nep-hea New Economics Papers
on Health Economics
Issue of 2008‒01‒26
thirteen papers chosen by
Yong Yin
SUNY at Buffalo, USA

  1. Can pay regulation kill? Panel data evidence on the effect of labor markets on hospital performance By Emma Hall; Carol Propper; John Van Reenen
  2. Prenatal nutrition and adult outcomes: the effect of maternal fasting during Ramadan By Douglas Almond; Bhashkar Mazumder
  3. The Chinese Health Care System: Structure, Problems and Challenges By Jens Leth Hougaard; Lars Peter Østerdal; Yi Yu
  4. An Application of Price and Quantity Indexes in the Analysis of Changes in Expenditures on Physician Services By Frank T. Denton; Christine H. Feaver; Byron G. Spencer
  5. Take-Up of Medicare Part D and the SSA Subsidy: Early Results from the Health and Retirement Study By Helen Levy; David R. Weir
  6. Estimating the Health Effects of Retirements By John Bound; Timothy Waidmann
  7. The Effects of Health Insurance and Self-Insurance on Retirement Behavior By Eric French; John Bailey Jones
  8. Preference Heterogeneity and Insurance Markets: Explaining a Puzzle of Insurance By David M. Cutler; Amy Finkelstein; Kathleen McGarry
  9. Managed Care and Medical Expenditures of Medicare Beneficiaries By Michael Chernew; Philip DeCicca; Robert Town
  10. Improved Health System Performance through better Care Coordination By Maria M. Hofmarcher; Howard Oxley; Elena Rusticelli
  11. Health, Economic Resources and the Work Decisions of Older Men By John Bound; Todd Stinebrickner; Timothy Waidmann
  12. The Effect of Newer Drugs on Health Spending: Do They Really Increase the Costs? By Civan, Abdülkadir; Koksal, Bulent
  13. A Parsimonious Model of Subjective Life Expectancy By Alexander Ludwig; Alexander Zimper

  1. By: Emma Hall; Carol Propper; John Van Reenen
    Abstract: Labor market regulation can have harmful unintended consequences. In many markets, especially for public sector workers, pay is regulated to be the same for individuals across heterogeneous geographical labor markets. We would predict that this will mean labor supply problems and potential falls in the quality of service provision in areas with stronger labor markets. In this paper we exploit panel data from the population of English acute hospitals where pay for medical staff is almost flat across the country. We predict that areas with higher outside wages should suffer from problems of recruiting, retaining and motivating high quality workers and this should harm hospital performance. We construct hospital-level panel data on both quality - as measured by death rates (within hospital deaths within thirty days of emergency admission for acute myocardial infarction, AMI) - and productivity. We present evidence that stronger local labor markets significantly worsen hospital outcomes in terms of quality and productivity. A 10% increase in the outside wage is associated with a 4% to 8% increase in AMI death rates. We find that an important part of this effect operates through hospitals in high outside wage areas having to rely more on temporary “agency staff” as they are unable to increase (regulated) wages in order to attract permanent employees. By contrast, we find no systematic role for an effect of outside wages of performance when we run placebo experiments in 42 other service sectors (including nursing homes) where pay is unregulated.
    Keywords: labor market regulation, hospital quality, hospital productivity, skills.
    JEL: J45 F12 I18 J31
    Date: 2007–12
  2. By: Douglas Almond; Bhashkar Mazumder
    Abstract: We use the Islamic holy month of Ramadan as a natural experiment for evaluating the long-term effects of fasting during pregnancy. Preliminary results using Michigan natality data show that babies of Arab descent who were in utero during Ramadan have lower birthweight compared to those who were not in utero during Ramadan. Using Census data in Uganda we also find that Muslim adults who were born nine months after Ramadan are 22 percent (p =0.02) more likely to be disabled. Effects are found for vision, hearing, and mental disabilities and may reflect neurological impairments from disruptions to early fetal development. We find no evidence that negative selection in conceptions during Ramadan accounts for our results. We urge caution in interpreting these results since we cannot directly link the incidence of adult disability with adverse fetal conditions. ; Preliminary and Incomplete, Do Not Cite.
