nep-hea New Economics Papers
on Health Economics
Issue of 2005‒02‒13
twelve papers chosen by
Yong Yin
SUNY at Buffalo, USA

  1. Health Care Quality and Economic Inequality By Jappelli, Tullio; Pistaferri, Luigi; Weber, Guglielmo
  2. Productive Benefits of Health: Evidence from Low-Income Countries By Schultz, T. Paul
  3. Disability Benefits as Social Insurance: Tradeoffs Between Screening Stringency and Benefit Generosity in Optimal Program Design By Timothy Waidman; John Bound; Austin Nichols
  4. Mental Health and Labor Force Exits in Older Workers: The Mediating or Moderating Roles of Physical Health and Job Factors By Linda A. Wray
  5. Medicare Gaps and Widow Poverty By Kathleen McGarry; Robert F. Schoeni
  6. Robust forecasting of mortality and fertility rates: a functional data approach By Rob J. Hyndman; Md. Shahid Ullah
  7. Forecasting age-specific breast cancer mortality using functional data models By Bircan Erbas; Rob J. Hyndman; Dorota M. Gertig
  8. Health Insurance, Treatment and Outcomes: Using Auto Accidents as Health Shocks By Joseph J. Doyle Jr.
  9. What Explains Differences in Smoking, Drinking and Other Health-Related Behaviors By David Cutler; Edward Glaeser
  10. Estimating the Impact of Medical Innovation: The Case of HIV Antiretroviral Treatments By Mark G. Duggan; William N. Evans
  11. The Cost of US Pharmaceutical Price Reduction: A Financial Simulation Model of R&D By Thomas A. Abbott; John A. Vernon
  12. Testing for Ownership Mix Efficiency: The Case of the Nursing Home Industry By Rexford E. Santerre; John A. Vernon

  1. By: Jappelli, Tullio; Pistaferri, Luigi; Weber, Guglielmo
    Abstract: We argue that health care quality has an important impact on economic inequality and on saving behaviour. We exploit district-wide variability in health care quality provided by the Italian universal public health system to identify the effect of quality on income inequality, health inequality and precautionary saving. We find that in lower quality districts there is greater income and health dispersion and higher precautionary saving. The analysis carries important insights for the ongoing debate about the validity of the life-cycle model and interesting policy implications for the design of health care systems.
    Keywords: health care; Income inequality; precautionary saving
    JEL: D31 D91
    Date: 2004–08
  2. By: Schultz, T. Paul (Yale University and IZA Bonn)
    Abstract: Various household survey indicators of adult nutrition and health status are analyzed as determinants of individual wages. However, survey indicators of health status may be heterogeneous, or a combination of health human capital formed by investment behavior and variation due to genotype, random shocks, and measurement error, which are uncontrolled by behavior. Although there are no definitive methods for distinguishing between human capital and genetic variation in health outcomes, alternative mappings of health status, such as height, on community health services, parent socioeconomic characteristics, and ethnic categories may be suggestive. Instrumental variable estimates of health human capital and residual sources of variation in measured health status are included in wage functions to assess empirically whether the productivity of both components of health are equal. Evidence from Ghana, Cote d’Ivoire and Brazil suggest that the health human capital effect on wages is substantially larger than that associated with residual health variation.
    Keywords: health human capital, wage productivity, Brazil-Ghana-Cote D’Ivoire
    JEL: I12 J24 O12
    Date: 2005–01
  3. By: Timothy Waidman (Urban Institute); John Bound (University of Michigan and NBER); Austin Nichols (University of Michigan)
    Abstract: The Social Security Disability Insurance (SSDI) system is designed to provide income security to workers in the event that health problems prevent them from working. In order to qualify for benefits, applicants must pass a medical screening that is intended to verify that the individual is truly incapable of work. Past research has shown, however, that the screening procedures used do not function without error. If screening were error-free, it has can be demonstrated that it is socially optimal to distinguish the disabled non-worker from the non-disabled, providing benefits to the disabled. In this paper we first demonstrate that if the errors in the medical screening are too large, it will not be optimal to distinguish the disabled from the non-disabled. Then, we use data on the actual quality of screening to determine first, if segmenting the non-working population is desirable, and second whether the current SSDI system relies too heavily on screening than is justified. Our preliminary conclusion is that while screening is good enough to justify some distinction in benefits, it may not be good enough to justify the size of the benefit offered.
