nep-hea New Economics Papers
on Health Economics
Issue of 2018‒10‒15
sixteen papers chosen by
Nicolas R. Ziebarth
Cornell University

  1. Mergers and Birth Outcomes: Evidence from Maternity Ward Closures By Avdic, Daniel; Lundborg, Petter; Vikström, Johan
  2. Biology Meets Behavior in a Clinical Trial: Two Relationships Between Mortality and Mammogram Receipt By Amanda E. Kowalski
  3. How does the type of remuneration affect physician behaviour? Fixed salary versus fee-for-service By Kurt R. Brekke; Tor Helge Holmäs; Karin Monstad; Odd Rune Straume
  4. A Test of Supply-side Explanations of Geographic Variation in Health Care Use By Kevin Callison; Robert Kaestner; Jason Ward
  5. Thinking of Incentivizing Care? The Effect of Demand Subsidies on Informal Caregiving and Intergenerational Transfers By Costa-Font, Joan; Jimenez-Martin, Sergi; Vilaplana-Prieto, Cristina
  6. Self-assessed cognitive ability and financial wealth: Are people aware of their cognitive decline? By Fabrizio Mazzonna; Franco Peracchi
  7. The Growing American Health Penalty: International Trends in the Employment of Older Workers with Poor Health By Baumberg Geiger, Ben; Böheim, René; Leoni, Thomas
  8. The Great Recession and Mental Health: the Effect of Income Loss on the Psychological Health of Young Mothers By Fiona Kiernan
  9. Mortality Risk, Insurance, and the Value of Life By Daniel Bauer; Darius Lakdawalla; Julian Reif
  10. Negligible Senescence: An Economic Life Cycle Model for the Future By Davide Dragone; Holger Strulik
  11. Is Good Health Contagious? The Impact of BMI Environment on Individual BMI By McKennie, Caitlin; Argys, Laura M.; Friedson, Andrew I.
  12. Who Votes for Medicaid Expansion? Lessons from Maine’s 2017 Referendum By David A. Matsa; Amalia R. Miller
  13. Establishing a Reasonable Price for an Orphan Drug By Berdud, M.; Drummond, M.F; Towse, A.
  14. Mental Health and Reporting Bias: Analysis of the GHQ-12 By Brown, Sarah; Harris, Mark N.; Srivastava, Preety; Taylor, Karl
  15. The Long-Term Consequences of Having Fewer Children in Old Age: Evidence from China’s “Later, Longer, Fewer” Campaign By Yi Chen; Hanming Fang
  16. Disability for HIV and Disincentives for Health: The Impact of South Africa's Disability Grant on HIV/AIDS Recovery By Noah Haber; Till B\"arnighausen; Jacob Bor; Jessica Cohen; Frank Tanser; Deenan Pillay; G\"unther Fink

  1. By: Avdic, Daniel (CINCH); Lundborg, Petter (Lund University); Vikström, Johan (IFAU)
    Abstract: Evidence suggests that hospital mergers can reduce costs but less is known about their effects on patient outcomes. We study how a wave of mergers that led to the shutdown of one third of all Swedish maternity wards affected the health of mothers who gave birth and their newborns. Applying a difference-in-differences approach to register data on all births in Sweden over two decades, we show that the closures negatively affected the health of mothers, while effects on infant health were small and insignificant. The adverse effects on mothers are mainly driven by crowding effects at remaining wards rather than by increased distance to the wards. Moreover, the closures reduced the use of C-sections for high-risk births.
    Keywords: quality of care, hospital closure, birth outcomes
    JEL: D24 I11 I18 J13 R41
    Date: 2018–08
  2. By: Amanda E. Kowalski
    Abstract: I unite the medical and economics literatures by examining relationships between biology and behavior in a clinical trial. Specifically, I identify relationships between mortality and mammogram receipt using data from the Canadian National Breast Screening Study, an influential clinical trial on mammograms. I find two important relationships. First, I find heterogeneous selection into mammogram receipt: women more likely to receive mammograms are healthier. This relationship follows from a marginal treatment effect (MTE) model that assumes no more than the local average treatment effect (LATE) assumptions. Second, I find treatment effect heterogeneity along the mammogram receipt margin: women more likely to receive mammograms are more likely to be harmed by them. This relationship follows from an ancillary assumption that builds on the first relationship. My findings contribute to the literature concerned about harms from mammography by demonstrating variation across the mammogram receipt margin. This variation poses a challenge for current mammography guidelines for women in their 40s, which unintentionally encourage more mammograms for healthier women who are more likely to be harmed by them.
