Coyote Blog

For years, a significant critique (mostly from the Left) of health care costs has been that over-investment by private hospitals in premium facilities (e.g. ICU beds, MRI scanners, etc) is part of the reason health care costs have been rising so rapidly.  This is why the response to a study like this from several years ago was not "wow, how fortunate the US has so many ICU beds" but instead "wow, this is what is wrong with US healthcare."  This is why per capital healthcare cost is in the next column, implying a link between more beds and higher costs.  And, this is why the "life expectancy at birth" is included in the chart.  The conclusion was supposed to be "see, the US spends all this money on ICU beds and gets nothing for it."  (Obviously this conclusion would be absurdly narrow-minded even before COVID-19, as US life expectancy is lower than that of many other countries due to lifestyle choices and other factors -- a better comparison would be US life expectancy at 65, where US looks much better).

As a result, many states and municipal authorities have Certificate of Need (CON) processes that require hospitals and other health care providers to get government permission before adding certain types of capacity/infrastructure.  Many of these government agencies actually delegate these decisions to a board populated with representatives of the current local incumbent hospitals, meaning one must get permission from one's competitors before adding capacity (permission unlikely to be given).

This sort of regulation has had acute consequences in the age of COVID-19.  John Phelan has an example from Minnesota.

With the extra time, Minnesota will work desperately to expand its ICU capacity. Local stadiums and hotels will be converted to temporary hospitals. “The attempt here is to strike a proper balance of making sure our economy can function; we protect the most vulnerable; [and] we slow the [infection] rate to buy us time and build out our capacity to deal with this,” Gov. Walz said....

Until 1984, Minnesota operated what were called Certificate of Need (CON) laws. These require government permission before a facility can expand, offer a new service, or purchase certain pieces of equipment. While Minnesota has not operated CON laws since 1984, along with two other states—Arizona and Wisconsin—it maintains several approval processes that function like CON laws.

In 1984, Minnesota enacted a hospital construction moratorium. This prohibits the building of new hospitals as well as “any erection, building, alteration, reconstruction, modernization, improvement, extension, lease or other acquisition by or on behalf of a hospital that increases bed capacity of a hospital.” Whenever hospitals or provider groups propose an exception to the moratorium, the Minnesota Legislature requires the Department of Health to conduct a “public interest review.”

Researcher Patrick Moran explains:

In its review, the Department must consider whether the proposed facility would improve timely access to care or provide new specialized services, the financial impact of the proposed exception on existing hospitals, the impact on the ability of existing hospitals to maintain current staffing levels, the degree to which the facility would provide services to low-income patients, as well as the expressed views of all affected parties. [Emphasis added]

Moran continues:

These reviews must be completed within 90 days of the proposed project. However, the public interest review is not binding. The Minnesota Legislature ultimately decides which exceptions are allowed to go forward. Except for the fact that the Legislature makes the final determination about each project, the public interest review process for new hospitals and hospital beds closely resembles CON statutes in other states. [Emphasis added]

Indeed, it is incredible to note that, as with CON laws, the purpose of this system is to make it harder to provide hospital beds in Minnesota. Moran says: “Policymakers hoped that the moratorium would be more effective than CON in reducing the growth of hospital beds.”

They appear to have been successful. In the twenty years from 1984 through 2004, 16 exceptions were granted permitting just 94 additional licensed beds. As the chart below shows, between 1996 and 2016, the number of licensed beds in Minnesota actually fell by 921 while the population increased by 810,000. Exactly how “the Minnesota Department of Health has concluded that the moratorium is largely ineffective in restraining bed capacity”, as Moran says, is something of mystery.

The reason for this sort of thinking has in part been based on misunderstandings on the Left about markets (similar to Bernie Sanders and his too many deoderants statement).  But it is part based on the reality that the US healthcare system is stuck between two different regulatory models.

