nep-hea New Economics Papers
on Health Economics
Issue of 2008‒12‒14
nineteen papers chosen by
Yong Yin
SUNY at Buffalo, USA

  1. Catastrophic health expenditure and household well-being By Ramses H. Abul Naga; Karine Lamiraud
  2. On the Golden Rule of capital accumulation under endogenous longevity By David, DE LA CROIX
  3. The Impact of the Medicare Drug Benefit on Health Care Spending by Older Households By Dean Baker; Ben Zipperer
  4. Value of statistical life and cause of accident: A choice experiment By Carlsson, Fredrik; Daruvala, Dinky; Jaldell, Henrik
  5. Health, Financial Incentives and Retirement in Spain By Esen Erdogan-Ciftci; Eddy Van Doorslaer; Angel Lopez-Nicolas
  6. The Intergenerational Content of Social Spending: Health Care and Sustainable Growth in China By Jean-Paul Fitoussi; Francesco Saraceno
  7. Fuel Choice, Indoor Air Pollution, and Children's Health By John H. Y. Edwards; Christian Langpap
  8. How Much Do Older Workers Value Employee Health Insurance? By Leora Friedberg; Wei Sun; Anthony Webb
  9. Are Older Men Healthy Enough to Work? By Alicia H. Munnell; Dan Muldoon; ;
  10. How Can We Improve Long-Term Care Financing? By Howard Gleckman; ;
  11. Population Aging and Economic Growth: the effect of health expenditure By Atsue Mizushima
  12. Intergenerational Transfers of Time and Public Long-term Care with an Aging Population By Atsue Mizushima
  13. Risk Aversion and the Value of Risk to Life By Bommier, Antoine; Villeneuve, Bertrand
  14. High Birth Weight and Cognitive Outcomes By Resul Cesur; Inas Rashad
  15. Mandates and the Affordability of Health Care By Sherry A. Glied
  16. More Women Missing, Fewer Girls Dying: The Impact of Abortion on Sex Ratios at Birth and Excess Female Mortality in Taiwan By Ming-Jen Lin; Nancy Qian; Jin-Tan Liu
  17. Are Health Insurance Markets Competitive? By Leemore Dafny
  18. Estimating Marginal Returns to Medical Care: Evidence from At-Risk Newborns By Douglas Almond; Joseph J. Doyle, Jr.; Amanda E. Kowalski; Heidi Williams
  19. The Cost of Primary Care Doctors By Sherry A. Glied; Ashwin Prabhu; Norman H. Edelman

  1. By: Ramses H. Abul Naga; Karine Lamiraud
    Abstract: According to the catastrophic health expenditure methodology a house-hold is in catastrophe if its health out-of-pocket budget share exceeds a critical threshold. We develop a conceptual framework for addressing three questions in relation to this methodology, namely: 1. Can a budget share be informative about the sign of a change in welfare? 2. Is there a positive association between a household.s poverty shortfall and its health out-of-pocket budget share? 3. Does an increase in population coverage of a health insurance scheme always result in a reduction of the prevalence of catastrophic expenditures?
    Keywords: Catastrophic health expenditure, welfare change, poverty, performance of health insurance schemes
    JEL: I1 I3
    Date: 2008–11
  2. By: David, DE LA CROIX (UNIVERSITE CATHOLIQUE DE LOUVAIN, Institut de Recherches Economiques et Sociales (IRES))
    Abstract: This note derives the Golden Rule of capital accumulation in a Chakraborty-type economy, i.e. a two-period OLG economy where longevity is endogenous. It is shown that the capital per worker maximizing steady-state consumption per head is inferior to the Golden Rule capital level prevailing under exogenous longevity. We characterize also the lifetime Golden Rule, that is, the capital per worker maximizing steady-state expected lifetime consumption per head, and show that this tends to exceed the standard Golden Rule capital level.
    Keywords: Golden Rule, longevity, OLG models
    JEL: E13 E21 E22 I12
    Date: 2008–12–02
  3. By: Dean Baker; Ben Zipperer
    Abstract: This report uses data from the Bureau of Labor Statistics Consumer Expenditure Survey from 2004 to 2006 as well as data from the Congressional Budget Office to analyze the savings in prescription drug spending for seniors as a result of the Medicare Prescription Drug, Improvement, and Modernization Act of 2003 (MMA). The results show that the 1st income quintile of seniors experienced a fall in the rate of expenditures for prescription drugs and the 2nd income quintile saw a slowing of the rate of increase in expenditures. However, senior households in the middle- and upper-income quintiles saw a rise in expenditures for prescription drugs.
