanimous approval of a universal coverage. The problem however will be the coverage of those not eligible, such as illegal aliens and non-covered visitors. The latter is easily handled by insisting that anyone coming into the country have evidence of coverage. The latter is a political problem which can be quite costly and still overburden health care.

2 MEDICARE SUBSCRIBERS HAVE MORE THAN PAID FOR THEIR COVERAGE AND SHOULD NOT BE PENALIZED: Perhaps Congress is totally unaware of the fact that Medicare Subscribers have generally contributed more into the Medicare fund in their working lifetime than they will ever get out! Consider a typical individual who works for 40 years and each year has contributed to the Medicare Fund. When that person retires at 65 that person, if they live another 12 years, would contribute to Medicare almost $20,000 as an annuity payment from their 40 prior years of Medicare Payments to the Fund. However Medicare disburses only $12,000 per participant. Clearly there is a gross disparity in how Medicare functions, especially when one considers what one contributes and what one obtains! Statements which allude to Medicare being too generous are fraudulent and frankly are attacks on the aged and defenseless and are below Congress! Medicare has internal problems which need fixing but on a cash in and cash out basis there should be no problem unless there are too many participants who have contributed nothing and thus are burdening those who have.

3 COMPARATIVE CLINICAL EFFECTIVENESS SHOULD BE LEFT IN THE HANDS OF PHYSICIANS AND NOT THE GOVERNMENT: CCE is a normal process of any medical practice. Physicians are always retraining and re-educations. There is a continual input of new procedures, new tests, new methods which any physician must remain familiar with as time progresses. However the concept of CCE as promulgated by the current plans is potentially quite insidious and life threatening. I have typically used two recent examples. (i) Prostate Cancer, recent studies have argued that measuring PSA above 4.0 did not result in any decrease in morbidity. The conclusion is correct but the test was invalid. We now know that 2.0 for men under 65 are best and that velocity of PSA is essential. Colon Cancer: A recent Canadian study stated that colonoscopies were not effective in the transverse and ascending colon. The reason was that there were done by untrained and inexperienced physicians, general practitioners and the like. Endoscopy is a complex specialty. However if the Government were to use these studies in their CCE demands many men and women would die unnecessarily due to deprived procedures. Yet the physician has the countervailing Tort issue to deal with. CCE with Government control is rationing and exposure to litigation.

4 ELECTRONIC MEDICAL RECORDS IS A SUPERB GOAL BUT WILL BE AN EVOLVING PROCESS: The EMR is something which I started working on at Harvard in the mid 1980s. I have developed, tested, and written on this for years. I believe it is essential but the conundrum is that it is a very complex issue. It should be introduced but incrementally. It must be socialized into practices and it must organically evolve from within the profession. I have argued that it should evolve in a manner akin to the Internet with the classic Internet Engineering Task Force, IETF, albeit assisted by the Government and with ARPA participation but a participatory group of those actually involved in implementing it. One knows that any Government approach is doomed to failure and cost explosions!

5 A GOVERNMENT SPONSORED PLAN IS JUST ANOTHER COSTLY CONTROL MECHANISM, INDIVIDUALS SHOULD BE RESPONSIBLE FOR OBTAINING THEIR OWN PLANS AND THEY SHOULD BE TAXED SO THAT THERE IS A LEVEL PLAYING FIELD, Leave The Plans in the Private Sector: This proposal is just expanding Medicare to all people and will result in an even more inefficient system. Equity and Fairness should be the by words. That means that each person should buy their own plan as is done with life and auto insurance. Companies should be taken out f the mix, that is what seems to be the problem and that state of nature is a result of the rice controls during World War II, another form of Government intervention. Keep the Government out, let the market work and make individuals responsible. Subsidies are fine.

6 TORT REFORM WILL REDUCE PROCEDURES AND CUT COSTS: The current system of liability results in increased costs due to both insurance and in terms of defensive medicine. The costs of insurance speak for themselves; the costs of over diagnosing are frankly much more subtle. It is doing an MRI when a clinical diagnosis is more appropriate, it is the cost of prescribing a wider array of medications when patient responsibility would be more effective. The proposals for capping awards, of providing "safe harbors" for procedures and for allowing the use of administrative boards are all productive. No matter what progress here is a sine qua non. It must be part of any new set of laws.

