Cost Information Changes Medical Test Decisions

It is one of the most basic ideas in economic theory: you are less likely to buy something if the price is higher. Obviously, we avoid buying expensive items because we want to save our money for other things. But there is more to it than that. We have all had the experience of avoiding something expensive even when someone else is paying. Minimizing costs is not just a matter of having more money in a personal sense, but also seems to be related to the idea of winning — the basic drive that leads you to perform well in a video game or another context where your results are being accurately measured. You will want to do things efficiently and produce good results even before you stop to ask who will be paying the price.

I remember noting this when I saw college professors going to some trouble to select less expensive textbooks, even though it would be the students, not the professors, who would be purchasing the books. The same effect works when doctors select medical tests for patients, according to a study. The study was published in November 2013, and I found the story in HCP Live:

EHR Cost Data Reduces Physician Lab Test Orders

Most of the time, U.S. doctors don’t know what the lab tests they order will cost. When computers running electronic health record (EHR) systems showed current indicative pricing for lab tests to doctors, most doctors ordered fewer and less expensive tests. The study looked at only 27 common laboratory tests out of the hundreds of routine medical tests. The cost savings were slight, about 11¢ per patient visit, but they would add up quickly if measured across the whole range of medical tests.

This kind of effect shows the advantages of better decisions when people know more about the costs of the resources they are using. Part of the challenge in improving the efficiency of work is having more and better information about costs readily available for people who will be making decisions that involve the use of specific resources.

Off to an Icy Start

A major winter storm disrupted the first two work days across large parts of North America. We might have been able to reboot the new year this morning, the first Monday morning of the 2014, basically pretending that last week didn’t count, but for another weather system bringing startlingly cold air to nearly all of the North American continent. This weather system is colder than the one we saw a month ago, and though it may linger for just a few days, it will be cold enough to do some damage in that short time. As one measure of how cold it is, all 49 of the U.S. states in North America are expected to record freezing temperatures tonight.

I write this as the cold weather has not yet reached where I am, and rain showers are melting the snow from the last storm. But it is barely sunrise, and the temperatures have already started to drop. Rain may give way to snow in about two more hours, and when the temperature falls below freezing, it is not expected to go back above freezing until Thursday or Friday. By the time the extreme cold air moves out, many of us will have lost the first week of the year. It is only a week, but looking at it a different way, it is 2 percent of the year. In macroeconomic terms, that is a big deficit to try to catch up from.

Those of us dealing with the weather when we had hoped to be working will have to do the best we can with it. Whatever we are able to accomplish in spite of this week’s weather will take some of the pressure off the weeks to come.

Chaos as Divide and Conquer Breaks Down

Is 2014 the year of global political chaos? It could seem so if you look at events in Europe, Japan, China, southeast and southwest Asia, tropical Africa, the United States, and elsewhere. If there is a common principle underlying many of these political dramas, it may be that electronic communication has made the classic divide-and-conquer political strategy unreliable. It is harder to divide people if they can get together and compare notes on what you are doing. The plans of the NSA, the Syrian military, and the insurgents in Bangladesh, to cite just three examples, all depended on divide and conquer, and are faltering in spectacular fashion as they find they must take on the world all at once.

Changes for 2014

More than a few things are changing at the start of 2014. Looking just at the United States:

• A technical change in incandescent light bulbs will provide better lighting efficiency while increasing the price of the least expensive light bulbs.
• The Fed has announced it is reducing the scale of its monthly bond-buying program by 12 percent this month.
• There are a raft of tax changes, including the expiration of the sales tax deduction for federal income taxes, the expiration of deductions and tax credits for energy initiatives in many states, and sales tax on Amazon.com sales in many states. Many of the federal tax rules on health insurance are changing with the health care overhaul that goes into effect this year.
• Extended unemployment compensation expired this week (though some political observers think Congress might reverse this change next week).
• Smoking bans go into effect in many places, protecting people in public parks and children in cars from secondhand smoke. Dozens of jurisdictions are banning e-cigarettes.

Happy Nay Year?

I heard from people who got their health insurance ID numbers by email yesterday and are making their premium payments today. Their health coverage starts today, as planned, if not quite as smoothly as planned. And this is just one of many new things that are launching today. When something new happens after a period of planning and preparation, the naysayers are left out in the cold. With respect to today’s expansion in health coverage, it was more than a few people who said this day would never come, who spent the last couple of years saying, “You people will never be able to see a doctor.” It was the consensus of the mainstream news reports. Right up until Christmas Eve, they really thought they could stop that train. But today, with the work completed, the naysayers are remembered not as critics, but as extra obstacles. They contributed nothing, did no work of their own, but made the work that had to be done harder than it had to be. It is always this way. New things come about and problems are solved in spite of skeptics and obstructionists. We say “Happy new year,” not “Happy nay year.”

Everyone sooner or later has something new to offer. Often you can avoid the extra distance, the detour around the obstructionists, just by not telling very much of what you are working on. On the other side of the exchange, when you see people trying something new, try to not muddle up their efforts too much by telling them the way things are and why nothing can change. It is the nature of change that those of us who are not directly involved in the work never quite see what is coming until it has already happened — and even then, sometimes it is difficult to grasp. New things happen no matter how skeptical we are. Happy new year!

For another take on the nature of change on the occasion of New Year’s Day, see “Happy ‘Srsly. OMG. New’ Year” in the Fear of Nothing blog.