    Date: 2003–04
  4. By: Linda A. Wray (Pennsylvania State University)
    Abstract: This paper extends earlier health and work studies by examining how mental health affects transitions out of paid work in the years prior to the traditional Social Security retirement ages. Given recent changes in the labor market, optimal mental health may be as important a prerequisite for continuing employment as good physical health. This study uses data from the Health and Retirement Study to examine how mental health is linked to transitions to early retirement or other unemployment in 1996 for middle-aged adults who were currently working in 1992 and whether physical health, job, or sociodemographic factors affect those links. The study results indicated that mental health plays a strong and significant role in the move from paid work to other unemployment in three ways, net of other documented health, job, and sociodemographic correlates of work status. First, higher baseline CES-D depressive symptoms predicted the transition to retiree in male workers. Second, increased CES-D depressive symptoms between 1992 and 1994 (net of baseline symptoms) predicted exits from paid employment and into other unemployment by 1996. Finally, low job autonomy did not have the hypothesized moderating effect on the mental health-work status link. The results also indicated that mental health may be an even more important predictor of transitions out of paid work among middle-aged workers than are physical health and functioning and that patterns of labor force exit differ for men and women.
    Date: 2003–06
  5. By: Kathleen McGarry (University of California, Los Angeles and NBER); Robert F. Schoeni (University of Michigan)
    Abstract: Several categories of medical expenditures are not covered by Medicare, including prescription drugs, most nursing home stays, and extended hospital visits. Out-of-pocket costs for these items can be substantial, and what’s more, they are likely to be concentrated at the end of life. At the same time, it is well documented that poverty is 3-4 times more common among widows than among similarly aged married women. This study examines the potential link between these two phenomena, asking the question: to what extent do out-of-pocket health care costs of a dying spouse affect the financial position of the survivor? We find that out-of-pocket medical spending increases substantially just prior to death, and that these expenditures are large relative to income for a large share of elderly couples. Simulations investigate the extent to which expansions in insurance coverage to include nursing home care or prescription drug coverage could improve the financial well-being of the surviving spouse.
    Date: 2003–12
  6. By: Rob J. Hyndman; Md. Shahid Ullah
    Abstract: We propose a new method for forecasting age-specific mortality and fertility rates observed over time. Our approach allows for smooth functions of age, is robust for outlying years due to wars and epidemics, and provides a modelling framework that is easily adapted to allow for constraints and other information. We combine ideas from functional data analysis, nonparametric smoothing and robust statistics to form a methodology that is widely applicable to any functional time series data, and age-specific mortality and fertility in particular. We show that our model is a generalization of the Lee-Carter model commonly used in mortality and fertility forecasting. The methodology is applied to French mortality data and Australian fertility data, and we show that the forecasts obtained are superior to those from the Lee-Carter method and several of its variants.
    Keywords: Fertility Forecasting, Functional Data, Mortality Forecasting, Nonparametric Smoothing, Principal Components, Robustness.
    JEL: J11 C53 C14 C32
    Date: 2005–02
  7. By: Bircan Erbas; Rob J. Hyndman; Dorota M. Gertig
    Abstract: Accurate estimates of future age-specific incidence and mortality are critical for allocation of resources to breast cancer control programs and evaluation of screening programs. The purpose of this study is to apply functional data analysis techniques to model age-specific breast cancer mortality time trends, and forecast entire age-specific mortality function using a state-space approach. We use yearly unadjusted breast cancer mortality rates in Australia, from 1921 to 2001 in 5 year age groups (45 to 85+). We use functional data analysis techniques where mortality and incidence are modeled as curves with age as a functional covariate varying by time. Data is smoothed using nonparametric smoothing methods then decomposed (using principal components analysis) to estimate basis functions that represent the functional curve. Period effects from the fitted functions are forecast then multiplied by the basis functions, resulting in a forecast mortality curve with prediction intervals. To forecast, we adopt a state-space approach and an extension of the Pegels modeling framework for selecting among exponential smoothing methods. Overall, breast cancer mortality rates in Australia remained relatively stable from 1960 to the late 1990's but declined over the last few years. A set of K=4 basis functions minimized the mean integrated squared forecasting error (MISFE) and accounts for 99.3% of variation around the mean mortality curve. 20 year forecast suggest a continual decline at a slower rate and stabilize beyond 2010 and by age, forecasts show a decline in all age groups with the greatest decline in older women. We illustrate the utility of a new modelling and forecasting approach to model breast cancer mortality rates using a functional model of age. The methods have the potential to incorporate important covariates such as Hormone Replacement Therapy (HRT) and interventions to represent mammographic screening. This would be particularly useful for evaluating the impact of screening on mortality and incidence from breast cancer.
