nep-hea New Economics Papers
on Health Economics
Issue of 2017‒11‒12
25 papers chosen by
Yong Yin
SUNY at Buffalo

  1. R&D-driven medical progess, health care costs, and the future of human longevity By Böhm, Sebastian; Grossmann, Volker; Strulik, Holger
  2. The rising longevity gap by lifetime earnings: Distributional implications for the pension system By Haan, Peter; Kemptner, Daniel; Lüthen, Holger
  3. Healthy Immigrant Effect or Over-Medicalization of Pregnancy? Evidence from Birth Certificates By Bertoli, P.; Grembi, V.; Kazakis, P.;
  4. Forced migration and mortality By Bauer, Thomas K.; Giesecke, Matthias; Janisch, Laura M.
  5. Determinants of Neonatal and Under-five Mortality in Kenya: Do Antenatal and Skilled Delivery Care Services Matter? By Phyllis Mumia Machio
  6. Healthier when retiring earlier? Evidence from France By Messe, Pierre-jean; Wolff, François-Charles
  7. Does Medicaid Generosity Affect Household Income? By Kumar, Anil
  8. Do youth access control policies stop young people smoking? Evidence from Ireland By Savage, Michael
  9. Parental Bargaining and Rural-Urban Child Health Differential in Tanzania By Alfred Mukong; Justine Burns
  10. Buyers' Ability in Public Procurement: A Structural Analysis of Italian Medical Devices By Alessandro Bucciol; Riccardo Camboni Marchi Adani; Paola Valbonesi
  11. Public preferences and valuation of new malaria risk By Mehmet Kutluay; Roy Brouwer; Haripriya Gundimeda; Nitin Lokhande; Richard S. J. Tol
  12. Hospital centralization and performance in Denmark - ten years on By Christiansen, Terkel; Vrangbæk, Karsten
  13. The 'Healthy Worker Effect': Do Healthy People Climb the Occupational Ladder? By Joan Costa-i-Font; Martin Ljunge
  14. Long-Term Care Insurance: Knowledge Barriers, Risk Perception and Adverse Selection By M. Martin Boyer; Philippe De Donder; Claude Fluet; Marie-Louise Leroux; Pierre-Carl Michaud
  15. Did UberX Reduce Ambulance Volume? By Leon S. Moskatel; David J.G. Slusky
  16. Using the Health and Retirement Study for Disability Policy Research: A Review By Jody Schimmel Hyde; David C. Stapleton
  17. Dynamics in Physical Functioning Limitations By Agarwal, Neha; Kohler, Hans-Peter; Mani, Subha
  18. Working, Volunteering and Mental Health in the Later Years By Mosca, Irene; Wright, Robert E.
  19. How is the Trade-off between Adverse Selection and Discrimination Risk Affected by Genetic Testing? Theory and Experiment By David Bardey; Philippe De Donder; Cesar Mantilla
  20. Competition and Physician Behaviour: Does the Competitive Environment Affect the Propensity to Issue Sickness Certificates? By Kurt R. Brekke; Tor Helge Holmås; Karin Monstad; Odd Rune Straume
  21. The Effect of Oil Spills on Infant Mortality: Evidence from Nigeria By Anna Bruederle; Roland Hodler
  22. Cultivating Optimism: How to Frame Your Future During a Health Challenge By Briley, Donnel A.; Rudd, Melanie; Aaker, Jennifer
  23. Health Savings Accounts: Consumer Contribution Strategies and Policy Implications By Lowsky, David J.; Lee, Donald K. K.; Zenios, Stefanos
  24. Health Care Investments and Economic Performance in Portugal: An Industry Level Analysis By Alfredo Marvão Pereira; Rui Manuel Pereira; Pedro G. Rodrigues
  25. Have Pharmaceutical R&D Project Success Rates Decreased? A Critical Review and New Empirical Results By Martin Backfisch

  1. By: Böhm, Sebastian; Grossmann, Volker; Strulik, Holger
    Abstract: In this paper we set up an overlapping generations model of gerontological founded human aging that takes the interaction between R&D-driven medical progress and access to health care into account. We use the model to explore potential futures of human health and longevity. For the baseline policy scenario of health care access, the calibrated model predicts substantial future increases in health and life expectancy, associated with rising shares of health expenditure in GDP. Freezing the expenditure share at the 2020 level by rationing access to health care severely reduces potential gains in health, longevity and welfare. These losses are greatest in the long run due to reduced incentives for medical R&D. For example, rationing is predicted to reduce potential gains of life-expectancy at age 65 by about 4 years in the year 2050. Generally, and perhaps surprisingly, young individuals (i.e. those who save the most health care contributions through rationing) are predicted to suffer the greatest losses in terms of life expectancy and welfare.
