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SELECTED FOR YOU... SEPTEMBER 2008: working papers

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WORKING PAPERS

Health Insurance

Income, Poverty, and Health Insurance Coverage in the United States: 2007

Denavas-Walt C., Proctor B.D., Smith J.C.

Washington : U.S. Government Printing Office : 2008/08

Real median household income in the United States climbed 1.3 percent between 2006 and 2007, reaching $50,233, according to a report released today by the U.S. Census Bureau. This is the third annual increase in real median household income. Meanwhile, the nation’s official poverty rate in 2007 was 12.5 percent, not statistically different from 2006. There were 37.3 million people in poverty in 2007, up from 36.5 million in 2006. The number of people without health insurance coverage declined from 47 million (15.8 percent) in 2006 to 45.7 million (15.3 percent) in 2007. These findings are contained in the report Income, Poverty, and Health Insurance Coverage in the United States: 2007 The data were compiled from information collected in the 2008 Current Population Survey (CPS) Annual Social and Economic Supplement (ASEC). Also released today were income, poverty and earnings data from the 2007 American Community Survey (ACS) for all states and congressional districts, as well as for metropolitan areas, counties, cities and American Indian/Alaska Native areas of 65,000 population or more.

Health expenditure

Use of propensity scores in non-linear response models : the case for health care expenditures

Basu A., Polsky D., Manning W.G.

Cambridge : NBER : 2008/06 : 53p.

Under the assumption of no unmeasured confounders, a large literature exists on methods that can be used to estimating average treatment effects (ATE) from observational data and that spans regression models, propensity score adjustments using stratification, weighting or regression and even the combination of both as in doubly-robust estimators. However, comparison of these alternative methods is sparse in the context of data generated via non-linear models where treatment effects are heterogeneous, such as is in the case of healthcare cost data. In this paper, we compare the performance of alternative regression and propensity score-based estimators in estimating average treatment effects on outcomes that are generated via non-linear models. Using simulations, we find that in moderate size samples (n= 5000), balancing on estimated propensity scores balances the covariate means across treatment arms but fails to balance higher-order moments and covariances amongst covariates, raising concern about its use in non-linear outcomes generating mechanisms. We also find that besides inverse-probability weighting (IPW) with propensity scores, no one estimator is consistent under all data generating mechanisms. The IPW estimator is itself prone to inconsistency due to misspecification of the model for estimating propensity scores. Even when it is consistent, the IPW estimator is usually extremely inefficient. Thus care should be taken before naively applying any one estimator to estimate ATE in these data. We develop a recommendation for an algorithm which may help applied researchers to arrive at the optimal estimator. We illustrate the application of this algorithm and also the performance of alternative methods in a cost dataset on breast cancer treatment.

Health Status

Health status determinants : lifestyles, environment, health care resources and efficiency

Joumard I., Andre C., Nicq C, Chatal O.

Paris : OCDE : 2008/08 : 72 p.

This paper aims to shed light on the contribution of health care and other determinants to the health status of the population and to provide evidence on whether or not health care resources are producing similar value for money across OECD countries. First, it discusses the pros and cons of various indicators of the health status, concluding that mortality and longevity indicators have some drawbacks but remain the best available proxies. Second, it suggests that changes in health care spending, lifestyle factors (smoking and alcohol consumption as well as diet), education, pollution and income have been important factors behind improvements in health status. Third, it derives estimates of countries’ relative performance in transforming health care resources into longevity from two different methods – panel data regressions and data envelopment analysis – which give remarkably consistent results. The empirical estimates suggest that potential efficiency gains might be large enough to raise life expectancy at birth by almost three years on average for OECD countries, while a 10% increase in total health spending would increase life expectancy by three to four months.

What good for wealth without health ? The effect of health on the marginal utility of the consumption

Finkelstein A., Luttmer E.F.P., Notowidigdo M.J.

Cambridge : NBER : 2008/06 : 51 p.

