Just a couple of interesting articles in the New York Times over the past week or so. The first is a good write-up about the revamping of the US food bank logistics chain:
A task force at Feeding America — which included Professor Prendergast, Ms. Morgan and others — adopted this approach. They embraced a bidding system using a virtual currency. Crucially, food banks with the greatest need received the most currency and so could place the highest bids, harnessing the benefits of a free market with fairness in the distribution of the underlying wealth.
The new system started in 2005 and quickly proved successful, sometimes in unexpected ways….
In the seven months after the new, more efficient system went into action, food donations increased by 50 million pounds, Professor Prendergast’s data indicates. Cause and effect is difficult to demonstrate, but the greater efficiency in making use of donations may have led to more donations….
This is an important point: Many economics textbooks separate efficiency from equity, but perceptions of the two are intertwined. The efficiency of the Feeding America market was intimately tied to its equity.
The other article is about Medicare Advantage and how it seems to have spill-off effects on local modes of practice that lead to lower Medicare FFS spending
The mysteries may be connected by something that appears, at first, to be unrelated: Doctors and hospitals tend to treat insured patients the same way, regardless of what kind of coverage they have. A traditional Medicare patient admitted to the hospital with, say, pneumonia will receive the same standard of care as a similar but privately insured pneumonia patient.
From this, an idea emerges that links the two mysteries. As enrollment in Medicare Advantage plans grows, so too do the plans’ influence over how doctors and hospitals provide care. Unlike the traditional program, Medicare Advantage plans establish networks, covering care provided only by certain doctors and specific hospitals. Often those are the ones with lower cost growth. As doctors and hospitals reduce their cost growth to gain access to Medicare Advantage networks and the increasing number of patients enrolled in the plans, they do so for traditional Medicare patients as well.
So, as Medicare Advantage enrollment swells, the growth in the cost of care for traditional Medicare falls — a spillover effect. That’s the theory, anyway. Does it hold water?
A few studies have examined the question, and all support the spillover theory. The first study, examining the period from 1994 through 2001, found that when the proportion of Medicare beneficiaries enrolled in Medicare H.M.O.s grew by an additional percentage point, per enrollee spending in traditional Medicare fell by one percentage point. Another study, focused on the period from 1999 to 2009, found that a 10-percentage-point increase in Medicare Advantage market share was associated with a 4.5 percent decrease in per enrollee traditional Medicare hospital costs and a commensurate reduction in duration of hospital stays.
Are the same factors at play here?
MomSense
Just seeing how my parents go through the process of choosing Medicare Advantage plans it seems that the choice comes down to how healthy you are and what level of medication and treatment you anticipate. Certainly you can’t always predict something happening that requires a major intervention. I guess my question is if Medicare Advantage plans are grouping seniors by health so healthier seniors in HMO plans will as a group see costs go down because seniors with more health problems will choose a different plan.
WereBear
I know I donate more because we have those scan cards at the checkout and I’m thinking about food at that time.
This spillover effect thing is fascinating.
@MomSense: I think we will also wind up with healthier seniors because their chance of getting care before that age increased.
aimai
Very interesting! Thanks for posting this.
MrSnrub
NPR’s Planet Money podcast covered the food bank thing a while back. Great story.
Applejinx
Wait, FOOD BANKS now have to operate on free market economics?
Have people figured out how to game the system so that 1% of the food banks have all the money yet, and food banks ‘without need’ die Darwinian deaths?
God knows we can’t have unfit hungry people around. Only the fittest hungry people are to be served, praise the market!
Seriously, does this not seem strange to anybody else? What the flying fuck is going on here?
Feathers
There is an enormous amount of waste in the American food chain. A large proportion of food donations come from within the food industry, largely from food that would have been wasted. Increased efficiency at food banks would free up capacity to be able to take in more diverted food waste.
I think the equivalent would be the hospital making the same amount of profit, but spread across more patients.
@WereBear: Those food cards are a so much better way to donate than bringing cans to a food drive. Food banks buy from the grocery wholesalers at their lowest price. They get far more food in easier to use forms with less volunteer work sorting and storing.
Applejinx
Is this simply offloading ‘distribution network’ management overhead, one of the few ways such a concept makes sense?
Anytime anybody’s using the term ‘benefits of a free market’ I suspect somebody’s gaming the system. Granted, it’s hard to find a phrase people are more successfully brainwashed to automatically revere. PR stunt?
Feathers
@Applejinx: Smaller charities, especially church based ones can be just horrible in terms of being run purely on ego and fantasy and huge amounts of people’s time and effort wasted. I hate talking about things in terms of markets, but when you are dealing with people in la la land, it may be needed.
Applejinx
Oh, like universal basic income?
Oh, like Universal Basic Income??
OK, I get it. They’ve literally implemented a system where ‘money’ isn’t a scorecard but functionally the same as a UBI, only using food-shelf buyer scrip instead of real money. The point is not to starve out lame food shelves with limited service, but to get a spontaneous distribution network going that makes up its own rules, based on scrip being fed into that network on an equitable basis (no feedback loop, but foodbanks with surpluses can use the scrip as currency)
Fuck me, I take it back: I made exactly the mistake warned against. Within the constraints the article gives, this is kinda awesome.
