CT Scans: Just a Money Making Scheme?

I previously wrote about how I feel like we are in the “Era of Ancillary Services” for the physician. The New York Times recently ran an interesting article about cardiologists and the unnecessary CT-angiography scan. At the heart of the issue is that among cardiologists the CT-angiography scan (basically a 3-dimensional X-ray of the heart showing how much vessels are occluded) is controversial in its actual preventive utility.

Medicare, in its effort to cut costs, has balked at reimbursing for these scans. However, many cardiologists continue to order these tests because they make money (up to half of the income of some cardiologists) and patients demand the scans. Last year 150,000 of these scans were done at a cost of more than $100 million. All data trends indicate that their use is increasing significantly.

In the best case, having a CT-angiography that reveals significant occlusion of vessels may indicate the need to increase medications or undergo a procedure to unblock coronary arteries. In the worst case, having a CT-angiography can reveal that there are no blockages in a healthy and asymptomatic patient.

What is interesting about this issue is that the economic and political lobby for CT-angiography is extremely strong and was able to get Medicare to back down from their coverage reversal. Obviously, cardiologists, who may own the machines or have a financial interest in the machines, are going to fight all they can to keep this industry alive. Some people feel that the lobby is driven by capitalism under the guise of “improving patient care.” It is the rare cardiologist that refuses to order scans, own scans, or have financial interests in scanning facilities. Most other cardiologists feel that they might as well own or else they will be leaving money on the table.

At the heart of the issue though is whether these scans affect the actual outcome of the patient. There is very little evidence to suggest that it affects or does not affect patient outcomes. There are many patients in whom asymptomatic disease has been detected. There are also symptomatic patients where the scan confirms what previously was a sound clinical diagnosis based on history and examination.

It does not appear that CT-angiography is going away. The demand is just too high from patients and the lobby is too strong. This is yet again another example where the utilization of healthcare and the discovery of medical advancement are incongruent with the payment and reimbursement mechanism in this country.

Travelers Head for Cheaper Destinations Abroad

Europe has long been a favored travel destination for American travelers. In spite of the dollar’s downward spiral, Americans continue to flock to Italy, the UK, Germany and a few other favorites. As the dollar passes the $1.56 mark against the euro (remember the days when they were essentially equal?), travel has been only slightly hindered for Americans.

In fact, in 2007, according to the U.S. Department of Commerce’s Office of Travel and Tourism Industries (OTTI), the number of Americans traveling abroad grew by 1% from 2006 to 2007, increasing for the fourth year in a row. However, the first quarter of 2008 could hint of change as the economy continues to weaken and the euro strengthens. Combined with higher fuel prices, and hence higher airline prices, travel to the Continent is starting to get quite expensive.

OTTI reports a .2% decline for American travelers to Europe in the first quarter of 2008, as compared to the same period last year. Interestingly, however, in a few areas where the dollar remains relatively strong, such as South Africa, Mexico and South America, travel has increased. Americans traveling to Central and South America have increased in numbers by over 6% from last year, Mexico is up more than 8% and visitors to Africa are up a whopping 47.9% over 2007.

Against All Odds

And while many Americans who choose to vacation abroad are still traveling, that trend is likely to drop off especially if the economy continues to limp along. The Air Transport Association has reported that jet fuel prices have increased a head-spinning 70% through July 3 in comparison to 2007.

The New York Times reports that airlines industry analysts expect cuts in flights by nearly 10% for the year. And what about those economic stimulus checks? The Y Partnership, a travel industry PR firm, in cooperation with the Travel Industry Association, found in a recent survey that one in six of those receiving a check would spend it on travel.

