nep-hea New Economics Papers
on Health Economics
Issue of 2011‒10‒01
twenty-one papers chosen by
Yong Yin
SUNY at Buffalo, USA

  1. The Fogel Approach to Health and Growth By Dihai Wang; Heng-fu Zou
  2. Health Care System Reform in China: Issues, Challenges and Options By Rong Hu; Chunli Shen; Heng-fu Zou
  3. Fertility Responses to Prevention of Mother-to-Child Transmission of HIV By Nicholas Wilson
  4. Does Expanding Health Insurance Beyond Formal-Sector Workers Encourage Informality? Measuring the Impact of Mexico's Seguro Popular By Aterido, Reyes; Hallward-Driemeier, Mary; Pagés, Carmen
  5. Is there a health-care problem in Western societies? By Enrico Colombatto
  6. Mediating effects of social support and socioeconomic status on the association between childhood interpersonal adversity and adulthood mental health in Japan By Oshio, Takashi; Umeda, Maki; Kawakami, Norito
  7. Extending Health Insurance: Effects of the National Health Insurance Scheme in Ghana By Agar Brugiavini; Noemi Pace
  8. Social Security and Health Services in EU Law: Towards Convergence or Divergence in Competition State Aids and Free Movement? By Daniele Gallo
  9. Patient Mobility, Health Care Quality and Welfare. By Brekke, Kurt R.; Levaggi, Rosella; Siciliani, Luigi; Straume, Odd Rune
  10. Demand for Hospital Care and Private Health Insurance in a Mixed Public–Private System: Empirical Evidence Using a Simultaneous Equation Modeling Approach By Terence Chai Cheng; Farshid Vahid
  11. Cost Incentives for Doctors: A Double-Edged Sword By Schottmuller, C.
  12. Health Conditions and Social Interactions By Diana Pacheco Barzallo
  13. Eye Disease and Development By Thomas Barnebeck Andersen; Carl-Johan Dalgaard; Pablo Selaya
  14. Health Insurance and Mortality in US Adults: A Cautionary Tale By Jeffrey Milyo; Jenny Kim
  15. Firms' Moral Hazard in Sickness Absences By René Böheim; Thomas Leoni
  16. Equity of Health Care Financing: An Application to Iran By Moradi, Alireza
  17. Health is wealth: an empirical note across the US states By Alexiadis, Stilianos; Eleftheriou, Konstantinos
  18. Social and economic implications of HIV/AIDS: evidence from West Bengal By Sarker, Debnarayan
  19. Adverse Selection and Switching Costs in Health Insurance Markets: When Nudging Hurts By Benjamin R. Handel
  20. Insuring Long Term Care In the US By Jeffrey Brown; Amy Finkelstein
  21. Does Widowhood Explain Gender Differences in Out-of-Pocket Medical Spending Among the Elderly? By Gopi Shah Goda; John B. Shoven; Sita Nataraj Slavov

  1. By: Dihai Wang (School of Economics, Fudan University); Heng-fu Zou (Research Department, World Bank)
    Abstract: According to Robert Fogel (1994a, 1994b), nutrition is the driving force for the increase in health human capital, which in turn has significantly promoted economic growth in the long run. In this paper, we take Fogel¡¯s finding to extend the standard Ramsey model by including the effect of consumption on nutrition and health human capital formation. It is demonstrated that there exist multiple equilibria in the modified Ramsey model with a subsistence level of consumption. That is to say, different countries may end up with different levels of long-run consumption, nutrition, health human capital, and physical capital.
