Int J Health Care Finance Econ
· 2006 Mar · PMID 16612569
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U.S. health care is often seen as an outlier, with high costs and only middling outcomes. This view implies a household production function for health, with both health care and lifestyle serving as inputs. Building on e...U.S. health care is often seen as an outlier, with high costs and only middling outcomes. This view implies a household production function for health, with both health care and lifestyle serving as inputs. Building on earlier work by Miller and Frech (2004), we make this argument explicit by estimating a production function from augmented OECD data. This allows us to determine whether the U.S. is literally an outlier; which turns on whether the United States is very far off the production surface. We find that the Unites States is somewhat less productive than the average OECD country, but that a substantial part of the observed difference results from poor lifestyle choices, particularly obesity.
Int J Health Care Finance Econ
· 2005 Dec · PMID 16378240
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Health economists use "willingness-to-pay" to assess the prospective value of novel interventions. The technique remains controversial, not least with respect to the formats under which values are elicited. The paper ana...Health economists use "willingness-to-pay" to assess the prospective value of novel interventions. The technique remains controversial, not least with respect to the formats under which values are elicited. The paper analyses the results of a series of studies of the same intervention valued by the same population, in which different elicitation formats were employed. The findings support the hypothesis that data collected using different formats give rise to different demand curves, from which different inferences about demand elasticity, profitability and consumer surplus will be derived. Judgements as to the relative merits of rival interventions depend crucially upon whichever format has been used to evaluate each intervention.
Int J Health Care Finance Econ
· 2005 Dec · PMID 16378239
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Relative to whites, Hispanics and blacks are less likely to have employer health insurance coverage. We examine whether ethnicity or race affects employment in traditional jobs or in contingent and alternative work arran...Relative to whites, Hispanics and blacks are less likely to have employer health insurance coverage. We examine whether ethnicity or race affects employment in traditional jobs or in contingent and alternative work arrangements, and whether ethnicity or race affects insurance offer, eligibility, and/or enrollment, conditional on employment sector. Health insurance disparities relative to whites are more pronounced for Hispanics, primarily due to disparities in employment by firms that offer coverage. Eliminating racial/ethnic disparities in offers, eligibility, and takeup would increase insurance coverage rates of Hispanics in traditional jobs and of both Hispanics and blacks in contingent and alternative jobs.
Int J Health Care Finance Econ
· 2005 Dec · PMID 16378238
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The cost of hospital care depends on the quality of the service, on the personal characteristics of the patient, on the effort of the medical staff and on information asymmetry. In this article the cost minimizing proper...The cost of hospital care depends on the quality of the service, on the personal characteristics of the patient, on the effort of the medical staff and on information asymmetry. In this article the cost minimizing properties of alternative payment systems will be discussed in a context where hospitals can observe patient severity and compete according to the rules of Hotelling's spatial competition. The scheme is designed from the standpoint of a purchaser that sets up a contract with several providers for services of a given quality at the least possible cost. Patients' severity cannot be observed and quality cannot be verified, but the latter can be inferred through the choice of patients. The model shows that in the health care market, prospective payments and yardstick competition are weak instruments for cost containment; incentive compatible schemes are, at least from a theoretical point of view, better instruments especially in a context where the purchaser can use signals relating to the variables it cannot observe. Cost inflation has two components: the information rent paid to the provider and inefficiency. In our model the information rent is used by the provider to get more patients to his hospital; spatial competition can then be used to curb the cost of providing hospital care.
Int J Health Care Finance Econ
· 2005 Dec · PMID 16378237
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This work examines the role of penalties as providers of incentives to prevent medical errors and ensure that such incidents, once they occur, become common knowledge. It is shown that a scheme with two penalties (accoun...This work examines the role of penalties as providers of incentives to prevent medical errors and ensure that such incidents, once they occur, become common knowledge. It is shown that a scheme with two penalties (accountability and non-report) induces the first-best solution. However, this scheme does not necessarily imply a punitive environment, but may, under given circumstances, yield insignificant and even negative penalties. Alternative sanction systems, such as voluntary reporting and immunity, are found to have less desirable properties. An exception is confidentiality (anonymity) which turns out to be an optimal scheme. Finally, the examination of various penalty restrictions (scope and scale) shows that such barriers may promote both tougher and softer sanction schemes.