    JEL: C18 I1 I12
    Date: 2018–09
  3. By: Kurt R. Brekke (Department of Economics, Norwegian School of Economics (NHH)); Tor Helge Holmäs (Uni Research Rokkan Centre); Karin Monstad (Uni Research Rokkan Centre); Odd Rune Straume (University of Minho and NIPE)
    Abstract: We analyse the effects of two different types of physician remuneration - fee-for-service and fixed salary - on the treatment decisions of general practitioners (GPs) and on patients´ health outcomes. Using rich Norwegian register data during the period 2009-2013, we focus on GP locums working in a succession of temporary positions, which allows us to observe the same GPs working under different remuneration schemes within a relatively short period of time. We find that GPs respond strongly and consistently to changes in remuneration type. Compared with fixed salary, GP payment by fee-for-service leads to an increase in the supply of consultations and a higher provision of medical services (along several dimensions) per consultation. This has also signficant implications for patients´ health outcomes. The probability of experiencing an emergency admission to hospital shortly after a GP consultation is close to 20 percent lower if the GP is paid by fee-for-service instead of fixed salary. Overall, our analysis suggests that fixed-salary remuneration leads to underprovision of primary care.
    Keywords: Physicians, Primary care; Fixed salary; Fee-for-service.
    JEL: I11 I18 J33
    Date: 2018
  4. By: Kevin Callison; Robert Kaestner; Jason Ward
    Abstract: Evidence of regional variation in health care utilization has been well-documented over the past 40 years. Yet uncertainty persists about whether this variation is primarily the result of supply-side or demand-side forces, and the difference matters for both theory and policy. In this article, we provide new evidence as to the cause of geographic variation in health care utilization. We do so by examining changes in health care use by the near-elderly as they transition from being uninsured into Medicare. Results provide support for a causal supply-side explanation of regional variation. Estimates indicate that gaining Medicare coverage in above-median spending regions increases the probability of at least one hospital visit by 36% and the probability of having more than five doctor visits by 25% relative to similar individuals in below-median spending regions.
    JEL: D43 H42 H51 I1 I11 I13
    Date: 2018–09
  5. By: Costa-Font, Joan (London School of Economics); Jimenez-Martin, Sergi (Universitat Pompeu Fabra); Vilaplana-Prieto, Cristina (Universidad de Murcia)
    Abstract: We study the effect of demand-side subsidies to old age care recipients on both caregiving and intergenerational transfer decisions. We exploit two quasi-natural experiments referring to the inception of a universal and unconditional caregiving allowance in 2007 and its subsequent reduction in 2012. We find that the introduction of a caregiving allowance of a magnitude up to 530€ in 2011 increased the probability of informal caregiving by 32% and the intensity of care in 13.5 days/year. Consistently, we find that downstream (upstream) intergenerational transfers increased (decreased) in a magnitude of 29% (15%). The effects concentrate among middle and lower income households and were attenuated by the reduction of the subsidy.
    Keywords: caregiving, intergenerational transfers, unconditional transfer, difference-in-differences, long-term care, family transfers, exchange motivation, caregiving allowances, demand-side cash subsidies
    JEL: I18 D14 G22
    Date: 2018–08
  6. By: Fabrizio Mazzonna (Università della Svizzera Italiana); Franco Peracchi (Georgetown University and EIEF)
    Abstract: We investigate whether people correctly perceive their own cognitive decline and the potential financial consequences of misperception. Using longitudinal data from the Health and Retirement Survey, we examine the relationship between self-ratings of memory ability and assessed memory performance and show that older people tend to underestimate their own cognitive decline. We then investigate the financial consequences of this underestimation. We show that respondents who experience a severe cognitive decline across waves, but are unaware of it, are more likely to experience financial losses. Finally, we examine potential explanations for the patterns of wealth changes observed among respondents who are unaware of their cognitive decline. Our findings support the view that financial losses among unaware respondents reflect bad financial decisions, not rational disinvestment strategies.
