The biennial Dartmouth Atlas of Health Care is out and the findings are as eye-popping this year as they have been in the past.  Among chronically ill patients in the last two years of life: 

• New Jersey patients spent almost three times as many days in the hospital as patients in Utah.
• Patients in Manhattan had 3½ times as many hospital days as patients in Bend, Oregon.
• Among teaching hospitals, the variation in the amount spent was more than four to one.

So what impact did this wide variation in care have on the health of patients?  Not a whit. 

• There is no evidence that extra care and extra spending produce better outcomes, and some evidence that they produce worse outcomes.
• Further, variations in care correlate with variations in supply: the more hospital beds, the more bed days; the more CT scanners, the more scans; the more cardiologists, the more cardiac care, etc. [See Associated Press article ]

Is this the whole story?  I'll shelve that question for another day.  For the moment, what do we make of all this? 

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Warren Buffet has it all wrong on the estate tax.

Consumption by worthless heirs creates positive externalities for the rest of us. Remove the idle rich and most of Manhattan's finest restaurants would have to close. There would be half as many Broadway shows. Granted, the cost of a pied-a-terre in New York City would probably be a third of its current price. But what's the point of having a Manhattan condo if there's nothing to do once you get there?

By contrast, the estate tax encourages people like Buffet to leave their fortunes to foundations, which can create negative externalities as well as positive ones. Conceivably, such gifts can do more harm than good. Continue reading »