nep-hea New Economics Papers
on Health Economics
Issue of 2012‒11‒11
fourteen papers chosen by
Yong Yin
SUNY at Buffalo, USA

  1. Improvement of the Implementation Procedures and Management Systems for the Health Facilities Enhancement Grant of the DOH By Lavado, Rouselle F.; Pantig, Ida Marie T.; Ulep, Valerie Gilbert T.; Rosales, Kristine Tyrol Z.
  2. Predicting Hospital’s Costs to Treat Emergency Patient By Rosella Levaggi; Marcello Montefiori
  3. Reducing Underage Alcohol and Tobacco Use: Evidence from the Introduction of Vertical Identification Cards By Bellou, Andriana; Bhatt, Rachana
  4. Stochastic modeling of financing longevity risk in pension insurance By Ronkainen , Vesa
  5. The effect of pharmacies’ right to negotiate discounts on the market share of parallel imported pharmaceuticals By Granlund, David
  6. The scale of hospital production in different settings: One size does not fit all By Mette Asmild; Bruce Hollingsworth; Stephen Birch
  7. A New Axiomatic Approach to the Evaluation of Population Health By Jens Leth Hougaard; Juan D. Moreno-Ternero; Lars Peter Østerdal
  8. Promoting handwashing behavior in Peru : the effect of large-scale mass-media and community level interventions By Galiani, Sebastian; Gertler, Paul; Orsola-Vidal, Alexandra
  9. Harsh occupations, health status and social security By Maria Racionero; Pierre Pestieau
  10. Selection and the Marriage Premium for Infant Health By Kasey S. Buckles
  11. Italian mutual benefit societies: an organizational social innovation in health and healthcare system. By Rago, Sara
  12. The Influence of BMI, Obesity and Overweight on Medical Costs: A Panel Data Approach By Toni Mora; Joan Gil; Antoni Sicras-Mainar
  13. Heterogeneous effect of prospective payment system on hospital’s volume and quality By Galina Besstremyannaya; Dmitry Shapiro
  14. The Demand for Tobacco in Post-Unification Italy By Ciccarelli, Carlo; De Fraja, Gianni

  1. By: Lavado, Rouselle F.; Pantig, Ida Marie T.; Ulep, Valerie Gilbert T.; Rosales, Kristine Tyrol Z.
    Abstract: One of the major challenges in the Philippine health sector is to secure adequacy of appropriate health facilities. To address this problem, the Health Facilities Enhancement Program (HFEP) was implemented by the Department of Health (DOH) in 2007. Specifically, HFEP aims to improve facilities such as health centers and barangay health stations to sufficiently provide for emergency and primary care services. It also aims to upgrade government hospitals. This study examines the implementation of the program and probes at the rationale for the selection of facilities for upgrading. It lays out policy options to improve equity and efficiency in allocation of funds.
    Keywords: health sector, health care, health facilities, hospitals, Philippines, health financing
    Date: 2012
  2. By: Rosella Levaggi (Economics Department, University of Brescia, Italy); Marcello Montefiori (Department of Economics, University of Genoa, Italy)
    Abstract: The Accident and Emergency Departments (A&EDs) are responsible for a large share of overall hospitalization, diagnostic activity, and ultimately health care expenditure. Most health care systems use retrospective reimbursement systems to finance A&E departments, but this system may not be efficient. Prospective payments systems would have the advantage to reduce uncertainty both for the purchaser and the provider. In Italy some Regions are starting to use prospective payments systems using triage codes to define the output. In this article we use a unique dataset that allows determining the cost of each patient going through an A&ED to determine whether triage codes can be used for this purpose.
    Keywords: emergency department, quality, efficiency
    JEL: I11 I12 C00
    Date: 2012–08
  3. By: Bellou, Andriana (University of Montreal); Bhatt, Rachana (Georgia State University)
    Abstract: From 1994-2009, forty-three states changed the design of their driver's license/state identification cards in an effort to reduce underage access to and consumption of alcohol and tobacco. In these states, individuals under the age of 21 are issued licenses that are vertically oriented, whereas licenses for individuals 21 and older retain a traditional horizontal shape. This paper examines the effect of this design change on underage alcohol and tobacco use. Using a difference-in-difference methodology, we find a reduction in drinking and smoking for 16 year olds. These results are robust to the inclusion of state-specific linear time trends, and are upheld in a triple difference model that uses a within state control group of teens that did not receive a vertical license to control for state-specific unobserved factors. Interestingly, we find that the effects of the design change are concentrated in the 1-2 years after a state begins issuing vertical licenses; there is little evidence of an effect of the license on underage consumption in the long-run. This finding is consistent with a scenario where, over time, teens substitute towards other methods of obtaining age-restricted products, and/or retailers continue to make underage sales.