• In model 1, which we will call free market, investment by private actors increases supply.  In such a market with a lot of fixed investment, prices are driven down as competitors vie to fill excess capacity.  This is close to the model the US has in veterinary medicine and some non-insurable surgeries like eye correction and plastic surgery, but is far from the model we have in most patient care
• In model 2, which I will call the public utility model, a small number of private companies operate with heavy regulations of services and prices in exchange for a guaranteed return on assets.  Since the size of the asset base drives profits, private players have the incentive to add lots of assets while regulators look on asset additions skeptically

The US patient healthcare system is stuck between these models, which may be a worse spot than either alone.  Dominance of third party payers or even a single government payer tends to drive the system towards model 2.  But model 2 is notoriously bad at producing innovation, often results in poor capital allocation decisions, and sub-optimizes costs compared to model 1.

I write this because I have been publicly skeptical of some of the COVID-19 responses.  But be that as it may, the decision has been made to go all-in on social distancing.  I am fully participating, whatever my personal beliefs are about risk.  Our family is staying isolated and wearing masks and gloves when we need to go into a store -- not because we are scared but because we are participating.  These sorts of things are much easier to do when everyone else is doing them, and more effective as well.

In places like Phoenix that is lightly hit by the virus and in rural areas where my company operates that have been hit not at all (e.g. zero cases in the county), a lot of folks are not playing along.  It would be heartbreaking to crash the economy and double the government debt only to have this thing still drag out because folks couldn't put neighborhood barbecues on hold for a few weeks (yes, I have seen several).

Update from a long-time reader:

The claimed purpose of quarantine is to create a gap in a long line of transmission. While it can be quite effective, the quarantine time does not really start until EVERYONE stops moving around. As long as even a few still move between isolated groups, those groups are not actually isolated at all. This means that failure to self quarantine lengthens the required quarantine period of all who actually comply. I would like this to be over, the sooner the better.

I am not going to take a position on COVID-19 severity now, if for no other reason as I am not an expert and I think its fine not to clutter the debates about virus responses too much with non-experts (though it is wrong, as discussed below, to censor experts who have heterodox opinions).  I am convinced COVID-19 is "not just the flu" but when I see the governor of Texas being told that there will be a million deaths in Texas alone if there is not a hard quarantine there -- well, I am skeptical.  Like with global warming, the full denier and total alarmist positions are likely both wrong -- with a lot of bad data analysis in the media along the way.  I have decided to focus on the latter.  So here are a few random thoughts:

• The data we have sucks, and thus any conclusions we are drawing mostly suck too.   The data is worse than just being incomplete or bad -- if it was randomly distributed, we could live with that.  But the lack of test kits and how we have deployed the few we have means that the data is severely biased.  We are only testing people who are strongly symptomatic.  If there is a normal distribution of outcomes from this disease, we are only testing on the right side of the distribution.  We have no idea where the median is or how long the tail is to the left side of asymptomatic outcomes.  The only thing we absolutely know about the disease is its not as deadly as the media is portraying as we are missing hundreds of thousands of cases in the denominator of the mortality rates.  The media has also been terrible about reporting on risk factors of those who died.  When a bunch of people died suddenly in Seattle, one had to read down 5 paragraphs into the story to find that they were all over 70 in an old-age home.  Or when prime-of-life people die, facts such as their being type 1 diabetics -- a known severe risk factor for this virus (and one that makes it different from the flu) are left out.
• The media is constantly confusing changes in measurement technique and intensity with changes in the underlying progress of the virus itself.  Changes in case numbers have as much to do with testing patterns and availability than they do with the real spread of the disease.
• While COVID-19 is likely worse than the normal flu, our perceptions of how much worse are strongly affected by observer bias.  Frankly, if every news broadcast every night spent 15 minutes reciting flu deaths each day, we would all be hiding in our homes away from flu.  They present a healthy man in his thirties dying clearly as the tragedy it is, but the spoken or unspoken subtext is, "this is abnormal so this thing is much worse."  But it seems abnormal because we do not report on the very real stories of healthy young people who die of the flu.  My nephew who was 25 years old and totally healthy with no pre-existing conditions died of the flu last month -- and no one featured this tragedy on the national news.
• The data we are getting sucks worse because the media has decided, as one big group, that for our own good they are going to limit all facts about the virus to only the bad ones.  There is a strong sense -- you see it on Twitter both in Twitter's policies as well as Twitter group attacks -- that saying anything that might in any way reduce one's fear of the disease should be banned for our own good.  One of the more prominent examples was Medium removing an article NOT because it was proven wrong but because it took one side of a very open question and it was obviously decided it was "unsafe" to allow that side to even be aired.
  
