nep-hea New Economics Papers
on Health Economics
Issue of 2005‒04‒03
twelve papers chosen by
Yong Yin
SUNY at Buffalo, USA

  1. Why Economics is good for your health - 2004 Royal Economic Society Public Lecture By Carol Propper
  2. On the identification of the effect of smoking on mortality By Jerome Adda; Valérie Lechene
  3. Urban Health Status in Ahmedabad city: GIS based study of Baherampura, Kubernagar, and Vasna wards By Ramani K V; Mehandiratta Sweta; Patel Amit; Joshi Diptesh; Patel Nina
  4. Moral Hazard and Cash Benefits in Long-Term Home Care By van den Berg, Bernard; Hassink, Wolter H.J.
  5. The Health Status of Indigenous and Non-Indigenous Australians By Booth, Alison; Carroll, Nick
  6. Extending Health Care Coverage to the Low-Income Population: The Influence of the Wisconsin BadgerCare Program on Labor Market Outcomes By Barbara Wolfe; Thomas Kaplan; Robert Haveman; Yoon Young Cho
  7. Health, Information, and Migration: Geographic Mobility of Union Army Veterans, 1860-1880 By Chulhee Lee
  8. Scioeconomic Differences in the Adoption of New Medical Technologies By Dana Goldman; James P. Smith
  9. The Competitive Effects of Drug Withdrawals By John Cawley; John A. Rizzo
  10. The Effects of Competition on Variation in the Quality and Cost of Medical Care By Daniel P. Kessler; Jeffrey J. Geppert
  11. Pharmaceutical Stock Reactions to Price Constraint Threats and Firm-Level R&D Spending By Joseph Golec; Shantaram Hegde; John Vernon
  12. Changes in the Physiology of Aging during the Twentieth Century By Robert W. Fogel

  1. By: Carol Propper
    Abstract: In this paper, I examine the contribution that economics can make to our understanding of key issues in health and health care. In the first part of the paper, I argue that economics can bring valuable insights into the world of over-eating and present recent economic theories that argue that the root cause of the increase in obesity lies in technological change. Technological change, in terms of the kind of work we do, the agricultural production revolution and the major cost reductions in food processing and distribution have all contributed to weight gain. This hypothesis is illustrated by data from the USA. In the second part, I argue that understanding incentives is the key to understanding the behaviour of suppliers of health care, explaining for example, why health staff 'fiddle the figures' to meet government targets and why doctors will respond to financial payments.
    Keywords: health, economics, healthcare, obesity, incentives
    JEL: I1
    Date: 2004–12
  2. By: Jerome Adda (Institute for Fiscal Studies and University College London); Valérie Lechene (Institute for Fiscal Studies and Wadham College, Oxford)
    Abstract: This paper considers the identification of the effect of tobacco on mortality. If individuals select into smoking according to some unobserved health characteristic, then estimates of the effect of tobacco on health that do not account for this are biased. We show that using information on mortality, morbidity and smoking, it is possible to control for this selection effect and obtain consistent estimates of the effect of smoking on mortality. We implement our method on Swedish data. We show that there is selection into smoking, and considerable dispersion around the average effect, so that health policies that aim at decreasing smoking prevalence and quantities smoked might have less effect in terms of average number of years of life gained than previously estimated. We also empirically show that selection into smoking has increased over the last fifty years with the availability of information on the dangers of smoking, so that future studies comparing smokers and non smokers will spuriously reveal a worsening effect of tobacco on health if they fail to control for selection.
    Keywords: Health, Duration, Smoking, Selection, Mortality, Life Expectancy, Causality.
    JEL: I12
    Date: 2004–02
  3. By: Ramani K V; Mehandiratta Sweta; Patel Amit; Joshi Diptesh; Patel Nina
    Abstract: Urbanization is an important demographic shift worldwide. Today, nearly half the world population is urban. In the 1991-2001 decade, Indian population grew by 2 %, urban India by 3 %, mega cities at 4 %, and slum population by 5 % (2-3-4-5 syndrome). Slum growth in future is expected to surpass the capacities of civic authorities to respond to health and infrastructure needs of this population group. Managing urban health, thus assumes critical importance to achieve better health outcomes in the country. Historically, Government of India’s focus has been on development of rural health system. However, since the 9th Five year Plan, Government has started giving priority to urban health as well, but hardly any progress has been achieved in this area. In this working paper, we discuss our initiatives in a pilot study of urban health management in Ahmedabad city, the seventh largest mega city in India with a population of 3.5 million consisting of 1.5 million people living in slums and slum-like conditions. Our objective is to understand the nature, magnitude, and complexity of issues in the management of urban health. Towards this, our pilot study focuses on three wards, in three different parts (zones) of Ahmedabad. Our GIS based analysis provides some very interesting insights into the status of health in the selected wards. Our next task is to understand private health care in Ahmedabad, analyze existing public private partnerships in the city, and thereby build a Model Urban Health Centre with Public private Participation.