    Keywords: youth alcohol and tobacco policies
    JEL: I1 J1
    Date: 2012–10
  4. By: Ronkainen , Vesa (Financial Supervisory Authority)
    Abstract: This work studies and develops tools to quantify and manage the risks and uncertainty relating to the pricing of annuities in the long run. To this end, an idealized Monte-Carlo simulation model is formulated, estimated and implemented, which enables one to investigate some typical pension and life insurance products. The main risks in pension insurance relate to investment performance and mortality/longevity development. We first develop stochastic models for equity and bond returns. The S&P 500 yearly total return is modeled by an uncorrelated and Normally distributed process to which exogenous Gamma distributed negative shocks arrive with Geometrically distributed interarrival times. This regime switching jump model takes into account the empirical observations of infrequent exceptionally large losses. The 5-year US government bond yearly total return is modeled as an ARMA(1,1) process after suitably log-transforming the returns. This model is able to generate long term interest rate cycles and allows rapid year-to-year corrections in the returns. We also address the parameter uncertainty in these models. <p> We then develop a stochastic model for mortality. The chosen mortality forecasting model is the well-known model of Lee and Carter (1992), in which we use the Bayesian MCMC methods in the inference concerning the time index. Our analysis with a local version of the model showed that the assumptions of the Lee-Carter model are not fully compatible with Finnish mortality data. In particular we found that mortality has been lower than average for the cohort born in wartime. However, because the forecasts of these two models were not significantly different, we chose the more parsimonious Lee-Carter model. Although our main focus is on the total population data, we also analysed the data for males and females separately. Finally we build a flexible model for the dependence structure that allows us to generate stochastic scenarios in which mortality and economic processes are either uncorrelated, correlated or shock-correlated. <p> By using the simulation model to generate stochastic pension cash-flows, we are then able to analyse the financing of longevity risk in pension insurance and the resulting risk management issues. This is accomplished via three case studies. Two of these concentrate on the pricing and solvency questions of a pension portfolio. The first study covers a single cohort of different sizes, and the second allows for multiple cohorts of annuitants. The final case study discusses individual pension insurance from the customer and long-term points of view. <p> Realistic statistical long-term risk measurement is the key theme of this work, and so we compare our simulation results with the Value-at-Risk or VaR approach. The results show that the limitations of basic VaR approach must be carefully accounted for in applications. The VaR approach is the most commonly used risk measurement methodology in insurance and finance applications. For instance, it underlies the solvency capital requirement in Solvency II, which we also discuss in this work.
    Keywords: equities; stocks; jump model; bond; longevity; Lee-Carter model; stochastic mortality; cohort mortality; dependence model; asymmetric dependence; parameter uncertainty; stochastic annuity; pension; cohort size; solvency; internal model
    JEL: G12 J11
    Date: 2012–05–25
  5. By: Granlund, David (Department of Economics, Umeå School of Business and Economics, Umeå University)
    Abstract: The market share for parallel imports when pharmacies can negotiate discounts with parallel traders and sellers of locally sourced products is analyzed both theoretically and empirically. The theoretical model shows that, with discount negotiations, pharmacies will sell locally sourced products to all consumers that prefer these or are indifferent between these and parallel imported products. The explanation is that the parallel traders have cost disadvantages because of their repacking and trading costs. Sellers of locally sourced products will therefore always underbid the marginal prices of parallel traders and this gives pharmacies an incentive to sell locally sourced products. The empirical results show that a reform allowing discount negotiations reduced the market share for parallel imports by about 11 percentage points to reach 31%. The most important mechanism is that the reform has reduced the probability that pharmacies offer consumers cheaper parallel imported substitutes.
    Keywords: Drugs; Margins; Parallel imports; Parallel trade; Pharmacies
    JEL: I11 I18 L13 L51 L65
    Date: 2012–11–01
  6. By: Mette Asmild (Institute of Food and Resource Economics, University of Copenhagen); Bruce Hollingsworth (Division of Health Research, Lancaster University, UK); Stephen Birch (Centre for Health Economics and Policy Analysis, McMaster University, Canada)
    Abstract: This paper analyses the productive efficiency of 141 public hospitals from 1998-2004 in two Canadian provinces; one a small province with a few small cities and a generally more rural population and the other a large province that is more urban in nature, with a population who mainly live in large cities. The relative efficiencies of the hospitals, the changes in productivity during this time period, and the relationship between efficiency and the size or scale of the hospitals are investigated using data envelopment analysis. The models for the production of health care use case mix adjusted hospital discharges as the output, and nursing hours as inputs. We find clear differences between the two provinces. Making use of ‘own’ and ‘meta’ technical efficiency frontiers, we demonstrate that efficient units in the larger and more urban province are larger than non-efficient units in that province. However, efficient hospitals in the smaller and more rural province are smaller than non-efficient hospitals in that province. Overall, efficient hospitals in the larger more urban province are larger than efficient hospitals in the smaller more rural province. This has interesting policy implications - different hospitals may have different optimal sizes, or different efficient modes of operation, depending on location, the population they serve, and the policies their respective provincial governments wish to implement. In addition, there are lessons to be learned by comparing the hospitals across the two provinces, since the inefficient hospitals in the small rural province predominantly use hospitals from the large urban province as benchmarks, such that substantially larger improvement potential can be identified by inter-provincial rather than intra-provincial benchmarking analysis.
