nep-hea New Economics Papers
on Health Economics
Issue of 2007‒08‒14
sixteen papers chosen by
Yong Yin
SUNY at Buffalo, USA

  1. A theory of dynamics and inequalities under epidemics By Raouf, BOUCEKKINE
  2. Measurement of Horizontal Inequity in Health Care Utilisation using European Panel Data By Teresa Bago d'Uva; Andrew M. Jones; Eddy van Doorslaer
  3. Age, Socioeconomic Status and Obesity Growth By Charles L. Baum II; Christopher J. Ruhm
  4. Returns to Local-Area Health Care Spending: Using Health Shocks to Patients Far From Home By Joseph J. Doyle, Jr.
  5. The FY2006 Economic Impact of Continuing Operations of the University of Connecticut Health Center (Fourth Report) By Stanley McMillen; Philip Shaw
  6. Economic benefit of Tuberculosis control By Laxminarayan, Ramanan; Klein, Eili; Dye, Christopher; Floyd, Katherine; Darley, Sarah; Adeyi, Olusoji
  7. Nurses Wanted. Is the job too harsh or is the wage too low? By Maria Laura Di Tommaso; S. Strøm; E. M. Sæther
  9. Optimal Health Care Contracts under Physician Agency By Ching-to Albert Ma Author-X-Name-First: Ching-to Albert; Philippe Chone
  11. Informal Payments in Developing Countries' Public Health Sectors By Ting Liu; Monic Jiayin Sun
  12. Health Insurance, Cost Expectations, and Adverse Job Turnover By Randall P. Ellis; Ching-to Albert Ma
  13. Habits, Complementarities and Heterogenenity in Alcohol and Tobacco Demand: A Multivariate Dynamic Model By David Aristei; Luca Pieroni
  14. Addiction, Social Interactions and Gender Differences in Cigarette Consumption By David Aristei; Luca Pieroni
  15. Measuring Hospital Case Mix : Evaluation of Alternative Approaches for the Irish Hospital System By Chris Aisbett; Miriam Wiley; Brian McCarthy; Aisling Mulligan
  16. An Analysis of the Impact of Age and Proximity of Death on Health Care Costs in Ireland By Richard Layte

  1. By: Raouf, BOUCEKKINE (UNIVERSITE CATHOLIQUE DE LOUVAIN, Department of Economics)
    Abstract: We develop a tractable general theory for the study of the economic and demographic impact of epidemics. In particular, we analytically characterise the short and medium term consequences of epidemics for population size, age pyramid, economic performance and income distribution. To this end, we develop a three-period overlapping generations where altruistic parents choose optimal health expenditures for their children and themselves. The survival probability of (junior) adults and children depend on such investments. Agents can be skilled or unskilled. The model emphasizes the role of orphans. Orphans are not only penalized in front of death, they are also penalized in the access to education. Epidemics are modeled as one period exogenous shocks to the survival rates. We identify three kinds of epidemics depending on how th epidemic shock alters the marginal efficiency of health expenditures. We first study the demographic dynamics, and prove that while a one-period epidemic shock has no permanent effect on income distribution, it can perfectly alter it in the short and medium run. We then study the impact of the three kinds of epidemics when they hit children and/or junior adults. We prove that while the three epidemics have significatly different demographic implications in the medium run, they all imply a worsening in the short and medium run of economic performance and income distribution. In particular, the distributional implications of the model mainly rely on orphans : if orphans are more penalized in the access to a high level of education than in front of death, they will necessarily lead to the medium-term increase in the proportion of the unskilled, triggering the impoverishment of the economy at that time horizon.