7 BUNDLED PAYMENT SCHEMES ARE BOTH UNWORKABLE AND INSTITUTIONALIZE A BAD SYSTEM: The President and many of the proposed Bills have included the concept of bundling. In my analysis this is totally inappropriate and will lead to a collapse of the system as we know it. It appears to be the creation of some group of academics who have little if any knowledge of how health care works. The unintended consequences of a Bundled approach are many:

1. THE PATIENT AND PROVIDER LOSE A NEXUS: THE RELATIONSHIP BECOMES ONE WITH THE HOSPITAL AND NOT THE PHYSICIAN. IT BREAKS THE FUNDAMENTAL BOND THAT IS THE CORNERSTONE OF HEALTH CARE. The patient and the physician are an important nexus. The only physicians who have little to no contact with a patient are the pathologist, radiologist, and anesthesiologist. The surgeon has contact as does the other specialists. It goes to the heart of practicing medicine. The hospital has the least. In my experience, hospitals are run by managers who care less about patients and more about their bottom line. They are not professionals as are physicians. The only fear a hospital administrator faces is possible loss of accreditation, which only comes after gross negligence if even then. The hospital is run for the benefit of the management and not the patient. By placing the hospital at the focus as is done in a bundled approach one creates a barrier between patient and physician and further places the worst possible party in a position of control, the hospital administrator.

2. IT INSTITUTIONALIZES AND MEMORIALIZES THE HOSPITAL AT A TIME WHEN THE ROLE OF THE HOSPITAL MAY BE AT A MASSIVE TURNING POINT WITH GENETIC MEDICINE. The Bundled approach places the hospital at the center of the model. We have argued that this entity is the most vulnerable to downsizing and change and is also at the heart of the explosion in costs. This is especially true for Medicare patients. Thus we see that placing such an entity at the core creates a tension for continuation of bad practices.

3. IT CREATES MASSIVE PROBLEMS WITH THE ISSUE OF TRANSFER PRICING OF SERVICES AND CREATES THE INCENTIVE FOR FURTHER PADDING BY HOSPITALS. Anyone who has ever been in business, in a large multifunction company, has come to grips with the transfer pricing problem. Many business school doctoral theses have been written on the topic and many a corporate war has been fought over the issue. The price one unit charges another for a good or service is difficult to ascertain. This is difficult even when there is a market for the product. For the buying unit may easily say the internal price is too high and that they will go elsewhere. The hospital could do the same. They may say your physician is too costly so you must accept theirs or no surgery, just go home and die!

4. IT DRIVES GOOD PHYSICIANS OUT OF THE DELIVERY OF MEDICARE SERVICES FURTHER DISENFRANCHISING THOSE ON MEDICARE. Physicians are opting out of Medicare in droves. This means that with the system as it is already, it is becoming harder for Medicare patients to find physicians which will take them. If one adds the burden of bundling then it becomes worse. In our opinion, as we have stated many times in the past, the rearrangement of deck chairs, namely the many plans on how to cut costs via payment and control mechanisms miss the point. First, demand can be modulated, second, costs can be reduced by multiple means, third, genetic medicine will change the paradigm fundamentally and having the agent which will be changed the most in the middle will just delay this change, and finally, and only as the last step is the payment issue.

8 PATIENT RESPONSIBILITY AND MOTIVATION: This is the most critical factor. Take Type 2 Diabetes as a simple example. Its cause is primarily obesity. Its cure, lose the weight. No cost for the cure! It just goes away. However to get a patient to reduce their weight and exercise is a near impossibility. Only 1% is successful. It is worse than smoking cessation and the extent of Type 2 Diabetes disease now costs 12% of the total health care budget growing to 25% by 2020! This MUST be stopped. Akin to smoking I am a true believer in taxing carbs as we tax tobacco. Motivation by education does not work. Motivation by taxation does. Just look at the deaths in men from lung cancer. As taxes have increased the death rate had gone down 50%! This must be done in the carbohydrate area as well.