So where are Americans choosing to vacation? For luxury travelers, high-end hotels, African safaris and River cruises in Europe are still popular. But for the average traveler who cannot afford the currently expensive euro, destinations such as Central and South America are looking very good. Many, however, are also choosing to stay in the States. Travel + Leisure magazine’s latest issue may be the harbinger of travel trends to come. Typically aimed at an upscale market of travelers, the July 2008 issue is draped in red, white and blue, and the headline reads “50 Fabulous U.S. Travel Ideas.” The editor’s regular column acknowledges the precipitous drop of the dollar against the euro and offers ideas for meaningful travel within the 50 states.

Travel Bargains

Arthur Frommer, long known for his budget travel guides and magazine Arthur Frommer’s Budget Travel, presented with his daughter Pauline at the April 2008 Atlanta Travel Expo. Their topic was travel bargains. Among the top picks were China, Vietnam, Kenya and Panama in addition to the American system of National Parks.

Exploring less frequented areas can offer a more authentic view of culture as well as a more favorable cost. Panama, which had an iffy reputation for travelers back in the 1980’s Noriega years, has transformed itself into a country ripe for visitors, with both rainforest jungles and sparkling beaches. (Disclaimer: travelers to foreign countries should always check with the State Department before departing.) The Panama Canal, which was handed over to the Panamanians by the U.S. in 1999, has experienced its busiest year ever in 2007. Furthermore, even though Panama uses the Balboa as currency, U.S. dollars are widely accepted, dispensing with the whole issue of currency exchange. With a beer that can easily cost under $1 and a wide range of tropical activities, Panama is becoming a popular destination.

Africa is becoming popular as an alternative to Europe too. For visitors who stay in a standard tourist hotel, rooms can be had in South Africa for under $50 per night, according to solotravel.org which offers cost guides for a number of countries. This is in sharp contrast to France, where a mid-range hotel will easily run you over $100 per night. Travelers who enjoy going abroad can also find great deals in other areas around the globe – such as a tourist hotel in China for about $30 or less and $20 in Vietnam.

Laws Against Outsourcing - Are They Necessary?

Often laws are passed to prevent or contain the undesirable effects of an economic activity. But sometimes the laws are more motivated by political considerations than economic benefits. The perfect example of this is outsourcing laws. The U.S. introduced outsourcing laws in 2005 in most of its 50 states in order to check the growing trend of outsourcing.

The most common argument against outsourcing is the resultant loss of jobs. These laws were passed to ensure that businesses kept their operations mainly in the U.S. and laid off fewer people. Instead of helping the businesses, these laws have cost local governments millions of dollars to ensure that their businesses did not leave the country. New Jersey and Indiana have paid amounts close to a million dollars more than necessary to ensure that their work is not outsourced in order to appease the anti-outsourcing lobby.

The first attempt at blocking outsourcing was made in 2004 when the Senate passed the Consolidated Appropriations Act which provides for statutory spending by different government departments. Section 233 of the act is entitled “Impact on Jobs in the United States” and requires that none of the funds appropriated by the act may be obligated or expected to provide financial incentive to a business enterprise to relocate outside the country if it is likely to reduce the number of its employees in the U.S. The act further provides that an activity or function of an executive agency that is converted to contractor performance under Office of Management and Budget Circular A-76 may not be performed by the contractor at a location outside the U.S. except to the extent that such activity or function was previously performed by federal employees outside the country. This meant that a government contract acquired by a private corporation could not be outsourced or relocated to a legal entity outside the U.S. if such inducement is likely to reduce the number of employees in the U.S. This rationale for the act is that the source of government projects is public money.

Leaving emotional issues aside, the main question is: Is outsourcing so undesirable that the government has to introduce laws to prevent outsourcing?

The answer is no.

Outsourcing has not resulted in Americans losing jobs. When the laws against outsourcing were passed, more Americans were employed since the recession ended in 2001 and unemployment was also falling. Outsourcing represents less than 1 percent of gross job turnover.

Preventing outsourcing is an attack on economic freedom of U.S. businesses. Economic freedom is necessary for economic growth, new jobs, and higher living standards. Outsourcing means efficiency – more final output with lower cost inputs – lower prices for all U.S. businesses and Americans in general. Lower prices lead directly to higher standards of living and more jobs in a growing economy.

