nep-hea New Economics Papers
on Helth Economics
Issue of 2005‒01‒23
four papers chosen by
Yong Yin
SUNY at Buffalo, USA

  1. Asymmetric Information and Outcome-based Compensation in Health Care – Theoretical Implications By Udo Schneider
  2. Investing in Health: The Long-Term Impact of Head Start By Kathryn Anderson; James Foster; David Frisvold
  3. Dynamic Inefficiencies in Insurance Markets: Evidence from long-term care insurance By Amy Finkelstein; Kathleen McGarry; Amir Sufi
  4. Health Care Expenditures in OECD Countries: A Panel Unit Root and Cointegration Analysis By Dreger, Christian; Reimers, Hans-Eggert

  1. By: Udo Schneider (University of Bayreuth)
    Abstract: The discussion about health care systems focuses on the dynamics of expenditures and on the weak growth of revenues. In this discussion it is widely overseen that medical expenditures and the supply of medical services depend crucially on the compensation of physician services. The paper analyzes the implementation of an outcome-based payment system in the presence of asymmetric information. Two cases are studied in detail. First, the common situation of physician’s moral hazard is analyzed. Second, a double moral hazard model is developed. Here, the patient’s actions influence health outcome and cannot be monitored by the physician. It is shown that the choice of insurance and payment contracts depends on the characteristics of asymmetric information. In addition, lack of knowledge about health status and productivity of health inputs prevent a solution using outcome-based contracts.
    Keywords: outcome-based contract, double moral hazard, health policy
    JEL: I11 I12 D82
    Date: 2005–01–17
  2. By: Kathryn Anderson (Department of Economics, Vanderbilt University); James Foster (Department of Economics, Vanderbilt University); David Frisvold (Graduate Student at Vanderbilt University)
    Abstract: Head Start is a comprehensive, early childhood development program designed to augment the human capital and health capital levels of disadvantaged children. Grossman's (1972) health capital model suggests that early investments of this type should have lasting effects on health outcomes. This research evaluates the impact of Head Start on long-term health by comparing health outcome and behavioral indicators of adults who attended Head Start with those of siblings who did not. The results suggest that there are long-term health benefits from participation in Head Start and that these benefits result from lifestyle changes.
    Keywords: Early childhood education, Head Start, health, health capital, health disparities, human capital, program evaluation
    JEL: H51 I12 I21 I38
    Date: 2004–12
  3. By: Amy Finkelstein; Kathleen McGarry; Amir Sufi
    Abstract: We examine whether unregulated, private insurance markets efficiently provide insurance against reclassification risk (the risk of becoming a bad risk and facing higher premiums). To do so, we examine the ex-post risk type of individuals who drop their long-term care insurance contracts relative to those who are continually insured. Consistent with dynamic inefficiencies, we find that individuals who drop coverage are of lower risk ex-post than individuals who were otherwise-equivalent at the time of purchase but who do not drop out of their contracts. These findings suggest that dynamic market failures in private insurance markets can preclude the efficient provision of insurance against reclassification risk.
    JEL: D4 D8 I11 G22 J14
    Date: 2005–01
  4. By: Dreger, Christian (Institute for Economic Research Halle and IZA Bonn); Reimers, Hans-Eggert (Wismar University of Technology, Business and Design)
    Abstract: This paper investigates the link between health care expenditures and GDP for a sample of 21 OECD countries using recent developed panel cointegration techniques. In contrast to previous studies, the analysis accounts for the fact that health care expenditures are not only determined by income. The other driving force is medical progress, which is proxied by different variables, like life expectancy, infant mortality and the share of the elderly. In the extended models, a cointegration relationship can be established among the variables. The income elasticity is not different from unity, implying that health care expenditures are not a luxury good. This finding is robust for alternative measures of medical progress. The evidence is unchanged, if alternative estimators of the cointegration vector are used. Controlling for cross section dependency does not affect the principal results, as cointegration can be found even in a model among nonstationary common factors.
    Keywords: health care expenditures; medical progress, panel cointegration
    JEL: C23 I10
    Date: 2005–01

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