  This strikes me as a terrible precedent and one with a very slippery slope.  We have had to fight this attitude for years in the climate debate, the bad idea that good science is unacceptable if it gets to the wrong answer.
• The media is never more dangerous than when it understands a little about a scientific topic.  After 40 years of engineering experience with feedback phenomena and exponential effects like positive feedbacks, the media suddenly thinks its the expert now and needs to lecture me that I don't really understand the power of exponential spread.  They are right that exponential disease spread with a highly transmissible virus is dangerous, but their 3rd grade math understanding is so simplistic it makes me scream.  Yes I understand the growth math, but I also understand that the same growth math says that a single bacteria colony in a month of growth should consume the whole Earth and a single chunk of plutonium that fissions indefinitely could destroy the planet.  But neither happens because there are brakes on the doubling process in later iterations.  I don't know in the case of COVID-19 if these brakes are strong or weak, but showing me mindless doubling trees is just insulting.
• Many of the computer model results I am seeing make no sense to me.  I am exhausted with people talking about computer models as if they are some fact, rather than a really opaque calculation on some researcher's set of non-transparent hypotheses.  The only way I respect a computer model is if someone presents it this way, "If X, Y, and Z are true, and you assume A and B, then this model shows what the result might be, with some large error ranges."  Add to this the fact that most modelers run a range of models based on a range of inputs that yield a range of outputs, and then the media picks the most extreme of all these outcomes and presents it as "the model results of experts" without even showing the range of other outcomes.  Arnold Kling wrote something I nodded my head to about COVID-19 and data modelling:

Once you build a model that is so complex that it can only be solved by a computer, you lose control over the way that errors in the data can propagate through the model. For me, it is important to look at data from a perspective of “How much can I trust this? What could make it misleadingly high? What could make it misleadingly low?” before you incorporate that data into a complex model with a lot of parameters.

• It will be interesting to see if anyone goes back to the models making the national news today and reconciles them to actual results.  Certainly no one ever does this in the climate debate, so I am not holding my breath.
• Frankly, I am done with the Precautionary Principle.  This does not mean I am against taking precautions, even strong and expensive precautions, against bad things.  But I am done with the notion that one should ignore the costs of these precautions and not make sensible tradeoffs.  This is even true when trading off the risk to life on one hand with reduction of economic outcomes on the other.  This is in part because reduced economic activity has real effects on human misery and has direct correlations with lifespan and well-being.

Update:  This is exactly the kind of thing I would like to see more of.  Kudos to 538.  When people rattle off ridiculous figures, it causes me to tune out.  I take this seriously.

I got this note from the head of alumni affairs (or something like that) at Harvard:

I write to share with you a message President Bacow sent this afternoon to Harvard faculty and staff. He also sent a similar message to students. His message is one he and I would like to extend to all of you.

This is an unprecedented moment for Harvard and for the world. The last week has brought uncertainty, but also great resolve and resiliency. I am heartened by the way members of the broader Harvard community, extended beyond the campus, are coming together to support each other.

I have never been prouder to be a part of the Harvard community.

Attached was a letter (sorry, no online version but this roughly mirrors its content) from the Harvard President about bravely making the decision to send all the students home.  There is a lot of uncertainty in the right response to COVID-19 and so I am generally open to difference of opinion, but the smug tone of making a brave decision in the face of adversity just rubbed me the wrong way.  So I wrote this in response.  Note I am not an expert, just one person's opinion:

FWIW, since you sent this, I will say that I think what Harvard has done is exactly the wrong thing and its actions are a victory of virtue-signaling over rational responses.