    Keywords: Longevity,Medical R&D,Morbidity,Health Care,Rationing
    JEL: H50 I10 C60
    Date: 2017
  2. By: Haan, Peter; Kemptner, Daniel; Lüthen, Holger
    Abstract: This study uses German social security records to provide novel evidence about the heterogeneity in life expectancy by lifetime earnings and, additionally, documents the distributional implications of this earnings-related heterogeneity. We find a strong association between lifetime earnings and life expectancy at age 65 and show that the longevity gap is increasing across cohorts. For West German men born 1926-28, the longevity gap between top and bottom decile amounts to about 4 years (about 30%). This gap increases to 7 years (almost 50%) for cohorts 1947-49. We extend our analysis to the household context and show that lifetime earnings are also related to the life expectancy of the spouse. The heterogeneity in life expectancy has sizable and relevant distributional consequences for the pension system: when accounting for heterogeneous life expectancy, we find that the German pension system is regressive despite a strong contributory link. We show that the internal rate of return of the pension system increases with lifetime earnings. Finally, we document an increase of the regressive structure across cohorts, which is consistent with the increasing longevity gap.
    Keywords: mortality,lifetime inequality,pensions,redistribution
    JEL: H55 I14 J11
    Date: 2017
  3. By: Bertoli, P.; Grembi, V.; Kazakis, P.;
    Abstract: We investigate the consumption of health care by immigrants by using newborn- and motherlevel data from birth certificates. We use a predictive algorithm based on machine learning to identify the observables affecting birth health outcomes and the use of prenatal care. Using these observables, our empirical analysis pinpoints an advantage of immigrants over natives regarding newborns’ birth weight and a lower use of prenatal care and of c-sections by immigrant mothers. To disentangle the healthy immigrant effect explanation for our results from an over-medicalization of pregnancy explanation, we use an IV approach. Our results support the over-medicalization of pregnancy hypothesis.
    Keywords: Healthy Immigrant Effect; Deliveries; Prenatal Care; Consumption of Health care;
    JEL: I12 I14 J15
    Date: 2017–11
  4. By: Bauer, Thomas K.; Giesecke, Matthias; Janisch, Laura M.
    Abstract: We examine the long-run effects of forced migration from Eastern Europe into postwar Germany. Existing evidence suggests that displaced individuals are worse off economically, facing a considerably lower income and a higher unemployment risk than comparable natives even twenty years after being expelled. We extend this literature by investigating the relative performance of forced migrants across the entire life cycle. Using social security records that document the exact date of death and a proxy for pre-retirement lifetime earnings, we estimate a significantly and considerably higher mortality risk among forced migrants compared to native West-Germans. The adverse displacement effect persists throughout the earnings distribution except for the top quintile. Although forced migrants are generally worse off regarding mortality outcomes, those with successful labor market histories seem to overcome the longlasting negative consequences of flight and expulsion.
    Keywords: forced migration,differential mortality,lifetime earnings,economic history
    JEL: I12 J61 O15 R23
    Date: 2017
  5. By: Phyllis Mumia Machio
    Abstract: Declines in neonatal and under-five mortality in Kenya were much slower than what was required to meet the Millennium Development Goal (MDG) on childhood mortality. Therefore, while Tanzania and Uganda met and surpassed their MDG targets, Kenya did not. Effort is now directed at ending all preventable deaths among neonates and under-fives, as envisaged in the Sustainable Development Goals (SDGs). Most childhood mortality can be prevented by ensuring that women have access to quality care during conception, pregnancy, intra-partum and in the post-natal period. This study investigated the effects of antenatal and skilled delivery care services on neonatal and under-five mortality in Kenya using pooled Kenya demographic and health survey data for 1998, 2003, 2008/2009 and 2014. Two-stage residual inclusion estimation procedure and the control function approach were used to test and control for potential endogeneity of antenatal and skilled delivery care and for potential unobserved heterogeneity. The study unveiled presence of both endogeneity and unobserved heterogeneity and found that failure to control these would have biased downwards the effects of antenatal and skilled delivery care services on childhood mortality. Findings indicated that adequate use of antenatal care services reduced risk of neonatal and under-five mortality by 2.4 and 4.2 percentage points respectively. Similarly, use of skilled delivery care services was associated with reduced risk of neonatal and under-five mortality by 0.3 and 1.8 percentage points respectively. Increasing coverage of women using adequate antenatal care services and skilled delivery care services can reduce the risk of neonatal and under-five mortality in Kenya. Policies that promote use of these services such as promoting women education and reducing average distances to health facilities should be promoted.
