nep-hea New Economics Papers
on Health Economics
Issue of 2019‒09‒23
fourteen papers chosen by
Nicolas R. Ziebarth
Cornell University

  1. Time-inconsistent health behavior and its impact on aging and longevity By Strulik, Holger; Werner, Katharina
  2. Health Risk, Insurance and Optimal Progressive Income Taxation By Juergen Jung; Chung Tran
  3. Paying for efficiency: incentivising same-day discharges in the English NHS By Gaughan, James; Gutacker, Nils; Grašič, Katja; Kreif, Noemi; Siciliani, Luigi; Street, Andrew
  4. The optimal payment system for hospitals under adverse selection, moral hazard, and limited liability By François Maréchal; Lionel Thomas
  5. Performance Pay and Productivity in Health Care: Evidence from Community Health Centers By Cadena, Brian C.; Smith, Austin C.
  6. Technical Efficiency and Corporate Structure of Italian Private Hospitals: Evidence from One-step Stochastic Frontier Analysis By Marco Alberto De Benedetto; Antonio Fabio Forgione
  7. Improving Regulatory Effectiveness through Better Targeting: Evidence from OSHA By Johnson, Matthew S; Levine, David I; Toffel, Michael W
  8. Does It Pay to Bet on Your Favourite to Win? Evidence on Experienced Utility from the 2018 FIFA World Cup Experiment By Kossuth, Lajos; Powdthavee, Nattavudh; Harris, Donna; Chater, Nick
  9. Experimental Long-Term Effects of Early-Childhood and School-Age Exposure to a Conditional Cash Transfer Program By Molina Millán, Teresa; Macours, Karen; Maluccio, John; Tejerina, Luis
  10. The changing opportunities and outcomes of non-college educated Americans By Margherita Borella; Fang Yang; Mariacristina De Nardi
  11. “Do elderly people living in rural areas enjoy better mental well-being? Evidence from Catalonia, Spain” By Manuela Alcañiz; Maria-Carme Riera-Prunera; Manuela Alcañiz
  12. Health Inequality: Role of Insurance and Technological Progress By Siddhartha Sanghi
  13. Preterm Births and Educational Disadvantage: Heterogeneous Effects Across Families and Schools By Anna Baranowska-Rataj; Kieron J. Barclay; Joan Costa-Font; Mikko Myrskylä; Berkay Özcan
  14. The Effect of Antimalarial Campaigns on Child Mortality and Fertility in Sub-Saharan Africa By Joshua Wilde; Bénédicte Apouey; Joseph Coleman; Gabriel Picone

  1. By: Strulik, Holger; Werner, Katharina
    Abstract: We integrate time-inconsistent decision making due to hyperbolic discounting into a gerontologically founded life cycle model with endogenous aging and longevity. Individuals can slow down aging and postpone death by health investments and by reducing unhealthy consumption, conceptualized as smoking. We show that individuals continuously revise their original plans to smoke less and invest more in their health. Consequently, they accumulate health deficits faster and die earlier than originally planned. This fundamental health consequence of time-inconsistency has not been addressed in the literature so far. Because death is endogenous, any attempt to establish the time-consistent first-best solution by manipulating the first order conditions through (sin-) taxes and subsidies is bound to fail. We calibrate the model with U.S. data for an average American in the year 2010 and estimate that time-inconsistent health behavior causes a loss of about 5 years of life. We show how price policy can nudge individuals to behave more healthy such that they actually realize the longevity and value of life planned at age 20.
    Keywords: present bias,time-inconsistency,health behavior,aging,longevity,health policy
    JEL: D03 D11 D91 I10 I12
    Date: 2019
  2. By: Juergen Jung (Towson University); Chung Tran (Australian National University)
    Abstract: We study the optimal progressivity of personal income taxes in an environment where individuals are exposed to idiosyncratic shocks to health and labor productivity over the lifecycle. Our analysis is based on a large-scale overlapping generations general equilibrium model that is calibrated to the US economy. Our results indicate that the presence of health risk and health insurance has a strong effect on the amount of redistribution and social in- surance provided by progressive income taxes. In an environment with a non-universal health insurance system, such as the US system, the optimal income tax system is highly progressive in order to provide a sufficient level of redistribution to unhealthy low income individuals. The total welfare gain from optimizing the progressivity level is 5.6 percent in compensating lifetime consumption. More inclusive health insurance systems, such as Medicare for all, lead to large decreases in the optimal level of tax progressivity. When health expenditure risk is eliminated, the optimal income tax code becomes more similar to the findings of previous studies that used models without health risk. Our findings highlight the quantitative importance of accounting for the interdependence of health insurance and income taxes when designing optimal income tax policies.