In particular, it is clear that the mortality rates for people aged 18-25 from COVID-19 are trivial -- and would be even more trivial except that we don't measure most of the COVID-19 cases in this age group because they are so mild (this from the South Korean experience where they had more measurement and they found many asymptomatic cases in this age range). When in university, these students are gathered together in a pocket of other people in their same age range and also with minimal mortality risk.

By sending these kids home, you have created a massive diaspora of folks from one of the US viral hotspots (Boston) all over the country. Students that would have been living with other low-risk people are now living with parents and grandparents who are very much at risk. Add to this the anecdotal evidence I see on the news and social media of young folks of college age flaunting quarantine and social isolation rules, and I believe that Harvard and other institutions have increased risk rather than decreased it. Also, given that Boston may have the best hospital network in the country, for those of your students who might get sick you have sent them from this location with strong medical services to one which almost certainly has an inferior medical network. Finally, given just how low the risk is to people of this age, it is amazing how panicked people in this age range are today, perhaps because they have a stronger presence on social media where there are panic positive feedback loops. An adult response would have been to tell the kids that they are going to be fine, and that their job was to stay clear of their family members who are far more vulnerable.

A better solution would have been to keep students in school and then to minimize their exposure to the older administration and professor body through online classes. Students if online but still at university could still have access to educational resources and could still hold group discussions that are much harder to do online.

I will add as a final note, because Harvard today seems to be inordinately focused on issues of class and intersectionality: I believe there is an ugly class issue built into the current panic. You can see a class gradient in the panic itself -- AJ's and Whole Foods in San Francisco have empty shelves, whereas everything is normal at the Family Dollar in rural Alabama. What I see are rich people with good amounts of savings and professional jobs at well-capitalized companies where they can work remotely asking that the jobs of low-wage restaurant, factory, and retail workers be sacrificed through quarantine for their incremental safety. I will make my assumptions explicit -- for a variety of reasons from under-counting asymptomatic cases to academic and media incentives that cause skeptical voices to self-censor or be overwhelmed, I believe the US potential mortality from COVID-19 is being grossly overestimated. One might say that it's better to be safe than sorry, but in public policy (I assume they teach this at the Kennedy School) there are always tradeoffs. What, for example, is the human misery and mortality associated with, say, 20% unemployment? I can't remember CNN interviewing many out-of-work restaurant employees about why we should quarantine cities for 2 months. I will bet you that those Harvard professors who are focused on intersectionality will be writing about exactly this a year from now -- and when they do, remember this old white cis European dude told you first.

Warren Meyer
MBA 1989

Theresa Bonopartis writes at the Federalist, "If Abortion Providers Cared About Women, They Wouldn’t Fight Abortion Safety At The Supreme Court."   The article is about what one would expect, an abortion opponent wondering why women who support abortion would oppose reasonable health and safety regulations to protect women from dangerous medical practices while receiving an abortion.

This should be super easy to explain to Conservatives (and vice versa) because there is an exactly parallel question that folks on the Left ask of Conservatives.  My New England liberal mother-in-law often asks "why do gun advocates oppose very reasonable and incremental measures to make gun ownership safer?"

And the reason in both cases is exactly the same:  That strong advocates of certain practices (gun ownership, abortion) are often worried -- and frequently with just cause -- that incremental regulations are not aimed at safety but are meant as ways to constrict the practice on the road to eventual elimination.  They fear these are eliminationist rules in the Trojan horse of "reasonable regulation."   This is why the Left, which generally advocates regulating the hell out of most every service offering, resists abortion regulations that are in some cases less stringent than those put on tanning booths.  And this is why the Right, which is generally happy to deny all civil rights to any criminal and put them in a hole for life, is resistant to background checks for gun ownership.

The funny thing is that as obvious as these parallels are to me, they almost never work with strong partisans.  "That's not the same at all, we are talking about protecting women, not letting wackos carry handguns to shoot up preschools." "That's not the same, we're just trying to protect ourselves while they are killing babies."  But the point is that while the issues are not the same, the reason for skepticism about "reasonable regulations" is exactly the same.