We estimate how the marginal utility of consumption varies with health. To do so, we develop a simple model in which the impact of health on the marginal utility of consumption can be estimated from data on permanent income, health, and utility proxies. We estimate the model using the Health and Retirement Study's panel data on the elderly and near-elderly, and proxy for utility with measures of subjective well-being. We find robust evidence that the marginal utility of consumption declines as health deteriorates. Our central estimate is that a one-standard-deviation increase in the number of chronic diseases is associated with an 11 percent decline in the marginal utility of consumption relative to this marginal utility when the individual has no chronic diseases. The 95 percent confidence interval allows us to reject declines in marginal utility of less than 2 percent or more than 17 percent. Point estimates from a wide range of alternative specifications tend to lie within this confidence interval. We present some simple, illustrative calibration results that suggest that state dependence of the magnitude we estimate can have a substantial effect on important economic problems such as the optimal level of health insurance benefits and the optimal level of life-cycle savings.

The Role of Childhood Health for the Intergenerational Transmission of Human Capital: Evidence from Administrative Data

Salm M.

Bonn : The Institute for the Study of Labor : 2008/08 : 38 p.

We use unique administrative German data to examine the role of childhood health for the intergenerational transmission of human capital. Specifically, we examine the extent to which a comprehensive list of health conditions – diagnosed by government physicians – can account for developmental gaps between the children of college educated parents and those of less educated parents. In total, health conditions explain 18% of the gap in cognitive ability and 65% of that in language ability, based on estimations with sibling fixed effects. Thus, policies aimed at reducing disparities in child achievement should also focus on improving the health of disadvantaged children.

Hospital

Is Hospital Treatment in Australia Inequitable? Evidence from the HILDA Survey

Goodall S., Scott A.

Melbourne : Melbourne Institute of Applied economics and social research : 2008 : 36 p.

The pursuit of equity is a key objective of many health care systems, including Australia’s Medicare. Using the Household, Income and Labour Dynamics in Australia (HILDA) survey, we measured the extent of inequity in the utilisation of hospital services. We used methodology developed by the ECuity project for measuring horizontal inequity indices. We examine income-related health care inequities in both inpatient and day patient access and utilisation, whilst controlling for morbidity, demographic and socio-economic variables. The probability of hospital inpatient admission appeared equitable, but the probability of a day patient visit demonstrated a pro-rich distribution. Even more pronounced were the findings on the quantity of visits. The positive horizontal inequality indices indicate a degree of inequity favouring the rich, especially for inpatient utilisation. The pro-rich distribution of the probability of a day patient visit was associated with whether individuals held private health insurance. These results suggest that in Australia, which has a universal and comprehensive health system, the rich and poor are not treated equally according to need. Further research should investigate whether the causes of inequities lie in the preferences of individuals or the preferences of health care providers.

Price Adjustment in the Hospital Sector

Miraldo M., Siciliani L., Street A.

York : University of York : 2008/08 : 27 p.

Prospective payment systems are currently used in many OECD countries, where hospitals are paid a fixed price for each patient treated. We develop a theoretical model to analyse the properties of the optimal fixed prices to be paid to hospitals when no lump-sum transfers are allowed and when the price can differ across providers to reflect observable exogenous differences in costs (for example land, building and staff costs). We find that: a) when the marginal benefit from treatment is decreasing and the cost function is the (commonly used) power function, the optimal price adjustment for hospitals with higher costs is positive but partial; if the marginal benefit from treatment is constant, then the price is identical across providers; b) if the cost function is exponential, then the price adjustment is positive even when the marginal benefit from treatment is constant; c) the optimal price is lower when lump-sum transfers are not allowed, compared to when they are allowed; d) higher inequality aversion of the purchaser is associated with an increase in the price for the high-cost providers and a reduction in the price of the low-cost providers.

Analyzing the determinants of willingness-to-pay values for testing the validity of the contingent valuation method. Application to home care compared to hospital care

Carrere M.O., Havet N., Morelle M., Remonnay R.

Ecully : Groupe d'Analyse et de Théorie Economique : 2008 : 32 p.

