nep-hea New Economics Papers
on Health Economics
Issue of 2008‒06‒27
fifteen papers chosen by
Yong Yin
SUNY at Buffalo, USA

  1. Determinants of Birthweight Outcomes: Quantile Regressions Based on Panel Data By Stefan Holst Bache; Christian M. Dahl; Johannes Tang
  2. Can We Measure Hospital Quality from Physicians' Choices? By Machado, Matilde Pinto; Mora, Ricardo; Romero-Medina, Antonio
  3. Collusion in the Private Health Insurance Market: Empirical Evidence for Chile By Claudio Agostini; Eduardo Saavedra; Manuel Willington
  4. Insuring Against Losses from Transgenic Contamination: The Case of Pharmaceutical Maize By Ripplinger, David; Hayes, Dermot J.; Goggi, Susana; Lamkey, Kendall
  5. Use of Propensity Scores in Non-Linear Response Models: The Case for Health Care Expenditures By Anirban Basu; Daniel Polsky; Willard G. Manning
  6. What Good Is Wealth Without Health? The Effect of Health on the Marginal Utility of Consumption By Amy Finkelstein; Erzo F.P. Luttmer; Matthew J. Notowidigdo
  7. The Cost of Uncertain Life Span By Ryan D. Edwards
  8. Is There a Market for Voluntary Health Insurance in Developing Countries? By Mark Pauly; Fredric E. Blavin; Sudha Meghan
  9. Utilisation of Physician Services in the 50+ Population. The Relative Importance of Individual versus Institutional Factors in 10 European Countries By Kristian Bolin; Anna Lindgren; Bjorn Lindgren; Petter Lundborg
  10. Marijuana Use and High School Dropout: The Influence of Unobservables By Daniel F. McCaffrey; Rosalie Liccardo Pacula; Bing Han; Phyllis Ellickson
  11. The Impact of Income on the Weight of Elderly Americans By John Cawley; John R. Moran; Kosali I. Simon
  12. Minimum Drinking Age Laws and Infant Health Outcomes By Tara Watson; Angela Fertig
  13. Trade-off between formal and informal care in Spain By Sergi Jiménez-Martín; Cristina Vilaplana Prieto
  14. Advantageous selection in private health insurance: The case of Australia By Thomas Buchmueller; Denzil Fiebig; Glenn Jones; Elizabeth Savage
  15. The effect of discounting on quality of life valuation using the Time Trade-Off, CHERE Working Paper 2008/3 By Richard Norman; Rosalie Viney

  1. By: Stefan Holst Bache; Christian M. Dahl; Johannes Tang (School of Economics and Management, University of Aarhus, Denmark)
    Abstract: Low birthweight outcomes are associated with large social and economic costs, and therefore the possible determinants of low birthweight are of great interest. One such determinant which has received considerable attention is maternal smoking. From an economic perspective this is in part due to the possibility that smoking habits can be influenced through policy conduct. It is widely believed that maternal smoking reduces birthweight; however, the crucial difficulty in estimating such effects is the unobserved heterogeneity among mothers. We consider extensions of three panel data models to a quantile regression framework in order to control for heterogeneity and to infer conclusions about causality across the entire birthweight distribution. We obtain estimation results for maternal smoking and other interesting determinants, applying these to data obtained from Aarhus University Hospital, Skejby (Denmark). We examine the use of both balanced and unbalanced panels. In conclusion, our results show the importance of considering conditional quantiles and controlling for unobserved heterogeneity when estimating determinants of birthweight outcomes. An example of this is the change in magnitude and significance of prenatal smoking. Controlling for unobserved effects does not change the fact that smoking reduces birthweight, but it shows that the effect is primarily a problem in the left tail of the distribution on a slightly smaller scale.
    Keywords: Random Correlated Effects, Fixed Effects, Cross Section, Quantile Regression, Maternal Smoking, Birthweight
    JEL: C13 C23 I10
    Date: 2008–05–08
  2. By: Machado, Matilde Pinto; Mora, Ricardo; Romero-Medina, Antonio
    Abstract: In this paper, we propose an alternative methodology for ranking hospitals based on the choices of Medical School graduates over hospital training vacancies. Our methodology is therefore a revealed preference approach. Our methodology for measuring relative hospital quality has the following desirable properties: a) robust to manipulation from hospital administrators; b) conditional on having enough observations, it allows for differences in quality across specialties within a hospital; c) inexpensive in terms of data requirements, d) not subject to selection bias from patients nor hospital screening of patients; and e) unlike other rankings based on experts' evaluations, it does not require physicians to provide a complete ranking of all hospitals. We apply our methodology to the Spanish case and find, among other results, the following: First, the probability of choosing the best hospital relative to the worst hospital is statistically significantly different from zero. Second, physicians value proximity and nearby hospitals are seen as more substitutable. Third, observable time-invariant city characteristics are unrelated to results. Finally, our estimates for physicians' hospital valuations are significantly correlated to more traditional hospital quality measures.