    Keywords: Health Human Capital, Consumption, Economic Growth, Poverty Trap
    JEL: D99 E21 I12
    Date: 2011
  2. By: Rong Hu; Chunli Shen; Heng-fu Zou
    Abstract: This paper examines health care reform in urban and rural China. Before health care reform, Chinese health service facilities were run entirely by the state and basically they performed a social welfare function. This health care system greatly improved the population health conditions but many problems started to emerge in 1980s when the economic reform started. Since then, the government has been struggling to maintain a balance between meeting people¡¯s health care needs and develop the health care "industry". Problems and their contribution factors in organization, financing and performance of the health care reform are examined and analyzed. In terms of organization, decentralization of the decision making power in health sector and marketization of the medical establishments constitutes the main organizational changes in the health care reform. This organizational reform of health sector as an imposed institution change, encounters lots of resistance in the process of implementation. A tremendous amount of conflictions arises because of the commercialization of health sector that used to perform social welfare function. In terms of financing, share of organized financing (government and social fund) in the total health expenditure declined dramatically since the reform. In urban China, Health care insurance faced tough going on universal access. In rural China, there are lots of problems in implementing new cooperative health system partly because of its imperfect design. In terms of performance, data shows that there is growing inequity in health status between rural and urban in the past 15 years. Inefficiencies also exists in both resource allocation and service delivery. Several options are analyzed for organizational reform and health care financing. The report recommends that the aims of the future reform policy that government would adopt should be to improve the population health status instead of generating profit for institutions or industry. The social welfare function of health care system should be reinforced and at the same time managed competition in the health care market should be encouraged. In health care financing in urban area, several directions of broadening risk pooling are discussed. In rural health care financing, the designing of new cooperative health care system is analyzed. Rural financing should be more flexible in order to attract more people to join the cooperative medical system. It is recommended that Chinese government should increase funding for public health programs and subsidize health services for the disadvantaged groups.
    Date: 2011
  3. By: Nicholas Wilson (Williams College)
    Abstract: Prevention of mother-to-child transmission (PMTCT) interventions reduce the cumulative probability of transmission from a HIV positive woman to her child by as much as 40 percentage points. This paper is the first economic analysis of the behavioral effects of PMTCT. I examine fertility responses to the scale-up of PMTCT in Zambia, a country where approximately 15 percent of adults age 15-49 are HIV positive. My results suggest that the local introduction of PMTCT reduced pregnancy rates by up to 20 percent, that the fertility response was greater among women who were more likely to be HIV positive, and that PMTCT substantially increased breastfeeding rates.
    Keywords: Fertility; HIV/AIDS; PMTCT; reproductive technology; Zambia
    JEL: I10 J13
    Date: 2011–05
  4. By: Aterido, Reyes (World Bank); Hallward-Driemeier, Mary (World Bank); Pagés, Carmen (Inter-American Development Bank)
    Abstract: Seguro Popular (SP) was introduced in 2002 to provide health insurance to the 50 million Mexicans without Social Security. This paper tests whether the program has had unintended consequences, distorting workers' incentives to operate in the informal sector. The analysis examines the impact of SP on disaggregated labor market decisions, taking into account that program coverage depends not only on the individual's employment status, but also on that of other household members. The identification strategy relies on the variation in SP's rollout across municipalities and time, with the difference-in-difference estimation controlling for household fixed effects. The paper finds that SP lowers formality by 0.4-0.7 percentage points, with adjustments largely occurring within a few years of the program's introduction. Rather than encouraging exit from the formal sector, SP is associated with a 3.1 percentage point reduction (a 20 percent decline) in the inflow of workers into formality. Income effects are also apparent, with significantly decreased flows out of unemployment and lower labor force participation. The impact is larger for those with less education, in larger households, and with somebody else in the household guaranteeing Social Security coverage. However, workers pay for part of these benefits with lower wages in the informal sector.
    Keywords: informality, Seguro Popular, Mexico, non-contributory social programs, social assistance
    JEL: J08 J62 I38
    Date: 2011–09
  5. By: Enrico Colombatto
    Abstract: The recent crisis in public finance that has characterized most Western countries has stoked renewed interest in the possibility of reducing government expenditure by reforming the health-care system. After reviewing the origins of today’s state intervention in this field, the present paper argues that policy-makers will certainly strive to contain health-care of expenditure. Yet, it also claims that unless the ideological context that has favoured the birth and development of the current systems undergoes significant transformation, reform in this area is bound to remain elusive. In particular, the myth of social justice and the concept of human dignity need to be reassessed. The outcome of this process will determine to which extent state intervention in the health sector will lose its rent-seeking connotations, while increasing attention will underscore critical phenomena to which the principle of individual responsibility offers only limited solutions.
