nep-hea New Economics Papers
on Health Economics
Issue of 2007‒05‒12
23 papers chosen by
Yong Yin
SUNY at Buffalo, USA

  1. Competition and Waiting Times in Hospital Markets By Brekke, Kurt Richard; Siciliani, Luigi; Straume, Odd Rune
  2. Willingness to Pay for Private and Public Safety: Why the Difference? By Svensson, Mikael; Vredin Johansson, Maria
  3. Worker Sorting, Taxes and Health Insurance Coverage By Kevin Lang; Hong Kang
  4. Information and Communications Technology in Chronic Disease Care: Why is Adoption So Slow and Is Slower Better? By Michael C. Christensen; Dahlia Remler
  5. Health and the Evolution of Welfare across Brazilian Municipalities By Rodrigo R. Soares
  6. New Actors in Health Financing: Implications for a Donor Darling By Denis Drechsler; Felix Zimmermann
  7. Time Preference and Its Relationship with Age, Health, and Longevity Expectations By Li-Wei Chao; Helena Szrek; Nuno Sousa Pereira; Mark V. Pauly
  8. The Determinants of Pricing in Pharmaceuticals: Are U.S. prices really higher than those of Canada? By Antonio Cabrales; Sergi Jiménez-Martín
  9. HIV/AIDS in Rural Northeast Thailand: Narratives of the Impacts of HIV/AIDS on Individuals and Households By Michael P. Cameron
  10. Policy Brief: How pro-poor is the South African Health System? By Ronelle Burger
  11. Estimating the Long-Term Costs of Diabetic Kidney Disease: an Economic Approach By Mark Knezevic
  12. Retailer Compliance as a Predictor of Youth Smoking Participation and Consumption By Diener, Alan; Ahmed, Rashid; Snider, Judy; Kaiserman, Murray
  13. An Economic Analysis of Health Care in China By Gregory C. Chow
  15. Health and wellbeing in Udaipur and South Africa By Anne Case; Angus Deaton
  16. Child mortality, income and adult height By Carlos Bozzoli; Angus Deaton; Climent Quintana-Domeque
  17. Endogenous Longevity and Economic Growth By Jocelyn E. Finlay
  18. Epidemics and Economics By David E. Bloom; David Canning
  19. The Consequences of Population Health for Economic Performance By Marcella Alsan; David E. Bloom; David Canning; Dean Jamison
  20. Assessing the Economic Impact of HIV/AIDS on Nigerian Households: A Propensity Score Matching Approach By David Canning; Ajay Mahal; Kunle Odumosu; Prosper OkonkwoZhiwei
  21. The Economics of HIV/AIDS in Low-Income Countries: The Case for Prevention By David Canning
  22. Awareness and the Demand of Safe Drinking Water Practices By Eatzaz Ahmed; Abdul Sattar
  23. Changes in the demand for private medical insurance following a shift in tax incentives By Marisol Rodríguez; Alexandrina Stoyanova

  1. By: Brekke, Kurt Richard; Siciliani, Luigi; Straume, Odd Rune
    Abstract: This paper studies the impact of hospital competition on waiting times. We use a Salop-type model, with hospitals that differ in (geographical) location and, potentially, waiting time, and two types of patients; high-benefit patients who choose between neighbouring hospitals (competitive segment), and low-benefit patients who decide whether or not to demand treatment from the closest hospital (monopoly segment). Compared with a benchmark case of regulated monopolies, we find that hospital competition leads to longer waiting times in equilibrium if the competitive segment is sufficiently large. Given a policy regime of hospital competition, the effect of increased competition depends on the parameter of measurement: Lower travelling costs increase waiting times, higher hospital density reduces waiting times, while the effect of a larger competitive segment is ambiguous. We also show that, if the competitive segment is large, hospital competition is socially preferable to regulated monopolies only if the (regulated) treatment price is sufficiently high.
