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SELECTED FOR YOU... MARCH 2008: book of the month - working papers

All the Selected for you

BOOK

Health economics and financing

Getzen T.
New York : John Wiley & Sons : 2007 : XXII - 458 p.

A primer for the economic analysis of medical markets, this book utilizes a flow of funds approach to investigate the sources and uses of financing as well as the incentives and organizational structure of the health care system. It then takes a wider macroeconomic perspective in order to explore the dynamics of change within the health care system, and to explicitly consider determinants of national health spending and the role of governments in public and private health.







WORKING PAPERS

Health Insurance

Covering the uninsured in the U.S.

Gruber J.

Cambridge : NBER : 2008/01 : 70 p.

One of the major social policy issues facing the U.S. in the first decade of the 21st century is the large number of Americans lacking health insurance. This article surveys the major economic issues around covering the uninsured. I review the facts on insurance coverage and the nature of the uninsured; focus on explanations for why the U.S. has such a large, and growing, uninsured population; and discuss why we should care if individuals are uninsured. I then focus on policy options to address the problem of the uninsured, beginning with a discussion of the key issues and available evidence, and then turning to estimates from a micro-simulation model of the impact of alternative interventions to increase insurance coverage.

Choice, price competition and complexity in markets for health insurance

Frank R. Lamiraud K.

Cambridge : NBER : 2008/01 : 44 p.

The United States and other nations rely on consumer choice and price competition among competing health plans to allocate resources in the health sector. A great deal of research has examined the efficiency consequences of adverse selection in health insurance markets, less attention has been devoted to other aspects of consumer choice. The nation of Switzerland offers a unique opportunity to study price competition in health insurance markets. Switzerland regulates health insurance markets with the aim of minimizing adverse selection and encouraging strong price competition. We examine consumer responses to price differences in local markets, the degrees of price variation in local markets. Using both survey data and observations on local markets we obtain evidence suggesting that as the number of choices offered to individuals grow their responsiveness to price declines allowing large price differentials to persist holding constant plan and population characteristics. We consider explanations for this phenomenon from the field of behavioral economics.

The Macroeconomic Consequences of Financing Health Insurance

Deloach S.B., Platania J.M.

Elon : Elon University : 2008 : 27 p.

Employer-financed health insurance systems, like that used in the United States, distort firms' labor demand and adversely affect the economy. Since such costs vary with employment rather than hours worked, firms have an incentive to increase output by increasing worker hours rather than employment. Given that the returns to employment exceed the returns to hours worked, this results in lower levels of employment and output. In this paper we construct a heterogeneous agent general equilibrium model where individuals differ with respect to their productivity and employment opportunities. Calibrating the model to the U.S. economy, we generate steady state results for several alternative models for financing health insurance: one in which health insurance is financed primarily through employer contributions that vary with employment; a second where insurance is funded through a non-distortionary, lump-sum tax; and a third where insurance is funded by a payroll tax. We measure the effects of each of the alternatives on output, employment, hours worked and inequality.

Hospital

Hospital competition and quality with regulated prices

Brekke K., Siciliani L., Straume O.

Braga : NIIPE : 2008 : 9 p.

We analyse the effect of competition on quality in hospital market with regulated prices, considering both the effect of free patient choice (monopoly versus competition) and increased competition through lower transportation costs (increased substitutability). With partially altruistic providers and a convex cost function that is non-separable in activity and quality, we show - in both cases - that the effect is generally ambiguous. In contrast to the received theoretical literature, this is consistent with, and potentially explains, the mixed empirical evidence.

Health inequalities

Longevity and Education: A Macroeconomic Perspective

Ricci F., Zachariadis M.

Nicosie : University of Cyprus : 2007/12 : 30 p.

This paper investigates the determinants of longevity at a macroeconomic level, emphasizing the important role played by education. To analyze the determinants of longevity, we build a model where households intentionally invest in health and education, and where education exerts external effects on longevity. Performing an empirical analysis using data across 71 countries, we find that society’s tertiary education attainment rate is important for longevity, in addition to any role that basic education plays for life expectancy at the individual level. This finding uncovers a key externality of education, consistent with the theoretical hypothesis advanced in our macroeconomic model.

Medicines

Pharmaceutical pricing and reimbursement pricing and reimbursement policies in Slovakia

Kalo Z., Docteur E., Moise P.

Paris : OCDE : 2008 : 51 p.

This paper examines aspects of the policy environment and market characteristics of Slovakia’s pharmaceutical sector, and assesses the degree to which Slovakia has achieved certain policy goals. Pharmaceutical expenditure in Slovakia accounts for a higher share of total health expenditure than it does in any other OECD country, and the share of national income going to pharmaceuticals is exceeded only in Hungary. Although its relatively low national income is a partial explanation for Slovakia’s status in this respect, this review finds that Slovakia has scope to reduce its expenditures and the rapid rate of growth in its pharmaceutical spending. Financing of pharmaceutical expenditure in Slovakia rests more heavily on the public sector than is typical in the OECD, with out-of-pocket spending accounting for just a quarter of total expenditure. The effectiveness of international price referencing in limiting Slovak prices for on-patent pharmaceutical products is questionable. For products that have gone off-patent and for those with similar chemical structure, a reference-pricing scheme and competition among generic alternatives results in effective price control, although incentives for generic substitution are weak (for patients) and misaligned (for pharmacists). When deciding whether a drug will be reimbursed through the social insurance scheme, the cost-effectiveness of new pharmaceuticals is not assessed. On the other hand, certain policy goals have been achieved. The accessibility and availability of medicines--including the most innovative products--is good; affordability is supported by relatively low average co-payment levels. While more expensive drugs usually have higher cost-sharing, drugs are not excluded from coverage on affordability grounds.