I hope that some of these ideas will be part of your consideration of the changes in health care. Having spent my time in Washington I am all too familiar with the process. However this will affect us, our children, our grandchildren and generations to come. It is much too critical to be left in the hands of the lobbyists! As I have said to my people time after time, if all else fails listen to the customer! In this case perhaps listening to the voters may be a novel thought as well.

Very truly yours,

The Fed's Balance Sheet and Debt Delinquency

There are certain metrics which are worth following in view of the anticipated inflation which is expected at the end of this expansion in Government spending. The first is the nature of the FED's assets especially in Treasury maturities. The chart below shows the result for last week. What is surprising is the amount held in long term debt as compared to the mix. We will be looking at the trend in this mix as a percent because the more the FED holds in long term the more we would suspect that they cannot sell the debt to third parties.




















The expansion of the above for three dates is shown below.



















We see that there is some percent growth to the shorter term notes.


The second chart shows the explosion in delinquencies of debt as recorded by the FED. The credit card debt delinquency is on a separate axis because it is exploding at a rapid rate. It exceeds any past level and this represents an added risk for the banks as they try to come out of the housing mess. In addition we still see the explosive delinquencies in residential and commercial meaning that there is no time soon that we would expect a resolution. This will thus change the nature of the FED's balance sheet as Treasury debt will become a more risky proposition.



















It will be important to watch these figures as well as the Treasury spreads, FED's assets, and the velocity of money and imputed inflation. Looking forward we still anticipate a 10% plus inflation rate depending on what the FED does. The problem is that if Bernake is replaced by Summers we may see wild fluctuations in the FED policy which may likely exacerbate the problem which is still two years down the road.

Further Facts on Medicare

The following data are three further facts on Medicare. We present the CBO estimated costs, the HHS estimates of participants and the cost participant per year.

The CBO Cost Estimates are presented below. We show Parts A,B and D as well as the total. The growth in the total is substantial over the period to 2018 dominated by the inflow of the Baby Boomers.



















The total participants are presented below. These are the Baby Boomers referred to above. One should remember that the enrollment starts at 65 and that the average life span for a male is about 75 and a female 79. Thus there will be a dominance of females receiving benefits even if many had not contributed as much as the males, although that is shifting as the younger group of working females is included. What that means is as we approach 2018 the females will have contributed equal to the males so the "free rider" status which may have been attributed before is no longer the case. All Medicare participants will have contributed as we have discussed before.



















The cost per participant calculated from the above two is presented below. Given our previous analyses and the above comments regarding contributing participants, we see that the expenditures for the period thru 2018 are still less than the contributions from participants!



















We thus argue that the Medicare participants will have contributed substantially in excess of their withdrawals by 2018 and that the excess has been spent by the Government rather than being used as specified. In addition we assumed in our earlier calculation a 20 year life for males and females post 65 and we know that it is substantially lower, only 10 for males and 14 for females. This makes the contribution excess even greater. This clear cold fact must become an element in the debate, and not a victim.

China and Treasuries: A Canary?

China Daily reports today that the Chinese Government has reduced their purchases of US Treasuries for the first time in a year. The article states:

"For the first time in 11 months China's holdings of US Treasury bonds fell - to $763.5 billion in April, US government data showed.

The figure, down from March's $767.9 billion, was the lowest since June 2008.

They do not include US Treasury bond holding in Hong Kong Special Administrative Region, which climbed to $80.9 billion in April from $78.9 billion the previous month."

They continue:

"As the largest holder of US Treasury bills, which are crucial to funding Washington's multi-trillion-dollar recovery plans, China had expressed concerns recently over what it called the safety of its dollar-linked assets.

US Treasury Secretary Timothy Geithner traveled to Beijing about two weeks ago to reassure Chinese leaders, saying their money is "very safe" despite the US budget deficit, which he pledged to cut."