    Keywords: competition; hospitals; waiting times
    JEL: H42 I11 I18 L13
    Date: 2007–05
  2. By: Svensson, Mikael (Department of Business, Economics, Statistics and Informatics); Vredin Johansson, Maria (Dept of Economics Uppsala University and Swedish National Road and Transport Research Institute)
    Abstract: Previous research on the willingness to pay (WTP) for risk reductions has almost systematically found the mean WTP for public risk reductions to be, both economically and statistically, significantly smaller than the mean WTP for private risk reductions. In this paper, we use socio-economic and social-psychological variables to gain insights into this, according to economic theory, anomalous result. Based on the results from a purpose-made survey, we find that part of the discrepancy can be explained by the individuals' age and his/her attitudes towards privately and publicly provided goods in general. Due to differences in attitudes, the public and private goods are in fact perceived as a two different goods, even if the risk reductions are of equal magnitudes. The results therefore suggest that, in cases where the elicited WTP is intended for public policy purposes, the survey context need to be public is consumer sovereignty should reign.
    Keywords: Contingent Valuation; Private Safety; Public Safety; Attitudes
    JEL: D81 J28 Q51
    Date: 2007–04–30
  3. By: Kevin Lang; Hong Kang
    Abstract: We develop a model in which firms hire heterogeneous workers but must offer all workers insurance benefits under similar terms. In equilibrium, some firms offer free health insurance, some require an employee premium payment and some do not offer insurance. Making the employee contribution pre-tax lowers the cost to workers of a given employee premium and encourages more firms to charge. This increases the offer rate, lowers the take-up rate, increases (decreases) coverage among high (low) demand groups, with an indeterminate overall effect. We test the model using the expansion of section 125 plans between 1987 and 1996. The results are generally supportive.
    JEL: H22 H24 I11 J32
    Date: 2007–04
  4. By: Michael C. Christensen; Dahlia Remler
    Abstract: Unlike the widespread adoption of information and communications technology (ICT) in much of the economy, adoption of ICT in clinical care is limited. We examine how a number of not previously emphasized features of the health care and ICT markets interact and exacerbate each other to create barriers for adoption. We also examine how standards can address these barriers and the key issues to consider before investing in ICT. We conclude that the ICT market exhibits a number of unique features that may delay or completely prevent adoption, including low product differentiation, high switching costs, and lack of technical compatibility. These barriers are compounded by the many interlinked markets in health care, which substantially blunt the use of market forces to influence adoption. Patient heterogeneity also exacerbates the barriers by wide variation in needs and ability for using ICT, by high demands for interoperability, and by higher replacement costs. Technical standards are critical for ensuring optimal use of the technology. Careful consideration of the socially optimal time to invest is needed. The value of waiting in health care is likely to be so much greater than in other sectors because the costs of adopting the wrong type of ICT are so much higher.
    JEL: I1 I10 I11 I18
    Date: 2007–05
  5. By: Rodrigo R. Soares
    Abstract: This paper describes the pattern of reductions in mortality across Brazilian municipalities between 1970 and 2000, and analyzes its causes and consequences. It shows that, as in the international context, the relationship between income and life expectancy has shifted consistently in the recent past. But reductions in mortality within Brazil have been more homogeneously distributed than across countries. We use a compensating differentials approach to estimate the value of the observed reductions in mortality. The results suggest that gains in life expectancy had a welfare value equivalent to 39% of the growth in income per capita, being therefore responsible for 28% of the overall improvement in welfare. We then use a dynamic panel to conduct a preliminary assessment of the potential determinants of these gains. We show that improvements in education, access to water, and sanitation seem to be important determinants of the dimension of changes in life expectancy not correlated with income.
    JEL: I12 I31 I38 J17 O15 O54
    Date: 2007–05
  6. By: Denis Drechsler; Felix Zimmermann
    Abstract: With concern about how to finance the Millennium Development Goals (MDGs) widespread, recent donor pledges to raise aid volumes are welcome. However, aid alone will not suffice – bringing in new actors and sources of development finance will be essential. In many developing countries, this is already happening, creating new opportunities and challenges for their governments and donors....
