nep-hea New Economics Papers
on Health Economics
Issue of 2007‒03‒10
seventeen papers chosen by
Yong Yin
SUNY at Buffalo, USA

  1. The impact of neighbourhood on the income and mental health of British social renters By Carol Propper; Simon Burgess; Anne Bolster; George Leckie; Kelvyn Jones; Ron Johnston
  2. Distance Travelled in the NHS in England for Inpatient Treatment By Carol Propper; Michael Damiani; George Leckie; Jennifer Dixon
  3. Is Drug Coverage a Free Lunch? Cross-Price Elasticities and the Design of Prescription Drug Benefits By Martin Gaynor; Jian Li; William B. Vogt
  4. Is It Time to Redesign Hospice? End-of-Life Care at the User Interface. Syracuse Seminar on Aging. By David J. Casarett
  5. The Truth about Moral Hazard and Adverse Selection. Eighteenth Annual Herbert Lourie Memorial Lecture on Health Policy. By Mark V. Pauly
  6. Cross-Cohort Differences in Health on the Verge of Retirement By Beth J. Soldo; Olivia S. Mitchell; Rania Tfaily; John F. McCabe
  7. Worker Sorting, Compensating Differentials and Health Insurance: Evidence from Displaced Workers By Steven F. Lehrer; Nuno Sousa Periera
  8. Income and Body Mass Index in Europe By Jaume Garcia Villar; Climent Quintana-Domeque
  9. Predictability of drug expenditures: an application using morbidity data By Manuel García-Goñi; Pere Ibern
  10. The Impact of Economics on Health Policy and Management in Spain By Vicente Ortún; Ricard Meneu de Guillerna
  11. Organisational Innovations and Health Care Decentralisation: A Perspective from Spain By Guillem López
  12. For Public Service or Money: Understanding Geographical Imbalances in the Health Workforce in Ethiopia By Pieter Serneels; Magnus Lindelow; José Garcia Montalvo; Abigail Barr
  13. Health Care Management Autonomy: Evidence from the Catalonian Hospital Sector in a Decentralised Spain By Guillem López; David McDaid; Joan Costa-Font
  14. Extending health insurance to the rural population : an impact evaluation of China ' s new cooperative medical scheme By Wagstaff, Adam; Lindelow, Magnus; Gao Jun; Xu Ling; Qian Juncheng
  15. Eliciting People's Preferences for the Distribution of Health: A Procedure for a more Precise Estimation of Distributional Weights By Ottar Mæstad; Ole Frithjof Norheim
  16. Measurement of Non-Market Output in Education and Health By Peter C Smith; Andrew Street
  17. The Link Between Health Care Spending and Health Outcomes: Evidence from English Programme Budgeting Data By Stephen Martin; Nigel Rice; Peter C Smith

  1. By: Carol Propper; Simon Burgess; Anne Bolster; George Leckie; Kelvyn Jones; Ron Johnston
    Abstract: This paper examines the impact of neighbourhood on the income and mental health of individuals living in social housing in the United Kingdom. We exploit a dataset that is representative and longitudinal to match people to their very local neighbourhoods. Using this, we examine the effect of living in a neighbourhood in which the population is more disadvantaged on the levels and change, over a 10-year window, of income and mental health. We find that social renters who live with the most disadvantaged individuals as neighbours have lower levels of household income and poorer mental health. However, neighbourhood appears to have no impact on changes in either household income or individual mental health.