    Date: 2019
  3. By: Gaughan, James; Gutacker, Nils; Grašič, Katja; Kreif, Noemi; Siciliani, Luigi; Street, Andrew
    Abstract: We study a pay-for-efficiency scheme that encourages hospitals to admit and discharge patients on the same calendar day when clinically appropriate. Since 2010, hospitals in the English NHS are incentivised by a higher price for patients treated as same-day discharge than for overnight stays, despite the former being less costly. We analyse administrative data for patients treated during 2006–2014 for 191 conditions for which same-day discharge is clinically appropriate – of which 32 are incentivised. Using difference-in-difference and synthetic control methods, we find that the policy had generally a positive impact with a statistically significant effect in 14 out of the 32 conditions. The median elasticity is 0.24 for planned and 0.01 for emergency conditions. Condition-specific design features explain some, but not all, of the differential responses.
    Keywords: Activity based funding; DRGs; Hospital incentives; Pay for performance; Policy evaluation; Prospective payment systems; Synthetic control method
    JEL: I11
    Date: 2019–08–21
  4. By: François Maréchal (Université de Bourgogne Franche-Comté, CRESE); Lionel Thomas (Université de Bourgogne Franche-Comté, CRESE)
    Abstract: This paper studies the optimal contract offered by a regulator to a partially altruistic hospital under adverse selection, moral hazard, and limited liability. We consider that the hospital privately observes the severity of illness of patients and chooses a hidden quality that influences the probability of some complications or comorbidities (CCs) occurring. We analyze the conditions under which the payment, for a given diagnosis Related Group, should be refined according to the severity of illness and the occurrence of CCs.
    Date: 2019–05
  5. By: Cadena, Brian C. (University of Colorado, Boulder); Smith, Austin C. (Miami University)
    Abstract: Nearly half of high earning workers receive performance pay as part of their compensation, but we know strikingly little about the incentive effects of piece rate compensation on high-skilled workers. In this paper, we examine changes in medical providers' output in response to a piece rate compensation scheme. We use data from a Federally Qualified Health Center that changed from a salary-based plan to one that rewarded providers for seeing more patients on a monthly basis. Two key facts guide our empirical approach. First, the timing of the switch from salary to piece rates varied at the individual level depending on the provider's hire date, which allows us to control for other changes over time in patient demand for services. Second, most providers worked under both compensation schemes, which allows us to make within-person comparisons. We further address incomplete compliance by using providers' expected monthly compensation plan status as an instrument for their actual status. We find that providers working under the piece rate scheme see roughly 18 percent more patients monthly. Only a small portion of this difference is due to within-provider changes in output, and we find no evidence that the incentive scheme causes providers to become more productive. Instead, most of this difference derives from compositional changes in the workforce, likely due to increased retention of more productive providers.
    Keywords: piece rates, performance pay, medical providers, fee for service
    JEL: J22 J33
    Date: 2019–08
  6. By: Marco Alberto De Benedetto (University of Messina); Antonio Fabio Forgione (University of Messina)
    Abstract: This paper aims to identify the relationship between the output-oriented technical efficiency of Italian private hospitals and their ownership structure. Using the one-step Stochastic Frontier Analysis technique, we explain technical efficiency throughout a set of variables capturing the firm’s shareholder activity, ownership concentration, and managerial ownership. Results suggest that (1) technical efficiency is positively affected by managerial ownership, and (2) private hospitals are more efficient when ownership concentration is low.
    Keywords: Technical Efficiency; Private Health System; Ownership; Stochastic Frontier
    JEL: D24 L25 I10
    Date: 2019–05
  7. By: Johnson, Matthew S; Levine, David I; Toffel, Michael W
    Abstract: We study how a regulator can best allocate its limited inspection resources. We direct our analysis to a US Occupational Safety and Health Administration (OSHA) inspection program that targeted dangerous establishments and allocated some inspections via random assignment. We find that inspections reduced serious injuries by an average of 9% over the following five years. We use new machine learning methods to estimate the effects of counterfactual targeting rules OSHA could have deployed. OSHA could have averted over twice as many injuries if its inspections had targeted the establishments where we predict inspections would avert the most injuries. The agency could have averted nearly as many additional injuries by targeting the establishments predicted to have the most injuries. Both of these targeting regimes would have generated over $1 billion in social value over the decade we examine. Our results demonstrate the promise, and limitations, of using machine learning to improve resource allocation. JEL Classifications: I18; L51; J38; J8
    Keywords: Social and Behavioral Sciences, Public Policy
    Date: 2019–09–01
  8. By: Kossuth, Lajos (Warwick Business School); Powdthavee, Nattavudh (University of Warwick); Harris, Donna (University of Oxford); Chater, Nick (Warwick Business School)
    Abstract: This paper examined whether people gained significant emotional benefits from not engaging in emotional hedging – betting against the occurrence of desired outcomes. Using the 2018 FIFA World Cup as the setting for a lab-in-the-field experiment, we found substantial reluctance among England supporters to bet against the success of the England football team in the tournament. This decision not to offset a potential loss through hedging did not pay off in people's happiness following an England win. It was, however, associated with a sharp decrease in people's happiness following an England loss. Post-match happiness is relatively more stable among those who chose to hedge or were randomly allocated to hedge. We conclude that people do not hedge enough partly because they tend to overestimate the expected diagnostic cost of betting against their social identity, while underestimate the negative emotional impact from betting on their favourite to win when they did not win.