    Date: 2018
  7. By: Baumberg Geiger, Ben (University of Kent); Böheim, René (University of Linz); Leoni, Thomas (WIFO - Austrian Institute of Economic Research)
    Abstract: Many countries have reduced the generosity of disability benefits while making them more activating – yet few studies have examined how employment rates have subsequently changed. We present estimates of how the employment rates of older workers with poor health in 13 high-income countries changed between 2004-7 and 2012-15 using HRS/SHARE/ELSA data. We find that those in poor health in the USA have experienced a unique deterioration: they have not only seen a widening gap to the employment rates of those with good health, but their employment rates fell per se. We find only for Sweden (and possibly England) signs that the health employment gap shrank. We then examine possible explanations for the development in the USA: we find no evidence it links to labour market trends, but possible links to the USA's lack of disability benefit reform – which should be considered alongside the wider challenges of our findings for policymakers.
    Keywords: disability benefits, employment of older workers, health employment gap
    JEL: J14 J18 H55
    Date: 2018–08
  8. By: Fiona Kiernan (School of Economics & Geary Institute, University College Dublin)
    Abstract: There is little consensus as to the effect of recessions on health, which may be due to the heterogenous nature of recessions, the choice of health outcome or the description of the independent variable involved. In contrast to previous work, which has predominantly studied labour market loss, I examine the relationship of income loss and health, and in particular focus on psychological rather than physical health. I study disposable income loss because disposable income is related to consumption expenditure, and therefore satisfaction. Psychological, rather than physical, health is important because younger populations are unlikely to manifest clinical evidence of recession-related disease in the short term. The Irish recession provides me with an opportunity to study the effect of changes in income, since households who remained in employment also experienced changes in disposable income. Using panel data from three waves of the Growing Up in Ireland study, I find that income loss is associated with an increase in depression, but not in parental stress. This effect of income loss is seen for those who are home owners, and subjective reports of being in mortgage or rent arrears is also associated with an increase in depression score.
    Date: 2018–10–09
  9. By: Daniel Bauer; Darius Lakdawalla; Julian Reif
    Abstract: We develop and apply a generalized framework for valuing health and longevity improvements that departs from conventional assumptions of full annuitization and deterministic mortality. In contrast to conventional theory, we find a given mortality improvement may be worth more, not less, to patients facing shorter lives. Using real-world data, we calculate that severe illness can increase the value of statistical life by over $1 million. This result reconciles an anomaly in the research on preferences for life-extension. Moreover, our framework can value the prevention of mortality and of illness. We calculate that treating illness is up to an order of magnitude more valuable to consumers than prevention, even when both extend life equally. This asymmetry helps explain low observed investment in preventive care. Finally, we show that retirement annuities boost aggregate demand for life-extension. For instance, Social Security adds $11.5 trillion (10.5 percent) to the value of post-1940 longevity gains.
    JEL: H51 H55 I10
    Date: 2018–09
  10. By: Davide Dragone; Holger Strulik
    Abstract: We propose a model of aging and health deficit accumulation model with an infinite time horizon and a steady state of constant health. The time of death is uncertain and endogenous to lifestyle and health behavior. This setup can be conceptualized as a strive for immortality that is never reached. We discuss adjustment dynamics and show that the new setup is particularly useful to understand aging of the oldest old, i.e. of individuals for which morbidity and mortality have reached a plateau. We then show how the existence of a steady state can be used to perform comparative dynamics exercises analytically. As an illustration we investigate the effects of more expensive health investment and of advances in medical technology on optimal short run and long run health behavior.