    Date: 2007
  3. By: Jens Leth Hougaard (Department of Economics, University of Copenhagen); Lars Peter Østerdal (Department of Economics, University of Copenhagen); Yi Yu (Department of Economics, University of Copenhagen)
    Abstract: In the present paper we describe the structure of the Chinese health care system and sketch its future development. We analyse issues of provider incentives and the actual burden sharing between government, enterprises and people. We further aim to identify a number of current problems and link these to a discussion of future challenges in the form of an aging population, increased privatization and increased inequity.
    Keywords: Chinese health care system; provider incentives; burden sharing; aging population; inequity
    JEL: H51 H75 I11 I18
    Date: 2008–01
  4. By: Frank T. Denton; Christine H. Feaver; Byron G. Spencer
    Abstract: Price and quantity indexes are applied in the analysis of expenditure on physician services in the province of Ontario, Canada, using newly available data files for 1992 and 2004. Price indexes for such services are found to have increased less rapidly than indexes of general inflation and quantity indexes are found to account for the largest share of physician expenditure increases. The quantity indexes imply substantial gains in services per capita, especially for older adults. They imply also an increase in labour productivity for physicians that is somewhat greater than the corresponding increase for the economy at large.
    Date: 2008–01
  5. By: Helen Levy (University of Michigan); David R. Weir (University of Michigan)
    Abstract: We analyze newly available data from the Health and Retirement Study on senior citizens’ take-up of Medicare Part D and the associated SSA Low-Income Subsidy. We find that economic factors ­ specifically, demand for prescription drugs ­ drove the decision to enroll in Part D. For the most part, individuals with employer-sponsored coverage in 2004 kept that coverage, as they should have. Individuals with no prescription drug coverage in 2004 mostly enrolled in Part D or obtained other coverage; many of those who remained without coverage reported that they do not use prescribed medicines. Take-up of the SSA "Extra Help" subsidy seems to have been more problematic, with many Part D beneficiaries unaware of the subsidy program or unsure about their eligibility. There is apparent under-reporting in the HRS of participation in the subsidy program, suggesting that some who profess to be unaware of the program may actually be participating in it. In terms of respondents’ subjective experiences of decision-making, the majority report having had little or no difficulty with the Part D enrollment decision and being confident that they made the right decision. Thus, for the most part, despite the complexity of the program, Medicare beneficiaries seem to have been able to make economically rational decisions in which they had confidence, although additional intervention for low-income beneficiaries may be desirable.
    Date: 2007–10
  6. By: John Bound (University of Michigan); Timothy Waidmann (The Urban Institute)
    Abstract: We estimate the magnitude of any direct effect of retirement on health. Since retirement is endogenous to heath, it is not possible to estimate this effect by comparing the health of individuals before and after they retire. As an alternative we use institutional features of the pension system in the United Kingdom that are exogenous to the individual to isolate exogenous variation in retirement behavior. Data used will include both vital statistics and survey data that include both "objective" physical measurements and respondent self-reports. We find no evidence of negative health effects of retirement and some evidence that there may be a positive effect, at least for men.
    Date: 2007–10
  7. By: Eric French (Federal Reserve Bank of Chicago); John Bailey Jones (SUNY-Albany)
    Abstract: This paper provides an empirical analysis of the effect of employer-provided health insurance and Medicare in determining retirement behavior. Using data from the Health and Retirement Study, we estimate the first dynamic programming model of retirement that accounts for both saving and uncertain medical expenses. Our results suggest that uncertainty and saving are both important. We find that workers value health insurance well in excess of its actuarial cost, and that access to health insurance has a significant effect on retirement behavior, which is consistent with the empirical evidence. As a result, shifting the Medicare eligibility age to 67 would cause a significant retirement delay--as large as the delay from shifting the Social Security normal retirement age from 65 to 67.