    Keywords: Hospital Quality; Hospital Rankings; Nested Logit; Physicians' Labour Market; Revealed Preference
    JEL: I11 I12 J24 J44
    Date: 2008–06
  3. By: Claudio Agostini (ILADES-Georgetown University, Universidad Alberto Hurtado); Eduardo Saavedra (ILADES-Georgetown University, Universidad Alberto Hurtado); Manuel Willington (ILADES-Georgetown University, Universidad Alberto Hurtado)
    Abstract: In September 2005, the Chilean Competition Authority filed a complaint against the 5 largest private health insurance providers for violation of antitrust laws. The 5 providers were accused of colluding to reduce the coverage of the plans offered to customers between March 2002 and March 2003. The main fact is that during that period these 5 providers reduced the coverage offered from 100% for hospitalization and 80% for ambulatory care to 90% and 70% respectively. As usual the observation of parallel conduct is not enough to infer collusion and it is required to observe additional factors that allow us to reject the hypothesis of providers behaving competitively. In this paper, we show that some specific characteristics of the health insurance markets generate barriers to entry and switching costs that allow the possibility of a collusive agreement. Then, we adapt an imperfect competition model of product differentiation to derive some testable propositions that allow us to distinguish between competition and collusion outcomes in the health insurance market in Chile. Finally, we show econometric evidence consistent with a collusive agreement among the 5 largest providers and inconsistent with a competitive equilibrium. . In particular, by comparing the prosecuted and non-prosecuted open Isapres before and during the collusive period, we show that sales efforts of the accused Isapres were reduced during the transition period toward lower-quality plans, that the profitability of the two groups of Isapres increased, and that the rate of transfers within the group of accused Isapres fell during the transition period.
    Keywords: Tacit Collusion, Isapres, Health Insurance, Conscious Parallelism, Plus Factors.
    JEL: L41 D43 I11
    Date: 2008–06
  4. By: Ripplinger, David; Hayes, Dermot J.; Goggi, Susana; Lamkey, Kendall
    Abstract: Concerns about the risk of food supply contamination and the resulting financial losses have limited the development and commercialization of certain pharmaceutical plants. This article develops an insurance pricing model that helps translate these concerns into a cost-benefit analysis. The model first estimates the physical dispersal of maize pollen subject to a number of weather parameters. This distribution is then validated with the limited amount of currently available field trial data. The physical distribution is then used to calculate the premium for a fair-valued insurance policy that would fund the destruction of possibly contaminated fields. The flexible framework can be readily adapted to other crops, management practices, and regions.
    Keywords: contemporaneous fertility, costs and benefits, insurance, pharmaceutical maize, pollen dispersal, risks and benefits, stochastic model.
    Date: 2008–06–20
  5. By: Anirban Basu; Daniel Polsky; Willard G. Manning
    Abstract: Under the assumption of no unmeasured confounders, a large literature exists on methods that can be used to estimating average treatment effects (ATE) from observational data and that spans regression models, propensity score adjustments using stratification, weighting or regression and even the combination of both as in doubly-robust estimators. However, comparison of these alternative methods is sparse in the context of data generated via non-linear models where treatment effects are heterogeneous, such as is in the case of healthcare cost data. In this paper, we compare the performance of alternative regression and propensity score-based estimators in estimating average treatment effects on outcomes that are generated via non-linear models. Using simulations, we find that in moderate size samples (n= 5000), balancing on estimated propensity scores balances the covariate means across treatment arms but fails to balance higher-order moments and covariances amongst covariates, raising concern about its use in non-linear outcomes generating mechanisms. We also find that besides inverse-probability weighting (IPW) with propensity scores, no one estimator is consistent under all data generating mechanisms. The IPW estimator is itself prone to inconsistency due to misspecification of the model for estimating propensity scores. Even when it is consistent, the IPW estimator is usually extremely inefficient. Thus care should be taken before naively applying any one estimator to estimate ATE in these data. We develop a recommendation for an algorithm which may help applied researchers to arrive at the optimal estimator. We illustrate the application of this algorithm and also the performance of alternative methods in a cost dataset on breast cancer treatment.
