nep-hea New Economics Papers
on Health Economics
Issue of 2015‒03‒22
nineteen papers chosen by
Yong Yin
SUNY at Buffalo

  1. Preventives Versus Treatments By Michael Kremer; Christopher Snyder
  2. The Insurance Value of Medical Innovation By Darius Lakdawalla; Anup Malani; Julian Reif
  3. Physician Incentives and the Rise in C-sections: Evidence from Canada By Sara Allin; Michael Baker; Maripier Isabelle; Mark Stabile
  4. The Impact of Consumer Inattention on Insurer Pricing in the Medicare Part D Program By Kate Ho; Joseph Hogan; Fiona Scott Morton
  5. Can Walmart make us healthier? The effect of Market Forces on Health Care Utilization By Florencia Borrescio
  6. Do you have to win it to fix it? A longitudinal study of lottery winners and their health care demand By Terence C. Cheng; Joan Costa-i-Font; Nattavudh Powdthavee
  7. How health plan enrollees value prices relative to supplemental benefits and service quality By Bünnings, Christian; Schmitz, Hendrik; Tauchmann, Harald; Ziebarth, Nicolas R.
  8. International Migration Opportunities and Occupational Choice: A Case Study of Philippine Nurses 2002 to 2014 By Arends-Kuenning, Mary P.; Calara, Alvaro; Go, Stella
  9. Analysis of Medical Expenditures and Service Use of Medicaid Buy-In Participants, 2002-2005 (Executive Summary) By Gilbert Gimm; Kristin L. Andrews; Jody Schimmel; Henry T. Ireys; Su Liu
  10. Progress and Challenges in Electronic Health Record Adoption: Findings from a National Survey of Physicians By Catherine DesRoches
  11. Designing an Health Insurance Scheme for Government Employees in Bangladesh: A Concept Paper By Hamid, Syed Abdul
  12. Social capital and access to primary health care in developing countries: Evidence from Sub-Saharan Africa By Guillaume Hollard; Omar Sene
  13. How Health Plan Enrollees Value Prices Relative to Supplemental benefits and Service Quality By Christian Bünnings; Hendrik Schmitz; Harald Tauchmann; Nicolas R. Ziebarth
  14. Medicaid and the Labor Supply of Single Mothers: Implications for Health Care Reform By Vincent Pohl
  15. The Relationship Between Social Capital And Health In China By Xindong Xue; W. Robert Reed
  16. Health Care Reform or Labor Market Reform? A Quantitative Analysis of the Affordable Care Act By Didem Tuzemen; Makoto Nakajima
  17. Bridging the Disconnect Between Patient Wishes and Care at the End of Life By James D. Reschovsky; Amanda E. Lechner; Alwyn Cassil
  18. Wealth, Health, and Child Development: Evidence from Administrative Data on Swedish Lottery Players By Cesarini, David; Lindqvist, Erik; Östling, Robert; Wallace, Björn
  19. Identifying structural breaks in stochastic mortality models By O'Hare, Colin; Li, Youwei

  1. By: Michael Kremer; Christopher Snyder
    Abstract: Preventives are sold ex ante, before disease status is realized, while treatments are sold ex post. Even if the mean of the ex ante distribution of consumer values is the same as that ex post, the shape of the distributions may differ, generating a difference between the surplus each product can extract. If, for example, consumers differ only in ex ante disease risk, then a monopolist would have more difficulty extracting surplus with a preventive than with a treatment because treatment consumers, having contracted the disease, no longer differ in disease risk. We show that the ratio of preventive to treatment producer surplus can be arbitrarily small, in particular when the distribution of consumer values has a Zipf shape and the disease is rare. The firm's bias toward treatments can be reversed, for example, if the source of private information is disease severity learned ex post. The difference between the producer surplus earned from the products can result in distorted R&D incentives; the deadweight loss from this distortion can be as large as the entire producer-surplus difference. Calibrations for HIV and heart attacks based on risk factors in the U.S. population suggest that the distribution of disease risk is sufficiently Zipf-similar to generate substantial differences between producer surplus from preventives and treatments. Empirically, we find that proxies for the Zipf-similarity of the disease-risk distribution are associated a significantly lower likelihood of vaccine development but not drug development.