    Date: 2007–10
  8. By: David M. Cutler; Amy Finkelstein; Kathleen McGarry
    Abstract: Standard theories of insurance, dating from Rothschild and Stiglitz (1976), stress the role of adverse selection in explaining the decision to purchase insurance. In these models, higher risk people buy full or near-full insurance, while lower risk people buy less complete coverage, if they buy at all. While this prediction appears to hold in some real world insurance markets, in many others, it is the lower risk individuals who have more insurance coverage. If the standard model is extended to allow individuals to vary in their risk tolerance as well as their risk type, this could explain why the relationship between insurance coverage and risk occurrence can be of any sign, even if the standard asymmetric information effects also exist. We present empirical evidence in five difference insurance markets in the United States that is consistent with this potential role for risk tolerance. Specifically, we show that individuals who engage in risky behavior or who do not engage in risk reducing behavior are systematically less likely to hold life insurance, acute private health insurance, annuities, long-term care insurance, and Medigap. Moreover, we show that the sign of this preference effect differs across markets, tending to induce lower risk individuals to purchase insurance in some of these markets, but higher risk individuals to purchase insurance in others. These findings suggest that preference heterogeneity may be important in explaining the differential patterns of insurance coverage in various insurance markets.
    JEL: G22 I11
    Date: 2008–01
  9. By: Michael Chernew; Philip DeCicca; Robert Town
    Abstract: This paper investigates the impact of Medicare HMO penetration on the medical care expenditures incurred by Medicare fee-for-service enrollees. We find that increasing penetration leads to reduced health care spending on fee-for-service beneficiaries. In particular, a one percentage point increase in Medicare HMO penetration reduces such spending by .9 percent. We estimate similar models for various measures of health care utilization and find penetration-induced reductions, consistent with our spending estimates. Finally, we present evidence that suggests our estimated spending reductions are driven by beneficiaries who have at least one chronic condition.
    JEL: I11 I18
    Date: 2008–01
  10. By: Maria M. Hofmarcher; Howard Oxley; Elena Rusticelli
    Abstract: This report attempts to assess whether -- and to what degree - better care coordination can improve health system performance in terms of quality and cost-efficiency. Coordination of care refers to policies that help create patient-centred care that is more coherent both within and across care settings and over time. Broadly speaking, it means making health-care systems more attentive to the needs of individual patients and ensuring they get the appropriate care for acute episodes as well as care aimed at stabilising their health over long periods in less costly environments. These issues are of particular interest to patients with chronic conditions and the elderly who may find it difficult to "navigate" fragmented health-care systems that are often found in OECD countries. Interest in coordination of care issues is increasing Growing interest in these issues has reflected a shift in the demands placed on health-care services. Chronic conditions have become progressively more important and are absorbing a growing share of health-care budgets. Since most of the chronically ill are elderly, this share can be expected to rise as populations age over coming decades. At the same time, many reports suggest that the quality of care that the chronically ill receive may need improvement. With these developments occurring in a context of tight public finance, some countries have been attempting to improve both the quality of care provided to the chronically ill and reduce cost pressures via changes to the architecture of health-care systems that encourage greater care coordination... <BR>L'objet de ce rapport est de tenter d'apprécier si - et, le cas échéant, dans quelle mesure - une meilleure coordination des soins est susceptible d'améliorer la performance des systèmes de santé en termes de qualité et d'efficience au regard du coût. Par coordination des soins on entend les mesures de nature à aider à instaurer une prise en charge centrée sur le patient qui soit plus cohérente aussi bien à l'intérieur d'un même cadre de soins qu'entre différents cadres de soins, et dans le temps. Plus généralement, il s'agit de faire en sorte que les systèmes de santé soient plus attentifs aux besoins individuels des patients et de faire en sorte que ceux-ci reçoivent les soins appropriés à l'occasion d'épisodes aigus, ainsi que des soins destinés à stabiliser leur état de santé, dans une perspective à long terme, dans un environnement moins coûteux. Ces questions revêtent une importance toute particulière pour les malades chroniques et pour les personnes âgées qui trouveront sans doute difficile de « naviguer » à l'intérieur de systèmes de santé fragmentés comme c'est souvent le cas dans les pays de l'OCDE. On s'intéresse de plus en plus à la problématique de la coordination des soins L'intérêt croissant pour cette question reflète un déplacement des attentes à l'égard des services de santé. Les maladies chroniques sont de plus en plus fréquentes et absorbent une part croissante des budgets de santé. Les maladies chroniques concernant, le plus souvent, les personnes âgées, on peut penser, la population vieillissant, que c'est un aspect des systèmes de santé qui prendra de plus en plus d?importance au cours des décennies à venir. Dans le même temps, de nombreux rapports signalent que la qualité des soins dispensés aux malades chroniques pourrait sans doute être améliorée. Ces évolutions intervenant dans un contexte difficile pour les finances publiques, certains pays s'efforcent d'améliorer la qualité des soins dispensés aux malades chroniques et de réduire la pression sur les coûts en repensant complètement l'architecture de leur système de santé, de façon à encourager une plus grande coordination des soins...