The situation today is different from the time these laws were passed. Today the U.S. economy is on the verge of recession. However it would be wrong to blame outsourcing for its woes. The subprime crisis, housing and stock market crisis were not caused by outsourcing. Outsourcing has virtually nothing to do with the increase in gas prices. Jobs are being lost in all countries including those the opponents of outsourcing say are stealing the American jobs.

Instead on concentrating on emotive issues, had the government paid more attention to the real economic issues facing the nation, maybe the economy would not have been in the state it is in today.

How Much Does Youth Cost?

Economic analysis always bases its theories on assumptions like “everyone is intelligent” or “people do whatever they can to maximize their profit.” It goes without saying that these assumptions do not hold good a lot of the time. However, they are valuable models and help approximate reality.

I’m going to take the assumption of “people do whatever they can to maximize their profit” to the extreme and introduce a nice conundrum – “would you sell your age?” I can hear shouts of, “Whaaaat?? No way!” All right. Fair enough. Before we proceed further, I would like to illustrate why anyone would want to buy your age.

When you put money into the stock market, what you are essentially saying is, “I don’t need this money right now. You (some corporation) need this for such and such purpose. You can do what you want with my money, but I expect a compensation.” This compensation is the interest you get on your money. Obviously, this trade is going to take place only if that corporation can do more with the money than you can. Otherwise, they lose out.

So this corporation needs the money more than you do (since they can do more with it), and you get your compensation.


Now just imagine the same when it comes to age. There is a rich old businessman called Kelly. Kelly is 90 yrs old and wants to go on making money. But he doesn’t have much time left. So he looks at you and thinks, “Hey. He’s twenty six. His earning potential is far less than mine. If he gives me 10 years of his life, I can make $200 million with it. He certainly can’t make that much in ten years. Let me see if he is willing to sell.” He offers you a trade, and you have two problems. Should you make the trade, and if you do, how much should you charge?

At first glance, there’s no way you would agree to sell your age. After all, when you sell your age, you are giving up the joys of experiences which can never come back. You tell this to Kelly, and he smiles shrewdly and says, “That’s OK. I wouldn’t dream of taking away the best years of your life. I only want those pieces of time (adding up to 10 years), that you actually spend working and trying to make money. I won’t even count coffee breaks”.

Photo by Anna Cervova from http://www.publicdomainpictures.net.

You go home, and work this out. You figure that you currently work for 10 hrs a day, out of which you really spend only 8 hours working. This means that for 10 years of working time to elapse, you need 30 years of actual life. You go to Kelly and ask how this would work out. He says, “Look. I’ll make you a deal. Since you work only for 1/3rd of your life, you will age 1/3rd faster than you are aging currently for the next 30 years. That extra time will come to me. This way, you will get to live your full life, and you will actually be only 40 years older when 30 years have passed.”

You figure this is not too bad. You will be 66 years old instead of 56, after which you will age normally. Plus you can relax and not have to work hard. Also, there’s no tension of losing your job, recession, etc. You’re not married (we have to make it easy!). You have parents, but they’re old anyway. And 30 years later, they’ll be long gone. The deal suddenly looks very sweet!

So you decide to accept Kelly’s offer and go through with the deal. Now it’s a question of pricing. You can’t let Kelly know that you’re dying to make the deal. You have to hard sell and get as much as possible. So you first figure out how much you’re going to make in 30 years. You currently earn $20,000 per month. In 30 years you will earn $7.2 Million. Assuming that you get a 10% hike per year, we can sum the series using Geometric progression and evaluate your total earnings to be $32.9 Million.

So you agree to Kelly’s deal, and go through with the trade. You have traded 10 years of your life for $32.9 Million! You tuck it away into savings and start enjoying your remaining 30 years. Remember, however, that whatever you got is taxable!

Would other people do the same? I don’t know. Maybe, and maybe not.