    Keywords: Urban health, management, Public-private partnership
    Date: 2005–03–29
  4. By: van den Berg, Bernard (University of Technology, Sydney); Hassink, Wolter H.J. (Utrecht University and IZA Bonn)
    Abstract: This paper tests empirically for ex-post moral hazard in a system based on demand-side subsidies. In the Netherlands, demand-side subsidies were introduced in 1996. Clients receive a cash benefit to purchase the type of home care (housework, personal care, support with mobility, organisational tasks or social support) they need from the care supplier of their choice (private care provider, regular care agency, commercial care agency or paid informal care provider). Furthermore, they negotiate with the care supplier about price and quantity. Our main findings are the following. 1) The component of the cash benefit a client has no residual claimant on, has a positive impact on the price of care. 2) In contrast, the components of the cash benefit a client has residual claimant on, have no or a negative impact on the price of care. Both results point at the existence of ex-post moral hazard in a system of demand-side subsidies.
    Keywords: long-term care, cash benefits, consumer directed services, demand-side subsidies, direct payments, moral hazard
    JEL: I10
    Date: 2005–03
  5. By: Booth, Alison (RSSS, Australian National University and IZA Bonn); Carroll, Nick (RSSS, Australian National University)
    Abstract: We use unique survey data to examine the determinants of self-assessed health of Indigenous and non-Indigenous Australians. We explore the degree to which differences in health are due to differences in socio-economic factors, and examine the sensitivity of our results to the inclusion of ‘objective’ health measures. Our results reveal that there is a significant gap in the health status of Indigenous and non-Indigenous Australians, with the former characterised by significantly worse health. These findings are robust to alternative estimation methods and measures of health. Although between one third and one half of the health gap can be explained by differences in socio-economic status - such as income, employment status and education - there remains a large unexplained component. These findings have important policy implications. They suggest that, in order to reduce the gap in health status between Indigenous and non-Indigenous Australians, it is important to address disparities in socio-economic factors such as education. The findings also suggest that there are disparities in access to health services and in health behaviour. These issues need to be tackled before Australia can truly claim to have 100% health-care coverage and high levels of health and life expectancy for all of its population.
    Keywords: self-assessed health, Indigenous health
    JEL: I1 I12
    Date: 2005–03
  6. By: Barbara Wolfe (University of Wisconsin-Madison and IZA Bonn); Thomas Kaplan (University of Wisconsin-Madison); Robert Haveman (University of Wisconsin-Madison and IZA Bonn); Yoon Young Cho (University of Wisconsin-Madison)
    Abstract: The Wisconsin BadgerCare program, which became operational in July 1999, expanded public health insurance eligibility to families with incomes below 185 percent of the U.S poverty line (200 percent for those already enrolled). This eligibility expansion was part of a federal initiative known as the State Children’s Health Initiative Program (SCHIP). In this paper, we investigate the effect of Wisconsin’s BadgerCare on the labor market outcomes of low-income single mothers. Using a coordinated set of administrative databases, we track three cohorts of mother-only families: those who were receiving cash assistance under the Wisconsin AFDC and TANF programs in September 1995, 1997, and 1999, and who subsequently left welfare. We follow the 19,201 single mothers heading these “welfare leaver” families on a quarterly basis from two years before they left welfare through the end of 2001. We use information on the labor market and welfare history of these women and their household characteristics and macroeconomic environment to analyze the effect of the availability of additional public health coverage on their employment and earnings. We apply multiple methods to investigate these outcomes, comparing across- and within-individual differences. The core finding is that labor earnings increased with the introduction of BadgerCare. This increase was small in absolute dollar value but sizeable in percentage terms.
    Keywords: health care coverage
    JEL: I18 J21
    Date: 2005–03
  7. By: Chulhee Lee
    Abstract: This paper explores how injuries, sickness, and geographical mobility of Union Army veterans while in service affected their post-service migrations. Wartime wounds and illnesses significantly diminished the geographical mobility of veterans after the war. Geographic moves while carrying out military missions had strong positive effects on their post-service geographic mobility. Geographic moves while in service also influenced the choice of destination among the migrants. The farther into the South a veteran had traveled while in service, the higher the probability that he would migrate to the South. Furthermore, these migrants to the South were more likely to settle in a state they had entered while in service. Increased general knowledge about geographical transfer itself, greater information on distant lands and labor markets, and reduced psychological cost of moving were probably important mechanisms by which prior mobility affected subsequent migration. I discuss some implications of the results for the elements of self-selection in migration, the roles of different types of information in migration decisions, and the overall impact of the Civil War on geographic mobility.