    Date: 2006–12
  7. By: Li-Wei Chao (Population Studies Department, University of Pennsylvania); Helena Szrek (CETE, Faculdade de Economia, Universidade do Porto); Nuno Sousa Pereira (CETE, Faculdade de Economia, Universidade do Porto); Mark V. Pauly (Health Care Systems Department, The Wharton School, University of Pennsylvania)
    Abstract: Although theories in both evolutionary biology and economics predict that an individual’s health should be associated with the individual’s time preference, no prior study has been done to empirically support or refute such predictions. By collecting detailed measures of health, time preference, and expected longevity on a sample of individuals in townships around Durban, South Africa, this study breaks new ground by being the first to analyze in detail the relationship between time preference and health, in an area of the world with high mortality and morbidity. Interestingly, we find that both physical health and expectations of longevity have a U-shaped relationship with the person’s subjective discount rate. This suggests that those in very poor health have high discount rates, but those in very good health also have high discount rates. Similarly those with longevity expectations on the extremes have high discount rates. The research question addressed by this pilot project is policy relevant, as the study tries to determine the importance of health in economic development, not from the commonly asserted productivity-gain argument, but from a much broader investment-for-the-future argument.
    Keywords: Subjective discount rate; Longevity; Health; Age
    JEL: I10 D90
    Date: 2007–05
  8. By: Antonio Cabrales; Sergi Jiménez-Martín
    Abstract: This paper studies price determination in pharmaceutical markets using data for 25 countries, six years and a comprehensive list of products from the MIDAS IMS database. We show that market power and the quality of the product has a significantly positive impact of prices. The nationality of the producer appears to have a small and often insignificant impact on prices, which suggests that countries which regulates prices have relatively little power to do it in a way that advances narrow national interest. We produce a theoretical explanation for this phenomenon based on the fact that low negotiated prices in a country would have a knock-on effect in other markets, and is thus strongly resisted by producers. Another key finding is that the U.S. has prices that are not significantly higher than those of countries with similar income levels. This, together with the former observation on the effect of the nationality of producers casts doubt on the ability of countries to pursue "free-riding" regulation.
    Keywords: Pharmaceutical prices
    JEL: I10 I18 L65
    Date: 2007–04
  9. By: Michael P. Cameron (University of Waikato)
    Abstract: HIV/AIDS is one of the greatest public health and development challenges currently faced by the global community. Amongst reported statistics, such as the estimated 39.5 million people infected with HIV at the end of 2006, the human face of HIV/AIDS is often lost. This paper presents several narratives of the impacts of HIV/AIDS on individuals and households, drawn from a 2003 survey of 71 HIV/AIDS patients in Khon Kaen Province, Northeast Thailand. These narratives illustrate the broad range of impacts of HIV/AIDS, as well as the diverse coping strategies that are employed to deal with those impacts. The narratives also demonstrate how the HIV/AIDS epidemic impacts not just those who are HIV-infected and other members of their household, but also the wider community.
    Keywords: HIV/AIDS; poverty; Thailand
    JEL: I19
    Date: 2007–04–30
  10. By: Ronelle Burger (Department of Economics, University of Stellenbosch)
    Abstract: This chapter investigates how effective recent changes in the South African public health care system have been in transforming the inequitable system inherited from the apartheid-era government. How has post-apartheid budget reallocations, decentralisation, the elimination of primary health care user fees and expansion of the network of clinics changed the incidence of spending and the quality of services provided? Have these changes benefited the poor? The results from research conducted indicate that the distribution of health spending on hospitals and clinics is driven by utilisation patterns. The decision by the affluent to opt-out of the public health system means that the most affluent receive a dramatically smaller proportion of the budget than the rest. There is, however, not much evidence of pro-poor targeting for the rest of the income distribution. However, in terms of spending equity, South Africa compares well with other developing countries. It is clear that health services have become more accessible and more affordable for the poor. Yet, the government is still far from achieving universal access and the desired degree of equity. In addition, there are concerns regarding the quality of services provided by public sector clinics and hospitals. Dissatisfaction among users of public sector services has increased and complaints include long waiting times, staff rudeness and problems with the availability of drugs.