Int J Health Care Finance Econ
· 2005 Sep · PMID 16082519
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A consistent pattern in the nursing home industry is that non-profit institutions serve a lower proportion of Medicaid patients than do for-profit facilities. This is contrary to the expectation that non-profit, altruist...A consistent pattern in the nursing home industry is that non-profit institutions serve a lower proportion of Medicaid patients than do for-profit facilities. This is contrary to the expectation that non-profit, altruistically motivated firms should serve a larger proportion of the less profitable Medicaid patients than proprietary firms. The literature confirms this pattern empirically, but provides no theoretical basis for it, which is the contribution of this paper. Specifically, we show theoretically that information disparities between providers and consumers regarding quality fosters an environment in which the percentage of uninformed consumers is a key factor in determining public-private patient mix.
Int J Health Care Finance Econ
· 2005 Sep · PMID 16082518
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This paper extends prior research on the effect of Medicaid coverage on medical interventions during pregnancy (prenatal ultrasound) and birth (ultrasound during delivery, cesarean delivery, inducement, and fetal monitor...This paper extends prior research on the effect of Medicaid coverage on medical interventions during pregnancy (prenatal ultrasound) and birth (ultrasound during delivery, cesarean delivery, inducement, and fetal monitor). The data are from two sources: the New York State Vital Statistics (VS) matched infant birth-death file and the Statewide Planning and Research Cooperative System (SPARCS) file for 1993--1996. Medicaid coverage increases the likelihood of teens and adults receiving prenatal care relative to being uninsured. Overall, the effect of insurance type varies depending on whether the procedure is part of standard care (ultrasound and fetal monitor) or more likely to be elective (inducement and cesarean delivery). Insurance type has a greater effect for elective procedures than for procedures that are part of standard care.
Int J Health Care Finance Econ
· 2005 Sep · PMID 16082517
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It has become clear that due to market failure, state failure, and other reasons, the conventional sources of finance alone could not solve the health problem of the rural population, particularly that of the socially ex...It has become clear that due to market failure, state failure, and other reasons, the conventional sources of finance alone could not solve the health problem of the rural population, particularly that of the socially excluded and disadvantaged groups. Community Based Health Insurance Schemes (CBHIS) are one of the most recently mentioned options to narrow the existing inequalities in access to basic health services. This study assesses the prospect of CBHIS in the rural areas of Ethiopia using a double bounded dichotomous contingent valuation method. The results show that even in one of the poorest countries of the world, there is a promising prospect to introduce CBHIS.
Int J Health Care Finance Econ
· 2005 Sep · PMID 16082516
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This paper evaluates the impact of Colombia's subsidized health insurance program (SUBS) on medical care utilization. Colombia's SUBS program is a demand-side subsidy intended for low-income families, where the screening...This paper evaluates the impact of Colombia's subsidized health insurance program (SUBS) on medical care utilization. Colombia's SUBS program is a demand-side subsidy intended for low-income families, where the screening of beneficiaries takes place in decentralized locations across the country. Due to the self-selection problems associated with non-experimental data, we implement Propensity Score Matching (PSM) methods to measure the impact of this subsidy on medical care utilization. By combining unique household survey data with community and regional data, we are able to compute propensity scores in a way that is consistent with both the local government's decision to offer the subsidy, and with the individual's decision to accept the subsidy. Although the application of PSM using these rich datasets helps to achieve a balance between the treatment and control groups along observable dimensions, we also present instrumental variable estimates to control for the potential endogeneity of program participation. Using both methods, we find that Colombia's subsidized insurance program greatly increased medical care utilization among the country's poor and uninsured. This evidence supports the case for other Latin American countries implementing similar subsidy programs for health insurance for the poor.
Int J Health Care Finance Econ
· 2005 Jun · PMID 15912316
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In several instances, third-party payers negotiate prices of health care services with providers. We show that a third-party payer may prefer to deal with a professional association than with the sub-set constituted by t...In several instances, third-party payers negotiate prices of health care services with providers. We show that a third-party payer may prefer to deal with a professional association than with the sub-set constituted by the more efficient providers, and then apply the same price to all providers. The reason for this is the increase in the bargaining position of providers. The more efficient providers are also the ones with higher profits in the event of negotiation failure. This allows them to extract a higher surplus from the third-party payer.