    Keywords: Epidemics; orphans; inome distribution; endogeneous survival; medium-term dynamics
    JEL: D9 I1 I2
    Date: 2007–07–30
  2. By: Teresa Bago d'Uva (Erasmus Universiteit Rotterdam); Andrew M. Jones (University of York); Eddy van Doorslaer (Erasmus Universiteit Rotterdam)
    Abstract: Measurement of inequity in health care delivery has focused on the extent to which health care utilization is or is not distributed according to need, irrespective of income. Studies using cross-sectional data have proposed various ways of measuring and standardizing for need, but inevitably much of the inter-individual variation in needs remains unobserved in cross-sections. This paper exploits panel data methods to improve the measurement by including the time-invariant part of unobserved heterogeneity into the need-standardization procedure. Using latent class hurdle models for GP and specialist visits estimated on 8 annual waves of the European Community Household Panel we compute indices of horizontal equity that partition total income-related variation in use into a need- and a non-need related part, not only for the observed but also for the unobserved but time-invariant component. We also propose and compare a more conservative index of horizontal inequity to the conventional statistic. We find that many of the cross-country comparative results appear fairly robust to the panel data test, although the panel based methods lead to higher estimates of horizontal inequity for most countries. This confirms that better estimation and control for need often reveals more pro-rich distributions of utilization.
    Keywords: Inequality; inequity; health care utilisation; panel data; ECHP
    JEL: D30 I10
    Date: 2007–08–02
  3. By: Charles L. Baum II; Christopher J. Ruhm
    Abstract: The rapid growth in obesity represents a major public concern. Although body weight tends to increase with age, the evolution of obesity over the lifecycle is not well understood. We use longitudinal data from the National Longitudinal Survey of Youth to examine how body weight changes with age for a cohort moving through early adulthood. We further investigate how the age-obesity gradient differs with socioeconomic status (SES) and begin to examine channels for these SES disparities. Our analysis uncovers three main findings. First, weight rises with age but is inversely related to SES at given ages. Second, the SES-obesity gradient widens over the lifecycle, a result consistent with research examining other health outcomes such as overall status or specific medical conditions. Third, a substantial portion of the SES "effect" is transmitted through race/ethnicity and the translation of advantaged family backgrounds during childhood into high levels of subsequent education. Conversely, little of the SES difference appears to be propagated through family income, marital status, number of children, or the set of health behaviors we control for. However, approximately half of the SES-weight correlation persists after the inclusion of controls, illustrating the need for further study of mechanisms for the gradient.
    JEL: I12
    Date: 2007–08
  4. By: Joseph J. Doyle, Jr.
    Abstract: Health care spending varies widely across markets, yet there is little evidence that higher spending translates into better health outcomes, possibly due to endogeneity bias. The main innovation in this paper compares outcomes of patients who are exposed to different health care systems that were not designed for them: patients who are far from home when a health emergency strikes. The universe of emergencies in Florida from 1996-2003 is considered, and visitors who become ill in high-spending areas have significantly lower mortality rates compared to similar visitors in lower-spending areas. The results are robust across different types of patients and within groups of destinations that appear to be close demand substitutes.
    JEL: I12
    Date: 2007–08
  5. By: Stanley McMillen; Philip Shaw
    Abstract: This report provides the financial detail to re-enforce the activities of the UConn Health Center as a significant surce of new state tax revenue, with a economically viable and vital fiscal basis. In addition to its fiscal engagement within Hartford county, the UConn Health Center contributes significant public health services, and is the source of new medical research.
    Keywords: UConn, medical college, fiscal review, "quality of life"
    JEL: H4 R5
    Date: 2007–03
  6. By: Laxminarayan, Ramanan; Klein, Eili; Dye, Christopher; Floyd, Katherine; Darley, Sarah; Adeyi, Olusoji
    Abstract: Tuberculosis is the most important infectious cause of adult deaths after HIV/AIDS in low- and middle-income countries. This paper evaluates the economic benefits of extending the World Health Organization ' s DOTS Strategy (a multi-component approach that includes directly observed treatment, short course chemoth erapy and several other components) as proposed in the Global Plan to Stop TB, 2006-2015. The authors use a model-based approach that combines epidemiological projections of averted mortality and economic benefits measured using value of statistical life for the Sub-Saharan Africa region and the 22 high-burden, tuberculosis-endemic countries in the world. The analysis finds that the economic benefits between 2006 and 2015 of sustaining DOTS at current levels relative to having no DOTS coverage are significantly greater than the costs in the 22 high-burden, tuberculosis-endemic countries and the Africa region. The marginal benefits of implementing the Global Plan to Stop TB relative to a no-DOTS scenario exceed the marginal costs by a factor of 15 in the 22 high-burden endemic countries, a factor of 9 (95% CI, 8-9) in the Africa region, and a factor of 9 (95% CI, 9-10) in the nine high-burden African countries. Uncertainty analysis shows that benefit-cost ratios of the Global Plan strategy relative to sustained DOTS were unambiguously greater than one in all nine high-burden countries in Africa and in Afghanistan, Pakistan, and Russia. Although HIV curtails the effect of the tuberculosis programs by lowering the life expectancy of those receiving treatment, the benefits of the Global Plan are greatest in African countries with high levels of HIV.