This must be watched closely since as we have said just a few days ago the alternative is FED buying on the FED Balance Sheet and the explosion of inflation in the not too distant future.

Speech to the AMA: An Analysis

The President of the United States gave a speech on June 15th 2009 before the AMA in Chicago. This was to be a speech which was an attempt to gain their support as well as provide some substance to the proposals which would be supported by the current Administration. We look at what was said and attempt to come to a better understanding of what he meant and to what direction he is taking the people of this country.

The Speech

He opened his speech as follows:

"So let me begin by saying this: I know that there are millions of Americans who are content with their health care coverage – they like their plan and they value their relationship with their doctor. And that means that no matter how we reform health care, we will keep this promise: If you like your doctor, you will be able to keep your doctor. Period. If you like your health care plan, you will be able to keep your health care plan. Period. No one will take it away. No matter what. My view is that health care reform should be guided by a simple principle: fix what's broken and build on what works…"

This is a strong promise and one that will be broken immediately with Medicare. This statement is there solely to assuage the public and in no way reflects the reality of what follows.

He continues:

"First, we need to upgrade our medical records by switching from a paper to an electronic system of record keeping. And we have already begun to do this with an investment we made as part of our Recovery Act."

Yes, again we all agree with this and this is a time consuming process which will take time just to define what is meant. It is stuck at the front as a technological solution whereas it is a solution which requires integration into the fabric of the very practice of medicine. It will happen, slowly and inevitably, but again slowly.

Again he continues:

"The second step that we can all agree on is to invest more in preventive care so that we can avoid illness and disease in the first place. That starts with each of us taking more responsibility for our health and the health of our children. It means quitting smoking, going in for that mammogram or colon cancer screening. It means going for a run or hitting the gym, and raising our children to step away from the video games and spend more time playing outside….It also means cutting down on all the junk food that is fueling an epidemic of obesity, putting far too many Americans, young and old, at greater risk of costly, chronic conditions…"

Prevention is the key, and we have shown that by dealing with Type 2 Diabetes, smoking related illnesses and a few major cancers, prostate, breast and colon, we can cut over 30% from the costs of health care. However the way to accomplish this is a carrot and stick approach, taxing and educating.

He then uses the Dartmouth studies; again we have discussed them in detail before, and lay out two proposals:

"One Dartmouth study showed that you're no less likely to die from a heart attack and other ailments in a higher spending area than in a lower spending one. There are two main reasons for this. …The first is a system of incentives where the more tests and services are provided, the more money we pay….We need to bundle payments so you aren't paid for every single treatment you offer a patient with a chronic condition like diabetes, but instead are paid for how you treat the overall disease. We need to create incentives for physicians to team up – because we know that when that happens, it results in a healthier patient. We need to give doctors bonuses for good health outcomes – so that we are not promoting just more treatment, but better care…."

Here he is taking a strong stand on bundling. We have shown how this will have a massive negative impact on health care. It places the hospitals in charge and reduces the physicians to mere clerks in a massive Government controlled health system. Why the AMA let this pass is incomprehensible. Bundling is a step to complete Government control via a concentration of power through a concentration of payment.

He uses the example of Diabetes. To any physician who has ever treated a Type 2 Diabetes patient you know that 90% of your battle is with the patient. They are too heavy and get too little exercise. They want to live their old lifestyle and just want more drugs to do so. So the metformin leads to insulin and leads to nephoropathy. So what role does the patient play. The physician is being penalized. Frankly he could not have chosen a better case to use as an example of why bundling makes no sense.

He continues with his second statement:

"The second structural reform we need to make is to improve the quality of medical information making its way to doctors and patients. We have the best medical schools, the most sophisticated labs, and the most advanced training of any nation on the globe. Yet we are not doing a very good job harnessing our collective knowledge and experience on behalf of better medicine. Less than one percent of our health care spending goes to examining what treatments are most effective. And even when that information finds its way into journals, it can take up to 17 years to find its way to an exam room or operating table."