    Keywords: medicare, prescription drugs, MMA, senior citizens, health care
    JEL: I I1 I18 I11
    Date: 2008–12
  4. By: Carlsson, Fredrik (Department of Economics, School of Business, Economics and Law, Göteborg University); Daruvala, Dinky (Department of Economics, Karlstad University); Jaldell, Henrik (Department of Economics, Karlstad University)
    Abstract: The purpose of this study is to compare value of statistical life (VSL) estimates for traffic, drowning and fire accidents. Using a choice experiment in a mail survey of 5000 Swedish respondents we estimated the willingness to pay for risk reductions in the three accidents. In the experiment respondents were asked in a series of questions, whether they would choose risk reducing investments where type of accident, cost of the investment, the risk reduction acquired, and the baseline risk varied between questions. The VSLs for fire and drowning accidents were found to be about 1/3 lower than that for traffic accidents. Although respondents worry more about traffic accidents, this alone cannot explain the difference in VSL estimates. The difference between fire and drowning accidents was not found to be statistically significant.<p>
    Keywords: Stated preferences; statistical life; risk; traffic; fire; drowning; choice experiment
    JEL: D60 D81 R41
    Date: 2008–12–09
  5. By: Esen Erdogan-Ciftci (Erasmus University Rotterdam); Eddy Van Doorslaer (Erasmus University Rotterdam); Angel Lopez-Nicolas (Universidad Politecnica de Cartagena, Cartagena, Spain)
    Abstract: We estimate the impact of health and financial incentives on the retirement transitions of older workers in Spain. Individual measures of pension wealth, peak and accrual values are constructed using labor market histories and health shocks are derived as changes in a composite health stock measure over time. We examine labour market exits into both old age retirement and a broader definition of retirement including inactivity, while controlling for unobserved heterogeneity. We find that pension wealth, accrual and peak value are significant determinants of retirement decisions, although their effect is weaker in the case of the broad definition of retirement. Initial health stock shows a significant impact on both definitions of retirement. Only large negative health shocks have a significant effect on the probability of entering the broader definition of retirement. Unlike previous literature, we find that (i) financial incentives, when measured adequately, exert a greater impact on retirement behaviour than health shocks, and (ii) initial health stock plays a more important role than health shocks in determining retirement decisions. We also perform simulations of a recently enacted reform of pension incentives and show how its expected effects compare to those of health improvements.
    Keywords: Health; Retirement; Social security and public pensions
    JEL: H55 I10 J26
    Date: 2008–10–02
  6. By: Jean-Paul Fitoussi (Observatoire Français des Conjonctures Économiques); Francesco Saraceno (Observatoire Français des Conjonctures Économiques)
    Abstract: The paper endorses the thesis that current macro imbalances are partly due to an excess of household savings in China, whose origin is to be found among other things in household uncertainty about the provision of public services like health care, pensions and education. Focusing on health services, because of their priority in the concerns of the Chinese people, we describe the recent trends in the provision of health care. We then argue that social spending by the government may have important intergenerational content, in that it allows higher private spending, lower inequality, higher levels of human capital and the like. All these factors are related to the potential growth rate of the economy. We conclude that a more important role of the government in the sector of public services, and in particular of health care, may help reduce the possibility of future bottlenecks, and hence help keeping the Chinese economy on a sustainable growth path. We conclude the paper by an assessment of the current debate on how to reform the system, and we advocate universal publicly funded basic health coverage.
    Keywords: Social Spending, Health Care, Sustainable Growth, Chinese Economy, Savings Glut
    JEL: I11 I18 N35
    Date: 2008
  7. By: John H. Y. Edwards (Department of Economics, Tulane University); Christian Langpap (Department of Agricultural and Resource Economics, Oregon State University)
    Abstract: Much of the world population, particularly in developing countries, still relies on firewood to meet basic energy needs. The resulting indoor air pollution can have severe health consequences, particularly for young children who spend considerable time in close proximity to the fire while their mothers cook. In this paper we use data from a household survey to examine gas stove adoption, firewood consumption, and the resulting effects on the health of young children in Guatemala. Our findings suggest that cooking with firewood has significant negative impacts on children's respiratory health. We also find strong evidence that these impacts go well beyond respiratory problems and have much broader health effects. Simulation results indicate that policies which attempt to reduce the consumption of wood and/or accelerate the adoption of LPG may not be as effective at improving respiratory health as policies that target cooking habits to directly attempt to reduce exposure by young children. However, broader health effects are more effectively addressed by policies aimed directly at eliminating the use of wood fuel.