    Keywords: Neighbourhood effects, income, mental health, social renters
    JEL: I30
    Date: 2006–05
  2. By: Carol Propper; Michael Damiani; George Leckie; Jennifer Dixon
    Abstract: Objectives: To establish the distances travelled for inpatient treatment in England across different population groups prior to the introduction of policy to extend patient choice focusing particularly on differences by socio-economic status of patient. Methods: Using HES data for 2003/04 the distance from the admitted patient’s residence to the NHS site of treatment was calculated for each admission. Distances were summed to electoral ward level to give the distribution of distances travelled at ward level. These were analysed to show the distance travelled for different admission types, ages of patient, rural/urban location, and the socio-economic deprivation of the population of the ward. Results: There is considerable variation in the distances travelled for hospital treatment between electoral wards. Some of this is explained by geographical location. Individuals located in wards in more rural areas travel further for elective, emergency and maternity admissions. But individuals located in highly deprived wards travel less far and this shorter distance is not explained just by the closer location of facilities to these wards. Conclusions: Before the patient choice reforms were implemented, there were considerable differences between individuals in the distances they travel for hospital care. As patient choice is being actively rolled-out the factors that result in people in more deprived areas travelling less need to be better understood.
    Keywords: hospital care, distance travelled, socio-economic inequality
    JEL: I10
    Date: 2006–10
  3. By: Martin Gaynor; Jian Li; William B. Vogt
    Abstract: Recently, many US employers have adopted less generous prescription drug benefits. In addition, the U.S. began to offer prescription drug insurance to approximately 42 million Medicare beneficiaries in 2006. We use data on individual health insurance claims and benefit data from 1997-2003 to study the effects of changing consumers’ co-payments for prescription drugs on the quantity demanded and expenditure on prescription drugs, inpatient care and outpatient care. We allow for effects both in the year of the co-payment change and in the year following the change. Our results show that increases in prescription drug prices reduce both the use of and spending on prescription drugs. However, consumers substitute the use of outpatient care and inpatient care for prescription drug use, and the expenditure reductions on prescription drugs are largely offset by the increases in outpatient spending.
    Keywords: drugs, elasticity, substitution, cost-sharing, insurance
    JEL: D12 I10 M52
    Date: 2006–11
  4. By: David J. Casarett (Division of Geriatrics, University of Pennsylvania, and the VA Center for Health Equity Research and Promotion.)
    Abstract: Hospice is a system of end-of-life care that’s not used to its full potential. That is, hospice is not used in the way that would benefit patients and families as much as it could. My argument is that this is an issue of usability, or ergonomics—the science of design. I illustrate how to take what we have learned from the science of usability to make hospice more accessible and approachable, and to increase hospice use among those who would benefit from it. Underneath this discussion, though, there is a more fundamental question: Can we make hospice more usable or do we need to think about redesigning hospice entirely?
    Keywords: nursing home, Medicare, Medicaid, long-term care, elderly, social welfare.
    JEL: I11 I23 I28 J14
    Date: 2007–02
  5. By: Mark V. Pauly (The Wharton School, University of Pennsylvania)
    Abstract: This brief is actually going to have two levels. One level will go with the advertised title, and I’ll tell you my current views on the truth about moral hazard and adverse selection. Adverse selection will serve as somewhat of a handmaid of moral hazard, as you will see. That’s one level. The other level, though, which continues to surprise me, is that these two topics—they’re two buzzwords from insurance theory—have generated an enormous amount of policy interest and, yes, passion. Some people passionately believe some things about moral hazard that others passionately disbelieve. And so as part of this second level I will draw back a bit from the actual subject matter to ask a kind of positive public policy question: Why is it that some people can get so passionate about a subject that seems fairly esoteric?