    Keywords: comparative dynamics, endogenous mortality, life-expectancy, medical progress
    JEL: D91 I12 J17
    Date: 2018
  11. By: McKennie, Caitlin (University of Stirling); Argys, Laura M. (University of Colorado Denver); Friedson, Andrew I. (University of Colorado Denver)
    Abstract: Increasing trends in obesity have driven policymakers around the US to examine factors associated with lower Body Mass Index (BMI) and improved health. Our research examines the relationship between an individual's health and their environment. Specifically, we examine whether moving to a state with a different statewide average BMI than the state of origin leads to changes in individual BMI. Combining individual data from the 1997 cohort of the National Longitudinal Survey of Youth with state-level data on average BMI from the Centers for Disease Control, we find that individuals experience changes in BMI that move their individual BMI based on the BMI of their destination state relative to their state of origin. The effect is largely due to female moving to states with much higher BMI than their state of origin. These individuals see an increase in their average BMI of approximately 2.5 percent and an increase in the likelihood of being overweight of approximately 9.8 percentage points.
    Keywords: Body Mass Index, peer effects, migration, obesity
    JEL: I1 I12 J61
    Date: 2018–08
  12. By: David A. Matsa; Amalia R. Miller
    Abstract: In November 2017, Maine became the first state in the nation to vote on a key provision of the Affordable Care Act: the expansion of Medicaid. We analyze local voting results to identify characteristics of areas that support Medicaid expansion. Support is strongly correlated with voter education. Places with more bachelor’s degree holders more often vote in favor, whereas those with more associate’s degree graduates vote against. Other patterns are consistent with economic self-interest. Conditional on education rates, areas with more uninsured individuals who would qualify for expanded coverage tend to vote in favor, while those with more high-income individuals vote against. Also conditional on education rates, greater hospitals employment is associated with support for expansion, but the presence of other health professionals, whose incomes might decrease from expansion, is associated with less support. Extrapolating from Maine to other states, our model predicts that hypothetical referendums on Medicaid expansion would pass in five of the 18 states that had not yet expanded Medicaid coverage.
    JEL: D72 I13 I23
    Date: 2018–09
  13. By: Berdud, M.; Drummond, M.F; Towse, A.
    Abstract: The high cost of drugs for rare diseases ('orphan drugs') has generated considerable debate. While there is debate in the economic literature over whether a premium should be paid for 'rarity', these drugs are reimbursed with high prices in many countries. The question then arises as to what should be a reasonable price for an orphan drug? The research by OHE authors Mikel Berdud and Adrian Towse, along with Professor Mike Drummond from University of York, addresses that question, based on the proposition that, although society may be willing to sacrifice some health gain overall to make treatments for orphan diseases available, it would not accept a situation whereby manufacturers of these drugs make higher profits than those manufacturers of drugs for non-orphan conditions. We propose a way to adjust the established cost-effectiveness thresholds (CETs) by several factors, including, the size of patient populations and the costs of research and development (R&D). Once adjusted, CETs sustain prices that generate rates of return from investments in developing orphan drugs no greater than the industry average. Authors firstly formally develop a general algebraic expression for the adjustment of CETs based on the proposed concept of reasonable price. Then, such general expression is applied, using actual data, to adjust a CET by the two main factors playing a role - (i) the cost of R&D for orphan drugs as compared to non-orphans and, (ii) patient population sizes targeted by orphans and non-orphans. Research shows that, on average, the estimated research and development (R&D) cost of an orphan drug is around the 27% of the cost of a non-orphan. However, potential market revenue is also lower for orphan drugs compared to non-orphans, as the average non-orphan patient populations were around 80 and 100 patients per 50,000 people for SMC and NICE appraised drugs respectively, which are higher than the cut-off population size (25 patients per 50,000 people) for orphan designation in the EMA's definition of rare diseases. Using the NICE incremental cost-effectiveness threshold (£20K per QALY) as an illustrative anchor and adjusting by R&D costs and expected market revenue, in the base case scenario the adjusted CET for orphan drugs is estimated to be £39.3K per QALY at the orphan population cut-off and £78.5K per QALY at the orphan population mid-point. For ultra-orphan drugs (with a patient population size of 1 in 50,000 or lower) the adjusted CET resulted in £938.4K. Based on results, authors conclude that to secure a price for orphan drugs that enables the manufacturer to achieve a rate of return equivalent to that from non-orphan drugs, the cost-effectiveness threshold for orphans and ultra-orphans would need to be higher. The threshold would also need to increase as the targeted patient population size decreases. It is important to note that the report does not indicate what society should be prepared to pay for an orphan drug, since this involves important societal judgments about whether some population health in total should be forgone in order to provide funding for treatments for rare conditions and, if so, how much. Rather, the authors' approach is one way of determining the maximum allowable price society should be willing to pay, based on allowing a reasonable rate of return.