This second statement is the CCE issue. The comment that it takes 17 years to enter practice is frankly an insult. Physicians are always being trained and retrained, a mandate of almost all State Medical Boards, requiring dozens of CME hours per year per physician and tested and retested. With the advent of the Internet we find patients confronting physicians with information before it is even approved by the FDA.

Thus this 17 year comment is frankly out of place. Yet what this means is the under his plan the Government will organize the information and tell physicians the best practices. In no other profession is this done, not even the law. This means again as I have stated that we can expect the Government to create the future volumes of Harrison's and Brunwald! We should just reintroduce witch doctors now!

He continues on the Medicare improvement track with three recommendations:

"So, we need to do a few things to provide affordable health insurance to every single American. ..The first thing we need to do is protect what's working in our health care system….Second, we need to use Medicare reimbursements to reduce preventable hospital readmissions…Third, we need to introduce generic biologic drugs into the marketplace…."

These are not too controversial but the issue is who decides what is working now, we have to understand why readmission occur, many times we have truly sick patients, and generics work in 90% of the cases but in those few in which they do not it may be because they do not exist.

Tort Reform

In the talk he also stated as regards to Tort Reform the following:

"Now, I recognize that it will be hard to make some of these changes if doctors feel like they are constantly looking over their shoulder for fear of lawsuits. Some doctors may feel the need to order more tests and treatments to avoid being legally vulnerable. That's a real issue. And while I'm not advocating caps on malpractice awards which I believe can be unfair to people who've been wrongfully harmed, I do think we need to explore a range of ideas about how to put patient safety first, let doctors focus on practicing medicine, and encourage broader use of evidence-based guidelines. That's how we can scale back the excessive defensive medicine reinforcing our current system of more treatment rather than better care."

The above is recognition of the problem but provides no pathway to its resolution. Admittedly many physicians perform tests over and over and even tests that in a less litigious environment would not be performed just to make certain that they have "belts and suspenders" regarding a diagnosis. One must understand that almost 90% of the diagnoses are based on the clinical presentation by the patient.

But to be certain that the educated analysis of the physician is not called into question at a later time there are multiple tests and even multiple referrals made. This clearly adds to the costs. The answer is not to reduce the payment but to reduce the law suits and the liability in a fair and equitable manner. The speech did not address this issue. It is a key issue.

In a recent NEJM paper by Mello and Brennan this same week, the authors provide an excellent overview of the Tort options. They state:

"There are at least three reasons why government champions of health care reform might consider bundling medical liability reform in the same package. First, one piece of conventional wisdom that is shared by those on both sides of the political aisle is that “defensive medicine” spurred by concern about malpractice liability is a substantial driver of the escalation of health care costs….Second, health care reformers understand that they will have to garner physician support for an omnibus bill that will no doubt create a more stringent financial environment for health care providers…Third, bundling tort and health care reform may help to attract support from congressional Republicans for a health care reform package."

The authors then go onto to discuss approaches which may gain acceptance.

They state:

"Two potential approaches are…. The first approach calls for state experimentation with innovative programs adopted by liability insurers, sometimes called disclosure- and-offer programs, in which health care providers disclose unanticipated outcomes of care to patients and make prompt offers of compensation in appropriate cases. Patients do not waive their right to sue by accepting the offer, but reportedly, few go on to file lawsuits… The second approach is to shift the adjudication of medical malpractice claims to a new kind of tribunal — either an administrative panel that would award damages on the basis of judgments by neutral experts about the avoidability of the injury or specialized judicial courts presided over by judges with medical expertise. .."

Clearly as the authors state the tort problem has a ready ability to be resolved. It is stuck however due to the influence of the Tort Attorneys who have always had a strong and costly influence in Washington. If we want a resolution in health care we demand a resolution in Tort Reform!

Coase

It is worth a brief review of what Coase has said regarding this issue. I have found Coase is one of my favorite economists, one of very few. He avoids the plethora of useless equations and deals with simple examples and logic. Coase is in many ways the Aristotle of economics.