Int J Health Care Finance Econ
· 2005 Jun · PMID 15912315
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As there is general disagreement about the way generic medicines should be commercialized, two retailing policies are analyzed, taking into account their effects on the welfare of patients, government, pharmacies and phy...As there is general disagreement about the way generic medicines should be commercialized, two retailing policies are analyzed, taking into account their effects on the welfare of patients, government, pharmacies and physicians. In the first policy scenario, pharmacies are allowed to substitute generic medicines for branded ones, while in the second, substitution is forbidden. In both cases a pharmacies association is allowed to have a share in the production of generic medicines. The model predicts that under some conditions patients may prefer substitution by pharmacies but when doctors' decisions are binding, they are never "excessively bad". However, the policy choice belongs to the government, which prefers to allow for substitution more often than patients would like.
Int J Health Care Finance Econ
· 2005 Jun · PMID 15912314
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Most research using cross-country data find income elasticities equal to or exceeding unity with respect to health expenditure. These conclusions might be confounded due to omitted variables bias and the presence of unob...Most research using cross-country data find income elasticities equal to or exceeding unity with respect to health expenditure. These conclusions might be confounded due to omitted variables bias and the presence of unobserved country and year specific determinants of per capita health expenditures. I obtain results supporting these hypotheses using recent (1990-98) data from fifteen OECD countries. Specifically, OLS coefficient estimates drop by more than 50% with the use of two-way fixed effects models and the inclusion of various demand and supply based determinants of per capita health expenditures, implying income elasticities of between 0.21 and 0.51. Weighted Least Squares (WLS), Generalized Least Squares (GLS) and Instrumental Variables (IV) estimation yield similar results.
Int J Health Care Finance Econ
· 2005 Jun · PMID 15912313
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Health care may be similar to Sisyphus work: When the task is about to be completed, work has to start all over again. To see the analogy, consider an initial decision to allocate more resources to health. The likely con...Health care may be similar to Sisyphus work: When the task is about to be completed, work has to start all over again. To see the analogy, consider an initial decision to allocate more resources to health. The likely consequence is an increased number of survivors, who will exert additional demand for health care. With more resources allocated to health, the cycle starts over again. The objective of this paper is to improve on earlier research that failed to find evidence of a Sisyphus syndrome in industrialized countries. This time, there are signs of such a cycle, which however seems to have faded away recently.
Int J Health Care Finance Econ
· 2005 Mar · PMID 15714265
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This paper addresses two seeming paradoxes in the realm of employer-provided health insurance: First, businesses consistently claim that they bear the burden of the insurance they provide for employees, despite theory an...This paper addresses two seeming paradoxes in the realm of employer-provided health insurance: First, businesses consistently claim that they bear the burden of the insurance they provide for employees, despite theory and empirical evidence indicating that workers bear the full incidence. Second, benefit generosity and the percentage of premiums paid by employers have decreased in recent decades, despite the preferential tax treatment of employer-paid benefits relative to wages-trends unexplained by the standard incidence model. This paper offers a revised incidence model based on nominal wage rigidity, in an attempt to explain these paradoxes. The model predicts that when the nominal wage constraint binds, some of the burden of increasing insurance premiums will fall on firms, particularly small companies with low-wage employees. In response, firms will reduce employment, decrease benefit generosity, and require larger employee premium contributions. Using Current Population Survey data from 2000-2001, I find evidence for this kind of wage rigidity and its associated impact on the employment and premium contributions of low-wage insured workers during a period of rapid premium growth.
Int J Health Care Finance Econ
· 2005 Mar · PMID 15714264
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In the last few decades, private health insurance rates have declined in many countries. In countries and states with community rating, a major cause is adverse selection. In order to address age-based adverse selection,...In the last few decades, private health insurance rates have declined in many countries. In countries and states with community rating, a major cause is adverse selection. In order to address age-based adverse selection, Australia has recently begun a novel approach which imposes stiff penalties for buying private insurance later in life, when expected costs are higher. In this paper, we analyze Australia's Lifetime Cover in the context of a modified version of the Rothschild-Stiglitz insurance model (Rothschild and Stiglitz, 1976). We allow empirically-based probabilities to increase by age for low-risk types. The model highlights the shortcomings of the Australian plan. Based on empirically-based probabilities of illness, we predict that Lifetime Cover will not arrest adverse selection. The model has many policy implications for government regulation encouraging long-term health coverage.