    Keywords: Health Monitoring & Evaluation,Disease Control & Prevention,Population Policies,Health Systems Development & Reform,Poverty and Health
    Date: 2007–08–01
  7. By: Maria Laura Di Tommaso; S. Strøm; E. M. Sæther
    Abstract: When entering the job market, nurses choose among different kind of jobs. Each of these jobs is characterized by wage, sector (primary care or hospital) and shift (daytime work or night shift). This paper estimates a multi-sector-job-type random utility model of labor supply on data for Norwegian registered nurses in 2000. The empirical model implies that labor supply is rather inelastic; 10 percent increase in the wage rates for all nurses is estimated to yield 3.3 percent increase in overall labor supply. This modest response shadows for much stronger inter job-type responses. Our approach differs from previous studies with respect to the measurement of the compensations for different types of work. So far, it has been focused on wage differentials. But there are more attributes of a job than the wage. Based on the estimated random utility model we therefore calculate the expected value of compensation that makes a utility maximizing agent indifferent between types of jobs, here between shift work and daytime work. It turns out that Norwegian nurses working night shifts may be willing to work night shift for lower wage than the current one.
    Keywords: Nurse labor supply, multi-sectoral, shift-work
    JEL: J22 J33 I11
    Date: 2007–04
  8. By: Daniele Fabbri; Chiara Monfardini
    Abstract: In this paper we assess the relative effectiveness of user charges and administrative waiting times as a tool for rationing public healthcare in Italy. We measure demand elasticities by estimating a simultaneous equation model of GP primary care visits, public specialist consultations and private specialist consultations, as if they were part of an incomplete system of demand. We find that own price elasticity of the demand for public specialist consultation is about -0.3, while administrative waiting time plays a less important role. No substitution exists between the demand for public and private specialists, so that user charges act as a net deterrent for ver-consumption. The public provision of healthcare does not induce the wealthy to opt out. Moreover our evidence suggests that user charges and waiting lists do not serve redistributive purposes.
    Keywords: healthcare demand elasticities, user charges, waiting lists, multivariate count data model
    JEL: C34 C35 C51 D12 I11
    Date: 2006–12
  9. By: Ching-to Albert Ma Author-X-Name-First: Ching-to Albert (Department of Economics, Boston University); Philippe Chone (CREST-LEI and CNRS URA 2200)
    Abstract: We examine contracts between insurers and physicians when the treatment is chosen to maximize a combination of physician profit and patient benefit (“physician agency”). The degree of substitution between doctor profit and patient benefit in the physician-patient coalition is the physician’s private information, as is the patient’s intrinsic valuation of treatment quantity. The equilibrium mechanism only depends on the physician-patient coalition parameter. Moreover, the equilibrium mechanism exhibits extensive pooling, with prescribed quantity and physician reimbursement being insensitive to the agency characteristics or patient’s actual benefit. The optimal mechanism is interpreted as managed care where strict approval protocols are placed on treatments.