    JEL: D42 I18 L11 O31
    Date: 2015–03
  2. By: Darius Lakdawalla; Anup Malani; Julian Reif
    Abstract: Economists think of medical innovation as a valuable but risky good, producing health benefits but increasing financial risk. This perspective overlooks how innovation can lower physical risks borne by healthy patients facing the prospect of future disease. We present an alternative framework that accounts for all these aspects of value and links them to the value of health insurance. We show that any innovation worth buying reduces overall risk, thereby generating positive insurance value on its own. We conduct two empirical exercises to assess the significance of our insights. First, we calculate that conventional methods underestimate the value of historical health gains by 30-80%. Second, we examine a large set of medical technologies and calculate that insurance value on average adds 100% to the conventional valuation of those treatments. Moreover, we find that the physical risk-reduction value of these technologies is ten times greater than the financial risk they pose and the corresponding value of health insurance that insures this financial risk. Our analysis also suggests standard methods disproportionately undervalue treatments for the most severe illnesses, where physical risk to consumers is most costly.
    JEL: I13 I18 J17 O30
    Date: 2015–03
  3. By: Sara Allin; Michael Baker; Maripier Isabelle; Mark Stabile
    Abstract: More than one in four births are delivered by Cesarean section across the OECD where fee-for-service remuneration schemes generally compensate C-sections more generously than vaginal deliveries. In this paper, we exploit unique features of the Canadian health care system to investigate if physicians respond to financial incentives in obstetric care. Previous studies have investigated physicians' behavioral response to incentives using data from institutional contexts in which they can sort across remuneration schemes and patient types. The single payer and universal coverage nature of Medicare in Canada mitigates the threat that our estimates are contaminated by such a selection bias. Using administrative data from nearly five million hospital records, we find that doubling the compensation received for a C-section relative to a vaginal delivery increases by 5.6 percentage points the likelihood that a birth is delivered by C-section, all else equal. This result is mostly driven by obstetricians, rather than by general practitioners. We also find that physicians' response to financial incentives is greater among patients over 34, which may reflect physicians' greater informational advantage on the risks of different delivery methods for this category of mothers.
    JEL: I1 I11
    Date: 2015–03
  4. By: Kate Ho; Joseph Hogan; Fiona Scott Morton
    Abstract: Medicare Part D presents a novel privatized structure for a government pharmaceutical benefit. Incentives for firms to provide low prices and high quality are generated by consumers who choose among multiple insurance plans in each market. To date the literature has primarily focused on consumers, and has calculated how much could be saved if they chose better plans. In this paper we take the next analytical step and consider how plans will adjust prices as consumer search behavior improves. We use detailed data on enrollees in New Jersey to demonstrate that consumers switch plans infrequently and imperfectly. We estimate a model of consumer plan choice with inattentive consumers. We then turn to the supply side and examine insurer responses to this behavior. We show that high premiums are consistent with insurers profiting from consumer inertia. We use the demand model and a model of firm pricing to calculate how much lower Part D program costs would be if consumer inattention were removed and plans re-priced in response. Our estimates indicate that consumers would save $536 each, and the government would save $550 million total over three years, when firms' choice of markup is taken into account. Cost growth would also fall: by the last year of our sample government savings would amount to 8.2% of the cost of subsidizing the relevant enrollees.
    JEL: I11 L10 L11
    Date: 2015–03
  5. By: Florencia Borrescio (Escuela de Gobierno, Universidad Adolfo Ibáñez)
    Date: 2014–11
  6. By: Terence C. Cheng (School of Economics, University of Adelaide); Joan Costa-i-Font (London School of Economics); Nattavudh Powdthavee (University of Melbourne)
    Abstract: We exploit lottery wins to investigate the effects of exogenous changes to individuals’ income on health care demand in the United Kingdom. This strategy allows us to estimate lottery income elasticities for a range of health care services that are publicly and privately provided. The results indicate that lottery winners with larger wins are more likely to choose private health services than public health services from the National Health Service. For high-income individuals without private medical insurance, the larger their winnings, the more likely they are to obtain private overnight hospital care. For privately insured individuals, the larger their winnings, the more likely they are to obtain private care for dental services and for eye, blood pressure, and cervical examinations. We find that medium to large winners (>£500) are more likely to have private health insurance. Larger winners are also more likely to drop coverage earlier, possibly after their winnings have been exhausted. The elasticities with respect to lottery wins are comparable in magnitude to the elasticities of household income from fixed-effect models.