    Keywords: health insurance, adverse selection, moral hazard
    JEL: D80 G18 G22 I10
    Date: 2007–03
  6. By: Beth J. Soldo; Olivia S. Mitchell; Rania Tfaily; John F. McCabe
    Abstract: Baby Boomers have left a unique imprint on US culture and society in the last 60 years, and it might be anticipated that they will also put their own stamp on retirement, the last phase of the life cycle. Yet because Boomers have not all fully retired, we cannot yet judge how they will fare as retirees. Instead, we focus on how this group compares with prior groups on the verge of retirement, that is, at ages 51-56. Accordingly, this chapter evaluates the stock of health which Early Boomers bring to retirement and compare these to the circumstances of two prior cohorts at the same point in their life cycles. Using three sets of responses from the Health and Retirement Study, we find some interesting patterns. Overall, the raw evidence indicates that Boomers on the verge of retirement are in poorer health their counterparts 12 years ago. Using a summary health index designed for this study, we find that those born 1948 to 1953 share health risks with the War Baby cohort. This suggests that most of the health decline instead began before the late 1940's. A more complex set of health conclusions emerges from the specific self-reported health measures. Boomers indicate they have relatively more difficulty with a range of everyday physical tasks, but they also report having more pain, more chronic conditions, more drinking and psychiatric problems, than their HRS earlier counterparts. This trend portends poorly for the future health of Boomers as they age and incur increasing costs associated with health care and medications. Using our health index, only those at the 75th percentile or higher are likely to be characterized as having good or better health.
    JEL: I1 J1 J26
    Date: 2006–12
  7. By: Steven F. Lehrer; Nuno Sousa Periera
    Abstract: This article introduces an empirical strategy to the compensating differentials literature that i) allows both individual observed and unobserved characteristics to be rewarded differently in firms based on health insurance provision, and ii) selection to jobs that provide benefits to operate on both sides of the labor market. Estimates of this model are used to directly test empirical assumptions that are made with popular econometric strategies in the health economics literature. Our estimates reject the assumptions underlying numerous cross sectional and longitudinal estimators. We find that the provision of health insurance has influenced wage inequality. Finally, our results suggest there have been substantial changes in how displaced workers sort to firms that offer health insurance benefits over the past two decades. We discuss the implications of our findings for the compensating differentials literature.
    JEL: I11 J30
    Date: 2007–03
  8. By: Jaume Garcia Villar; Climent Quintana-Domeque
    Abstract: Obesity is alarming public health authorities around the world. Given this situation it is important to study its determinants. This paper focuses on the economic determinants of obesity. More specifically, we explore the empirical relationship between lifetime income and body mass index (BMI) in seven European Union countries in the short run. To study such a relationship, we make use of an accounting identity that relates current BMI to last year's BMI and current levels of both food consumption and physical activity. We estimate a reduced-form version of such an identity which relates current BMI to last year's BMI and lifetime income. Theoretically, lifetime income should affect contemporaneous BMI through its effect on both current consumption of food and current physical activity. Our results indicate that, once last year BMI's is taken into account, the relationship between lifetime income and BMI is at most weak. Such a finding suggests that income-based public policies are not likely to be effective in the fight against obesity in the short run.
    Keywords: Europe, obesity, permanent income, short run
    JEL: I12 I18
    Date: 2006–12
  9. By: Manuel García-Goñi; Pere Ibern
    Abstract: The growth of pharmaceutical expenditure and its prediction is a major concern for policy makers and health care managers. This paper explores different predictive models to estimate future drug expenses, using demographic and morbidity individual information from an integrated healthcare delivery organization in Catalonia for years 2002 and 2003. The morbidity information consists of codified health encounters grouped through the Clinical Risk Groups (CRGs). We estimate pharmaceutical costs using several model specifications, and CRGs as risk adjusters, providing an alternative way of obtaining high predictive power comparable to other estimations of drug expenditures in the literature. These results have clear implications for the use of risk adjustment and CRGs in setting the premiums for pharmaceutical benefits.
    Keywords: Drug expenditure, risk-adjustment, morbidity, clinical risk groups
    Date: 2006–09
  10. By: Vicente Ortún; Ricard Meneu de Guillerna
    Abstract: Background Despite the intrinsic value of scientific disciplines, such as Economics, it is appropriate to gauge the impact of its applications on social welfare, or at least –Health Economics’ (HE) case- its influence on health policy and management. Methods The three relevant features of knowledge (production, diffusion and application) are analyzed, more from an ‘emic’ perspective –the one used in Anthropology relying on the experience of the members of a culture- than from an ‘etic’ approach seated on material descriptions and dubious statistics. Results The soundness of the principles and results of HE depends on its disciplinary foundations, whereas its relevance –than does not imply translation into practice- is more linked with the problems studied. Important contributions from Economics to the health sphere are recorded. HE in Spain ranks seventh in the world despite the relatively minor HE contents of its clinical and health services research journals. HE has in Spain more presence than influence, having failed to impregnate sufficiently the daily events. Conclusions HE knowledge required by a politician, a health manager or a clinician is rather limited; the main impact of HE could be to develop their intuition and awareness.