    Date: 2011–09
  6. By: Oshio, Takashi; Umeda, Maki; Kawakami, Norito
    Abstract: In this study, we examined how the impact of child adversity on adulthood mental health is mediated by perceived social support and socioeconomic status (SES) in Japan, using micro data collected from surveys conducted in four municipalities in the Tokyo metropolitan area (N = 3,305). We focused on the self-reported experience of parental maltreatment and bullying in school. Our moderation analysis revealed that perceived social support and SES mediated 9-21% and 6-13%, respectively, of the impact of child adversity on selected mental health variables. The results highlight the mediating roles of social support and SES on the impact of adverse events in childhood on adulthood mental health. However, a large proportion of the impact is unexplained by either social support or SES, underscoring the need for reducing risks of parental maltreatment and bullying in school.
    Keywords: Child adversity, Social support, Socioeconomic status, Adulthood mental health, Mediation analysis, Japan
    Date: 2011–09
  7. By: Agar Brugiavini; Noemi Pace
    Abstract: There is considerable interest in exploring the potential of health insurance to increase the access to, and the affordability of, health care in Africa. We focus on the recent experience of Ghana, where a National Health Insurance Scheme (NHIS) became law in 2003 and fully implemented from late 2005. Even though there is some evidence of large coverage levels, the effect of the NHIS on health care demand and out-of-pocket expenditures has still not been fully examined. This paper is an attempt to close this gap. Using nationally-representative household data from the Ghana Demographic and Health Survey, we find that the introduction of the NHIS has a positive and significant effect on the utilisation of health care services, although it does have only a weak effect on out-of-pocket expenditure.
    Keywords: Health insurance; out-of-pocket expenses; maternity care demand
    Date: 2011–05–13
  8. By: Daniele Gallo
    Abstract: With this paper I maintain that the regulation of social security and healthcare in EU law revolves around the quest for a right balance between conflicting interests, involving the issues of social rights, State and Market, distribution of competences. In particular, the analysis of the way in which the ECJ legally frames the so called public/private divide permits to underline the emergence of relevant dissonances in the jurisprudence concerning the three sectors of competition, free movement and State aids. The rationale behind some of such divergences pertain to the existence of natural asymmetries on which evolve and take shape the constitutive elements of the European economic and social constitution. In this sense, the lack of convergence is not undesirable per se. On the contrary, it depends on the different role and function exercised by the solidarity principle on one hand and on the relevance of the public financing of social services on the other hand, in their interplay with the choice between abandon or revaluation of a (more or less) idealtpic public/private dichotomy. At the centre of the analysis is the full incorporation or, alternatively, attenuation, in the field of social security and healthcare, of the functional approach adopted in relation to the notion of economic activity. Some other divergences, however, are not justifiable. That is to say that in some cases there seems to emerge a need for a rapprochement between competition, free movement and States aids. This concerns the concept of general (economic?) interest and its potential intervention as a method of positive market and rights integration. Finally, the paper intends to highlight that at the core of the EU discourse is the pursuit of (and the quest for) a “healthy” interaction and relationship between individual free movement rights, social rights and State redistributive autonomy for the management of national social security and healthcare systems. In this respect, I will underline role, function and potentialities of Art. 106.2 TFEU as the appropriate sedes materiae to balance public interest’s aims and values with market principles and demands, both considered as constitutive elements, respectively, of the EU social and economic constitution.
