Frank Curmudgeon of the Bad Money Advice blog succinctly explains an amazing loophole in the rules for collecting Social Security:

I’ve known for a while that seniors can elect to “reset” the year they start taking benefits by paying back what they got before the new start date. So a 70-year-old who started getting checks at 62 can pay back eight years of benefits and start getting much larger checks from then on. What I didn’t realize, and what stupidly never occurred to me, is that the paying back is without interest. …

And it is more than just an interest-free loan. It is also a free option. The downside risk for waiting until age 70 to collect benefits is not subtle. You might not live that long. Kick off the day before you turn 70 and you get nothing. But start at 62 and you can have it both ways. Draw checks for eight years and if you are still in reasonably good health, pay it back interest-free and reset. If not, well, you got some money from the feds while you could.

In case you don’t know, this matters because, as Frank explains elsewhere in the post, Social Security benefits are about 70% larger if you begin taking them at age 70 rather than than at 62. But you may not live long enough to recoup the forgone income between ages 62 and 70. With this Social Security gambit, you can have it both ways!

Start collecting at 62. Sock the money away and earn some interest. If you’re still in good health at 70, give it back (but keep the interest) and then enjoy the 70% bigger checks. It’s a no brainer. This only works if you really don’t need the Social Security money between 62 and 70. You have to be in a position to give it all back. Also, if you’re in bad health at age 70 you may be better off keeping the money you collected since age 62. If you die too soon, you won’t recoup it. (What’s the age of death that makes this scheme just worth doing? It’s too complicated for me to bother with. You have to assume some rate of return to account for the interest earned from 62-70. Then you have to add to that the present discounted value of the stream of 70% higher checks, again assuming some rate of return. How long until that equals the total SS payments between 62 and 70? That’s the answer. Anybody want to calculate it? If you’re very persnickety you’ll also consider spousal and survivor benefits.)

I knew all this, but I’ve never seen it so clearly explained. It sounds so simple. Why is it legal? And why doesn’t everybody try it? If it is remotely complex (a lot of paperwork?), there should be investment managers selling this as a product–offering to manage your Social Security money so you can have your cake and eat it too. Are they? If not why not?

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The September issue of Health Affairs focuses on medical malpractice in the United States, and there are a number of pieces in there worth reading.  I’m going to discuss just a few.  Unfortunately, those looking for “answers” may be disappointed.  While many of the pieces are rigorous and thoughtful, they are often based on models and have limitations that will undoubtedly leave them open to attack by those who do not like their implications.  That does not mean they should be ignored.

Low Costs Of Defensive Medicine, Small Savings From Tort Reform, by J. William Thomas, Erika C. Ziller, and Deborah A. Thayer.  While many seem to believe that capping damages and awards is the panacea to the high cost of health care in the US, no one ever really seems to explain why.  The best explanation I have heard is that reducing indemnity payments will mean both fewer cases and less expensive cases, which will bring down the cost of malpractice insurance.  This will make doctors behave in a less defensive manner, and then they will practice better and cheaper medicine, since they fear lawsuits less.  In this paper, the authors attempted to explicitly quantify the relationship between physicians’ perceived liability risk and how they practices in ways that increased cost.  They used a number of large data sources to model this relationship, and then examined how behavior would change if premiums were reduced.  They found that a 10% reduction in premiums would lead to behavior changes that would result in a savings of about 0.1% of health care costs.  That doesn’t mean it’s not worth doing; it does mean that those who think simple tort reform is the real answer to lowering health care costs may be misguided.

National Costs Of The Medical Liability System, by Michelle M. Mello, Amitabh Chandra, Atul A. Gawande, and David M. Studdert.  This is the all-star team, and they have put together a very well-written and comprehensive piece on the costs of the system , including indemnity payments, administrative costs, defensive medicine, and some other minor costs.  They found that the annual medical liability system costs are about $55.6 billion in 2008 dollars, or about 2.4% of all US health care spending.  You’ll note a theme when I say that this isn’t chump change, but it’s not nearly the amount portrayed during the health care reform debate when some argued tort reform would solve the health care cost issue.  Many will note that this article is, however, mostly a summary of evidence that has been gathered from other research.  Please don’t misunderstand me; you will absolutely will learn something by reading it.  But if you follow the research in the field, you will either agree or disagree with their findings depending on whether you agreed or disagreed with many of he papers that came before.