    Keywords: physician agency, optimal payment, health care quantity, managed care, minimum profit, asymmetric information
    JEL: D82 I1 I10 L15
    Date: 2007–01
  10. By: Greir Godager (Department of Health Management and Health Economics, University of Oslo); Tor Iversen (Department of Health Management and Health Economics, University of Oslo); Ching-to Albert Ma (Department of Economics, Boston University and University of Oslo)
    Abstract: We model physicians as health care professionals who care about their services and monetary rewards. These preferences are heterogeneous. Different physicians trade off the monetary and service motives differently, and therefore respond differently to incentive schemes. Our model is set up for the Norwegian health care system. First, each private practice physician has a patient list, which may have more or less patients than he desires. The physician is paid a fee-for-service reimbursement and a capitation per listed patient. Second, a municipality may obligate the physician to perform 7.5 hours per week of community services. Our data are on an unbalanced panel of 435 physicians, with 412 physicians for the year 2002, and 400 for 2004. A physician’s amount of gross wealth and gross debt in previous periods are used as proxy for preferences for community service. First, for the current period, accumulated wealth and debt are predetermined. Second, wealth and debt capture lifestyle preferences because they correlate with the planned future income and spending. The main results show that both gross debt and gross wealth have negative effects on physicians’ supply of community health services. Gross debt and wealth have no effect on fee-for-service income per listed person in the physician’s practice, and positive effects on the total income from fee-for-service; hence, the higher income from fee-for-service is due to a longer patient list. Patient shortage has no significant effect on physicians’ supply of community services, a positive effect on the fee-for-service income per listed person, and no effect on the total income from fee-for service. These results confirm physician preference heterogeneity.
    Date: 2007–04
  11. By: Ting Liu (Department of Economics, Boston University); Monic Jiayin Sun (Department of Economics, Boston University)
    Abstract: A government or public organization would like to subsidize an indivisible good. Consumers’ valuations of the good vary according to their wealth and benefits from the good. Education, medical care, and housing are common examples. A regulator has access to either wealth or benefit information, but not both. We present a method to translate a wealth-based policy to a benefit-based policy, and vice versa. We give a necessary and sufficient condition for the wealth-based policy and translated benefit-based policy to implement the same assignment: consumers choose to purchase the good under the wealth-based policy if and only if they choose to do so under the translated benefit-based policy. General taxation allows equivalent wealth-based and benefit-based policies to generate the same revenue from consumers.
    Date: 2007–04
  12. By: Randall P. Ellis (Department of Economics, Boston University); Ching-to Albert Ma (Department of Economics, Boston University)
    Abstract: In our theoretical model some firms do not offer health insurance to their employees because of large between-firm heterogeneity in expected employee health care costs. Because job turnover rates for healthier employees reduce by less than those for sicker employees when firms offer health insurance, expected health costs will increase when health insurance is offered. We call this adverse job turnover. State regulations on annual premium changes, and insurer reluctance to rapidly increase premiums mean that coverage is only offered to small firms at premiums above initial expected costs. The resulting separating equilibrium is one in which some firms face high initial premiums, choose not to offer insurance, and tolerate higher turnover rates than other firms the same industry that offer insurance. High administrative costs at small firms exacerbate selection. Using 1998-99 MEDSTAT MarketScan and 1997 Employer Health Insurance Survey data we find that expected employee health expenditures at firms offering insurance have lower within-firm and higher between-firm variance than at firms not offering insurance. Turnover rates are systematically higher in industries not offering insurance, and small firms have lower withinfirm variance but greater between-firm variance than large firms in their employee’s age and income distributions. These support our model.
    Keywords: health insurance, job turnover, adverse selection
    Date: 2007–07
  13. By: David Aristei (Department of Economics (University of Verona)); Luca Pieroni (Department of Economics, Finance and Statistics (University of Perugia))
    Abstract: In this paper we test the existence of rational habit formation in a multivariate model for alcohol and tobacco consumption. The theoretical framework, based on a dynamic adjustment cost model with forward-looking behaviour, is enhanced to include the intertemporal interactions between the two goods. The analysis of the within-period preferences completes the intertemporal model, allowing to evaluate the static substitutability/complementarity relationships. The empirical strategy consists in a two step estimation procedure. In the first stage, the parameters of the demand system are obtained, while in a second stage Euler equations are estimated by a dynamic fixed-effects panel data model. Estimation results, based on a cohort dataset constructed from a series of crosssections of the ISTAT Italian Household Budget Survey, reveal a significant complementarity relationship between alcohol and tobacco. The Euler system estimation does not reject the hypothesis of intertemporal dependence, providing support for a forward-looking behaviour in alcohol and tobacco consumption. Moreover, we find significant intertemporal interactions for tobacco adjustments, while alcohol consumption seems to follow only its own adjustment dynamics.