    Keywords: Health Economics, Health Policy and Management, Spain
    JEL: I18 L38
    Date: 2006–10
  11. By: Guillem López
    Abstract: Recent policy developments in public health care systems lead to a greater diversity in health care. Decentralisation, either geographically or at an institutional level, is the key force, because it encourages innovation and local initiatives in health care provision. The devolution of responsibilities allows for a sort of ‘de-construction’ of the status quo by changing both organizational forms and service provision. The new organizations enjoy greater freedom in the way they pay their staff, and are judged according to their results. These organizations may retain financial surpluses, develop ‘spin-off’ companies and commission a range of specialised services (such as Diagnostic and Treatment Centres in UK) from providers outside the institutional setting in order to have more access to capital markets. However this diversity may generate a feeling of lack of commitment to a national health service and ultimately a loss of social cohesion. By fiscal decentralisation to regional authorities or planned delegation of financial agreements to the providers, financial incentives are more explicit and may seem to place profit-making above a commitment to better health care. An evaluation of the ‘myths and realities’ of the decentralization process is needed. Here, I offer an assessment ‘pros’ and ‘cons’of the decentralization process of health care in Spain, drawing on the experience of regional reforms from the pioneering organisational innovations implemented in Catalonia in 1981, up to the observed dispersion of health care spending per capita among regions at present.
    Keywords: Fiscal decentralisation, management autonomy, hospital innovation, National Health system, Spain, regional health service, Catalonia
    JEL: H11 H51 H73 H77 H83 I18
    Date: 2006–11
  12. By: Pieter Serneels; Magnus Lindelow; José Garcia Montalvo; Abigail Barr
    Abstract: Geographical imbalances in the health workforce have been a consistent feature of nearly all health systems, and especially in developing countries. In this paper we investigate the willingness to work in a rural area among final year nursing and medical students in Ethiopia. Analyzing data obtained from contingent valuation questions, we find that household consumption and the student’s motivation to help the poor, which is our proxy for intrinsic motivation, are the main determinants of willingness to work in a rural area. We investigate whoe is willing to help the poor and find that women are significantly more likely than men. Other variables, including a rich set of psychosocial characteristics, are not significant. Finally, we carry out some simulation on how much it would cost to make the entire cohort of starting nurses and doctors chooseto take up a rural post.
    Keywords: Health care delivery, health workers, labour supply, public service
    JEL: D1 J22 J64
    Date: 2006–11
  13. By: Guillem López; David McDaid; Joan Costa-Font
    Abstract: The organisation of inpatient care provision has undergone significant reform in many southern European countries. Overall across Europe, public management is moving towards the introduction of more flexibility and autonomy . In this setting, the promotion of the further decentralisation of health care provision stands out as a key salient policy option in all countries that have hitherto had a traditionally centralised structure. Yet, the success of the underlying incentives that decentralised structures create relies on the institutional design at the organisational level, especially in respect of achieving efficiency and promoting policy innovation without harming the essential principle of ‘equal access for equal need’ that grounds National Health Systems (NHS). This paper explores some of the specific organisational developments of decentralisation structures drawing from the Spanish experience, and particularly those in the Catalonia. This experience provides some evidence of the extent to which organisation decentralisation structures that expand levels of autonomy and flexibility lead to organisational innovation while promoting activity and efficiency. In addition to this pure ‘managerial decentralisation’ process, Spain is of particular interest as a result of the specific regional NHS decentralisation that started in the early 1980’s and was completed in 2002 when all seventeen autonomous communities that make up the country had responsibility for health care services. Already there is some evidence to suggest that this process of decentralisation has been accompanied by a degree of policy innovation and informal regional cooperation. Indeed, the Spanish experience is relevant because both institutional changes took place, namely managerial decentralisation – leading to higher flexibility and autonomy- alongside an increasing political decentralisation at the regional level. The coincidence of both processes could potentially explain why some organisation and policy innovation resulting from policy experimentation at the regional level might be an additional feature to take into account when examining the benefits of decentralisation.