    Keywords: indoor air pollution, health, children, fuel transition, firewood, Guatemala
    JEL: Q53 Q56 D13 I12 O13
    Date: 2008–12
  8. By: Leora Friedberg; Wei Sun; Anthony Webb
    Abstract: This brief seeks to answer the question in the title by analyzing data from the Health and Retirement Study (HRS), a nationally representative survey of older Americans. New questions in the HRS enable researchers to compare the value that workers place on health insurance with their perceptions about the cost of coverage...
    Date: 2008–07
  9. By: Alicia H. Munnell; Dan Muldoon; ;
    Abstract: Since the mid-1960s, the median retirement age for men has declined from 66 to 63. If Americans continue to retire at age 63, a great many will risk income shortfalls, especially at older ages. This risk is even greater for those currently nearing retirement who have recently seen a large portion of their nest eggs evaporate...
    Date: 2008–10
  10. By: Howard Gleckman; ;
    Abstract: The system for financing and delivering long-term care in the United States is deeply flawed. While families and government spend more than $200 billion annually for such services, many frail elderly and disabled fail to receive the care they need. This problem is expected to become more severe as the Baby Boom generation ages...
    Date: 2008–06
  11. By: Atsue Mizushima
    Abstract: Rising longevity has led to population aging in developed countries, causing increasing concerns about its economic impact. Specially, the trend of population aging increases health expenditure in developed countries, and 70% to 80% of health expenditure is funded by public sector. Therefore, this paper focuses on the health demand in an aging economy and examines how the aging of the population and public health funding (PHF) affects agents' behavior. For this purpose, we construct a simple growth model and examine the e®ect of aging and PHF on saving and the growth rate. We show that an increase in life expectancy increases the growth rate in the economy without PHF, but that it has an inverted U-shaped relation in the economy with PHF. From the welfare standpoint, we show that it increases the intergenerational conflict between current and future generation and that PHF has the result of alleviating the conflict.
    Keywords: life expectancy, household production, economic growth, social welfare
    JEL: I10 J14 O41
    Date: 2008
  12. By: Atsue Mizushima
    Abstract: Although a large number of studies have been done on intergenerational transfers of goods, little is known about intergenerational transfers of time. In step with an increase in the aging of the population, the demand for time-intensive transfers in health care and other health services increases. Using an overlapping generations model which incorporates uncertain longevity, we set up a model which incorporates intergenerational transfers of time and examine the macroeconomic effect of public long-term care policy (LTC). Using the model, we show that LTC decreases the steady state level of capital, but that it enhances the welfare level when the rate of tax is sufficiently small.
    Keywords: time transfers, household production, overlapping generations model
    JEL: E60 I12 J14 J22
    Date: 2008
  13. By: Bommier, Antoine; Villeneuve, Bertrand
    Abstract: The standard literature on the value of life relies on Yaari’s (1965) model, which includes an implicit assumption of risk neutrality with respect to life duration. To overpass this limitation, we extend the theory to a simple variety of nonadditively separable preferences. The enlargement we propose is relevant for the evaluation of life-saving programs: current practice, we estimate, puts too little weight on mortality risk reduction of the young. Our correction exceeds in magnitude that introduced by the switch from the notion of number of lives saved to the notion of years of life saved.
    Keywords: Value of Statistical Life; Lifecycle Behavior; Cost-benefit Analysis
    JEL: D81 I18 J17 D91 D61
    Date: 2008–06–10
  14. By: Resul Cesur; Inas Rashad
    Abstract: While the effects of low birth weight have long been explored, those of high birth weight have been essentially ignored. Economists have analyzed the negative effects that low birth weight might have on subsequent school outcomes, while taking into account unobserved characteristics that may be common to families with low birth weight babies and negative outcomes in terms of school test scores when children, in addition to labor market income when adults. Today, however, with increasing obesity rates in the United States, high birth weight has become a potential concern, and has been associated in the medical literature with an increased likelihood of becoming an overweight child, adolescent, and subsequently an obese adult. Overweight and obesity, in turn, are associated with a host of negative effects, including lower test scores in school and lower labor market prospects when adults. If studies only focus on low birth weight, they may underestimate the effects of ensuring that mothers receive adequate support during pregnancy. In this study we find that cognitive outcomes are adversely affected not only by low birth weight (<2500 grams) but also by high birth weight (>4500 grams). Our results have policy implications in terms of provision of support for pregnant women.
    JEL: I10
    Date: 2008–12
  15. By: Sherry A. Glied
    Abstract: This paper examines the economic rationale of affordability exemptions in the context of a health insurance mandate. On its face, an affordability exemption makes little sense –it exempts people from purchasing a good that policymakers believe benefits them. I provide an economic definition of affordability and discuss how it is implemented in the contexts of food, housing, and health care. Affordability standards are frequently used in food and housing policy making, but both empirically and theoretically health care operates quite differently than do these other merit goods. These differences help explain why the use of affordability in health policymaking is so different from its use in these other contexts. I conclude with a discussion of the relationship between mandates and exemptions in other health care systems.