Physicians’ Fears Of Malpractice Lawsuits Are Not Assuaged By Tort Reforms, by Emily R. Carrier, James D. Reschovsky, Michelle M. Mello, Ralph C. Mayrell, and David Katz.  As I said before, if you believe the arguments for tort reform, physicians fear of lawsuits eventually wind up with high health care costs.  You therefore need tort reform to assuage these fears so that practice changes.  People who take this at face value have never worked in my field.  A nationwide sample of physicians was surveyed to see if perceptions about malpractice claims were related to the actual risk of their being sued. They found even in states where objective measures of malpractice risk were low, there existed high levels of malpractice concern; this was true for  both generalists and specialists.  They also found that there were only modest differences in concerns about malpractice in states with and without common tort reforms. In other words, tort reform doesn’t appear to change physicians’ malpractice concerns much, and therefore may not decrease defensive medicine or health care costs much.

There are others, and I hope to get to them soon.  Since I have often argued (from this post on) that malpractice reform is not the answer to the cost problem, I grant you that most of these conformed with my world view.  Hopefully, there will be some reasoned debate around these papers that might either change my mind or move the ball forward in terms of meaningful policy implementations.

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What else is like that? Education. It is exactly like that. You or your parents or your government pay for teachers and school buildings. What you want is knowledge and skills. The quality of the knowledge and skills you walk away with depends, in large part, on you (and your family and community), not just on your teachers and books.

A less good example is, perhaps, gym memberships. You pay for the facility, equipment, and trainer. What you get out of it in terms of fitness depends a lot on what you put in, your own habits and effort. Commercial diet plans and products are like this too. So is marriage or any relationship (though those aren’t industries). How it turns out depends a lot on you.

But one way in which health care is pretty different from education and gym memberships and everything else I can think of that has quality that depends on personal characteristics is this: the poorer quality the outcomes the more you consume.* Why? Because if you stop when things get worse you might die. If you have a minor and routine operation and you get an infection, you don’t stop consuming care. You don’t say, “Health care sucks. I’m outta here.” No, you pack your body with antibiotics and do what the doctor orders. If you should happen to have an allergic reaction to the antibiotics or other things go haywire and organs begin to shut down, you generally don’t call it a life, you go on the ventilator, the dialysis machine, … you do what it takes. (You’ll consume more auto mechanic services as things go wrong too, but that’s just one way health care is like auto repair. It isn’t like it in other ways.)

Going back to my earlier posts on how health care is different, I believe health care is unique in that it has all of the following three characteristics:

• It involves mortality and morbidity,
• Quality of outcomes depend, in part, on personal characteristics,
• The worse the outcome, the more you consume.

These are not trivial aspects of the industry. The are essential features of it that contribute to why we consume health care the way we do (we can’t easily accept that poorer health states can’t be improved), why it is psychologically difficult to commit to doing otherwise (death and illness are powerful motivators of consumption), and why it is hard to agree on how to allocate the cost risk (heterogeneity really matters since outcomes depend on individual characteristics–do people in different circumstances deserve the same burden of cost risk?). Add to these information asymmetry, third-party payment, the importance of trust in the provider, barriers to entry, differentiated and complex products, and the fact that providers, like everyone else, want good and increasing standards of living and you’ve got something that bears very little resemblance to any other industry.

So, finally, I conclude that the notion that health care is like some other industry is, well, just wrong. It is only like this or that in a small number of dimensions, not including the combination of all three bulleted ones above. Thus, health care in total is not like anything else, and it never will be.

Really, this should be self-evident. If health care were so much like cell phones or auto repair or credit cards we’d have solved the health care cost problem by now. There are reasons it is a hard problem, why all previous well-intentioned approaches have failed (manged care, Medicare PPS, Medicare Advantage and its predecessors, and so on), and they are not all entirely due to politics, though it plays a large role. Health care is deeply personal, complicated, and deals with scary stuff. Treating it like it is just another commodity completely misses what is so diabolically special about it. That’s not to say we can’t make headway on health care and its costs. I just don’t think we can do so by trivializing its unique combination of important characteristics. We have to embrace and understand its full complexity and do something that respects the totality of health care and our relationship with it. And, on top if it all, we can only do something that is also politically viable.