    Keywords: Lottery wins, Health care; Income elasticity; Public-private
    JEL: H42 I11 D1
    Date: 2015–03
  7. By: Bünnings, Christian; Schmitz, Hendrik; Tauchmann, Harald; Ziebarth, Nicolas R.
    Abstract: This paper empirically assesses the relative role of health plan prices, service quality and optional benefits in the decision to choose a health plan. We link representative German SOEP panel data from 2007 to 2010 to (i) health plan service quality indicators, (ii) measures of voluntary benefit provision on top of federally mandated benefits, and (iii) health plan prices for almost all German health plans. Mixed logit models incorporate a total of 1,700 health plan choices with more than 50 choice sets for each individual. The findings suggest that, compared to prices, health plan service quality and supplemental benefits play a minor role in making a health plan choice.
    Keywords: service quality,non-essential benefits,prices,health plan switching,German sickness funds,SOEP
    JEL: D12 H51 I11 I13 I18
    Date: 2015
  8. By: Arends-Kuenning, Mary P. (University of Illinois at Urbana-Champaign); Calara, Alvaro (affiliation not available); Go, Stella (De la Salle University, The Philippines)
    Abstract: We analyze trends in nursing education in the Philippines during a period of rising and falling demand for Philippine nurses in the developed countries. Based on focus group discussion data obtained in the Philippines, we examine students' motivations to become nurses and to what extent their choices were affected by the possibility of international migration. The number of nursing graduates rose, resulting in brain gain. However, policies promoting the migration of skilled workers such as nurses impose high costs on middle class and lower class families who invest in education hoping that a family member will be able to migrate.
    Keywords: brain drain, brain gain, international nurse migration, Philippines
    JEL: I11 J24 J44
    Date: 2015–02
  9. By: Gilbert Gimm; Kristin L. Andrews; Jody Schimmel; Henry T. Ireys; Su Liu
    Abstract: Congress established the Medicaid Buy-In program when it passed the Balanced Budget Act (BBA) of 1997 and the Ticket to Work and Work Incentives Improvement Act (Ticket Act) of 1999. Under the program, so named because participants “buy into†Medicaid by paying monthly premiums or co-payments, states can offer Medicaid coverage to workers with disabilities whose income and assets would otherwise make them ineligible for Medicaid. To enroll in the program, individuals must have a disability as defined by the Social Security Administration (SSA) and meet certain work and financial eligibility requirements.
    Keywords: Medicaid, Medicare, expenditures, service use, Medicaid Buy-In program, dual eligibles
    JEL: I J
    Date: 2015–03–06
  10. By: Catherine DesRoches
    Abstract: One in 10 physicians has no plans to adopt an electronic health record. These physicians were older; in small, isolated practices; and were not participating in other delivery system or payment reform efforts.
    Keywords: EHRs, Electronic Health Record, physician survey
    JEL: I
    Date: 2015–03–03
  11. By: Hamid, Syed Abdul
    Abstract: Introducing compulsory health insurance for government employees bears immense importance for stepping towards universal healthcare coverage in Bangladesh. Lack of scientific study on designing such scheme, in the Bangladesh context, motivates this paper. The study aims at designing a comprehensive insurance package simultaneously covering health, life and accident related disability risks of the public employees, where the health component would extend to all dependent family members. We mainly analyzed, due to lack of data on the target population for actuarial calculation, the MIS data of group health insurance schemes (offered to various corporate houses) of some reputed insurance companies in Bangladesh. In addition, we consulted with various stakeholders including insurance companies and Insurance Development and Regulatory Authority. Our predicted loading costs including inflationary factor ranges from 10-15 percent. We have outlined the structure of a contributory and cashless health insurance scheme for the public servants and their eligible family members initially for a block period of 5 years. This offers a comprehensive list of surgical and no-surgical inpatient care (including complicated maternal care) available in the public hospitals and empanelled private hospitals. The coverage includes pre-existing illnesses, but excludes dental and ophthalmic care. The scheme offers a benefit of 5 Lakh Taka for covering all medical costs (excluding transport charges) of inpatient care for a block period of 5 years and 5 Lakh Taka for death benefit. The estimated premium is 500 Taka per month (400 Taka per month for health insurance and 100 Taka per month for life and accident related disability insurance).The hospitalization benefit is on a floater basis i.e. the total coverage can be availed of individually or collectively by the employees and their eligible family members during the said block period with no restriction on the number of times of availing. Subscription may be deducted from salary or medical allowance. If the spouse is also a government employee then subscription may be deducted from one of them. Some infrastructural constraints need to be addressed while introducing the scheme. These, for example, are capacity constraints of public hospitals; lack of provision of local fund in the public hospitals for regular maintenance of medical equipment and continuous supply of reagents for diagnostic tests to smoothen the services and increasing quality of care; provision of sufficient amount of all necessary drugs in the public hospitals; lack of an effective referral chain in the public hospitals; capacity constraints of the existing insurance companies; and lack of third party administrator (TPA). Establishing a powerful autonomous body is also crucial, due to capacity constraints of the existing insurance companies, to carry the risk of such a big pool of population. The main role of this body is to manage insurance fund, carry the risk and to monitor and supervise the health services to be provided under the scheme. The role of the insurance companies may be limited to claim settlement, issuing of smart card, etc.