    Keywords: Fiscal incidence, South Africa, health
    JEL: H51 I18
    Date: 2007
  11. By: Mark Knezevic
    Abstract: Healthcare spending in Australia has increased rapidly in the past two decades. Part of this has come from the prevalence of lifestyle related illness and demographics, as physical inactivity and ageing have become common. Diabetes is a chronic and costly illness resulting from poor lifestyle choice and ageing. To show the potential future health funding requirements as a result of continuing changes in Australian lifestyle characteristics and demographics, we estimate the long run cumulative costs of a complication of diabetes, diabetic kidney disease, using well known techniques from health economics. We find that spending on treatment for diabetic kidney disease alone will amount to an average of A$300m per annum for the next thirty years. This figure can be reduced if healthy living habits are promoted in populations at risk.
    Date: 2006
  12. By: Diener, Alan; Ahmed, Rashid; Snider, Judy; Kaiserman, Murray
    Abstract: Ninety per cent of smokers report having their first whole cigarette before the age of 19. Thus, it is important to have policies such as youth access laws which may prevent youth from becoming future smokers. In Canada, the Tobacco Act prohibits retailers from furnishing tobacco products to individuals under the age of 18. For such laws to be effective, however, it is important that retailers comply with them. The objective of this study was to examine the effect of retailer compliance on youth smoking behaviour. Data on individual smoking behaviour in conjunction with provincial retailer compliance rates and cigarette prices for the years 1999-2005 were employed to examine the effects of retailer compliance on youth smoking participation and consumption. Both price and retailer compliance were significant predictors of smoking participation. Price elasticity of demand for the overall sample was estimated to be -0.54. Our results which are consistent with previous research indicate that retailer compliance must be considered when examining the effects of youth access laws. This research confirmed that youth access laws can be an important component of a successful public policy approach to youth smoking prevention.
    Keywords: youth smoking; two-part model; retailer compliance
    JEL: I18
    Date: 2007–04
  13. By: Gregory C. Chow (Princeton University)
    Abstract: After describing the institutions for health care in China as they evolved since 1949, this paper presents statistical demand functions for health care. It applies the demand functions to explain the rapid increase in health care demand and the resulting rapid increase in price when supply failed to increase. The failure in increase in supply was traced to the system of public supply of healthcare in China. The reform experience of Suqian city in the privatization of healthcare is reported to demonstrate the positive effect of privatization on supply. The government’s health care program for the urban and rural population is described and an evaluation of it is provided.
    Date: 2006–08
  14. By: Anne Case (Princeton University); Christina Paxson (Princeton University); Tom Vogl (Princeton University)
    Abstract: Understanding whether the gradient in children's health becomes steeper with age is an important first step in uncovering the mechanisms that connect economic and health status, and in recommending sensible interventions to protect children's health. To that end, this paper examines why two sets of authors, Chen et al (2006) and Case et al (2002), using data from the same source, reach markedly different conclusions about income-health gradients in childhood. We find that differences can be explained primarily by the inclusion (exclusion) of a handful of younger adults living independently.
    JEL: I1
    Date: 2006–05
  15. By: Anne Case (Princeton University); Angus Deaton (Princeton University)
    Abstract: This paper presents a descriptive account of health and economic status in India and South Africa – countries in very different positions in the international hierarchy of life expectancy and income. The paper emphasizes the lack of any simple and reliable relationship between health and wealth between and within our sites in rural Rajasthan, in a shack township outside of Cape Town, and in a rural South African site that, until 1994, was part of a Bantustan. Income levels across our sites are roughly in the ratio of 4:2:1, with urban South Africa richest and rural Rajasthan poorest, while ownership of durable goods, often used as a short-cut measure or check of living standards, are in the ratio of 3:2:1. These differences in economic status are reflected in respondents’ own reports of financial status. People know that they are poor, but appear to adapt their expectations to local conditions, at least to some extent. The South Africans are taller and heavier than the Indians—although their children are no taller at the same age. South African self-assessed physical and mental health is no better, and South Africans are more likely to report that they have to miss meals for lack of money. In spite of differences in incomes across the three sites, South Africans and Indians report a very similar list of symptoms of ill-health. Although they have much lower incomes, urban women in South Africa have fully caught up with black American women in the prevalence of obesity, and are catching up in terms of hypertension. These women have the misfortune to be experiencing many of the diseases of affluence without experiencing affluence itself.