What is that something? I won’t even pretend I know. I seriously doubt anyone truly does.

*Having a bad health outcome doesn’t require any use of care. Even folks who use no care can have bad health outcomes. In fact, failure to deal obtain good, preventative or maintenance care is a standard way toward poor health. Nevertheless, those who use care and, for whatever reason, experience a bad outcome, are likely to seek more, not less, care.

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Austin has already linked to Avik Roy’s post on David Dranove’s piece on the socialists among us.  He, perhaps wisely, dodged the most controversial aspect of Dranove’s post.  I usually ignore this kind of stuff. This time I can’t.

First of all, Dranove’s attempt to portray Cambridge, Massachusetts as the uptopia socialists have only dreamed of is not serious.  Let me make a disclaimer.  Harvard and I have never been that close.  At almost every stage of my education, I looked there, applied there, even interviewed there.  And, every time, I chose somewhere else.  There’s something about it which never fit with me.  It’s not the politics.*

Yes, a number of appointments in this administration are linked to Cambridge.  But, last I checked the Chief Justice of the Supreme Court (no socialist) went to Harvard Law School.  So did a surprising number of current Supreme Court law clerks, two of whom are working for Justice Scalia.  Oh yeah, he went there, too.  I’m pretty sure Greg Mankiw works there, and Mark McClellan trained in the system.

You know who else has been affiliated with Harvard?  Robert Nozick.  Go ahead and call him a socialist.  I bet he’d crawl out of his grave and come after you.  Harvey Mansfield is still going strong.  I’m pretty sure he taught both Bill Kristol and Alan Keyes when they went to Harvard.  Is Niall Ferguson a socialist?  He teaches there.  Bill O’Reilly earned a Master’s degree from Harvard’s John F. Kennedy School of Government.  Senator David Ritter has a degree from Harvard (even if it’s not on his Senate Biography).  So does Pat Toomey.  Mitt Romney has two.

Need I go on?  I’m not saying that Harvard might not lean liberal, or that even more people who teach at Harvard might be liberal.  But to claim that it’s somehow odd that “the U.S. healthcare system will be in the hands of academics from Cambridge, Massachusetts” is just weak.  People who go to Harvard and work at Harvard tend to be smart ambitious people who sometimes get to work in government.   Deal with it.  Claiming that Cambridge = socialism is a talking point, not a serious argument.

Moreover, to put down on paper that Mark Pauly isn’t in the administration because “Wharton is hundreds of miles from Cambridge“?  Hey, I went to medical school at the University of Pennsylvania, and someone once called me “Marxist Welby, MD” in a nasty email.  I don’t think the University of Pennsylvania association taints him any more than it does me.

The rest of the piece basically falls into the “if you like any government at all, you’re a socialist” category.  I don’t know how else to read “Socialized insurance necessarily leads to socialized medicine“.  We’ve had Medicare for 45 years now, and this system ain’t socialized medicine no matter how many times some people scream it.

I respect David Dranove.  I agree with him that politics can screw up even the best policy; but I think that goes both ways, not necessary in a one-way liberal progression.  I agree with him that academics can sometimes lose the forest for the trees; but again, that’s true of all academics, not just those on one end of the spectrum.  I even agree with his prediction that the private insurance market may fail.

But I don’t think it’s because we’re all secret or even accidental socialists. There’s plenty of blame to go around, and it’s not Cambridge’s fault.

*Some of my best friends have gone to Harvard.  This is nothing personal.

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There isn’t a public or private health insurer anywhere in the world that doesn’t directly intervene in the delivery of medical care. Socialized insurance necessarily leads to socialized medicine, and if the government controls well over half of the insurance sector through Medicare and Medicaid, and tightly regulates the rest, it is only inevitable that it will also seek to control how health care is bought and sold. And I don’t think it will make much difference whether it is Democrats or Republicans in control. The temptation to set the rules for 17 percent of the GDP is too great.