    Keywords: Health Insurance, Government Employees, Bangladesh, Concept Paper
    JEL: I13
    Date: 2014–09–30
  12. By: Guillaume Hollard; Omar Sene
    Abstract: We test the causal role of social capital, as measured by self-reported trust, in determining access to basic health facilities in Sub-Saharan Africa. To skirt reverse-causality problems between social capital and basic health, we rely on instrumental variable (IV) estimates. The results show that a one standard deviation increase in the level of localized trust leads to a 0.221 standard deviation decrease in the predicted value of doctor absenteeism, a 0.307 standard deviation decreases in the predicted value of waiting time and a 0.301 standard deviation decreases in the predicted value of bribes. As a robustness check, we also use a different database regarding a different health issue, namely access to clean water. We find that a one standard deviation increase in the level of localized trust leads to a 0.330 standard deviation increase in the access on clean water. All in all, social capital is found to have an important causal effect on health, even stronger that the one found in western countries.
    Keywords: Social Capital, Health, Africa, Causality.
    JEL: I15 I12 D71 I18 H41
    Date: 2015
  13. By: Christian Bünnings; Hendrik Schmitz; Harald Tauchmann; Nicolas R. Ziebarth
    Abstract: This paper empirically assesses the relative role of health plan prices, service quality and optional benefits in the decision to choose a health plan. We link representative German SOEP panel data from 2007 to 2010 to (i) health plan service quality indicators, (ii) measures of voluntary benefit provision on top of federally mandated benefits, and (iii) health plan prices for almost all German health plans. Mixed logit models incorporate a total of 1,700 health plan choices with more than 50 choice sets for each individual. The findings suggest that, compared to prices, health plan service quality and supplemental benefits play a minor role in making a health plan choice.
    Keywords: Service quality, non-essential benefits, prices, health plan switching, German sickness funds, SOEP
    JEL: D12 H51 I11 I13 I18
    Date: 2015
  14. By: Vincent Pohl (Queen's University, Ontario)
    Abstract: The Patient Protection and Affordable Care Act expands Medicaid and introduces health insurance subsidies, thereby changing work incentives for single mothers. To undertake an ex ante policy evaluation of the employment effects of the PPACA, I structurally estimate a model of labor supply and health insurance choice exploiting existing variation in Medicaid policies. Simulations show that single mothers increase their labor supply at the extensive and the intensive margin by six and five percent, respectively. The PPACA leads to crowding-out of employer-sponsored health insurance of about 40 percent and increases single mothers' welfare by about $190 per month.
    Keywords: health care reform, Medicaid, labor supply, single mothers
    JEL: I18 I3 J2
    Date: 2014–05
  15. By: Xindong Xue; W. Robert Reed (University of Canterbury)
    Abstract: This paper uses the 2005 and 2006 China General Social Survey (CGSS) to study the relationship between social capital and health in China. Using four separate samples totalling over 18,000 respondents and some methodological innovations that are new to the social capital literature, we identify social trust, social relationships, and social networks as robust correlates of self-reported health. The estimated sizes of the social capital effects are economically important, being of the same order of magnitude as those associated with age and income. We are unable to find evidence that social participation is related to self-reported health. Further, while women generally report poorer health than men, we find no evidence of gender differences in the social capital-health relationship.