    Date: 2017–09
  6. By: Messe, Pierre-jean; Wolff, François-Charles
    Abstract: This paper contributes to the literature on the health-retirement relationship by looking at the effect of retiring before legal age on health in later life in France. To account for the endogeneity of the early retirement decision, our identification strategy relies on eligibility rules to a long-career-based early retirement scheme introduced in France starting from 2004 that substantially increased the proportion of older workers leaving their last job before the legal age of 60 years. We find a positive association between early retirement treated first as exogenous and health problems among retirees. However, we fail to evidence any causal effect of early retirement on poor health once we account for the endogeneity of the decision to retire before the legal age. Controlling for working conditions has no influence on our results and occupying a demanding job is harmful to health after retirement regardless of the retirement date.
    Keywords: early retirement, self-assessed health, working conditions
    Date: 2017–10
  7. By: Kumar, Anil (Federal Reserve Bank of Dallas)
    Abstract: Almost all recent literature on Medicaid and labor supply has used Affordable Care Act (ACA)- induced Medicaid eligibility expansions in various states as natural experiments. Estimated effects on employment and earnings differ widely due to differences in the scope of eligibility expansion across states. Using a Regression Kink Design (RKD) framework, this paper takes a uniquely different approach to the identification of the effect of Medicaid generosity on household income. Both state-level data and March CPS data from 1980–2013 suggest that generous federal funding of state-level Medicaid costs have a modest negative effect on household income. The negative impact of Medicaid generosity on household income is more pronounced at the lower end of the household income distribution and on the income and earnings of female heads.
    Keywords: Medicaid; household income; labor supply
    JEL: C31 I13 J08 J22
    Date: 2017–10–01
  8. By: Savage, Michael
    Abstract: Increasing the legal age at which individuals can buy tobacco has become an increasingly common policy tool aimed at reducing youth smoking. There remains, however, some debate on whether such policies are an efficient use of resources. Evidence thus far has either (i) relied on local or regional Minimum Legal Age (MLA) reforms which suffer from a range of potential endogeneity and spillover biases, or (ii) rely on the use of adult population control groups that are, in many cases, unsuitable. Missing from the debate on the effectiveness of MLA policy is an analysis of a national increase in an MLA, where a suitable control group of identically aged adolescents exists. The 2001 MLA reform in the Republic of Ireland, which increased the MLA from 16 to 18, offers natural experiment conditions whereby issues relating to endogeneity, spillover effects and unreliable control groups are made redundant. The outcomes examined in the analysis are also novel compared to previous research, as both intensity of current smoking behaviour and previous smoking experience are examined. The evidence found here strongly supports increases in MLAs as an effective policy tool to reduce youth smoking rates.
    Date: 2017–09
  9. By: Alfred Mukong; Justine Burns
    Abstract: This paper extends the empirical analysis of child health by simultaneously considering the effects and contributions of parental bargaining to the rural-urban child health differential in Tanzania, a country where most communities are patriarchal in nature. The study uses the Heckman two-step procedure to correct for possible sample selection bias. The results suggest that domestic violence towards female partners increases the probability of child stunting while cooperation in decision-making between couples and female discretion over household resources reduces the probability of child stunting. The signicance of these effects are mainly observed in rural than in urban communities. Differences in parental bargaining account for 5 percent of the rural-urban gap in child nutrition. Correcting for sample selection bias reduces the contribution to 4 percent. The findings suggest that empowering rural women is essential in reducing the rural-urban child health differentials.