The contingent valuation (CV) method is an attractive approach for comparing home care to hospital care in which the only difference is patients’ well-being during the treatment process and not health outcomes. We considered the empirical situation of blood transfusion (BT) in cancer patients and collected willingness to pay (WTP) values among BT users. Our main objective was to test the validity of the CV method, namely its ability to elicit true preferences. Firstly, possible determinants of WTP values and their expected influences were identified, from both economic and non economic literature and from the findings of a pilot study. Secondly, they were compared to predicted influences resulting from appropriate econometric analysis of WTP values elicited by a bidding process. From the health economics literature it appeared that the double-hurdle model is the most appropriate approach to account for zero values and protest responses. However, because the number of protest responses was too small, we used a truncated regression model. None of the 7 hypothesized influences was invalidated by econometric results. The anchoring bias hypothesis was confirmed. The WTP for home BT compared to hospital BT increased with household income, with previous experience of home care, with living far from the hospital and with low quality of life. Conversely, it was lower for advanced-stage (palliative or terminal) than for early-stage (curative) patients. We conclude that the CV approach is acceptable to severely ill patients. Moreover, WTP values demonstrate good validity given that influences predicted by our model are consistent with expected determinants.

Health inequalities

Closing the gap in a generation: Health equity through action on the social determinants of health

World Health Organization. Commission on the Social Determinants of Health. (CSDH).

Genève : OMS : 2008 : 256p.

The Final Report of the Commission on Social Determinants of Health sets out key areas of daily living conditions and of the underlying structural drivers that influence them in which action is needed. It provides analysis of social determinants of health and concrete examples of types of action that have proven effective in improving health and health equity in countries at all levels of socioeconomic development. Part 1 sets the scene, laying out the rationale for a global movement to advance health equity through action on the social determinants of health. It illustrates the extent of the problem between and within countries, describes what the Commission believes the causes of health inequities are, and points to where solutions may lie. Part 2 outlines the approach the Commission took to evidence, and to the indispensable value of acknowledging and using the rich diversity of different types of knowledge. It describes the rationale that was applied in selecting social determinants for investigation and suggests, by means of a conceptual framework, how these may interact with one another. Parts 3, 4, and 5 set out in more detail the Commission s findings and recommendations. The chapters in Part 3 deal with the conditions of daily living the more easily visible aspects of birth, growth, and education; of living and working; and of using health care. The chapters in Part 4 look at more structural conditions social and economic policies that shape growing, living, and working; the relative roles of state and market in providing for good and equitable health; and the wide international and global conditions that can help or hinder national and local action for health equity. Part 5 focuses on the critical importance of data not simply conventional research, but living evidence of progress or deterioration in the quality of people s lives and health that can only be attained through commitment to and capacity in health equity surveillance and monitoring. Part 6, finally, reprises the global networks the regional connections to civil society worldwide, the growing caucus of country partners taking the social determinants of health agenda forward, the vital research agendas, and the opportunities for change at the level of global governance and global institutions that the Commission has built and on which the future of a global movement for health equity will depend.

Health inequalities by education, income and wealth : a comparison of 11 european countries and the US

Jurges H.

Mannheim : MEA : 2007 : 13 p.

This paper compares education, income and wealth-related health inequalities using data from 11 European countries and the US. The health distribution of the US, England and France are relatively unequal independent of the stratifying variable, while Switzerland or Austria always have relatively equal distribution. Some countries such as Italy dramatically changes rank depending on stratifying variable.

Medicines

External referencing and pharmaceutical price negotiation

Garcia Marinoso B., Jelovac I., Olivella P.

Ecully : Groupe d'Analyse et de Théorie Economique : 2008/05 : 36 p.

External referencing (ER) imposes a price cap for pharmaceuticals based on prices of identical products in foreign countries. Suppose a foreign country (F) negotiates prices with a pharmaceutical firm while a home country (H) can either negotiate independently or implement ER based on the foreign price. We show that country H always prefers ER if (i) it can condition ER on the drug being subsidized in the foreign country and (ii) copayments are higher in H than in F. H’s preference is<br />reinforced when the difference between country copayments is large and/or H’s population is small. External referencing by H always harms F if (ii) holds, but less so if (i) holds.