    Keywords: Economics of innovation
    JEL: I1
    Date: 2018–07–01
  14. By: Brown, Sarah (University of Sheffield); Harris, Mark N. (Curtin University); Srivastava, Preety (RMIT University); Taylor, Karl (University of Sheffield)
    Abstract: Measures of mental wellbeing are heavily relied upon to identify at-risk individuals. However, self-reported mental health metrics might be unduly affected by mis-reporting (perhaps stemming from stigma effects). In this paper we consider this phenomenon using data from the British Household Panel Survey (BHPS) and its successor, Understanding Society, the UK Household Longitudinal Study (UKHLS) over the period 1991 to 2016. In particular, in separate analyses of males and females we focus on the GHQ-12 measure, and specifically its sub-components, and how inaccurate reporting can adversely affect the distribution of the index. The results suggest that individuals typically over-report pyschological wellbeing and that reporting bias is greater for males. The results are then used to adjust the composite GHQ-12 score to take such mis-reporting behaviours into account. To further illustrate the importance of this, we compare the effects of the adjusted and unadjusted GHQ-12 index when modelling a number of economic transitions. The results reveal that using the original GHQ-12 score generally leads to an underestimate of the effect of psychological distress on transitions into improved economic states, such as unemployment into employment.
    Keywords: GHQ-12 index, inflated outcomes, mental health and mis-reporting
    JEL: C3 D1 I1
    Date: 2018–08
  15. By: Yi Chen; Hanming Fang
    Abstract: Family planning plays a central role in contemporary population policies. However, little is known about its long-term consequences in old age because of the identification challenge. In this study, we examine how family planning affects the quality of life of the Chinese elderly. The direction of the effect is theoretically unclear. On the one hand, having fewer children allows parents to reallocate more resources to themselves, improving their well-being. On the other hand, having fewer children also leads to less care and companionship from children in old age. To empirically probe the effect of family planning, we identify the causal impact by exploiting the provincial heterogeneity in implementing the “Later, Longer, Fewer” policies in the early 1970s. We find that the policies greatly reduced the number of children born to each couple by 0.85. Parents also receive less support from children in terms of living arrangements, inter vivos transfers, and emotional support. Finally, we find that family planning has drastically different effects on elderly parent's physical and mental well-being. Whereas parents who are more exposed to the family planning policies consume more and enjoy slightly better physical health status, they report more severe depression symptoms. Our study calls for greater attention to the mental health status of the Chinese elderly.
    JEL: H31 I15 I18 J13
    Date: 2018–09
  16. By: Noah Haber; Till B\"arnighausen; Jacob Bor; Jessica Cohen; Frank Tanser; Deenan Pillay; G\"unther Fink
    Abstract: South Africa's disability grants program is tied to its HIV/AIDS recovery program, such that individuals who are ill enough may qualify. Qualification is historically tied to a CD4 count of 200 cells/mm3, which improve when a person adheres to antiretroviral therapy. This creates a potential unintended consequence where poor individuals, faced with potential loss of their income, may choose to limit their recovery through non-adherence. To test for manipulation caused by grant rules, we identify differences in disability grant recipients and non-recipients' rate of CD4 recovery around the qualification threshold, implemented as a fixed-effects difference-in-difference around the threshold. We use data from the Africa Health Research Institute Demographic and Health Surveillance System (AHRI DSS) in rural KwaZulu-Natal, South Africa, utilizing DG status and laboratory CD4 count records for 8,497 individuals to test whether there are any systematic differences in CD4 recover rates among eligible patients. We find that disability grant threshold rules caused recipients to have a relatively slower CD4 recovery rate of about 20-30 cells/mm3/year, or a 20% reduction in the speed of recovery around the threshold.
    Date: 2018–10

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