Provided health care costs keep going up at high rates, I have little doubt Dranove is correct, in the long run. If private industry wants to maintain the the proportion of control it has over health insurance and health care it had better demonstrate it can do so without bankrupting families, businesses, and governments.

In some sense, this is a matter of consumer preference. Health insurers were able to hold the line on health care prices, volume, and premiums in the mid-1990s via managed care. In time the restrictions they imposed were judged too onerous by consumers, as well as physicians. With the backlash, high health care inflation returned. Will consumer’s embrace what the private sector dishes up next: high-deductible plans coupled with health savings accounts? Perhaps, at least in the short run. But long term, I’m not sure higher and higher deductibles are going to be quietly accepted. There may be another private-sector idea after that. Time will tell what it is and whether it succeeds.

Eventually, if private solutions seem to have failed, and failed again, the political pressure for an even fuller government solution may be great. If that’s what consumers want–if that’s what they essentially demonstrate by rejecting private-side alternatives–on what basis am I or is anyone to complain? I think private insurers and health care providers have at most two, maybe three, decades to be part of a solution. The clock is ticking.

Later: The comments to this post are, so far, very good. If this subject interests you, please read them.

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[A] prominent feature of the 1997 Medicare reforms was policy makers’ creation of ‘Medicare+Choice’. Republicans’ broad vision was to dramatically increase the number of Medicare beneficiaries in participating (private) managed care plans (Biles et al., 2002). The concept of shifting financial risk away from the government by moving Medicare beneficiaries into private managed care plans originated in the early 1970s, but the enrollment in such plans had been trivial.  …

The [1997] Balanced Budget Act provided a redesigned payment formula that was intended to address earlier payment methodology problems that had resulted in significant geographic disparities, with most enrollment being clustered in counties where payment rates to HMOs were very high and plans could purchase care for their members at lower costs (Hurley et al., 2003). The main thrust of the BBA formula was to increase payments to private HMOs in areas of the country with low payment rates based on fee-for-service spending, while (at the same time) limiting increases in HMO payments in relatively high-payment counties, thereby compressing the range of payments and theoretically unlinking ‘Medicare+Choice’ payments and county-level spending for the fee-for-service part of the Medicare programme (Berenson and Dowd, 2002).

The multiple agendas of the Balanced Budget Act fostered an internal paradox within the legislation and led to many unanticipated effects. … In short, the BBA represented a historic milestone by virtue of its aspirations for a significant expansion of private, managed care elements within the Medicare programme. Yet it also continued the process of moving Medicare closer to a government-controlled, single-payer model by calling for the development of prospective payment systems for Medicare’s remaining cost-based service components. As Jonathan Oberlander explains:

These new regulatory reforms, as well as reducing payments to providers under already established regulations, generated the savings in programme spending, not the procompetitive elements of the legislation. In this the BBA echoed a familiar theme from Medicare politics during the 1980s. In 1997, as in 1983, when the prospective payment system for hospitals was adopted, the rhetoric was all about markets and competition. But the reality was that the savings were all from regulation. The secret of the BBA was that the move to competition was not projected to save Medicare any money. Given budgetary pressures for Medicare savings, Republicans and Democrats once again embraced more regulation and lower payments to providers as the best way to achieve short-term budgetary goals. (Oberlander, 2003, 183)

… Another paradoxical aspect of the Balanced Budget Act is that … future increases for all HMOs were smaller than initially anticipated, because the BBA’s success in reducing payments to providers in the Medicare programme meant that the payment base for HMOs grew more slowly (Hurley et al., 2003). Congress had for a long time based its payments to HMOs in the private sector on what it was spending on the traditional Medicare programme in the public sector. Thus, by doing so well in decreasing payments to hospitals, physicians and other health care providers (such as home health agencies and skilled nursing facilities), Congress inadvertently reduced payments to HMOs just as they were losing control over their expenses (Berenson, 2001). In 1997, health care inflation began rising again at twice the rate of consumer price inflation, and by the late 1990s growing numbers of HMOs were teetering on the verge of bankruptcy (Cutler, 2005). Once again, the lack of synchronization between public sector and private sector cost containment came into play and – in the case of Medicare’s efforts to rely on private sector managed care – this proved to be particularly self-defeating.