    Keywords: hedging, happiness, social identity, wellbeing, world cup, experienced utility
    JEL: I31
    Date: 2019–09
  9. By: Molina Millán, Teresa (Universidade Nova de Lisboa); Macours, Karen (Paris School of Economics); Maluccio, John (Middlebury College); Tejerina, Luis (IDB Invest)
    Abstract: Numerous evaluations of conditional cash transfer (CCT) programs show positive short-term impacts, but there is only limited evidence on whether these benefits translate into sustained longer-term gains. This paper uses the municipal-level randomized assignment of a CCT program implemented for five years in Honduras to estimate long-term effects 13 years after the program began. We estimate intent-to-treat effects using individual-level data from the population census, which allows assignment of individuals to their municipality of birth, thereby circumventing migration selection concerns. For the non-indigenous, we find positive and robust impacts on educational outcomes for cohorts of a very wide age range. These include increases of more than 50 percent for secondary school completion rates and the probability of reaching university studies for those exposed at school-going ages. They also include substantive gains for grades attained and current enrollment for others exposed during early childhood, raising the possibility of further gains going forward. Educational gains are, however, more limited for the indigenous. Finally, exposure to the CCT increased the probability of international migration for young men, from 3 to 7 percentage points, also stronger for the non-indigenous. Both early childhood exposure to the nutrition and health components of the CCT as well as exposure during school-going ages to the educational components led to sustained increases in human capital.
    Keywords: conditional cash transfers (CCTs), early childhood, education, migration
    JEL: I25 I28 I38 O15
    Date: 2019–09
  10. By: Margherita Borella (Unversity of Torino and and CeRP-Collegio Carlo Alberto); Fang Yang (Louisiana State University); Mariacristina De Nardi (Minneapolis Fed, UCL, CEPR, and NBER)
    Abstract: We show that white, non-college-educated Americans born in the 1960s face lower life expectancies and higher medical expenses compared to those born in the 1940s. In addition, men's wages for each unit of human capital declined much more than women's across these cohorts. We calibrate a life-cycle model of couples and singles to match the labor market and savings outcomes of the white, non-college-educated 1960s cohort and use it to evaluate the effects of these changes. The changes in wages depressed the labor supply of men and increased that of women, especially in married couples. The decrease in life expectancy reduced retirement savings but the increase in out-of-pocket medical expenses increased them by more. Single men experienced the largest welfare losses, requiring a one-time asset compensation corresponding to 12.5% of the present discounted value of their earnings. Single women experienced a 7.2% welfare loss. Couples had a welfare loss of 8%. Lower wages explain 47-58% of these losses, shorter life expectancies explain 25-34%, and higher medical expenses account for the rest.
    Date: 2019
  11. By: Manuela Alcañiz (Riskcenter, Department of Econometrics, Statistics and Applied Economy Universitat de Barcelona. Av. Diagonal 690, 08034 Barcelona, Spain); Maria-Carme Riera-Prunera (Riskcenter, Department of Econometrics, Statistics and Applied Economy Universitat de Barcelona. Av. Diagonal 690, 08034 Barcelona, Spain); Manuela Alcañiz (Riskcenter, Department of Econometrics, Statistics and Applied Economy Universitat de Barcelona. Av. Diagonal 690, 08034 Barcelona, Spain)
    Abstract: Despite its relevance, the effect of rurality/territory on the emotional well-being of the elderly population has not been analyzed in depth. This work examines the influence of fixed and modifiable risk factors on emotional well-being at older ages with a special attention on the level of rurality in the environment. A population-based sample of 2,621 individuals aged 65-plus from Catalonia (Spain) is used. Cross-sectional data from 2015 to 2017 were provided by an official face-to-face survey. Based on a logistic regression, our results indicate that residing in a densely populated urban area reduces mental well-being in the elderly. More factors were found to be related to emotional well-being, especially those referred to functional limitations, social support and health burden. Health officials have to ensure that people enjoy a good quality of life during their last years of life.