    Date: 2005–03
  8. By: Dana Goldman; James P. Smith
    Abstract: New medical technologies hold tremendous promise for improving population health, but they also raise concerns about exacerbating already large differences in health by socioeconomic status (SES). If effective treatments are more rapidly adopted by the better educated, SES health disparities may initially expand even though the health of those in all groups eventually improves. Hypertension provides a useful case study. It is an important risk factor for developing cardiovascular disease, the condition is relatively common, and there are large differences in rates of hypertension by education. This paper examines the short and long-term diffusion of two important classes of anti-hypertensives - ACE inhibitors and calcium channel blockers - over the last twenty-five years. Using three prominent medical surveys, we find no evidence that the diffusion of these drugs into medical practice favored one education group relative to another. The findings suggest that - at least for hypertension - SES differences in the adoption of new medical technologies are not an important reason for the SES health gradient.
    JEL: D6 H0
    Date: 2005–03
  9. By: John Cawley; John A. Rizzo
    Abstract: In September 1997, the anti-obesity drugs Pondimin and Redux, ingredients in the popular drug combination fen-phen, were withdrawn from the market for causing potentially fatal side effects. That event provides an opportunity for studying how consumers respond to drug withdrawals. In theory, remaining drugs in the therapeutic class could enjoy competitive benefits, or suffer negative spillovers, from the withdrawal of a competing drug. Our findings suggest that, while the withdrawal of a rival drug may impose negative spillovers in the form of higher patient quit rates, on the whole non-withdrawn drugs in the same therapeutic class enjoy competitive benefits in the form of higher utilization.
    JEL: I1
    Date: 2005–03
  10. By: Daniel P. Kessler; Jeffrey J. Geppert
    Abstract: We estimate the effects of hospital competition on the level of and the variation in quality of care and hospital expenditures for elderly Medicare beneficiaries with heart attack. We compare competition's effects on more-severely ill patients, whom we assume value quality more highly, to the effects on less-severely ill, low-valuation patients. We find that low-valuation patients in less-competitive markets receive more intensive treatment than in more-competitive markets, but have statistically similar health outcomes. In contrast, high-valuation patients in less-competitive markets receive less intensive treatment than in more-competitive markets, and have significantly worse health outcomes. Since this competition-induced increase in variation in expenditures is, on net, expenditure-decreasing and outcome-beneficial, we conclude that it is welfare-enhancing. These findings are inconsistent with conventional models of vertical differentiation, although they can be accommodated by more recent models.
    JEL: I1
    Date: 2005–03
  11. By: Joseph Golec; Shantaram Hegde; John Vernon
    Abstract: Political pressure in the United States is again building to constrain pharmaceutical prices either directly or through legalized reimportation of lower-priced pharmaceuticals from foreign countries. This study uses the Clinton Administration's Health Security Act (HSA) of 1993 as a natural experiment to show how threats of price constraints affect firm-level R&D spending. We link events surrounding the HSA to pharmaceutical company stock price changes and then examine the cross-sectional relation between the stock price changes and subsequent unexpected R&D spending changes. Results show that the HSA had significant negative effects on firm stock prices and R&D spending. Conservatively, the HSA reduced R&D spending by $1.6 billion, even though it never became law. If the HSA had passed, and had many small firms not raised capital just prior to the HSA, the R&D effects could have been much larger.
    JEL: G31 O32 L65 I1
    Date: 2005–03
  12. By: Robert W. Fogel
    Abstract: One way to demonstrate how remarkable changes in the process of aging have been is to compare health over the life cycles of 3 cohorts. For the first cohort, born between 1835 and 1845 (the Civil War cohort), life was short and disabilities were common even at young ages. Other factors contributing to lifelong poor health were widespread exposure to severely debilitating diseases and chronic malnutrition. Fewer of the World War II cohort, born between 1920 and 1930, died in infancy and most of the survivors have lived past age 60 without developing severe chronic diseases. Members of this cohort have experienced better health throughout their lives largely due to their lower exposure to environmental hazards before birth and throughout their infancy and early childhood. Members of the cohort born between 1980 and 1990 have a 50-50 chance of living to age 100. The average age at onset of disabilities has continued to rise, so members of this cohort can expect to remain healthy at later ages. Adopting a healthy life style early can help to prevent or postpone disability at older ages.
    JEL: I11 I12 J11 J14
    Date: 2005–03

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