    Date: 2006–01
  16. By: Carlos Bozzoli (Princeton University); Angus Deaton (Princeton University); Climent Quintana-Domeque (Princeton University)
    Abstract: We investigate the childhood determinants of adult height in populations, focusing on the respective roles of income and of disease. We develop a model of selection and scarring, in which the early life burden of nutrition and disease is not only responsible for mortality in childhood but also leaves a residue of long-term health risks for survivors, risks that express themselves in adult height, as well as in late-life disease. Across a range of European countries and the United States, we find a strong inverse relationship between post-neonatal (one month to one year) mortality, interpreted as a measure of the disease and nutritional burden in childhood, and the mean height of those children as adults. In pooled birth-cohort data over 30 years for the United States and eleven European countries, post-neonatal mortality in the year of birth accounts for more than 60 percent of the combined cross-country and cross-cohort variation in adult heights. The estimated effects are smaller but remain significant once we allow for country and birth-cohort effects. In the poorest and highest mortality countries of the world, there is evidence that child mortality is positively associated with adult height. That selection should dominate scarring at high mortality levels, and scarring dominate selection at low mortality levels, is consistent with the model for reasonable values of its parameters.
    Date: 2007–03
  17. By: Jocelyn E. Finlay (PGDA, Harvard School of Public Health)
    Abstract: In a two period overlapping generations model of endogenous longevity and economic growth, individuals choose to invest in health and education. The investments are costly in terms of foregone first period consumption and the benefit is in the second period where health has the effect of increasing the probability of survival, and education investment will bring higher income. These investments are risky as survival through period two, when the payoffs can be had, is not certain. Individuals with varying degrees of risk aversion will choose the ordering in which they invest in health and education. It is only when investment in education is achieved that an economy will experience endogenous growth.
    Keywords: Endogenous Longevity, Endogenous Growth, Health, Risk
    Date: 2006–09
  18. By: David E. Bloom; David Canning (Harvard School of Public Health)
    Abstract: This paper discusses the links between income and infectious disease epidemics and asks how such links are affected by changing global circumstances. Having money and living in a prosperous society protects individuals against health setbacks in general and epidemics in particular. Healthy people get more education, are more productive in the work force, attract foreign investment, and save more. As better health leads to de-creases in family size, the consequent change in a country's age structure can boost eco-nomic growth. Epidemics can obstruct these effects by changing expectations about how well an economy will function and by deterring investment and tourism. In many instances, the immediate costs of an epidemic are apparent, while the long-term costs are unclear. However, when we include the value of human life in the cost, it becomes clear that epidemics are extremely costly. Preventing epidemics requires overcoming a range of obstacles, as does responding to an epidemic once it begins. Globally, long-term vulnerability to epidemics may decrease as development standards rise, but a more highly interconnected world may actually promote the occurrence of infectious disease epidemics.
    Date: 2006–06
  19. By: Marcella Alsan; David E. Bloom (Harvard School of Public Health); David Canning (Harvard School of Public Health); Dean Jamison
    Abstract: This chapter goes beyond the traditional economic thinking about the relationship between health and income – simply stated: wealth is needed to achieve health – by presenting evidence that population health is an important factor in strengthening economies and reducing poverty. The world's overarching framework for reducing poverty is expressed in the UN's eight Millennium Development Goals. Three of these eight goals pertain to health: reducing child mortality, improving maternal health, and combating HIV/AIDS, malaria, and other diseases. These potentially huge improvements in health are extremely important goals in themselves, and they serve as beacons toward which numerous development efforts are oriented. But these potential improvements in health are not only endpoints that we seek through a variety of means. The improvements are actually instruments for achieving economic growth and poverty reduction. That is, better health does not have to wait for an improved economy; measures to reduce the burden of disease, to give children healthy childhoods, to increase life expectancy will in themselves contribute to creating healthier economies.