    Keywords: Management autonomy, hospital innovation, National Health system, Spain, regional health service, Catalonia
    JEL: H11 H51 H73 H77 H83 I18
    Date: 2006–11
  14. By: Wagstaff, Adam; Lindelow, Magnus; Gao Jun; Xu Ling; Qian Juncheng
    Abstract: In 2003, after over 20 years of minimal health insurance coverage in rural areas, China launched a heavily subsidized voluntary health insurance program for rural residents. The authors use program and household survey data, as well as health facility census data, to analyze factors affecting enrollment into the program and to estimate its impact on households and health facilities. They obtain estimates by combining differences-in-differences with matching methods. The authors find some evidence of lower enrollment rates among poor households, holding other factors constant, and higher enrollment rates among households with chronically sick members. The household and facility data point to the scheme significantly increasing both outpatient and inpatient utilization (by 20-30 percent), but they find no impact on utilization in the poorest decile. For the sample as a whole, the authors find no statistically significant effects on average out-of-pocket spending, but they do find some-albeit weak-evidence of increased catastrophic health spending. For the poorest decile, by contrast, they find that the scheme increased average out-of-pocket spending but reduced the incidence of catastrophic health spending. They find evidence that the program has increased ownership of expensive equipment among central township health centers but had no impact on cost per case.
    Keywords: Health Monitoring & Evaluation,Housing & Human Habitats,Small Area Estimation Poverty Mapping,Regional Rural Development,Health Economics & Finance
    Date: 2007–03–01
  15. By: Ottar Mæstad; Ole Frithjof Norheim
    Abstract: Several empirical studies have demonstrated that people do not evaluate health programmes solely based on aggregate health gains; they also care about the distribution of health. In order to incorporate distributional concerns into cost-effectiveness analysis, it would be useful to elicit distributional weights that express people's valuation of marginal health gains at various levels of health. Distributional preferences are commonly elicited either through a person trade off (PTO) or a gain trade off (GTO) technique. An inherent problem of the GTO is that it is based on the valuation of non-marginal health gains. In practice, many contributions using the PTO also focus on non-marginal health gains. This paper demonstrates that the failure to distinguish appropriately between marginal and non-marginal health gains may lead to seriously misleading estimates of distributional weights. Moreover, the paper proposes a methodology for utilising information obtained through non-marginal analysis more efficiently in order to obtain more reliable estimates of distributional weights.
    Keywords: Health equity Distributional weights Eliciting preferences
    Date: 2006
  16. By: Peter C Smith (Centre for Health Economics, University of York); Andrew Street (Centre for Health Economics, University of York)
    Abstract: In recent years considerable progress has been made in developing improved methodologies to measure non-market output in the National Accounts. Most EU Member States have supported the introduction of a legal framework to implement these methodologies and have introduced current best practice methods to measure output of health and education services. This report summarises contributions at a Workshop held in October 2006 that focussed on building on this foundation and further improving the measurement of non-market output in the National Accounts. The Workshop supports a project intended to provide detailed international guidelines for the further development of volume measures of non-market outputs, in particular for education and health.
    Date: 2007–02
  17. By: Stephen Martin (Department of Economics, University of York); Nigel Rice (Centre for Health Economics, University of York); Peter C Smith (Centre for Health Economics, University of York)
    Abstract: This report describes preliminary results from research funded by the Health Foundation under its Quest for Quality and Improved Performance (QQuIP) initiative.
    Date: 2007–03

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