    Keywords: Parental Bargaining, Rurual-Urban Child Healt Differential, Tanzania, Heckman
    Date: 2017–10
  10. By: Alessandro Bucciol (Department of Economics (University of Verona)); Riccardo Camboni Marchi Adani (Department of Economics (University of Verona)); Paola Valbonesi (University of Padova)
    Abstract: By empirically exploiting an original dataset on standardized medical devices purchased in the period January--December 2013 by 135 Italian local public buyers (i.e., hospitals and health units), we investigate each buyer's ability to run the procurement process. Our results show that: i) the average prices vary substantially among public buyers; ii) this variation is largely captured by the buyer's fixed effect; iii) the buyer's ability is correlated with institutional characteristics, geography, and size; iv) mandatory reference prices determine higher average purchasing prices for high-ability public buyers, no effect for medium-ability and lower prices for low-ability public buyers.
    Keywords: Public Procurement, Medical Devices, Buyer's Ability, Reference Price
    JEL: D44 D73 H57 I18
    Date: 2017–11
  11. By: Mehmet Kutluay (Institute for Environmental Studies, Vrije Universiteit, Amsterdam; Tinbergen Institute, Amsterdam/Rotterdam); Roy Brouwer (Department of Economics, University of Waterloo, Canada; Institute for Environmental Studies, Vrije Universiteit, Amsterdam); Haripriya Gundimeda (Department of Economics, IIT Bombay, Mumbai); Nitin Lokhande (Department of Economics, IIT Bombay, Mumbai); Richard S. J. Tol (Department of Economics, University of Sussex; Institute for Environmental Studies, Vrije Universiteit, Amsterdam; Department of Spatial Economics, Vrije Universiteit, Amsterdam; Tinbergen Institute, Amsterdam; CESifo, Munich)
    Abstract: After years of decline, malaria prevalence may increase in the future due to climate change, and spread to areas that have not experienced the disease before. Any policy that aims to mitigate or adapt to this scenario needs to take into account the economic benefits of avoided malaria (willingness to pay - WTP). Much work has been done on WTP, but not much is known about how WTP changes with the probability of becoming ill. To this end a survey is carried out in Mumbai, India, to compare respondents' WTP to avoid malaria across risky and less-risky areas. We find WTP to be 10% higher in risky areas than in less-risky areas. We also observe WTP to increase by more than 15% between malaria-experienced and naïve respondents, indicating a familiarity premium. These findings indicate higher welfare returns to climate change mitigation policies than previously thought.
    Keywords: malaria; willingness to pay; discrete choice experiment
    JEL: I12 Q51
    Date: 2017–10
  12. By: Christiansen, Terkel (Department of Business and Economics, and COHERE); Vrangbæk, Karsten (Department of Public Health)
    Abstract: Denmark implemented a major reform of the administrative and political structure in 2007 when the previous 13 counties were merged into five new regions and the number of municipalities was reduced from 271 to 98. A main objective was to create administrative units that were large enough to support a hospital structure with few acute hospitals in each region and to centralize specialized care in fewer hospitals. This paper analyses the reorganization of the somatic hospital sector in Denmark since 2007, discusses the mechanisms behind the changes and analyses hospital performance after the reform. The reform emphasized an improved acute service and high quality. The number of acute hospitals was reduced from about 40 to 21 hospitals with joint acute facilities. The restructuring and geographical placement of acute hospitals took place in a democratic process subject to central guidelines and requirements. Since the reform, hospital productivity has increased by more than 2 per cent per year and costs have been stable. While the overall indicators point to a successful reform, it has also been criticized that some people in remote areas feel “left behind” in the economic development and that hospital staff are under increased workload pressure. Concurrent with the centralization of hospitals municipalities strengthened their health service with an emphasis on prevention and health promotion.
    Keywords: Government health policy; state and local taxation; state and local budgets and expenditures; state and local government - health; clinical specialization; acute health care
    JEL: H71 H72 H75 I18
    Date: 2017–10–30
  13. By: Joan Costa-i-Font; Martin Ljunge
    Abstract: The association between occupational status and health has been taken to reveal the presence of health inequalities shaped by occupational status. However, that interpretation assumes no influence of health status in explaining occupational standing. This paper documents evidence of non-negligible returns to occupation status on health (which we refer as ‘healthy worker effect’). We use a unique empirical strategy that addressed reverse causality, namely an instrumental variable strategy using the variation in average health in the migrant’s country of origin, a health measure plausibly not determined by the migrant’s occupational status. Our findings suggest that health status exerts significant effects on occupational status in several dimensions; having a supervising role, worker autonomy, and worker influence. The effect size of health is larger than that of an upper secondary education.