    Keywords: Data Envelopment Analysis (DEA), Scale, Efficiency, Hospitals, Provinces
    Date: 2012
  7. By: Jens Leth Hougaard (Department of Food and Resource Economics, University of Copenhagen); Juan D. Moreno-Ternero (Department of Economics, Universidad Pablo de Olavide); Lars Peter Østerdal (Department of Business and Economics, University of Southern Denmark)
    Abstract: In this paper we explore the implications of ethical and operational principles for the evaluation of population health. We formalize those principles as axioms for social preferences over distributions of health for a given population. We single out several focal population health evaluation functions, which represent social preferences, as a result of combinations of those axioms. Our results provide rationale for popular theories in health economics (such as the unweighted aggregation of QALYs or HYEs, and generalizations of the two, aimed to capture concerns for distributive justice) without resorting to controversial assumptions over individual preferences.
    Keywords: population health, QALYs, HYEs, axioms
    JEL: D63 I10
    Date: 2012–03
  8. By: Galiani, Sebastian; Gertler, Paul; Orsola-Vidal, Alexandra
    Abstract: This paper analyzes a randomized experiment that uses novel strategies to promote handwashing with soap at critical times in Peru. It evaluates a large-scale intervention that includes a mass media provincial campaign and a district-level community component. The analysis finds that the mass media intervention alone had no significant effect on exposure to the handwashing promotion campaign messages, and therefore no effect on handwashing knowledge or handwashing behavior. In contrast, the community-level intervention, a more comprehensive intervention that included several community and school activities in addition to the communications campaign, was successful in reaching the target audience with handwashing promotion messages and in improving the knowledge of the treated population on appropriate handwashing behavior. Those improvements translated into higher self-reported and observed handwashing with soap at critical junctures. However, no significant improvements in the health of children under the age of five were observed. The results are consistent with earlier literature, which indicates that substantively changing behavior to improve health is a complex task requiring intensive and more personalized interventions.
    Keywords: Health Monitoring&Evaluation,Hygiene Promotion and Social Marketing,Disease Control&Prevention,Housing&Human Habitats,Population Policies
    Date: 2012–11–01
  9. By: Maria Racionero; Pierre Pestieau
    Abstract: We study the optimal design of a social security system when individuals differ in health status and occupation. The health status is private information but is imperfectly correlated with occupation: individuals in harsh occupations have a higher probability of being in poor health. We explore the desirability of allowing the social security policy to differ by occupation and compare the results with those obtained if disability tests are used instead. We show that tagging by occupation is preferable to disability testing when the audit technology is relatively expensive and/or the ratio of disabled to healthy workers is significantly different across occupations. We also study the implications of imposing horizontal equity among disabled workers in different occupations and show that the disabled workers in harsher occupations may be induced to retire later.
    Keywords: health status, retirement are, tagging, disability tests
    JEL: H21 H55
    Date: 2012–11
  10. By: Kasey S. Buckles (Department of Economics, University of Notre Dame)
    Abstract: Previous research has found a positive relationship between marriage and infant health. However, it is unclear whether this relationship is causal or a reflection of positive selection into marriage. In this paper, we use multiple empirical approaches to address this issue. First, we use the rich set of information available in the Natality Detail Files to control for selection into marriage along observable characteristics. We use a technique developed by Gelbach (2009) to determine the relative importance of different covariates, and show how selection into marriage has changed over time. Second, we construct a matched sample of children born to the same mother and exploit individual-level variation in marital status at birth. We apply fixed-effects and first-differences techniques to this matched sample to account for time-invariant unobserved characteristics. We find evidence of a sizable marriage premium. However, the premium fell by over 40% between 1989 and 2004, largely as a result of declining selection into marriage by race. Accounting for selection reduces OLS estimates of the marriage premiums for birth weight, prematurity, and infant mortality by at least half.