    JEL: I18 I32 I38
    Date: 2008–12
  16. By: Ming-Jen Lin; Nancy Qian; Jin-Tan Liu
    Abstract: Many countries with "deficits" in their female population see banning sex-selective abortion as a way to curb the observed sex imbalance. However, they rarely discuss the potentially negative unintended consequences of this ban on female survival rates as parents may be forced to substitute post-natal for pre-natal sex-selection. This paper presents novel empirical evidence on the impact of access to abortion on sex ratios at birth and relative female infant mortality. We use the universe of birth and death registry data from Taiwan and exploit plausibly exogenous variation in the availability of sex-selective abortion caused legislative changes to identify the causal effects of sex-selective abortion on sex ratios at birth and excess female mortality. We find that sex-selective abortion increased the fraction of males at birth by approximately 0.7 percentage-points, accounting for approximately 100% of the observed increase in sex ratios at birth during the 1980s; and it decreased relative female neo-natal mortality by approximately 61%. We estimate that approximately 13 more female infants survived for every 100 aborted female fetuses.
    JEL: J1
    Date: 2008–12
  17. By: Leemore Dafny
    Abstract: Although the vast majority of Americans have private health insurance, researchers focus almost exclusively on public provision. Data on the private insurance sector is extremely difficult to obtain because health insurance contracts are complex, renegotiated annually, and not subject to reporting requirements. This study makes use of a privately-gathered national database of insurance contracts agreed upon by a sample of large, multisite employers between 1998 and 2005. To gauge the competitiveness of the group health insurance industry, I investigate whether health insurers charge higher premiums, ceteris paribus, to more profitable firms. I find they do, and this result is not driven by cross-sectional differences across firms or plans: firms with positive profit shocks subsequently face higher premium growth, even for the same healthplans. Moreover, this relationship is strongest in geographic markets served by a small number of insurance carriers. Further analysis suggests profits act to increase employers' switching costs, and insurers exploit this inelasticity where they have sufficient bargaining power. Given the rapid industry consolidation during the study period, these findings suggest healthcare insurers possess and exercise market power in an increasing number of geographic markets.
    JEL: I1 L1
    Date: 2008–12
  18. By: Douglas Almond; Joseph J. Doyle, Jr.; Amanda E. Kowalski; Heidi Williams
    Abstract: We estimate marginal returns to medical care for at-risk newborns by comparing health outcomes and medical treatment provision on either side of common risk classifications, most notably the "very low birth weight" threshold at 1500 grams. First, using data on the census of US births in available years from 1983-2002, we find evidence that newborns with birth weights just below 1500 grams have lower one-year mortality rates than do newborns with birth weights just above this cutoff, even though mortality risk tends to decrease with birth weight. One-year mortality falls by approximately one percentage point as birth weight crosses 1500 grams from above, which is large relative to mean one-year mortality of 5.5% just above 1500 grams. Second, using hospital discharge records for births in five states in available years from 1991-2006, we find evidence that newborns with birth weights just below 1500 grams have discontinuously higher costs and frequencies of specific medical inputs. We estimate a $4,000 increase in hospital costs as birth weight approaches 1500 grams from above, relative to mean hospital costs of $40,000 just above 1500 grams. Taken together, these estimates suggest that the cost of saving a statistical life of a newborn with birth weight near 1500 grams is on the order of $550,000 in 2006 dollars.
    JEL: I12
    Date: 2008–12
  19. By: Sherry A. Glied; Ashwin Prabhu; Norman H. Edelman
    Abstract: This study uses a human capital model to estimate the societal cost of producing a physician service. Physician human capital consists of the underlying human capital (productivity) of those who become physicians and the job-specific investments (physician training) added to this underlying capital. The value of physicians' underlying human capital is estimated by forecasting an age-earnings profile for doctors based on the characteristics in youth of NLSY cohort participants who subsequently became doctors. Published estimates are used to measure the total cost (wherever paid) of investments in physician training. These data are combined to compute the societal cost per primary care physician visit. The estimated societal cost per primary care physician visit is much higher than the average co-payment per primary care service and generally higher than the current Medicare compensation rate per service unit The private return to primary care physician training is relatively low, in the range of 7-9%. At current levels of supply, the marginal social costs of primary care visits appear to be equal to or greater than marginal social benefits.
    JEL: I18 J24 J44
    Date: 2008–12

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