Primary health care

Prescribing in primary care. Understanding what shapes GPs’ prescribing choices and how might these be changed

Scoggins A., Tiessen J., Ling T., Rabinovich L.

Santa Monica : Rand corporation : 2007 : 44 p.

This report, which was commissioned by the National Audit Office (NAO), presents the results of a prescribing in primary care study which aims to understand what shapes general practitioners’ (GPs’) prescribing decisions, and how the cost efficiency of prescribing might be improved in the future. This qualitative study contributes to the NAO’s larger investigation into prescribing in primary care in England, and more specifically how financial savings can be delivered by helping primary care prescribing to deliver better value for patients.

Pay for Performance in California’s Workers’ Compensation Medical Treatment System : An assessment of Options, Challenges, and Potential Benefits

Wynn B.O., Sorbero M.E.

San Franscico : Rand Corporation : 2008 : 48 p.

Over the past few years, nonoccupational group health-insurance programs and health plans have implemented initiatives to improve the quality and efficiency of care through incentive programs, typically called “pay for performance,” or P4P. In addition, Medicare program administrators are evaluating how P4P incentives might be incorporated into Medicare payment systems. This paper assesses the options, challenges, and potential benefits of adopting P4P incentives for physician services in California's workers' compensation program. It offers three models that might be able to surmount the challenges, provided that the stakeholders have the commitment and trust to work through the design issues and allow the P4P program to evolve over time. P4P alone will not be sufficient to drive value-based medical care provided to injured workers; rather, it should be considered as part of a multipronged set of strategies designed to increase the efficient delivery of high-quality care that enables rapid and sustained return to work.

Health systems, Health policies

Organizing the U.S. Health care Delivery System for High Performance

Shih A., Davis K., Schoenbaum S.C., Gauthier A., Nuzum R., Mc Carthy M.

New York : The Commonwealth Fund : 2008/07 : 60 p.

This report from The Commonwealth Fund Commission on a High Performance Health System examines fragmentation in our health care delivery system and offers policy recommendations to stimulate greater organization - established mechanisms for working across providers and care settings. Fragmentation fosters frustrating and dangerous patient experiences, especially for patients obtaining care from multiple providers in a variety of settings. It also leads to waste and duplication, hindering providers’ ability to deliver high-quality, efficient care. Moreover, our fragmented system rewards high-cost, intensive medical intervention over higher-value primary care, including preventive medicine and the management of chronic illness. The solutions are complex and will require new financial incentives, changes to the regulatory, professional, and educational environments, and support for new infrastructure. But as a nation, we can no longer tolerate the status quo of poor health system performance. Greater organization is a critical step on the path to higher performance.

Health and Employment

Contractual Conditions, Working conditions, Health and Well-Being in the British Household Panel Survey

Robone S., Johns A.M., Rice N.

York : HEDG : 2008/07 : 36 p.

We consider the effects of contractual and working conditions on self-assessed health and psychological well-being using twelve waves (1991/92 – 2002/2003) of the British Household Panel Survey. While one branch of the literature suggests that “atypical” contractual conditions have a significant impact on health and well-being, another suggests that health is damaged by adverse working conditions. As far as we are aware, previous studies have not explicitly considered the two factors jointly. Our aim is to combine the two branches of the literature to assess the distinct effects of contractual and working conditions on health and psychological well-being and how these effects vary across individuals. For self-assessed health the dependent variable is categorical, and we estimate non-linear dynamic panel ordered probit models, while for psychological well-being we estimate a dynamic linear specification. Our estimates show that being unsatisfied with the number of hours worked has a negative influence on the health of individuals who have a part-time job. Having a high level of employability appears to influence positively the health and psychological well-being of individuals with temporary job arrangements. Family structure appears to influence the health and well-being of workers with atypical contractual conditions.

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September 15th, 2008