    Keywords: Marriage, Infant Health
    JEL: J13 J12
    Date: 2012–07
  11. By: Rago, Sara (Associazione Italiana per la Cultura della Cooperazione e del Non Profit)
    Abstract: The paper aims to analyse the role covered by “Mutual Benefit Societies” (hereinafter MBSs – it. trans. “Mutue Sanitarie Integrative”) in terms of “social innovation” within the on-going changing of Italian welfare system. In fact, several of these organisations survived the last three decades despite the establishment of the National Health Service (NHS) by Italian Law no. 833/1978. The law also allowed for the possibility to supplement services provided within the public system by private insurers, including MBSs. The opportunity for MBSs to establish supplementary health funds aimed at providing supplementary coverage has been confirmed by the Legislative Decree no. 502/1992 and subsequent amendments. As the crisis of the public welfare system, MBSs working in health and social risks areas currently deal with both challenges and opportunities. The added value of MBSs emerges especially in high level social and health content services (e.g., long term care – LTC – services). It is related to the ability in linking economic (efficiency), social (relationships network inside MBSs – both with members and staff), cultural (connected with principles and values of their mission), and institutional (in terms of generation of social capital – external relationships) sides. MBSs are a subsidiary and supplementary tool to already existing welfare policies addressing the demand for the integration of health and welfare costs. The shared goal is to combine the universality of welfare and the economic sustainability of the system, taken from the perspective of social innovation founded in civil society involvement. As “social innovation” is the application of new ideas on a product, process, or organisational arrangements producing an outcome or a stable and positive change in the level of well-being of a society or part of it through the creation of social added value, in the case of Italian MBSs, social innovation emerges from their organisational structure through which they are able to link the demand and supply of health. MBSs are able to tackle better than other types of organisations the problems of redefining intervention policies as they can organise it in a flexible way that more closely reflects needs and desires of members. This paper is based on data collected through the administration of a survey questionnaire sent to a sample of 20 Italian MBSs working in health and healthcare fields.
    Keywords: mutual benefit society; welfare; health/healthcare; social innovation; added value.
    JEL: I31 L31
    Date: 2012–09–21
  12. By: Toni Mora; Joan Gil; Antoni Sicras-Mainar
    Abstract: This paper estimates the impact of the BMI, obesity and overweight on direct medical costs. We apply panel data econometrics and use a two-part model with a longitudinal dataset of medical and administrative records of patients in primary and secondary healthcare centres in Spain followed up over seven consecutive years (2004-2010). Our findings show a positive and statistically significant impact of the BMI, obesity and overweight on annual medical costs after accounting for data restrictions, different subsamples of individuals and various econometric approaches.
    Date: 2012–10
  13. By: Galina Besstremyannaya (CEFIR); Dmitry Shapiro (Belk College of Business, University of North Carolina)
    Abstract: In early 2000s Japan introduced a special version of an inpatient prospective payment system (PPS) that contains incentives to increase efficiency and shorten the average length of stay (ALOS). This paper presents a theoretical model, which explains heterogeneous dynamics of volume and quality in a mixed PPS system. The model exploits two essential features of Japanese PPS: per diem payments and a length-of-stay dependent PPS tariff. The novelty of the model is that it incorporates hospitals heterogeneity through an explicit parameter of hospitals cost efficiency. The model predicts different directions of the change in ALOS for efficient and inefficient hospitals. Moreover, the decline in ALOS is shown to be associated with a rise in the rate for planned early readmissions. Using an administrative database for 684 Japanese PPS hospitals in 2007-2011, we conduct avearge treatment effect estimations with dynamic panel data and …nd an empirical support for the predictions of the theoretical model.
    Date: 2012–11
  14. By: Ciccarelli, Carlo; De Fraja, Gianni
    Abstract: This paper studies the demand for tobacco products in post-unification Italy. We construct a very detailed panel dataset of yearly consumption in the 69 Italian provinces from 1871 to 1913, and use it to estimate the demand for tobacco products. We find support for the Becker and Murphy (1988) rational addiction model. We also find that, in the period considered, tobacco was a normal good in Italy: aggregate tobacco consumption increased with income. Subsequently, we consider separately the four types of products which aggregate tobacco comprises (fine-cut tobacco, snuff, cigars, and cigarettes), and tentatively suggest that habit formation was a stronger factor on the persistence of consumption than physical addiction. The paper ends by showing that the introduction of the Bonsack machine in the early 1890s did not coincide with changes in the structure of the demand for tobacco, suggesting cost driven technological change.
    Keywords: Italian Kingdom; Rational Addiction; Tobacco
    JEL: D11 I18 N33
    Date: 2012–10

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