nep-hea New Economics Papers
on Health Economics
Issue of 2005‒06‒27
seven papers chosen by
Yong Yin
SUNY at Buffalo, USA

  1. Efficient Kidney Exchange: Coincidence of Wants in a Structured Market By Alvin E Roth; Tayfun Sönmez; M. Utku Ünver
  2. Can Ranking Hospitals on the Basis of Patients' Travel Distances Improve Quality of Care? By Daniel P. Kessler
  3. Do Report Cards Tell Consumers Anything They Don't Already Know? The Case of Medicare HMOs By Leemore Dafny; David Dranove
  4. Opportunities for Improving the Drug Development Process: Results from a Survey of Industry and the FDA By Ernst R. Berndt; Adrian H. B. Gottschalk; Matthew W. Strobeck
  5. Death and the City: Chicago's Mortality Transition, 1850-1925 By Joseph P. Ferrie; Werner Troesken
  6. Alcohol mortality, drinking behaviour, and business cycles: are slumps really dry seasons? By Petri Böckerman; Edvard Johansson; Ritva Prättälä; Antti Uutela
  7. Rational Addiction with an Optimal Inventory: Theory and Evidence from Japanese Daily and Monthly Purchases By Junmin Wan

  1. By: Alvin E Roth; Tayfun Sönmez; M. Utku Ünver
    Date: 2005–06–21
  2. By: Daniel P. Kessler
    Abstract: Conventional outcomes report cards­ public disclosure of information about the patient-background-adjusted health outcomes of individual hospitals and physicians -- may help improve quality, but they may also encourage providers to %u201Cgame%u201D the system by avoiding sick and/or seeking healthy patients. In this paper, I propose an alternative approach: ranking hospitals on the basis of the travel distances of their Medicare patients. At least in theory, a distance report card could dominate conventional outcomes report cards: a distance report card might measure quality of care at least as well but suffer less from selection problems. I use data on elderly Medicare beneficiaries with heart attack and stroke from 1994 and 1999 to show that a distance report card would be both valid ­ that is, correlated with true quality ­ and able to distinguish confidently among hospitals ­ that is, able to reject at conventional significance levels the hypothesis that the true quality of a low-ranked hospital was the same as the quality of the average hospital. The hypothetical distance report card I propose compares favorably to (although does not necessarily dominate) the California AMI outcomes report card.
    JEL: I1
    Date: 2005–06
  3. By: Leemore Dafny; David Dranove
    Abstract: The use of government-mandated report cards to diminish uncertainty about the quality of various products and services is widespread. However, report cards will have little effect if they simply confirm consumers' prior beliefs. Moreover, documented "responses" to report cards may reflect learning about quality that would have occurred in their absence. Using panel data on Medicare HMO market shares between 1994 and 2002, we examine the relationship between enrollment and quality both before and after report cards were mailed to 40 million Medicare beneficiaries in 1999 and 2000. We find evidence for both market-based and report-card-induced learning. We estimate the report-card effect on enrollment in the 2 years following their release to be approximately equal to that of cumulative market learning between 1994 and 2002. The report-card effect is entirely due to beneficiaries' responses to consumer satisfaction scores; other reported quality measures such as the mammography rate did not affect enrollment.
    JEL: D8 H4 I1
    Date: 2005–06
  4. By: Ernst R. Berndt; Adrian H. B. Gottschalk; Matthew W. Strobeck
    Abstract: In the United States, the Food and Drug Administration (FDA) agency is responsible for regulating the safety and efficacy of biopharmaceutical drug products. Furthermore, the FDA is tasked with speeding new medical innovations to market. These two missions create an inherent tension within the agency and between the agency and key stakeholders. Oftentimes, communications and interactions between regulated companies and the FDA suffer. The focus of this research is on the interactions between the FDA and the biopharmaceutical companies that perform drug R&D. To assess the current issues and state of communication and interaction between the FDA and industry, we carried out a survey of industry leadership in R&D and regulatory positions as well as senior leadership at the FDA who have responsibility for drug evaluation and oversight. Based on forty-nine industry and eight FDA interviews we conducted, we found that industry seeks additional structured and informal interactions with the FDA, especially during Phase II of development. Overall, industry placed greater value on additional communication than did the FDA. Furthermore, industry interviewees indicated that they were willing to pay PDUFA-like fees during clinical development to ensure that the FDA could hire additional, well-qualified staff to assist with protocol reviews and decision-making. Based on our survey and discussions, we uncovered several thematic opportunities to improve interactions between the FDA and industry and to reduce