    Date: 2006–10
  20. By: David Canning; Ajay Mahal; Kunle Odumosu; Prosper OkonkwoZhiwei (Harvard School of Public Health)
    Abstract: We assess the impact of HIV/AIDS on individuals’ health care utilization and spending in the Oyo and Plateau states of Nigeria and income foregone from work time lost. Data was from a 2004 survey of nearly 1,500 households, including 482 individuals living with HIV/AIDS. Estimating the effect of HIV is complicated by the fact that our sample of HIV positive individuals is non-random; there are selection effects, both in acquiring HIV, and in being in our sample our HIV positive people, which was based on contacts through non-governmental organizations. To overcome this selection effect, we compare HIV positive people with a control group with similar observed characteristics, using propensity score matching. The matched control group has very different health and economic outcomes than a random sample of the population indicating that our HIV sample would not have had "average" outcomes even if they had not acquired HIV. HIV is associated with significantly increased morbidity, health care utilization, public health facility use, lost work time and increased time devoted to care-giving relative to outcomes in the control group. Direct health care costs and indirect income loss per HIV positive individual were 16,569 Naira, about 32% of annual income per capita in affected households. About 40% of these costs are income losses associated with sickness and care-giving. 15% of the cost of HIV is accounted for by public subsidies on health. The largest single economic cost, representing 45% of the total economic burden of HIV, are out of pocket expenses, mainly for health care.
    Keywords: HIV, Nigeria, Economic Impacts, Households, Direct Costs, Propensity Score
    Date: 2006
  21. By: David Canning (Harvard School of Public Health)
    Abstract: There are two approaches to reducing the burden of sickness and death associated with HIV/AIDS: treatment and prevention. With limited resources, should the focus be on prevention or treatment? I discuss the range of prevention and treatment alternatives, examine their cost effectiveness, and consider various arguments that have been raised against the use of cost-effectiveness analysis in setting priorities for health. I conclude that promoting AIDS treatment using antiretrovirals in resource-constrained countries comes at a huge cost in terms of avoidable deaths that could be prevented through interventions that would substantially lower the scale of the epidemic.
    Date: 2006–06
  22. By: Eatzaz Ahmed (Quaid-i-Azam University, Islamabad); Abdul Sattar (Ministry of Finance, Islamabad)
    Abstract: The demand for environmental goods is often low in developing countries. The major causes are awareness regarding the contamination of water and poverty, but less attention has been paid to the former reason. We use a household survey from Hyderabad city and estimate the contribution of awareness and income on households’ water purification behaviour. The study finds out that measures of awareness such as different level of schooling of decision-makers and household heads and their exposure to mass media have statistically significant effects on home purification methods for drinking water, while other members of households can effect this behaviour only when they get higher levels of schooling.
    Keywords: Demand, Awareness, Safe Drinking Water, Logit Model, Probit Model
    JEL: D12 D13 D31 Q21 Q25 Q51 R21
    Date: 2007
  23. By: Marisol Rodríguez (Grup de Recerca en Economia del Benestar (CREB, Departament de Política Econòmica i Estructura Econòmica Mundial, Universitat de Barcelona); Alexandrina Stoyanova (Grup de Recerca en Economia del Benestar (CREB), Departament d'Economia i Empresa, Universitat de Barcelona)
    Abstract: The 1998 Spanish reform of the Personal Income Tax eliminated the 15% deduction for private medical expenditures including payments on private health insurance (PHI) policies. To avoid an undesirable increase in the demand for publicly funded health care, tax incentives to buy PHI were not completely removed but basically shifted from individual to group employer-paid policies. In a unique fiscal experiment, at the same time that the tax relief for individually purchased policies was abolished, the government provided for tax allowances on policies taken out through employment. Using a bivariate probit model on data from National Health Surveys, we estimate the impact of said reform on the demand for PHI and the changes occurred within it. Our findings suggest that the total probability of buying PHI was not significantly affected. Indeed, the fall in the demand for individual policies (by 10% between 1997 and 2001) was offset by an increase in the demand for group employer-paid ones, so that the overall size of the market remained virtually unchanged. We also briefly discuss the welfare effects on the state budget, the industry and society at large.
    Keywords: Private health insurance, tax reform, Spain.
    JEL: I10 H31
    Date: 2006–12

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