    Keywords: Social capital, trust, self-reported health, China, ordered logistic regression, heteroskedastic ordered logistic regression, interaction effects.
    JEL: I1 O53 C25
    Date: 2015–03–09
  16. By: Didem Tuzemen (Federal Reserve Bank of Kansas City); Makoto Nakajima (Federal Reserve Bank of Philadelphia)
    Abstract: The Patient Protection and Affordable Care Act (ACA) requires all individuals to have health insurance, and introduces penalties to large firms that do not offer affordable coverage to their employees. While the possible effects of the ACA on the insurance decision of individuals have been studied, what is less studied is how the ACA can affect labor demand. In particular, since the ACA does not require small firms to offer health insurance, and does not require firms to offer health insurance to part-time employees, there are concerns that employers will either stay small, or replace full-time workers with part-time workers in order to avoid offering health insurance to their employees. The main focus of this paper is to study the effects from the distortions caused by the ACA, modeling employer’ decision on hiring part-time and full-time workers, as well as the decision to offer coverage. The aim is to quantify the effect of the possible changes in the size distribution of firms and the composition of the labor force on employment, aggregate output, and welfare.
    Date: 2014
  17. By: James D. Reschovsky; Amanda E. Lechner; Alwyn Cassil
    Abstract: Most Americans want to die at home, but most die in hospitals or other facilities. Most people care more about quality of life than prolonging life as long as possible, but many receive invasive, life-sustaining treatments that diminish quality of life.
    Keywords: Patient Wishes, End of Life, quality of care, Health
    JEL: I
    Date: 2015–03–19
  18. By: Cesarini, David (New York University); Lindqvist, Erik (Stockholm School of Economics); Östling, Robert (Institute for International Economic Studies); Wallace, Björn (University of Cambridge)
    Abstract: We use administrative data on Swedish lottery players to estimate the causal impact of wealth on players' own health and their children's health and developmental outcomes. Our estimation sample is large, virtually free of attrition, and allows us to control for the factors such as the number of lottery tickets conditional on which the prizes were randomly assigned. In adults, we find no evidence that wealth impacts mortality or health care utilization, with the possible exception of a small reduction in the consumption of mental health drugs. Our estimates allow us to rule out effects on 10-year mortality one sixth as large the cross-sectional gradient. In our intergenerational analyses, we find that wealth increases children's health care utilization in the years following the lottery and may also reduce obesity risk. The effects on most other child outcomes, which include drug consumption, scholastic performance, and skills, can usually be bounded to a tight interval around zero. Overall, our findings suggest that correlations observed in affluent, developed countries between (i) wealth and health or (ii) parental income and children's outcomes do not reflect a causal effect of wealth.
    Keywords: Health; Mortality; Healthcare; Child health; Child development; Human capital; Wealth; Income; Lotteries
    JEL: D91 I10 I12 I14 J13 J24
    Date: 2015–03–12
  19. By: O'Hare, Colin; Li, Youwei
    Abstract: In recent years the issue of life expectancy has become of upmost importance to pension providers, insurance companies and the government bodies in the developed world. Significant and consistent improvements in mortality rates and hence life expectancy have led to unprecedented increases in the cost of providing for older ages. This has resulted in an explosion of stochastic mortality models forecasting trends in mortality data in order to anticipate future life expectancy and hence quantify the costs of providing for future ageing populations. Many stochastic models of mortality rates identify linear trends in mortality rates by time, age and cohort and forecast these trends into the future using standard statistical methods. These approaches rely on the assumption that structural breaks in the trend do not exist or do not have a significant impact on the mortality forecasts. Recent literature has started to question this assumption. In this paper we carry out a comprehensive investigation of the presence or otherwise of structural breaks in a selection of leading mortality models. We find that structural breaks are present in the majority of cases. In particular, where there is a structural break present we find that allowing for that improves the forecast result significantly.
    Keywords: Mortality; stochastic models; forecasting; structural breaks
    JEL: C51 C52 C53 G22 G23 J11
    Date: 2014–10

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