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The effect of smoking on health using a sequential self-selection model.

We estimate a structural model of individual smoking behaviour emphasizing the role of individual risk belief on smoking choices. Our model consists of five equations: two selection equations for initiation and cessation decisions, and three switching outcome regressions for nonsmokers, ex-smokers, and current smokers. The presence of significant self-selectivity implies that the health effects of smoking based on sample proportions do not correctly indicate the true risk of cigarette smoking. Further, our evidence suggests that the self-selection in the cessation decision, but not in the initiation decision, is consistent with economic rationality. We estimate the model by full information maximum likelihood (FIML) with starting values from heteroskedasticity corrected Heckman-Lee two-step method using newly released Health and Retirement Study (HRS) data.

Adult↗

The use of long-term care services by the Dutch elderly.

The main focus of this paper is the development of an appropriate framework to characterize the process of long-term care utilization by the Dutch elderly. Three broad categories of care services are considered, namely, informal care, formal care at home, and institutional care. The use of these care alternatives is modelled jointly, and stochastic dependence is allowed between the various care options. Special attention is given to the concept of health status and to the potential endogeneity of this variable in the model. We apply a flexible non-parametric method to summarize the multidimensional concept of health status into a limited set of interpretable indices. The model is applied on the Longitudinal Ageing Study Amsterdam (LASA). We find strong effects of health status, gender, socio-economic variables, and prices on the utilization of long-term care services.

Aged↗

Health services utilization of elderly Swiss: evidence from panel data.

The demand for health care services by the elderly is a topic of growing importance because of changes in the demographic structure in many countries. This paper provides estimates of the determinants of the demand for physician visits by the elderly, including the impact of a disability prevention intervention. We control for unobserved heterogeneity across individuals and the count data structure of the data by estimating random effects negative binomial models for all primary physician and specialist visits.

Aged↗

A note on risk adjustment and fair compensation.

This note comments on the application of results from the theory of fair compensation to risk adjustment. It argues that the main flaw of such application lies in the consideration of health plans merely as administrative social agents, through which money flows from a central fund to providers of medical care, ignoring their economic behaviour. However, it is that behaviour which raises the issue of risk selection to begin with. With linear health expenditure function, the fair compensation axiomatic solution is shown to be equivalent to the solution of a simple optimal regulation problem. That equivalence permits the analysis of several further issues related to risk adjustment and to the application of the theory of fair compensation to it.

Cost Control↗

A Bayesian approach to economic analyses of clinical trials: the case of stenting versus balloon angioplasty.

New results about the costs and effects of a new therapy may be weighted with prior information. As such, classical confidence intervals surrounding the costs and effects of a therapy may not reflect the real uncertainties. Bayesian techniques may improve this by formalizing the way that prior information is taken into account in assessing the new evidence. Costs and effects can be analysed separately, but also, when considering the balance between costs and effects, they can be analysed simultaneously. Here, an example is given using data from two trials that compared costs and effectiveness of stent implantation with balloon angioplasty. The Bayesian results make it clear that different prior distributions may lead to different decisions, and it is concluded that even Bayesian analysis may not always reflect the process of capturing the remaining uncertainties.

Angioplasty, Balloon↗

Definition, interpretation and calculation of cost-effectiveness acceptability curves.

This paper discusses the definition, interpretation and computation of cost-effectiveness (CE) acceptability curves. A formal definition of the CE acceptability curve based on the net benefit approach is provided. The curve can be computed using parametric or non-parametric techniques and for both computational approaches we establish a formal relation between the CE acceptability curve and statistical inference based on confidence intervals and P values in CE analysis.

Cost-Benefit Analysis↗

The price of placements in residential and nursing home care: the effects of contracts and competition.

A variety of contract types are used in the placement of elderly people in residential and nursing care homes in the UK. Contracts vary according to how and when providers are paid. Among other things, prices can be made contingent on the total quantity of service to be purchased and on production cost characteristics. They can be determined at the time of placement or in advance. The primary objective of this paper is to assess the impact of contract choices on the price of placements. Regression analysis was conducted on a final sample of 1780 publicly funded placements made in 18 local authorities in the UK over a 6-month period ending in early 1996. Controlling factors included in the price analysis were production cost indicators and those measuring market competitiveness. Choices of both quantity and cost contingent contracts were found to be significantly associated with placement prices. The findings support the hypothesis that contract payment arrangements have different risk, insurance and information properties, and so have implications for the performance of residential care providers.

Aged↗

Is there a trade-off between longevity and quality of life in Grossman's pure investment model?