In fact, we should do it with dollars, too. Note the presence of scrip being issued to foodbanks because foodbanks must be given food to live! There seems to be a mysterious absence of demanding food banks finance themselves through selling their surplus food stocks in order to prove they’re entitled to survive.
Feathers
@Applejinx: Just to add, one of the issues in the charity world is everyone wanting to start their own “charity,” when there are larger established organizations who know what they are doing and could use volunteers.
I worked for a major nonprofit where a big part of the PR guys job was to reach out to people he read about in the newspaper or saw on TV who had started a charity to explain the basics of how the field they were in worked. Part of it was that he didn’t want them fucking up and bringing bad vibes down on the whole field. Some of them didn’t even know that what they were shouting for was already available through one of the national orgs.
Also little charities can be very hard to deal with. People screaming on the TV how babies are being starved because of XYZ, when their “charity” is impossible to deal with and gets nothing done anyway. How do you make sure the food banks that are actually getting people fed, not the drama factories are getting funding? Some standards other than personal hard luck stories have to be used.
WereBear
@Feathers: That brings up a classic issue for animal issues: emphasizing horrible abuse stories brings in the dollars, but seems to have a chilling effect on getting pets adopted, as they are seen as “damaged goods.”
Applejinx
If this does work, it speaks volumes about how relatively unrestricted market systems could distribute the fruits of a Universal Basic Income.
Basically, the idea is: here is your capitalism, wheel and deal all you like, and everybody starts with a steady influx of ‘scrip’ with which they can do whatever.
The point is not to make people generate their own scrip, the point is that after issuing the scrip, you don’t have to keep track much. Selling arsenic as sugar ought to remain illegal, but you don’t pay a battalion of government wonks to micromanage everything. You pay all the citizens a seed income that works like their economic vote, and the industrious can quite easily parlay that into a fortune, or not if they don’t want to bother.
Then you tax those who made fortunes and pump it back into the system… which, ironically, provides money for the customers OF those who made fortunes, so they’ll stay well ahead of the game as long as they keep trying. They don’t run out of customers because the government is subsidizing them through paying citizens, not subsidising them through directly funding them.
Interesting to see how well this works with the food banks…
Feathers
@WereBear: also the fact that many people very damaged from abuse become involved in working for animal rights. The charity where I worked had a number of people who had previously been working at a highly disfunctional shelter. Treated their workers horribly and were so overwhelmed they couldn’t see how it was affecting the animals. My co-workers were really good about helping people to find good shelters to work with, as well as great vets.
I’ve come to be wary of companies who are too small for an HR department. Lots of people seem to self select for that kind of work environment.
Actually, Hillary Rettig is fantastic on disfunctional activism.
Jeannet
Whoah! That was a surprise – I went to the linked article on food banks and found they were quoting my husband John Arnold. Small world!
Bill Arnold
@Applejinx:
I have mixed feelings about this kind of optimization because price signals are not very expressive. Would prefer that the various actors with heterogeneous utility functions could/would describe their utility functions in detail so that a moral and rational society could implement basically a distributed iterated Platinum Rule optimization. [1] But maybe that can wait for a more ethical (some would say utopian) future. :-) In the meantime the basic approach seems to work pretty well.
[1] Is there a word for that, or a literature, anyone? (Asking from ignorance.)
Bill Arnold
@Jeannet:
I was thoroughly impressed by the quotes, FWIW. It takes some moral discipline to jettison ideology when it’s the right thing to do.
RaflW
Thanks for this, Richard. It is nice to be reminded in this insane season that people continue to do the work of policy analysis, impact and efficiency studies, etc. Plenty of people just keep working for the common good even as one of our political parties doesn’t care if the whole American ship of state goes down.
This is how we come out on Nov 9th still able to function as a nation. Phew.
Jeannet
@Bill Arnold:
John was very pragmatic: his goal was to move the most possible food from being wasted to being used by those who needed it (without judging the recipients, without demanding they eat what he thought they should eat). The fact that the new bidding system equalized resources, increased warehouse turnover and made food more accessible to the food banks with the biggest poverty populations/smallest donor base was actually very in tune with his ideology. It just wasn’t obvious at first blush. (Or second blush, probably.)
The article was wrong about what John ‘went on’ to do: by 2005, he had already spent several decades pioneering and preaching about food bank and food pantry practices that were more efficient, adaptive and equitable. He was notorious in food bank circles: his peers either loved him or despised him. Shortly before his death, the cultural wind finally shifted and many of his ideas came to be adapted and applied by food banks around the country.
(So could you be a relative, Bill? John’s parents were from Big Rapids, MI.)
Bill Arnold
@Jeannet:
Pretty sure I have no close relatives from Michigan; that side of my family emerged from Pennsylvania. (including a 2-term late-19thC Republican congressman if that rings a genealogy bell).
It’s inspirational to read about very ethical people, so thanks for the additions to the story.
Dennis Byron
@MomSense: You asked: “I guess my question is if Medicare Advantage plans are grouping seniors by health so healthier seniors in HMO plans will as a group see costs go down because seniors with more health problems will choose a different plan. ” The answer is “No.” If a plan has all “seniors with more health problems” in a particular plan (unlikely), they would simply get a bigger risk factor payment per member than a plan with “healthier seniors.”