nep-hea New Economics Papers
on Health Economics
Issue of 2008‒04‒12
seven papers chosen by
Yong Yin
SUNY at Buffalo, USA

  1. Does education reduce the probability of being overweight? By Dinand Webbink; Nicholas G. Martin; Peter M. Visscher
  2. Can Pay Regulation Kill? Panel Data Evidence on the Effect of Labour Markets on Hospital Performance By Hall, Emma; Propper, Carol; Van Reenen, John
  3. Upcoding and Optimal Auditing in Health Care (or The economics of DRG creep) By Kuhn, Michael; Siciliani, Luigi
  4. Copayments for Ambulatory Care in Germany : A Natural Experiment Using a Difference-in-Difference Approach By Jonas Schreyögg; Markus M. Grabka
  5. Search Costs and Medicare Plan Choice By Ian McCarthy; Rusty Tchernis
  6. Supplier inducement in the Belgian primary care market By Catherine Schaumans
  7. Costs and Benefits of Elderly Prescription Drug Coverage: Evidence from Veterans’ Health Care By Melissa Boyle

  1. By: Dinand Webbink; Nicholas G. Martin; Peter M. Visscher
    Abstract: The prevalence of overweight and obesity is growing rapidly in many countries. Education policies might be important for reducing this increase. This paper analyses the causal effect of education on the probability of being overweight by using longitudinal data of Australian identical twins. The data include self-reported and clinical measures of body size. Our crosssectional estimates confirm the well-known negative association between education and the probability of being overweight. For men we find that education also reduces the probability of being overweight within pairs of identical twins. The estimated effect of education on overweight status increases with age. Remarkably, for women we find no negative effect of education on body size when fixed family effects are taken into account. Identical twin sisters that differ in educational attainment do not systematically differ in body size. This finding is robust to differences in employment and number of children.
    Keywords: education; overweight; body size
    JEL: I12 I18 I20
    Date: 2008–04
  2. By: Hall, Emma; Propper, Carol; Van Reenen, John
    Abstract: Labour 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 labour markets. We would predict that this will mean labour supply problems and potential falls in the quality of service provision in areas with stronger labour 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 labour 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: hospital productivity; hospital quality; labour market regulation; skills
    JEL: F12 I18 J31 J45
    Date: 2008–02
  3. By: Kuhn, Michael; Siciliani, Luigi
    Abstract: We present a model of optimal contracting between a purchaser and a provider of health services. We assume that providers can increase demand by increasing quality but can also inflate activity through a manipulative effort (upcoding or DRG creep). We derive and compare the optimal price and audit policy for the purchaser under two scenarios: a) the purchaser can commit to a given audit policy (commitment); b) the purchaser cannot commit to a given audit policy (no commitment). If reported output is additive in quality and manipulation, we find that, if price is exogenously determined, the frequency of an audit is higher under the 'commitment' scenario than under the 'no commitment' one; also, under 'commitment', the degree of manipulation, quality and reported output are higher. If price is endogenous (i.e. it can be optimally chosen by the purchaser), then price is higher under 'no commitment' while the optimal audit policy, the equilibrium quality, manipulation and purchaser's net benefit are identical. If reported output is multiplicative in manipulation and quality, the purchaser sets a higher price under 'no commitment'. Nevertheless, quality and manipulation remain at lower levels, whereas auditing is more intensive than under commitment. The inability to commit now reduces the purchaser's net benefit.
    Keywords: DRG creep; Falsification; Hospitals
    JEL: D82 I11 I18 L51
    Date: 2008–02
  4. By: Jonas Schreyögg; Markus M. Grabka
    Abstract: In response to increasing health expenditures and a high number of physician visits, the German government introduced a copayment for ambulatory care in 2004 for individuals with statutory health insurance (SHI). Because persons with private insurance were exempt from the copayments, this health care reform can be regarded as a natural experiment. We used a difference-in-difference approach to examine whether the new copayment effectively reduced the overall demand for physician visits and to explore whether it acted as a deterrent to vulnerable groups, such as those with low income or chronic conditions. We found that there was no significant reduction in the number of physician visits among SHI members compared to our control group. At the same time, we did not observe a deterrent effect among vulnerable individuals. Thus, the copayment has failed to reduce the demand for physician visits. It is likely that this result is due to the design of the copayment scheme, as the copayment is low and is paid only for the first physician visit per quarter.
    Keywords: copayments, ambulatory care, difference-in-difference, count data, zero-inflated-model
    JEL: C13 I18 L31
    Date: 2008
  5. By: Ian McCarthy (Indiana University Bloomington); Rusty Tchernis (Indiana University Bloomington)
    Abstract: There is increasing evidence suggesting that Medicare beneficiaries do not make fully informed decisions when choosing among alternative Medicare health plans. To the extent that deciphering the intricacies of alternative plans consumes time and money, the Medicare health plan market is one in which search costs may play an important role. To account for this, we split beneficiaries into two groups--those who are informed and those who are uninformed. If uninformed, beneficiaries only use a subset of covariates to compute their maximum utilities, and if informed, they use the full set of variables considered. In a Bayesian framework with Markov Chain Monte Carlo (MCMC) methods, we estimate search cost coefficients based on the minimum and maximum statistics of the search cost distribution, incorporating both horizontal differentiation and information heterogeneities across eligibles. Our results suggest that, conditional on being uninformed, older, higher income beneficiaries with lower self-reported health status are more likely to utilize easier access to information.
    Keywords: Search, Medicare Health Plan Choice, Discrete Choice Models, Bayesian Methods
    JEL: C11 C21 D21 D43 M31
    Date: 2008–04
  6. By: Catherine Schaumans
    Abstract: We address the presence of supplier-induced demand in the Belgian primary care market, which is characterized by a .fixed fee system and a high density of General Practitioners (GP). Using a unique dataset on the number of visits of all Belgian GPs, we first investigate whether we can find evidence of demand inducement by Belgian GPs. Novel to this literature is that we furthermore investigate which type of visits GPs typically use for inducing demand. We extend the theoretical framework of Carlsen and Grytten (1998) to allow for a limitation in the possibility of inducing demand due to the amount of information in the market. As a result, our model predicts GPs to induce demand when the level of competition becomes high, while a further increase of competition triggers a decrease in their inducing behavior. The results indicate the presence of both availability effects and supplier inducement in the Belgian primary care market. We also find that GPs prefer the use of home visits during working hours to induce demand for their services. However, when competition gets fierce, they substitute toward inducement through office visits
    Keywords: supplier induced demand, GP, Belgium
    Date: 2008–03
  7. By: Melissa Boyle (Department of Economics, College of the Holy Cross)
    Abstract: This study tests the impact of a public prescription benefit on Medicare-eligible veterans, utilizing a mid-1990s benefit change in the VA health care system. Using data from the Medicare Current Beneficiary Survey, I compare prescription spending and utilization, as well as use of other health services and health outcomes for veterans and non-veterans before and after the VA insurance change. Results show that receipt of a publicly-provided prescription benefit leads to an increase in spending on prescriptions, and simultaneously, a decrease in spending on other medical services. On average, every $1 increase in drug spending is associated with a $6.50 decrease in other medical spending, and this change is accompanied by measured improvements in the health of benefit recipients. The benefit appears to accrue mainly to low-income and disabled individuals who typically have higher-than-average medical expenses, and are also more likely to experience substantial welfare gains from the relative income increase associated with the reduction (to zero) in the price of prescription drugs.
    Keywords: Medicare, prescription drugs, elderly, veteran, VA healthcare
    JEL: I1 H51
    Date: 2008–04

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