    Keywords: alcohol and tobacco consumption, cohort data, adjustment cost model, intertemporal interactions, GMM.
    JEL: D12 D91 C33
    Date: 2007–06
  14. By: David Aristei (Department of Economics (University of Verona)); Luca Pieroni (Department of Economics, Finance and Statistics (University of Perugia))
    Abstract: This paper addresses the impact of addiction and social interactions on cigarette demand, controlling for demographic and socioeconomic factors. A Box-Cox double-hurdle model for the simultaneous decisions of how much to smoke and whether to quit smoking is estimated on individual data from the 2000 Italian “Health Status and Use of Health Services” survey. The model incorporates the fixed costs of quitting and allows for the analysis of the effects of addiction and within-household interactions on smoking participation and cigarette consumption. Estimation results show that the duration of the smoking habit, used as measure of addiction, significantly increases the level of cigarette consumption and lowers the probability of quitting. Within-household social interactions affect individual’s attitude toward smoking. Participation decision is significantly influenced by the presence of other smokers and individual cigarette consumption increases as the consumption of the peer-group grows. Finally, gender differences are formally tested to verify whether male and female sub-samples can be pooled or should be separately analyzed. The hypothesis of equal consumption parameters is clearly rejected, suggesting the opportunity of distinguishing the consumption patterns of men and women.
    Keywords: cigarette consumption, social interactions, gender effects, double-hurdle models.
    JEL: C24 D12 J16
    Date: 2007–06
  15. By: Chris Aisbett (Laeta Pty Ltd); Miriam Wiley (Economic and Social Research Institute (ESRI)); Brian McCarthy (Economic and Social Research Institute (ESRI)); Aisling Mulligan (Economic and Social Research Institute (ESRI))
    Abstract: The impetus for this study arose from the need to upgrade the case mix measure of choice in use at the national level in Ireland. Since 1993, various versions of the DRG grouper supported by the Health Care Financing Administration (HCFA) had been in use in Ireland. With improvements in available data, together with developments in the range and quality of alternative groupers available, it was considered timely to test performance of the alternative options on discharge abstract data for Irish hospitals. The groupers selected for testing included four versions of the Australian Refined (AR) DRGs, the AP DRGs (V18.0), CMS DRGs (V20) and IR DRGs (V1.2). Results for the HCFA DRGS (V16.0) were also included for purposes of comparison. The empirical analysis ranked the AR DRG Groupers highly relative to the alternatives. Additional factors favouring the AR DRG series of Groupers are the fact that they are the more widely used internationally, are updated regularly and supported by Australian government agencies. More support and training opportunities are also available for the use of these Groupers. Given these factors, together with the fact that the ICD-10-AM morbidity coding system is used in Ireland, the AR DRG classification system was recommended as the best option for use at the national level in Ireland.
    Keywords: case mix, DRG Groupers, AR DRGs, ICD-10-AM
    Date: 2007–04
  16. By: Richard Layte (Economic and Social Research Institute (ESRI))
    Abstract: Research has shown that older individuals are far more likely to avail of health care and there is concern in a number of countries that the trend toward population ageing may mean that health care expenditures increase to unsustainable levels. However, there is a growing body of evidence that the approach of death rather than age per se may be the main determinant of health care costs. Previous analyses of the relationship between proximity to death and costs have used rare longitudinal data on costs and whether died and none have used a national sample. In this paper we use a more commonly found data type – a national panel survey to show that proximity to death is indeed a more significant predictor of expenditure on GP and hospital services than age. Using random effects panel models we show that there is a significant gradient in costs as death approaches. Controlling for proximity to death there is no age gradient in costs. This conclusion remains unchanged adjusting for differential health inpatient costs across age groups. In fact, adjustment steepens the gradient in costs as death approaches.
    Keywords: Ageing, cost of dying, Healthcare expenditure, panel survey
    Date: 2007–05

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