Coase's famous observation is stated in the Library of Economics and Liberty is:

"Firms are like centrally planned economies, he wrote, but unlike the latter they are formed because of people’s voluntary choices. But why do people make these choices? The answer, wrote Coase, is “marketing costs.”… But because markets are costly to use, the most efficient production process often takes place in a firm. His explanation of why firms exist is now the accepted one and has given rise to a whole literature on the issue."

The article continues:

"Economists before Coase of virtually all political persuasions had accepted British economist Arthur Pigou's idea that if, say, a cattle rancher’s cows destroy his neighboring farmer’s crops, the government should stop the rancher from letting his cattle roam free or should at least tax him for doing so. Otherwise, believed economists, the cattle would continue to destroy crops because the rancher would have no incentive to stop them..."

As I have argued before the Pigou school is one of central Government control via taxation. A favorite approach by Mankiw and the Harvard economists. If you don't like it tax it. In contrast Coase recognizes the efficiency of the market, if left to its own merits and that is saying something for a man who was an ardent Socialist when he began his analysis.

The article concludes:

"This insight was stunning. It meant that the case for government intervention was weaker than economists had thought…"

Now on point as regards to health care Coase talks of the light house and how they functioned without Government control. Specifically:

"Coase also upset the apple cart in the realm of public goods. Economists often give the lighthouse as an example of a public good that only government can provide. They choose this example not based on any information they have about lighthouses, but rather on their a priori view that lighthouses could not be privately owned and operated at a profit. Coase showed, with a detailed look at history, that lighthouses in nineteenth-century Britain were privately provided and that ships were charged for their use when they came into port. "

Thus health care, using the lighthouse metaphor, and in a Coasian sense, should follow a similar path, and such a path is in many ways divergent from that as presented by the current President.

Another Medicare Assault

So why am I not surprised. In an op ed in the Times on Saturday, Tyler Cowen writes a piece entitled "Something’s Got to Give in Medicare Spending". This title states his conclusion based on what at best can be said are a confused set of facts. Cowen is a faculty member in economics at George Mason University, one of the Virginia state schools in Arlington, VA.

First, as we have stated and we have shown on multiple and repeated occasions, Medicare is a program that supports those who have contributed in excess of what they ever hope to get returned and many more who have contributed nothing.

Now Cowen states:

"It’s not the profits of the drug companies or the overhead of the insurance companies that make American health care so expensive, but the financial incentives for doctors and medical institutions to recommend more procedures, whether or not they are effective. So far, the American people have been unwilling to say no."

Frankly that may be part correct but it is not the provider alone who it fault. Providers perform tests to avoid legal problems. As has been noted, a 70 year old with back pain may have metastasized prostate cancer, breast cancer, multiple myeloma, and a plethora of other problems. This the tests to determine what the problem is. The patient may not sue but oftentimes the family will. Thus to reduce the risk procedures are performed. How are you to control that. Multiple myeloma can be diagnosed by a series of blood tests seeking specific markers, PSA may help with prostate cancers but the CCE may not permit that if the patient if over say 70!

Cowen then continues:

"Drawing upon the ideas of the Harvard economist David Cutler, the Obama administration talks of empowering an independent board of experts to judge the comparative effectiveness of health care expenditures; the goal is to limit or withdraw Medicare support for ineffective ones. This idea is long overdue, and the critics who contend that it amounts to “rationing” or “the government telling you which medical treatments you can have” are missing the point. The motivating idea is the old conservative chestnut that not every private-sector expenditure deserves a government subsidy."

Cutler is a health care mini-czar to the current President. Yes he was at Harvard but he has moved on, thus one should be honest at least with that biased disclosure. CCE has its problems as articulated herein many times. It as proposed is a Government and not a professional assessment group and as such it lags trends, delimits options and in the end will ration. Only those not on Medicare such as all Government employees will be free of the rationing. Is there no wonder that there are no objections from Congress, they are not affected. Cowen is missing the point and paying no attention to facts. Just look at how long a new drug takes to get through the FDA. Now compound that many fold and we have CCE procedure approvals. If the Government has its way the unapproved Medicare CCE procedures may be banned totally. Why don't we just burn the medical books, JAMA and NEJM to start!