The book, coauthored by Bob Berenson: Medicare Prospective Payment and the Shaping of U.S. Health Care.

Here’s the list of papers by Mayes that relate to Medicare payment history.

R. Mayes, “The Origins, Development and Passage of Medicare’s Revolutionary Prospective Payment System,” Journal of the History of Medicine & Allied Sciences (Vol. 62, No. 3, January 2007: 21-55).

R. Mayes, “The Origins of and Momentum behind ‘Pay for Performance’ Reimbursement,” Health Law Review (Vol. 15, No. 2, December 2006: 17-22).

R. Mayes, R. Hurley, “Pursuing Health Care Cost Containment in a Pluralistic Payer Environment,” Journal of Health Economics, Policy & Law (Vol. 1, No. 3, Summer 2006: 237-261).

R. Mayes, J. Lee, “Medicare Payment Policy and the Controversy Over Hospital Cost Shifting,” Journal of Applied Health Economics & Health Policy (Vol. 3, No. 3, 2004: 153-159).

R. Mayes, “Causal Chains and Cost Shifting: How Medicare’s Rescue Inadvertently Triggered the Managed Care Revolution,” Journal of Policy History (Vol. 16, No. 2, April 2004: 144-174).

J. Lee, R. Berenson, R. Mayes, A. Gauthier, “Medicare Payment Policy: Does Cost Shifting Matter?” Health Affairs (Vol. 22, No. 6, October 2003).

R. Mayes, “Medicare and America’s Health Care System in Transition: From the Death of Managed Care to the Medicare Modernization Act of 2003 and Beyond,” Journal of Health Law (Vol. 38, Summer 2005: 391-422).

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But I suck at it. In general, I have very poor memory aid skills. Having never taken notes before age 20 and only barely needing them for the rest of my education, I never learned to do it well. Somehow, I muddle through. Writing summaries of papers helps, which is a lot of what I do on this blog.

But it now looks like the perfect technology for my problem exists. It’s the Livescribe Pulse Smartpen, just reviewed favorably by James Fallows in The Atlantic.

Here’s how it works: The somewhat plump looking, cigar-sized item [...] is both a ballpoint pen — and a very sensitive, high-quality, high-capacity tape recorder. [...]

But in addition to recording sound, the pen also includes a very small camera at its tip, which many times per second takes pictures of whatever you are writing in the special notebooks. [... T]he pen registers exactly what sound you were hearing at exactly the moment you are writing a certain word, letter, or doodle. Then when you want to hear the recording, you can point the pen to that word and hear what was being said at the time. More on how it works here.

What does this mean in practice? Suppose you’re having an hour-long interview, in my case — or listening to an hour-long lecture as a student, or sitting through an hour-long business meeting. When something comes up that you want to remember, you can write a note at just that point (“Interesting point about Poland”) and later go back to get just that part of the conversation. You do so by touching the pen’s tip to the relevant phrase in the notebook, or moving your cursor to it on a stored online image of the page. No searching through the whole hour’s recording; no need to make sure you write down every detail in real time.

I’m very interested in this “pen,” which doesn’t mean I’ll actually buy one. Among other barriers, I’ve got work IT issues to iron out first. I am the master neither of my workplace computational domain nor of my memory, unfortunately.

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Trace any chain of events back far enough, and it’s all somebody else’s fault. Why not [... blame your] friend’s parents [for your misfortune]? If they had never met, fallen in love and wed, he wouldn’t have been born. [...]  Or his grandparents, or . . . well, I think you see where this is going: someplace where sarcasm reigns and every misfortune can be blamed on that darn fish who left the sea to walk on dry land and evolve into the woman who broke my heart. I curse that fish. [Bold mine.]

And so, a useful phrase is born. Had a bad week? Feeling blue? Unappreciated? Misunderstood? Toss the blame as far as you can. Launch it like a javelin. Shed it like rain off Gor-Tex. It’s not your fault. Say it with me, “I curse that fish.”

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Thanks to “Piled Higher and Deeper” by Jorge Cham www.phdcomics.com for allowing me to post this.

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More pictures of here. It’s worth a look.

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