    Date: 2007–12–12
  11. By: John Bound (University of Michigan); Todd Stinebrickner (University of Western Ontario); Timothy Waidmann (The Urban Institute)
    Abstract: In this paper, we specify a dynamic programming model that addresses the interplay among health, financial resources, and the labor market behavior of men in the later part of their working lives. Unlike previous work which has typically used self reported health or disability status as a proxy for health status, we model health as a latent variable, using self reported disability status as an indicator of this latent construct. Our model is explicitly designed to account for the possibility that the reporting of disability may be endogenous to the labor market behavior we are studying. The model is estimated using data from the Health and Retirement Study. We compare results based on our model to results based on models that treat health in the typical way, and find large differences in the estimated effect of health on behavior. While estimates based on our model suggest that health has a large impact on behavior, the estimates suggest a substantially smaller role for health than we find when using standard techniques. We use our model to simulate the impact on behavior of raising the normal retirement age, eliminating early retirement altogether and eliminating the Social Security Disability Insurance program.
    Keywords: retirement behavior; disability insurance; social security; dynamic programming, latent Variable models
    JEL: C15 C61 H55 J14 J26
    Date: 2007
  12. By: Civan, Abdülkadir; Koksal, Bulent
    Abstract: We analyze the influence of technological progress on pharmaceuticals on rising health expenditures using US State level panel data. Improvements in medical technology are believed to be partly responsible for rapidly rising health expenditures. Even if the technological progress in medicine improves health outcomes and life quality, it can also increase the expenditure on health care. Our findings suggest that newer drugs increase the spending on prescription drugs since they are usually more expensive than their predecessors. However, they lower the demand for other types of medical services, which causes the total spending to decline. A one-year decrease in the average age of prescribed drugs causes per capita health expenditures to decrease by $31.92. The biggest decline occurs in spending on hospital and home health care due to newer drugs.
    Keywords: Health care expenditure; pharmaceuticals; technology diffusion
    JEL: I11 C23 I10
    Date: 2007–10
  13. By: Alexander Ludwig; Alexander Zimper (Mannheim Research Institute for the Economics of Aging (MEA))
    Abstract: This paper develops a theoretical model for the formation of subjective beliefs on individual survival expectations. Data from the Health and Retirement Study (HRS) indicate that, on average, young respondents underestimate their true sur- vival probability whereas old respondents overestimate their survival probability. Such subjective beliefs violate the rational expectations paradigm and are also not in line with the predictions of the rational Bayesian learning paradigm. We therefore introduce a model of Bayesian learning which combines rational learn- ing with the possibility that the interpretation of new information is prone to psychological attitudes. We estimate the parameters of our theoretical model by pooling the HRS data. Despite a parsimonious parametrization we ¯nd that our model results in a remarkable ¯t to the average subjective beliefs expressed in the data.
    JEL: C44 D83 D91 I10
    Date: 2007–12–31

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