    Keywords: Mortality, Breast Cancer, Forecasting, Functional Data Analysis, Exponential Smoothing
    JEL: I12 J11 C53
    Date: 2005–02
  8. By: Joseph J. Doyle Jr.
    Abstract: Previous studies find that the uninsured receive less health care than the insured, yet differences in health outcomes have rarely been studied. In addition, selection bias may partly explain the difference in care received. This paper focuses on an unexpected health shock -- severe automobile accidents where victims have little choice but to visit a hospital. Another innovation is the use of a comparison group that is similar to the uninsured: those who have private health insurance but do not have automobile insurance. The medically uninsured are found to receive twenty percent less care and have a substantially higher mortality rate.
    JEL: I11
    Date: 2005–02
  9. By: David Cutler; Edward Glaeser
    Abstract: We explore economic model of health behaviors. While the standard economic model of health as an investment is generally supported empirically, the ability of this model to explain heterogeneity across individuals is extremely limited. Most prominently, the correlation of different health behaviors across people is virtually zero, suggest that standard factors such as variation in discount rates or the value of life are not the drivers of behavior. We focus instead on two other factors: genetics; and behavioral-specific situational factors. The first factor is empirically important, and we suspect the second is as well.
    JEL: I2
    Date: 2005–02
  10. By: Mark G. Duggan; William N. Evans
    Abstract: In 1995 AIDS was the eighth-leading cause of death in the U.S. and the leading cause among men between the ages of 25 and 44. During the next three years the number of deaths among individuals with HIV/AIDS in the U.S. declined by nearly 70 percent. In this paper, we use data for the 1993-2003 period for a sample of more than 10,000 Medicaid recipients from the state of California and diagnosed with HIV/AIDS to estimate the contribution of HIV antiretroviral treatments (ARVs) to this decline and their corresponding effect on long-term health care spending. The Medicaid population is a natural one to consider given that approximately half of all AIDS patients in the U.S. are enrolled in this program. Using the detailed information on health care utilization in our claims data, we account for the fact that patients taking ARVs are significantly less healthy than the average patient in our sample. Our findings demonstrate that the increase in the use of four drugs approved by the FDA in late 1995 and early 1996 was responsible for more than 90 percent of the drop in the mortality rate from 1995 to 1998. Despite the entry of more than a dozen drugs since these four, mortality rates have remained virtually unchanged. We find that the use of the new drugs led to a threefold increase in lifetime Medicaid spending due to their high cost and the resulting increase in life expectancy. Despite this, the new treatments were costeffective, with the average additional cost in Medicaid spending per life-year saved equal to $23,000.
    JEL: H51 I12 I18
    Date: 2005–02
  11. By: Thomas A. Abbott; John A. Vernon
    Abstract: Previous empirical studies that have examined the links between pharmaceutical price controls, profits, cash flows, and investment in research and development (R&D) have been largely based on retrospective statistical analyses of firm- and/or industry-level data. These studies, which have contributed numerous insights and findings to the literature, relied upon ad hoc reduced-form model specifications. In the current paper we take a very different approach: a prospective micro-simulation approach. Using Monte Carlo techniques we model how future price controls in the U.S. will impact early-stage product development decisions in the pharmaceutical industry. This is done within the context of a net present value (NPV) framework that appropriately reflects the uncertainty associated with R&D project technical success, development costs, and future revenues. Using partial-information estimators calibrated with the most contemporary clinical and economic data available, we demonstrate how pharmaceutical price controls will significantly diminish the incentives to undertake early-stage R&D investment. For example, we estimate that cutting prices by 40 to 50 percent in the U.S. will lead to between 30 to 60 percent fewer R&D projects being undertaken (in early-stage development). Given the recent legislative efforts to control prescription drug prices in the U.S., and the likelihood that price controls will prevail as a result, it is important to better understand the firm response to such a regulatory change.
    JEL: I1 L1 L2 L5
    Date: 2005–02
  12. By: Rexford E. Santerre; John A. Vernon
    Abstract: This paper offers an empirical test of ownership mix efficiency in the U.S. nursing home industry. We test to compare the benefits of quality assurance with the costs from the attenuation of property rights that result from an increased presence of nonprofit organizations. The empirical results suggest that too few nonprofit nursing homes may exist in the typical market area of the U.S. The policy implication is that more quality of care per dollar might be obtained by attracting a greater percentage of nonprofit nursing homes into most market areas.
    JEL: I1 L3 L2
    Date: 2005–02

This nep-hea issue is ©2005 by Yong Yin. It is provided as is without any express or implied warranty. It may be freely redistributed in whole or in part for any purpose. If distributed in part, please include this notice.
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