    Keywords: EU Law; ECJ; social security; health services; competition law; free movement; state aid; social solidarity
    Date: 2011–03–29
  9. By: Brekke, Kurt R. (Dept. of Economics, Norwegian School of Economics and Business Administration); Levaggi, Rosella (University of Brescia); Siciliani, Luigi (University of York); Straume, Odd Rune (University of Minho)
    Abstract: Patient mobility is a key issue in the EU who recently passed a new law on patients’right to EU-wide provider choice. In this paper we use a Hotelling model with two regions that differ in technology to study the impact of patient mobility on health care quality, health care financing and welfare. A decentralised solution without patient mobility leads to too low (high) quality and too few (many) patients being treated in the high-skill (low-skill) region. A centralised solution with patient mobility implements the first best, but the low-skill region would not be willing to transfer authority as its welfare is lower than without mobility. In a decentralised solution, the effects of patient mobility depend on the transfer payment. If the payment is below marginal cost, mobility leads to a ‘race-to-the-bottom’in quality and lower welfare in both regions. If the payment is equal to marginal cost, quality and welfare remain unchanged in the high-skill region, but the low-skill region bene…ts. For a socially optimal payment, which is higher than marginal cost, quality levels in the two regions are closer to (but not at) the …rst best, but welfare is lower in the low-skill region. Thus, patient mobility can have adverse effects on quality provision and welfare unless an appropriate transfer payment scheme is implemented.
    Keywords: Patient mobility; Health care quality; Regional and global welfare.
    JEL: H51 H73 I11 I18
    Date: 2011–09–22
  10. By: Terence Chai Cheng (Melbourne Institute of Applied Economic and Social Research, The University of Melbourne); Farshid Vahid (Department of Econometrics and Business Statistics, Monash University)
    Abstract: This paper examines the determinants of hospital stay intensity, the decision to seek hospital care as a public or private patient and the decision to purchase private hospital insurance. We describe a theoretical model to motivate the simultaneous nature of these decisions. For the empirical analysis, we develop a simultaneous equation econometric model that accommodates the count data nature of length of stay and the binary nature of the patient type and insurance decisions. The model also accounts for the endogeneity of the patient type and insurance binary variables. The results indicate that there is no evidence of endogeneity between the decision to purchase insurance on the type and intensity of hospital care use. We find some evidence of moral hazard effects of private hospital insurance on the intensity of private hospital care. The results also indicate that the length of hospital stay for private patients is shorter than for public patients.
    Keywords: Simultaneous equation models, count data, demand for hospital care, moral hazard, public–private mix
    JEL: I11 H42 C31 C15
    Date: 2011–09
  11. By: Schottmuller, C. (Tilburg University, Center for Economic Research)
    Abstract: Incentivicing doctors to take the costs of treatment into account in their prescription decision could lead to lower health care expenditures and higher welfare. This paper shows that also the opposite effects can result. The reason is a misalignment of doctor and patient incentives: Because of health insurance, the patient does not take the costs of treatment fully into account. This misalignment hampers communication between patient and doctor, e.g. the patient may overstate the intensity of symptoms. It is shown that cost incentives for doctors increase welfare if (i) the doctor's examination technology is sufficiently good or (ii) (marginal) costs of treatment are high enough. Optimal health care systems should implement different degrees of cost incentives depending on type of disease and/or doctor.
    Keywords: cheap talk;communication;health insurance;market design.
    JEL: D82 D83 I10
    Date: 2011
  12. By: Diana Pacheco Barzallo (Institute of economic research IRENE, Faculty of Economics, University of Neuchâtel, Switzerland)
    Abstract: This paper evaluates the impact of an antipoverty program on the health condition of individuals. The program combines a cash transfer with financial incentives for positive behavior to poor families. Its main purposes are to improve the living conditions of eligible households and to promote their investment in their children through school attendance and the provision of basic health services. Since the design of the program includes information on eligible and ineligible families, it is possible to evaluate its direct effect as well as its indirect effect. While the direct impact is measured by the effect of cash grants on eligible individuals, its indirect impact is estimated by the effect generated for the treated neighbors on their non-treated peers. The results show that eligible and ineligible individuals significantly improved their health status due to the program’s interventions: the sickness incidences decreased, the sickness spell was reduced, and people seemed to be able to manage normal activities with less difficulty. Thus anti-poverty programs, despite the fact that constitute a big weight in the public finance of a country, have an important multiplicative effect on the population. It not only generates, in the short run, an increase in the demand for health services but also changes in a positive way the behaviour of people by educating them on the importance of health and nutrition. This result will impact treated and non-treated families in the long run due to the high interaction that characterizes poor societies: families are learning from others.