    Keywords: occupational status, self-reported health, immigrants, work autonomy, supervising role
    JEL: J50 I18
    Date: 2017
  14. By: M. Martin Boyer; Philippe De Donder; Claude Fluet; Marie-Louise Leroux; Pierre-Carl Michaud
    Abstract: We conduct a stated-choice experiment where respondents are asked to rate various insurance products aimed to protect against financial risks associated with long-term care needs. Using exogenous variation in prices from the survey design, and objective risks computed from a dynamic microsimulation model, these stated-choice probabilities are used to predict market equilibrium for long-term care insurance using the framework developped by Einavetal. (2010). We investigate in turn causes for the low observed take-up of long-term care insurance in Canada despite substantial residual out-of-pocket financial risk.We first find that awareness and knowledge of the product is low in the population: 44% of respondents who do not have long-term care insurance were never off ered this type of insurance while overall 31% report no knowledge of the product. Although we find evidence of adverse selection, results suggest it plays a minimal role in limiting take-up. On the demandside, oncer espondents have been made aware of the risks,we find that demand remains low,in part because of misperceptions of risk, lack of bequest motive and homeownership which may act as a substitute.
    Date: 2017–10–30
  15. By: Leon S. Moskatel (Department of Medicine, Scripps Mercy Hospital;); David J.G. Slusky (Department of Economics, The University of Kansas;)
    Abstract: Ambulances are a vital part of emergency medical services. However, they come in single, homogeneous, high intervention form, which is at times unnecessary, resulting in excessive costs for patients and insurers. In this paper, we ask whether UberX’s entry into a city caused substitution away from traditional ambulances for low risk patients, reducing overall volume. Using a city-panel over-time and leveraging that UberX enter markets sporadically over multiple years, we find that UberX entry reduced the per capital ambulance volume by at least 7%. Our result is robust to numerous specifications.
    Keywords: Uber, Ambulances, Emergencies
    JEL: I10 I18 L91
    Date: 2017–10
  16. By: Jody Schimmel Hyde; David C. Stapleton
    Abstract: This article highlights key information collected from Health and Retirement Study (HRS) respondents that benefits disability policy research and the body of knowledge that has resulted from this information.
    Keywords: Disability, employment, survey data, Health and Retirement Study
    JEL: I J
  17. By: Agarwal, Neha (University of California, Riverside); Kohler, Hans-Peter (University of Pennsylvania); Mani, Subha (Fordham University)
    Abstract: The extent to which physical functioning limitations result in permanent job loss, lowered lifetime income and assets, in part, depends upon the extent to which onset of these limitations becomes permanent. This paper uses five rounds of data from Malawi to examine path dependence in physical functioning limitations. We do so using a dynamic linear panel data model where the coefficient on the one-period lagged health outcome captures path dependence in functional limitations. Our preferred estimates indicate – (a) partial recovery from onset of functional limitations for males, (b) there is less recovery in severe limitations than moderate limitations for males, (c) perfect recovery from both moderate and severe functional limitation for females.
    Keywords: activity of daily living, functional limitation, panel data, Malawi
    JEL: J14 I15 I10
    Date: 2017–10
  18. By: Mosca, Irene (Trinity College Dublin); Wright, Robert E. (University of Strathclyde)
    Abstract: This paper examines the effect that working for pay and volunteering has on the mental health of older Irish women and men. Data from four waves of The Irish Longitudinal Study of Ageing (TILDA) are used. Three measures that capture different dimensions of mental health are considered. Ordinary least squares regression estimates suggest that both working for pay and volunteering have statistically significant and substantially large positive effects on mental health. However, these effects are less well defined when fixed effects regression is used. The analysis also suggests that combining working for pay with volunteering is more beneficial in terms of mental health than either working for pay or volunteering on their own. That is, there is something "extra" from engaging in both activities. The estimates also suggest a possible trade-off between working for pay and volunteering in terms of mental health benefits. Volunteering may be a "good mental health substitute" for working for pay. The extent of this substitutability is particularly important amongst older people, since participation in paid employment decreases while volunteering increases in older age. Higher levels of volunteering may compensate for the mental health loss associated with lower levels of working for pay. If this is the case, policies that promote volunteering may be cost-effective if they result in higher levels of self-sufficiency amongst older people.