    JEL: C01 C21 I10
    Date: 2008–06
  6. By: Amy Finkelstein; Erzo F.P. Luttmer; Matthew J. Notowidigdo
    Abstract: We estimate how the marginal utility of consumption varies with health. To do so, we develop a simple model in which the impact of health on the marginal utility of consumption can be estimated from data on permanent income, health, and utility proxies. We estimate the model using the Health and Retirement Study's panel data on the elderly and near-elderly, and proxy for utility with measures of subjective well-being. We find robust evidence that the marginal utility of consumption declines as health deteriorates. Our central estimate is that a one-standard-deviation increase in the number of chronic diseases is associated with an 11 percent decline in the marginal utility of consumption relative to this marginal utility when the individual has no chronic diseases. The 95 percent confidence interval allows us to reject declines in marginal utility of less than 2 percent or more than 17 percent. Point estimates from a wide range of alternative specifications tend to lie within this confidence interval. We present some simple, illustrative calibration results that suggest that state dependence of the magnitude we estimate can have a substantial effect on important economic problems such as the optimal level of health insurance benefits and the optimal level of life-cycle savings.
    JEL: D12 I1
    Date: 2008–06
  7. By: Ryan D. Edwards
    Abstract: A considerable amount of uncertainty surrounds life expectancy, e0, the average length of life. The standard deviation in adult life spans, S10 , is about 15 years in the U.S., and theory and evidence suggest it is costly. In this paper, I calibrate a standard intertemporal model to show that one less year in standard deviation is worth about half a mean life year. Differences in S10 amplify measured differences in e0 between the U.S. and other industrialized countries, and accounting for historical gains against S10 raises the total value of mortality declines during the last century by about 25 percent.
    JEL: I10 J11 J17 O11
    Date: 2008–06
  8. By: Mark Pauly; Fredric E. Blavin; Sudha Meghan
    Abstract: In many developing countries the proportion of health care spending paid out of pocket is about half of all spending or more. This study examines the distribution of such spending by income and care type, and the variation in spending about its expected value, in order to see whether voluntary private health insurance that reduces variation in spending might be able to be supplied. Using data from the World Health Survey for 14 developing countries, we find that out of pocket spending varies by income but that most spending usually occurs in income quintiles below the topmost quintile. We use estimates of the variance of total spending, hospital spending, physician spending, and outpatient drug spending about their means to generate estimates of the risk premia risk averse consumers might pay for insurance coverage. For hospital spending and total spending, these risk premia as a percent of expenses are generally larger than reasonable estimates of private health insurer loading as a percent of expenses, suggesting that voluntary insurance might be feasible. However, the strong relationship between spending and income suggests that insurance markets may need to be segmented by income.
    JEL: I11
    Date: 2008–06
  9. By: Kristian Bolin; Anna Lindgren; Bjorn Lindgren; Petter Lundborg
    Abstract: We analysed the relative importance of individual versus institutional factors in explaining variations in the utilisation of physician services among the 50+ in ten European countries. The importance of the latter was investigated, distinguishing between organisational (explicit) and cultural (implicit) institutional factors, by analysing the influence of supply side factors, such as physician density and physician reimbursement, and demand side factors, such as co-payment and gate-keeping, while controlling for a number of individual characteristics, using cross-national individual-level data from SHARE. Individual differences in health status accounted for about 50 percent of the between-country variation in physician visits, while the organisational and cultural factors considered each account for about 15 percent of the variation. The organisational variables showed the expected signs, with higher physician density being associated with more visits and higher co-payment, gate-keeping, and salary reimbursement being associated with less visits. When analysing specialist visits separately, however, organisational and cultural factors played a greater role, each accounting for about 30 percent of the between-country variation, whereas individual health differences only accounted for 1 percent of the variation.
    JEL: I11
    Date: 2008–06
  10. By: Daniel F. McCaffrey; Rosalie Liccardo Pacula; Bing Han; Phyllis Ellickson
    Abstract: In this study we reconsider the relationship between heavy and persistent marijuana use and high school dropout status using a unique prospective panel study of over 4500 7th grade students from South Dakota who are followed up through high school. Propensity score weighting is used to adjust for baseline differences that are found to exist before marijuana initiation occurs (7th grade). Weighted logistic regression incorporating these propensity score weights is then used to examine the extent to which time-varying factors, including substance use, also influence the likelihood of dropping out of school. We find a positive association between marijuana use and dropping out (OR=5.68), over half of which can be explained by prior differences in observational characteristics and behaviors. The remaining association (OR=2.31) is made statistically insignificant when measures of cigarette smoking are included in the analysis. Because no physiological justification can be provided for why cigarette smoking would reduce the cognitive effects of marijuana on schooling, we interpret this as evidence that the association is due to other factors. We then use the rich data to explore which constructs are driving this result, determining that it is time-varying parental and peer influences.
    JEL: I10 I18
    Date: 2008–06
  11. By: John Cawley; John R. Moran; Kosali I. Simon
    Abstract: This paper tests whether income affects the body weight and clinical weight classification of elderly Americans using a natural experiment that led otherwise identical retirees to receive significantly different Social Security payments based on their year of birth. We exploit this natural experiment by estimating models of instrumental variables using data from the National Health Interview Surveys. The model estimates rule out even moderate effects of income on weight and on the probability of being underweight or obese, especially for men.