Health care systems

Productivity in the National Health Service

Hart P.

Reading : University of Reading Business School : 2007/07 : 8 p.

To what extent are the many services provided by the NHS improving? Are the differences between the performances of different hospitals decreasing or increasing? Are the differences in NHS performance across regions in the UK being reduced? To answer such questions, and many others like them, it is necessary to measure the performance of the NHS. There is an even more extensive literature on the measurement of labour productivity and total factor productivity in the private sector. Section 2 of this note outlines an accounting approach to such measurement in the private sector and shows that the fundamental problems arising also hold for the NHS. Section 3 discusses the measurement of productivity in the NHS. Unlike firms in the private sector, the NHS does not charge for its services so that the output prices normally used to weight different services in an output index are zero. It is argued here that this fundamental problem is not overcome by the use of input prices in a cost weighted index of output. Hence indices of productivity based on cost-weighted indices of output should not be used to measure NHS total factor.

Control and Performance of Health Care Systems. A comparative analysis of 19 OECD countries

Kotzian P.

Darmstadt : Institut für Politikwissenschaft : 2006 : 30 p.

The paper performs a empirical comparison of Health Care Systems (HCS). HCS are seen as a network of delegation relationships among various principals and agents, subject to agency problems. Citizens as the original principal delegate various tasks to agents. The delivery of health services is delegated to physicians, the organization of collecting and distributing contributions is delegated to the health insurance funds or the state, the exercise of an overall control is delegated to the government. The agents involved may not have an incentive to act in the principals best interest. They may shirk from the task, or even actively extract rents using the citizens’ lack of knowledge and information. The physician may over-supply medical services or may provide insufficient quality. Insurance funds may use resources for on the job consumption. The government may renounce the exercise of control, since doing so might lead to political pressure from the well organized groups, while citizens are a latent and inactive group. Following the institutional economics approach, a HCS’ productive efficiency – understood as the ratio of financial input to health output - is seen as determined by the existence and treatment of agency problems. The more agency problems and the less control is used to counteract these, the higher the consumption of resources that is not used to produce health. Agency problems can be controlled by mechanisms built-into the HCS. Setting a certain remuneration mode for providers, e.g. capitation instead of fee-for-service, may diminish the incentive to extend the quantity of services provided, competition among insurance funds may induce them to operate more efficient. But the HCS and the various agents can also be controlled by an external actor, e.g. the government, either by using available instruments or by conducting institutional reforms. To explain differences in the amenability of a country’s HCS to external control by the government, I combine the veto player approach and the incentives for societal actors to exert influence to the concept of indirect veto players: the more indirect veto players exist, the less external control will be exercised. In the paper’s empirical section, I derive indicators capturing both forms of control and perform a comparison of HCS based on institutional and performance data. Using data reducing methods to cope with the institutional complexity among HCS, I identify two dimensions of control underlying the institutional setting of the HCS and three dimensions of HCS performance. The relationships found among control and performance confirms the hypotheses derived from the underlying theoretical approach.

Paying the Patient: Improving health using financial incentives

Harvey S., Jochelson K.

Londres : King's Fund Institute : 2007/12 : 10 p.

This work is the first in a series of papers on how people can be encouraged to adopt healthy behaviour. Input into these papers, through discussion and invited comment, will contribute to a final report at the end of 2008. This paper, identifying programmes based on both positive and negative incentives, finds that financial incentives are effective in encouraging people to perform clearly defined, time-limited, simple behavioural tasks, and also in encouraging participation in lifestyle programmes. However, healthier behaviour is not maintained and financial incentives are not effective when the behaviour change required is complex, for example, giving up smoking.

Primary health care

Physician Labour Supply in Canada: a Cohort Analysis

Crossley T.F., Hurley J., Jeon S.H.

Ontario : McMaster University : 2006 : 33 p.

This paper employs cohort analysis to examine the relative importance of different factors in explaining changes in the number of hours spent in direct patient care by Canadian general/ family practitioners (GP/FPs) over the period 1982 to 2002. Cohorts are defined by year of graduation from medical school. The results for male GP/FPs indicate that: there is little age effect on hours of direct patient care, especially among physicians aged 35 to 55; there is no strong cohort effect on hours of direct patient care; but there is a secular decline in hours of direct patient care over the period. The results for female GP/FPs indicate that: female physicians on average work fewer hours than male physicians; there is a clear age effect on hours of direct patient care; there is no strong cohort effect; there has been little secular change in average hours of direct patient care. The changing behaviour of male GP/FPs accounted for a greater proportion of the overall decline in hours of direct patient care from the 80’s through the mid 90’s than did the growing proportion of female GP/FPs in the physician stock.

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March 28th , 2008