    Keywords: Randomization, experimental design, social interactions
    JEL: C93 I12 I28 I38
    Date: 2011–09
  13. By: Thomas Barnebeck Andersen (Department of Business and Economics, University of Southern Denmark); Carl-Johan Dalgaard (Institute of Economics, University of Copenhagen); Pablo Selaya (Institute of Economics, University of Copenhagen)
    Abstract: This research advances the hypothesis that cross-country variation in the historical incidence of eye disease has influenced the current global distribution of per capita income. The theory is that pervasive eye disease diminished the incentive to accumulate skills, thereby delaying the fertility transition and the take-off to sustained economic growth. In order to estimate the influence from eye disease incidence empirically, we draw on an important fact from the field of epidemiology: Exposure to solar ultraviolet B radiation (UVB-R) is an underlying determinant of several forms of eye disease; the most important being cataract, which is currently the leading cause of blindness worldwide. Using a satellite-based measure of UVB-R, we document that societies more exposed to UVB-R are poorer and underwent the fertility transition with a significant delay compared to the forerunners. These findings are robust to the inclusion of an extensive set of climate and geography controls. Moreover, using a global data set on economic activity for all terrestrial grid cells we show that the link between UVB-R and economic development survives the inclusion of country fixed effect.
    Keywords: Comparative development, eye disease, climate
    JEL: O11 I00 Q54
    Date: 2011–08–01
  14. By: Jeffrey Milyo (Department of Economics, University of Missouri-Columbia); Jenny Kim
    Abstract: A 2009 observational study reported that private insurance status is associated with decreased mortality risk compared to no insurance. Employing the same statistical model but with more recent data, we observe a weaker and statistically insignificant relationship. However, Medicaid coverage is associated with increased mortality risk; the adjusted hazard ratio for Medicaid compared to no insurance is 1.32 (95% CI = 1.01, 1.72). These findings bolster concerns about using observational studies to understand the health consequences of insurance.
    Keywords: Health, Insurance, Mortality
    JEL: D78 H75
    Date: 2011–09–17
  15. By: René Böheim (WIFO); Thomas Leoni (WIFO)
    Abstract: Sick workers in many countries receive sick pay during their illness-related absences from the workplace. In several countries, the social security system insures firms against their workers' sickness absences. However, this insurance may create moral hazard problems for firms, leading to the inefficient monitoring of absences or to an underinvestment in their prevention. In the present paper, we investigate firms' moral hazard problems in sickness absences by analysing a legislative change that took place in Austria in 2000. In September 2000, an insurance fund that refunded firms for the costs of their blue-collar workers' sickness absences was abolished (firms did not receive a similar refund for their white-collar workers' sickness absences). Before that time, small firms were fully refunded for the wage costs of blue-collar workers' sickness absences. Large firms, by contrast, were refunded only 70 percent of the wages paid to sick blue-collar workers. Using a difference-in-differences-in-differences approach, we estimate the causal impact of refunding firms for their workers' sickness absences. Our results indicate that the incidences of blue-collar workers' sicknesses dropped by approximately 8 percent and sickness absences were almost 11 percent shorter following the removal of the refund. Several robustness checks confirm these results.
    Keywords: Absenteeism Moral Hazard Sickness Insurance
  16. By: Moradi, Alireza
    Abstract: This paper analyzes inequality in Iran's health system from a financing perspective. Through grouped data of household budget published by Iran Statistic Center (ISC) and Beta Lorenz curve introduced in Kakwani (1980), it has been tried to extract Beta Lorenz curve and Kakwani progressivity index in each individual rural and urban district, and also to obtain other inequality measure in (1997-2007) Period.Then to study health inequality for the given period, we divided it into two sub-periods: (1997-2001) and (2002-2007) and finally to compare health inequality, using Bootstrap technique, we made a pseudo statistical population. Results show a degree of descending progressively in urban areas while in rural areas it has witnessed a slight improvement. However as the results show in both rural and urban areas, because of the negativity of Kakwani's index of the household expenditure which is financed by themselves is not progressive at all. Also the ratio of share richest quintile to poorest quintile for health care in urban and rural areas are 8.79 and 8.01 respectively.