    Keywords: mental health, working, volunteering, older people
    JEL: I12 J14 J22
    Date: 2017–10
  19. By: David Bardey; Philippe De Donder; Cesar Mantilla
    Abstract: We compare two genetic testing regulations, Disclosure Duty (DD) and Consent Law (CL), in an environment where individuals choose to take a genetic test or not. DD forces agents to reveal the test results to their insurers, resulting in a discrimination risk. CL allows agents to withhold that information, generating adverse selection. We complement our model with an experiment. We obtain that a larger fraction of agents test under CL than under DD, and that the proportion of individuals preferring CL to DD is non-monotone in the test cost when adverse selection is set endogenously at its steady state level.
    Keywords: consent law, disclosure duty, personalized medicine, test take up rate, pooling health insurance contracts
    JEL: C91 D82 I18
    Date: 2017
  20. By: Kurt R. Brekke; Tor Helge Holmås; Karin Monstad; Odd Rune Straume
    Abstract: Competition among physicians is widespread, but compelling empirical evidence on the impact on service provision is limited, mainly due to lack of exogenous variation in the degree of competition. In this paper we exploit that many GPs, in addition to own practice, work in local emergency centres, where the matching of patients to GPs is random. This allows us to observe the same GP in two different competitive environments; with competition (own practice) and without competition (emergency centre). Using rich administrative patient- level data from Norway for 2006-14, which allow us to estimate high-dimensional fixed-effect models to control for time-invariant patient and GP heterogeneity, we find that GPs with a fee-for-service (fixed-salary) contract are 12 (7.5) percentage points more likely to certify sick leave at own practice than at the emergency centre. Thus, competition has a positive impact on GPs’ sick listing that is strongly reinforced by financial incentives.
    Keywords: physicians, competition, sickness certification
    JEL: I11 I18 L13
    Date: 2017
  21. By: Anna Bruederle; Roland Hodler
    Abstract: Oil spills can lead to irreversible environmental degradation and pose hazards to human health. We are the first to study the causal effects of onshore oil spills on neonatal and infant mortality rates. We use spatial data from the Nigerian Oil Spill Monitor and the Demographic and Health Surveys, and rely on the comparison of siblings conceived before and after nearby oil spills. We find that nearby oil spills double the neonatal mortality rate. These effects are fairly uniform across locations and socio-economic backgrounds. We also provide some evidence for negative health effects of nearby oil spills on surviving children.
    Keywords: oil spills, Nigeria, infant mortality, child health
    JEL: I10 I18 J13 Q53
    Date: 2017
  22. By: Briley, Donnel A. (University of Sydney); Rudd, Melanie (University of Houston); Aaker, Jennifer (Stanford University)
    Abstract: Research shows that optimism can positively impact health, but when and why people feel optimistic when confronting health challenges is less clear. Findings from six studies show that the frames people adopt when thinking about health challenges influence their optimism about overcoming those challenges, and that their culture moderates this effect. In cultures where the independent self is highly accessible, individuals adopting an initiator frame (how will I act, regardless of the situations I encounter?) were more optimistic than those adopting a responder frame (how will I react to the situations I encounter?); the converse occurred for individuals from cultures where the interdependent self is highly accessible. Moreover, mediation and moderation evidence revealed that this interactive effect of culture and frame on optimism was driven by people's ability to easily imagine the recovery process. These effects held for distinct health challenges (cancer, diabetes, flood-related illness, traumatic injury) and across single-country and cross-country samples, as well as impacted positive health outcomes and decisions ranging from anticipated energy, physical endurance, and willingness to take on more challenging physical therapy to intentions to get vaccinated, stick to a doctor recommended diet, and undertake a physically strenuous vacation.