    JEL: H55 I1 I12 I38 J14 J26
    Date: 2008–06
  12. By: Tara Watson; Angela Fertig
    Abstract: Alcohol policies have potentially far-reaching impacts on risky sexual behavior, prenatal health behaviors, and subsequent outcomes for infants. We examine whether changes in minimum drinking age (MLDA) laws affect the likelihood of poor birth outcomes. Using data from the National Vital Statistics (NVS) for the years 1978-88, we find that a drinking age of 18 is associated with adverse outcomes among births to young mothers -- including higher incidences of low birth weight and premature birth, but not congenital malformations. The effects are largest among black women. We find suggestive evidence from both the NVS and the 1979 National Longitudinal Study of Youth (NLSY) that the MLDA laws alter the composition of births that occur. In states with lenient drinking laws, young black mothers are more likely to have used alcohol 12 months prior to the birth of their child and less likely to report paternal information on the birth certificate. We suspect that lenient drinking laws generate poor birth outcomes because they increase the number of unplanned pregnancies.
    JEL: I18 J13
    Date: 2008–06
  13. By: Sergi Jiménez-Martín; Cristina Vilaplana Prieto
    Abstract: The remarkable growth of older population has moved long term care to the front ranks of the social policy agenda. Understanding the factors that determine the type and amount of formal care is important for predicting use in the future and developing long-term policy. In this context we jointly analyze the choice of care (formal, informal, both together or none) as well as the number of hours of care received. Given that the number of hours of care is not independent of the type of care received, we estimate, for the first time in this area of research, a sample selection model with the particularity that the first step is a multinomial logit model. With regard to the debate about complementarity or substitutability between formal and informal care, our results indicate that formal care acts as a reinforcement of the family care in certain cases: for very old care receivers, in those cases in which the individual has multiple disabilities, when many care hours are provided, and in case of mental illness and/or dementia. There exist substantial differences in long term care addressed to younger and older dependent people and dependent women are in risk of becoming more vulnerable to the shortage of informal caregivers in the future. Finally, we have documented that there are great disparities in the availability of public social care across regions.
    Keywords: Formal care, informal care, caregiver, dependent
    JEL: I1 J14
    Date: 2008–06
  14. By: Thomas Buchmueller (University of Michigan); Denzil Fiebig (University of NSW); Glenn Jones (Macquarie University); Elizabeth Savage (CHERE, University of Technology, Sydney)
    Abstract: When consumers have private information about risk of suffering a loss, or equivalently, if insurers are prohibited from using observable information on risk in underwriting, theoretical models of insurance predict adverse selection. Yet the most common finding in empirical studies is that of no positive correlation between risk and insurance coverage. This is found for different types of insurance (e.g. car, health, life) and in different countries (e.g. France, US, UK, Israel) suggesting a fundamental relationship involving private information and consumer preferences. In this paper, we investigate the nature of risk selection in the Australian market for private health insurance in which community rated private health insurance complements a universal public health care system. We use National Health Survey data on hospital utilisation and individual characteristics to construct an empirical analogue for the risk variable in the Rothschild and Stiglitz model. Estimating the relationship between insurance and risk semi-parametrically, we find robust evidence of favourable selection. To explore the extent to which underlying risk preferences rather than risk drives the decision to purchase health insurance, we use Household Expenditure Survey data to model decisions to purchase a range of insurance products (health, life, accident, home, car) and to engage in risky behaviours (smoking and various forms of gambling). Correlations between residuals in the model suggest that advantageous selection is driven by risk aversion, which theoretical models do not typically capture.
    Keywords: health insurance, adverse selection, Australia
    JEL: I10
    Date: 2008–05
  15. By: Richard Norman (CHERE, University of Technology, Sydney); Rosalie Viney (CHERE, University of Technology, Sydney)
    Abstract: Cost-utility analysis, combining mortality effects with health-related quality of life effects, has become the preferred method for presenting economic evaluation. It allows comparability between potential investments in different areas of health and healthcare as the outcomes are generic and designed to be applicable in multiple contexts. There are various methods for estimating health-related quality of life scores but one major approach is the use of the Time Trade-Off. Evidence has suggested that scores from this measure are relatively lower than from other measures. We argue that one possible reason for this is that the TTO method artificially deflates valuation scores because it does not take account of time preference. The extent of the deflation depends on the duration of survival offered for the health state in question, the true valuation placed on that state, and the individual?s rate of time preference. This has implications for the use of TTO valuation scores in economic evaluation, particularly when models are populated using health-related quality of life scores from sources using different methods.
    Keywords: health related quality of life, time trade off
    JEL: I10
    Date: 2008–06

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