Cowen then goes on to use the Dartmouth study:

"Scholars have been applying comparative-effectiveness research to Medicare for years, and the verdict is not altogether pretty. It turns out that some regions spend more on Medicare than others — sometimes two or three times as much, as documented by the Dartmouth Atlas Project. Yet the higher-spending regions often fail to produce superior health care results."

The problem here is in the details. Take a colonoscopy for example. If one does a colonoscopy in Florida the overhead costs are low and the patients may be somewhat homogeneous. Then take one done at Columbia Presbyterian in New York at 168th Street. In New York there are say 200 performed per day in a clinic setting which is akin to some industrial type surgery wards I have seen in Russia. People side by side and English not the main language. The staff performs one per 40 minutes and it is a true assembly line. But the costs are higher despite the attempts to be more productive than any other location. Why? Good question. Dartmouth damns New York without asking why. Truth is found by answering the whys and not just mouthing the whats. One should remember that Dartmouth is in Hanover and it does not in any way present the real world. Columbia Presbyterian and other New York Hospitals are a cross section of humanity. Thus the Dartmouth group should really find the whys before they justify themselves on the whats!

Cowen then goes on:

"Suggested ways to lower costs include an emphasis on preventive care, the use of electronic medical records and increased competition among insurers. But even if these are likely to improve the quality of care, they are speculative and uncertain as cost-saving measures. Keep in mind that while computers were remarkably powerful inventions, it took decades before they showed up in the statistics as having improved productivity in the workplace."

Frankly I have no idea where he is going here. It is a bit of on the one hand and then on the other. Yes we all agree the the EMR will help, assuming it exists, it works, and it is used. We have addressed that issue in detail before.

Cowen continues:

"One idea embodied in a bill sponsored by Senator Ron Wyden, Democrat of Oregon, and Senator Robert F. Bennett, Republican of Utah, is to finance new health care programs by taxing health insurance benefits. This makes sense in principle: why should insurance benefits be favored over salary by our tax system? But employer-supplied insurance is a mainstay of the current health care system, and there is no adequate replacement immediately in sight.....It sounds harsh to suggest that the Obama administration cut areas of Medicare spending, but, too often, increased expenditures and coverage are confused with good health care outcomes. The reality is that our daily environment, our social status and our behavior — including diet and exercise — have more to do with good health than does health care more narrowly defined....The demand for universal coverage sounds like a moral imperative to “take care of everybody,” but in reality it would make only a marginal difference when it comes to the overall health of the American population. The sober reality is that universal coverage is another way to spend money, which may or may not be a good idea."

There are many ideas here with little justification. Let me address them in a more logical order:

1. Universal Coverage: Like auto insurance there are externalities. We have to take care of a sick person whether they have insurance or not. Opting out means moving the cost to everyone who is in. The issue is coverage for what? Catastrophic, accident, chronic, acute. That is the debate.

2. Taxing Benefits: This is a question if and only is we assume that employer benefits remain rather than having a system where every person is insured in a manner akin to auto insurance. I recognize that such an approach is antithetical to the way we think but perhaps new thinking is necessary. Multiple providers, and individuals. Perhaps also the patient should pay the physician or provider and the patient should then get reimbursed by the insurer. Again like auto insurance in many cases. The nexus between the patient and the provider in terms of the payment is a critical connection to let both understand costs.

3. Medicare has some problems but they are too often Government based problems. The Medicare reimbursement system if used in global financial trading systems would collapse the world economy in just a few days. It is incompetently organized and operated. No business would have a billing and payment system like this. I remember my days developing and managing the cellular billing system twenty years ago. They were complex and if we had a problem we were soon aware if it and it was fixed. What takes Medicare so long, well it is the Government!

4. Back to Universal: If Universal is to work then all must be in the system, and if one looks at Medicare then that means Unions and Government workers and all politicians. They must have a dog in the hunt!