    Keywords: Mental well-being, Rurality, Longevity, Spain. JEL classification:I31.
    Date: 2019–07
  12. By: Siddhartha Sanghi (Washington University in St. Louis)
    Abstract: The paper investigates the role of insurance and technological progress on the rising health inequality across income groups and its aggregate output costs for the US. We develop a continuous-time life-cycle model of an economy where individuals decide consumption-hours worked, whether to take up health insurance, when to visit a doctor, how much to invest in their health capital and whether to engage in bad behavior. A simple version of the model is able to explain about 50% of the gap in life-expectancy across income groups observed in data. In our model, consistent with the pattern in data, uninsured individuals, having deferred the treatment aren’t able to reap the benefits of the technological progress, thus resulting in poorer outcomes. The policy simulation with a plausible public health insurance scheme reduces the disparity in health outcomes to half. We use National Longitudinal Mortality Survey (NLMS), Mortality Differentials Across Communities (MDAC) and linked National Health Interview Survey (NHIS)- Medical Expenditures Panel Survey (MEPS) data to estimate the parameters of the model. As a cross-validation exercise using National Longitudinal Mortality Survey (NLMS) data, we exploit the state variation in Medicaid eligibility and find that among the working age individuals with low family income, Medicaid reduces the probability of dying by 9%. Using propensity score matching estimator, we find that private insurance reduces the probability of dying by upto 25% when compared to the uninsured.
    Date: 2019
  13. By: Anna Baranowska-Rataj; Kieron J. Barclay (Max Planck Institute for Demographic Research, Rostock, Germany); Joan Costa-Font; Mikko Myrskylä (Max Planck Institute for Demographic Research, Rostock, Germany); Berkay Özcan
    Abstract: Although preterm births are the leading cause of perinatal morbidity and mortality in advanced economies, evidence about the consequences of such births later in life is limited. Using Swedish population register data on cohorts born 1982-1994 (N=1,087,750), we examine the effects of preterm births on school grades using sibling fixed effect models which compare individuals with their non-preterm siblings. We test for heterogeneous effects by degree of prematurity, as well as whether family socioeconomic resources and school characteristics can compensate for any negative effects of premature births. Our results show that preterm births can have negative effects on school grades, but these negative effects are largely confined to children born extremely preterm (<28 weeks of gestation, i.e. born at least 10 weeks earlier). Children born moderately preterm (i.e. born up to 5 weeks early) suffer no ill effects. We do not find any evidence for the moderating effect of parental socioeconomic resources. Our results indicate that school environment is very important for the outcomes of preterm born children, such that those born extremely preterm that are in the top decile of schools have as good grades as those born full-term that are in an average school. However, good schools appear to lift scores for all groups, and as a result that gap between extremely preterm and full-term children remains also in the best schools. This highlights the role of schools as institutions that may either reduce or reinforce the early life course disadvantage.
    Keywords: Sweden, education, premature birth, school success
    JEL: J1 Z0
    Date: 2019–09
  14. By: Joshua Wilde (MPIDR - Max Planck Institute for Demographic Research - Max-Planck-Gesellschaft); Bénédicte Apouey (PSE - Paris School of Economics, PJSE - Paris Jourdan Sciences Economiques - UP1 - Université Panthéon-Sorbonne - ENS Paris - École normale supérieure - Paris - INRA - Institut National de la Recherche Agronomique - EHESS - École des hautes études en sciences sociales - ENPC - École des Ponts ParisTech - CNRS - Centre National de la Recherche Scientifique); Joseph Coleman (USF - University of South Florida); Gabriel Picone (USF - University of South Florida)
    Abstract: We examine the extent to which recent declines in child mortality and fertility in Sub-Saharan Africa can be attributed to insecticide-treated bed nets (ITNs). Exploiting the rapid increase in ITNs since the mid-2000s, we employ a difference-in-differences estimation strategy to identify the causal effect of ITNs on mortality and fertility. We show that the ITN distribution campaigns reduced all-cause child mortality, but surprisingly increased total fertility rates in the short run in spite of reduced desire for children and increased contraceptive use. We explain this paradox in two ways. First, we show evidence for an unexpected increase in fecundity and sexual activity due to the better health environment after the ITN distribution. Second, we show evidence that the effect on fertility is positive only temporarily – lasting only 1-3 years after the beginning of the ITN distribution programs – and then becomes negative. Taken together, these results suggest the ITN distribution campaigns may have caused fertility to increase unexpectedly and temporarily, or that these increases may just be a tempo effect – changes in fertility timing which do not lead to increased completed fertility.
    Keywords: Malaria,Bed nets,Child mortality,Fertility,Sub-Saharan Africa
    Date: 2019–09

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