    Date: 2017–06
  23. By: Lowsky, David J. (?); Lee, Donald K. K. (?); Zenios, Stefanos (Stanford University)
    Abstract: A Health Savings Account (HSA) is a tax-advantaged savings account available only to households with high-deductible health insurance. This paper provides initial answers to two questions related to HSAs: 1) How should a household determine its annual contributions as the health status of its members evolve, and 2) do current contribution limits provide households with the flexibility to use HSAs efficiently? To answer these questions, we formulate the household's problem as one of determining a contribution strategy for minimizing total expected discounted medical costs. Costs are modeled as varying from year to year according to a Markov process where the state reflects the household's health status. A dynamic threshold policy, in which the contribution each year brings the HSA balance to a health state-dependent threshold, is derived. This is compared to a simpler static threshold policy in which the annual save-up-to level is state-independent (equal to the plan's out-of-pocket maximum) with contributions further capped by an annual limit. The cost model is calibrated to data from the 2002-2014 Medical Expenditure Panel Survey (MEPS). Policies are then derived and tested for a typical HSA-eligible plan. The results show that: a) The dynamic policy has 1%-27% lower total costs than the static one, though the static policy with a sufficiently high annual limit is a worthy alternative in the absence of personalized analytical guidance; b) a two-tiered tax-free contribution limit, in which the contribution size is unrestricted up to a certain HSA balance (tied to the plan's out-of-pocket maximum) and restricted beyond it, is necessary for households to make efficient use of HSAs.
    Date: 2017–07
  24. By: Alfredo Marvão Pereira (Department of Economics, The College of William and Mary, PO Box 8795, Williamsburg VA 23187, United States of America); Rui Manuel Pereira (Department of Economics, The College of William and Mary, PO Box 8795, Williamsburg VA 23187, United States of America); Pedro G. Rodrigues (Centro de Administração e Políticas Públicas (CAPP), and Instituto Superior de Ciências Sociais e Políticas (ISCSP), Universidade de Lisboa, Rua Almerindo Lessa, 1300-663 Lisboa, Portugal)
    Abstract: We analyze how public and private health care investments affect economic performance in Portugal. With a newly-developed data set for twenty-two industries, we use a vector autoregressive model to estimate the elasticities and marginal products on investment, employment and output. First, every €1 million invested in health care yields significant positive spillover effects, boosting investment and GDP by €24.74 and €20.45 million, respectively, and creating 188 net jobs. Adversely, net exports deteriorate, as most of the new capital goods are imported. Second, while only 28.2% of the total accumulated increase in GDP occurs within a year, investment is front-loaded with a corresponding 73.8%. Over this period, 68 workers are displaced for every €1 million invested. Third, at a disaggregated level, real estate, construction, and transportation and storage are the three industries where output shares increase the most. Employment shares increase the most in professional services, construction, and basic metals. These results have important policy implications. Health investments enhance long-term performance, but are unhelpful counter-cyclically. Also, they will change the industry mix: construction and professional services are the non-traded industries that will benefit the most, while the traded industries of non-metallic minerals, basic metals, and machinery and equipment benefit much less.
    Keywords: Health care investment; Economic performance; Industry mix; Vector autoregressive; Portugal
    JEL: C32 E22 H54 O52 L90 L98
    Date: 2017–11
  25. By: Martin Backfisch (Baden-Wuerttemberg Cooperative State University Center for Advanced Studies and Philipps-Universität Marburg)
    Abstract: In the context of the ongoing debate about an innovation crisis in the pharmaceutical industry, we study the success rates of pharmaceutical R&D projects as a measure of innovative productivity. The empirical literature suggests success rates have been decreasing during recent decades. We critically review this literature and only find few studies with a focus on the development of success rates over time. Further, the empirical analysis of success rates imposes difficulties with respect to methodological aspects like data censoring, the definition of success, and the range of firms included in the samples. These difficulties are generally not discussed by the literature. We therefore discuss these issues when critically reviewing the empirical studies and complement this discussion with own empirical results. While most other studies use samples containing a small number of firms and cover just a short time period, we use a broad sample containing firms of different sizes over an observation period of more than 20 years (1989-2010). Descriptive results suggest a declining success rate of pharmaceutical projects during recent years. Correcting for censored observations shows there has been a stabilization of success rates, but at a lower level than before. The main underlying reason for a lower success rate is the start of many more projects in more recent time periods. Results from hazard rate models even suggest there has only been a temporary drop in the success rate for projects between 1995 and 2002.
    Keywords: pharmaceutical R&D; drug development; innovation; success rates
    JEL: O32 L65
    Date: 2017

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