Int J Health Care Finance Econ
· 2005 Mar · PMID 15714263
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We perform an econometric analysis of the effect of new drug launches on longevity, using data from the IMS Health Drug Launches database and the WHO Mortality Database. Under conservative assumptions, our estimates impl...We perform an econometric analysis of the effect of new drug launches on longevity, using data from the IMS Health Drug Launches database and the WHO Mortality Database. Under conservative assumptions, our estimates imply that the average annual increase in life expectancy of the entire population resulting from new drug launches is about one week, and that the incremental cost effectiveness ratio (new drug expenditure per person per year divided by the increase in life-years per person per year attributable to new drug launches) is about $6750--far lower than most estimates of the value of a statistical life-year.
Int J Health Care Finance Econ
· 2005 Mar · PMID 15714262
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This paper has two, mutually supportive purposes: (1) to show that the modern economic rationale for universal social health insurance is consistent with the classical liberal understanding of property rights; (2) to sho...This paper has two, mutually supportive purposes: (1) to show that the modern economic rationale for universal social health insurance is consistent with the classical liberal understanding of property rights; (2) to show that the writings of the leading liberal sages-Locke, Smith, Mill, and Hayek-are congenial to programs economically similar to universal social health insurance, and, in Hayek's cases, were specifically approving. It is hoped that these facts and reasonings, which are unlikely to be known in toto to those who do not normally study across the intersection of philosophy and economics, will encourage a dialogue that reasserts in a non-ideological way the neglected role of property rights in the health economic assessment of social health insurance alternatives.
Int J Health Care Finance Econ
· 2005 Mar · PMID 15714261
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In this paper we investigate the implications of permitting parallel imports of pharmaceuticals produced by a monopoly, from one country to another. We use a model where countries differ in the patients' level of co-paym...In this paper we investigate the implications of permitting parallel imports of pharmaceuticals produced by a monopoly, from one country to another. We use a model where countries differ in the patients' level of co-payment for buying pharmaceuticals, and patients differ in the utility obtained from the consumption of pharmaceuticals. We show that the effects of parallel imports on total welfare are as follows: On the one hand, when countries differ in their health system only, parallel imports decrease total welfare; On the other hand, when countries differ in the health needs of their patients only, parallel imports enhance total welfare.
Int J Health Care Finance Econ
· 2004 Dec · PMID 15467409
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We develop a model of public-private hospital competition under regulated prices, recognizing that hospitals are multi-service firms and that equilibria depend on the interactions of patients, hospital administrators, an...We develop a model of public-private hospital competition under regulated prices, recognizing that hospitals are multi-service firms and that equilibria depend on the interactions of patients, hospital administrators, and physicians. We then use data from China to calibrate a simulation model of the impact of China's recent payment and organizational reforms on cost, quality and access. Both the analytic and simulation results show how providing implicit insurance through distorted prices leads to over/under use of services by profitability, which in turn fuels cost escalation and reduces access for those who cannot afford to self-pay for care. Simulations reveal the benefits of mixed payment and expanded insurance cover for mitigating these distortions.
Int J Health Care Finance Econ
· 2004 Dec · PMID 15467408
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Recently, several Blue Cross plans that sponsor Health Maintenance Organizations (HMOs), among other insurance products, have sought regulatory approval to convert from a not-for-profit to a for-profit entity. We examine...Recently, several Blue Cross plans that sponsor Health Maintenance Organizations (HMOs), among other insurance products, have sought regulatory approval to convert from a not-for-profit to a for-profit entity. We examine the impact of not-for-profit HMOs converting to for-profit status in a fixed-effects framework using HMO level data from InterStudy. Our findings indicate conversions to for-profit status do not significantly impact HMO prices, profit margins, use of hospital days or ambulatory visits, and the provision of Medicare and Medicaid products.