    Keywords: Equity; Health care financing; Kakwani progressivity index; Iran
    JEL: D63 D31 P43 I18
    Date: 2011–05–06
  17. By: Alexiadis, Stilianos; Eleftheriou, Konstantinos
    Abstract: An attempt is made to establish the relation between risk-health factors (encapsulated in terms of obesity) and regional convergence, with special reference to the US states. The econometric results indicate that obesity does have an impact on regional growth and convergence. A preliminary examination of these findings shows harmful effects on the process of catching-up between ‘poor’ and ‘rich’ regions. Nevertheless, considerably more research is required before this relation can be discussed with confidence.
    Keywords: Health risk factors; obesity; regional convergence; US states
    JEL: R11 I10
    Date: 2011–02–26
  18. By: Sarker, Debnarayan
    Abstract: Based on household level’ field survey in West Bengal State in Indian context, this study suggests that poverty and lower level of human capital provide the basic initiatives for both rural –urban migration and risky occupational choice for household’s income, and thus contributes to the spread of HIV/AIDS. Also, the HIV/AIDS epidemic of those economically and socially disadvantaged households leads to the consequence of absolute economic and social poverty within a short period after its detection. Despite such a consequence of absolute economic and social poverty, the benefit of actions by government or non-government organizations is insignificant for them
    Keywords: Socio-economic reasons; Socio-economic implications; Benefit of actions; Rural-Urban Migration; Economically ; Socially disadvantaged households
    JEL: H51 I18
    Date: 2011–03
  19. By: Benjamin R. Handel
    Abstract: This paper investigates consumer switching costs in the context of health insurance markets, where adverse selection is a potential concern. Though previous work has studied these phenomena in isolation, they interact in a way that directly impacts market outcomes and consumer welfare. Our identification strategy leverages a unique natural experiment that occurred at a large firm where we also observe individual-level panel data on health insurance choices and medical claims. We present descriptive results to show that (i) switching costs are large and (ii) adverse selection is present. To formalize this analysis we develop and estimate a choice model that jointly quantifies switching costs, risk preferences, and ex ante health risk. We use these estimates to study the welfare impact of an information provision policy that nudges consumers toward better decisions by reducing switching costs. This policy increases welfare in a naive setting where insurance plan prices are held fixed. However, when insurance prices change endogenously to reflect updated enrollee risk pools, the same policy substantially exacerbates adverse selection and reduces consumer welfare, doubling the existing welfare loss from adverse selection.
    JEL: D81 D82 D83 G22 I11 I18
    Date: 2011–09
  20. By: Jeffrey Brown; Amy Finkelstein
    Abstract: Long-term care expenditures constitute one of the largest uninsured financial risks facing the elderly in the United States. This paper provides an overview of the economic and policy issues surrounding insuring long-term care expenditure risk. Through this lens we also discuss the likely impact of recent long-term care public policy initiatives at both the state and federal level.
    JEL: I11 I28
    Date: 2011–09
  21. By: Gopi Shah Goda; John B. Shoven; Sita Nataraj Slavov
    Abstract: Despite the presence of Medicare, out-of-pocket medical spending is a large expenditure risk facing the elderly. While women live longer than men, elderly women incur higher out-of-pocket medical spending than men at each age. In this paper, we examine whether differences in marital status and living arrangements can explain this difference. We find that out-of-pocket medical spending is approximately 29 percent higher when an individual becomes widowed, a large portion of which is spending on nursing homes. Our results suggest a substantial role of living arrangements in out-of-pocket medical spending; however, our estimates combined with differences in rates of widowhood across gender suggest that marital status can explain only one third of the gender difference in total out-of-pocket medical spending, leaving a large portion unexplained. On the other hand, gender differences in widowhood more than explain the observed gender difference in out-of-pocket spending on nursing homes.
    JEL: I11 J12 J14 J16
    Date: 2011–09

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