clinical development times: 1) develop metrics and goals at the FDA for clinical development times in exchange for PDUFA like fees; 2) establish an oversight board consisting of industry, agency officials, and premier external scientists (possibly at NIH or CDC) to evaluate and audit retrospectively completed and terminated drug projects; and 3) construct a knowledge database that can simultaneously protect proprietary data while allowing sponsor companies to understand safety issues and problems of previously developed/failed drug programs. While profound scientific and medical challenges face the FDA and industry, the first step to reducing development times and associated costs and facilitating innovation is to provide an efficient regulatory process that reduces unnecessary uncertainty and delays due to lack of communication and interaction.
    JEL: I1 H11 K23
    Date: 2005–06
  5. By: Joseph P. Ferrie; Werner Troesken
    Abstract: Between 1850 and 1925, the crude death rate in Chicago fell by 60 percent, driven by reductions in infectious disease rates and infant and child mortality. What lessons might be drawn from the mortality transition in Chicago, and American cities more generally? What were the policies that had the greatest effect on infectious diseases and childhood mortality? Were there local policies that slowed the mortality transition? If the transition to low mortality in American cities was driven by forces largely outside the control of local governments (higher per capita incomes or increases in the amount and quality of calories available to urban dwellers from rising agricultural productivity), then expensive public health projects, such as the construction of public water and sewer systems, probably should have taken a back seat to broader national policies to promote overall economic growth. The introduction of pure water explains between 30 and 50 percent of Chicago%u2019s mortality decline, and that other interventions, such as the introduction of the diphtheria antitoxin and milk inspection had much smaller effects. These findings have important implications for current policy debates and economic development strategies.
    JEL: N0 N9
    Date: 2005–06
  6. By: Petri Böckerman (Labour Institute for Economic Research); Edvard Johansson (The Research Institute of the Finnish Economy); Ritva Prättälä (National Public Health Institute); Antti Uutela (National Public Health Institute)
    Abstract: This paper explores the connection between alcohol mortality, drinking behaviour and macroeconomic fluctuations in Finland by using both aggregate and micro-level data during the past few decades. The results from the aggregate data reveal that an improvement in regional economic conditions measured by the employment-to-population rate produces a decrease in alcohol mortality. However, the great slump of the early 1990s is an exception to this pattern. During that particular episode, alcohol mortality did indeed decline, as there was an unprecedented collapse in economic activity. The results from the micro-data show that an increase in the employment-to-population rate and expansion in regional GDP produces an increase in alcohol consumption while having no effect on the probability of being a drinker. All in all, the Finnish evidence presented does not overwhelmingly support the conclusions reported for the USA, according to which temporary economic slowdowns are good for health. In contrast, at least alcohol mortality seems to increase in those bad times that are not exceptional economic crises like the one experienced in the early 1990s. However, there is evidence that alcohol consumption is strongly procyclical by its nature. This suggests that alcohol consumption and mortality may be delinked in the short-run business cycle context.
    Keywords: alcohol mortality, drinking, business cycles
    JEL: E32 I12 R11
    Date: 2005–06–17
  7. By: Junmin Wan (Graduate School of Economics, Institute of Social and Economic Research, Osaka University)
    Abstract: A rational addiction model with an optimal inventory is developed and can be used as a new way to distinguish consumption from purchases when there is perfect foresight concerning price. The theoretical framework is tested using daily and monthly cigarette purchases in Japan. In Japan, the central government controls the price of cigarettes; this can be considered a natural experiment. The rational addiction model is not supported when inventory is not considered, as the inventory becomes an omitted variable and correlates with price and tax, while it is supported if the optimal inventory is included in the estimating equation. The timing of hoarding is clarified theoretically and empirically.Since the tax elasticity of hoarding exceeds 400 percent, the hoarding effect is very large just before a tax or price increase; a tax increase, therefore, is considered a good tool for temporary economic stimulation.
    Keywords: addiction, hoarding, tax increase, omitted variable
    JEL: C12 D11 D12 H31
    Date: 2004–01

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