Wednesday, December 30, 2009

Heath Cuts With Little Effect on Care

New York Times article "Health Cuts With Little Effect on Care" (December 29th, 2009) offers poor partial equilibrium analysis of Richmond health care. Specifically, it makes inferences from data on local rationing of health care to the impact of a global rationing of health care. This is improper in the presence of control group substitution, the search for alternative treatment by individuals denied it by an experiment (in this case, natural).

Since 1996, the Richmond area has lost more than 600 of its hospital beds, mostly because of state regulations on capacity. Several hospitals have closed, and others have shrunk. In 1996, the region had 4.8 hospital beds for every 1,000 residents. Today, it has about three. Hospital care has been, in a word, rationed.


The quality of care in Richmond is better than in most American metropolitan areas, according to various measures, and it continues to improve. Medicare data, for example, shows that Richmond hospitals do a better-than-average job of treating heart attacks, heart failure and pneumonia.

The New York Times is broadly examining the impact of a natural experiment in medical care. It implicitly compares a forced change in hospital bed capacity, using a difference-in-difference model. Specifically, the article examines how the difference between American metropolitan hospitals and an unconstrained Richmond changed when Richmond become constrained.

However, it is important to note that individuals living in Richmond who may have been made worse off (implicitly, the control group in this natural experiment) had the capacity to seek out-of-area hospitals that were not limited by (control group substitution). We could therefore observe an increase in Richmond health statistics due to this local prohibition, while observing a decrease in health due to a global prohibition.

Corrections notes that these observations are predicated on the premise that the New York Times is doing proper analysis to begin with. Observations about hospital care rates alone, neglecting individuals that never went to the hospital, would obviously be severely flawed. The claim that quality of care is better when not considering the quantity, which the New York Times appears to do, is an additional and fatal flaw.

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