The question is posed whether an individual maximizes lifetime or trades off longevity for quality of life in Grossman's pure investment (PI)-model. It is shown that the answer critically hinges on the assumed production function for healthy time. If the production function for healthy time produces a trade-off between life-span and quality of life, one has to solve a sequence of fixed time problems. The one offering maximal intertemporal utility determines optimal longevity. Comparative static results of optimal longevity for a simplified version of the PI-model are derived. The obtained results predict that higher initial endowments of wealth and health, a rise in the wage rate, or improvements in the technology of producing healthy time, all increase the optimal length of life. On the other hand, optimal longevity is decreasing in the depreciation and interest rate. From a technical point of view, the paper illustrates that a discrete time equivalent to the transversality condition for optimal longevity employed in continuous optimal control models does not exist.

Algorithms↗

Cross-subsidization in the market for employment-related health insurance.

This paper uses data from the 1987 National Medical Expenditure Survey to examine the nature of equilibrium in the market for employment-related health insurance. We examine coverage generosity, premiums, and insurance benefits net of expenditures on premiums, showing that despite a degree of market segmentation, there was a substantial amount of pooling of heterogeneous risks in 1987 among households with employment-related coverage. Our results are largely invariant to (i) firm size and (ii) whether or not employers offer a choice among plans. Our results suggest the need for caution concerning incremental reforms that would weaken the link between employment and insurance without substituting alternative institutions for the pooling of risks.

Adult↗

Estimating the cost of primary care training in ambulatory settings.

The Balanced Budget Act of 1997 legislated the idea of reimbursing ambulatory sites for training medical professionals. However, very little is known about the costs of training in such settings. This paper assesses the cost of primary care training in ambulatory settings. Selection models were used to separate the cost of teaching from the cost of infrastructural differences between teaching and non-teaching sites. A probit equation modelled the likelihood of an ambulatory site having a teaching programme and a cost function related total medical practice costs to clinical output, the presence of a health professions educational programme, the price of resources used, characteristics of the medical practice and location. Data on 184 community health centres (CHCs), group practices, health maintenance organizations (HMOs) and outpatient clinics were used. Teaching sites were found to have 36% higher operating costs than their non-teaching counterparts: 38% of these higher costs were due to infrastructural differences and 62% were the 'pure' costs of teaching, i.e. the costs of teaching the net of infrastructural effects.

Allied Health Personnel↗

Age and proximity to death as predictors of GP care costs: results from a study of nursing home patients.

This paper reports the results of a study of GP costs associated with a group of nursing home patients who died at various stages during a 12-month period. The relationship between costs per month of care, patient age and proximity to death, where sex and diagnosis are controlled for are reported. A comparison of care costs for patients in their last year of life and those who survived the course of the study is also made. The study found that those in their last year of life were significantly more expensive to care for than those who survived the duration of the study, but that there was no statistically significant difference in age. In multivariate regression analyses, it was also found that among those who died during the study care costs were unrelated to age, but significantly related to proximity to death. The study supports the contention of others (Zweifel P, Felder S, Meiers M. Ageing of population and health care expenditure: a red herring? Health Econ 1999; 8: 485-496) that health care costs are more directly related to proximity to death than age.

Age Factors↗

Parameter solicitation for planning cost effectiveness studies with dichotomous outcomes.

When economic endpoints are included alongside clinical effectiveness measures in randomized clinical trials (RCT), they are summarized together by the incremental cost effectiveness ratio (ICER). Adding economic endpoints to an RCT complicates the planning of experiments because investigators must now solicit their beliefs about costs, but even more challenging, they must also specify their association with effectiveness. Solicitation of correlations between costs and effects can be unintuitive, and so potentially highly inaccurate. This is unfortunate because power is highly sensitive to the association between costs and effects. Mis-specification in this association may lead to substantially underpowered or overpowered studies. We show that when clinical effectiveness measures are dichotomous, specification of the correlation between costs and effects can be avoided by instead describing their association with a mixture model. This representation leads to simple and highly intuitive parameter specifications. It may also be used to generate realistic raw data that can be used to evaluate experiment power with simulation. We give particular attention to evaluating and interpreting power when Fieller's theorem method (FTM) is used to calculate confidence for, and test hypotheses about, the ICER. Data from a previously published clinical trial are used to demonstrate the use of this new method to calculate sample size for a cost effectiveness study.

Cost-Benefit Analysis↗

Physicians' payment contracts, treatment decisions and diagnosis accuracy.

We derive optimal payment contracts for physicians when neither physicians' effort to gather information about the patient's health condition (diagnosis effort) nor the actual patient's health condition (physicians' private information) are contractible. In a model where the patient is allowed to demand health care on more than one occasion, we show that, in general, the optimal payment contract includes supply-side cost sharing. This provides the physician with incentives to provide the most adequate treatment and to gather an informative signal about the patient's illness, to decrease the likelihood of future cost sharing. However, for some extreme values of the parameters of the model, we show that a public insurer may prefer to induce some 'blind' decision making.

Contract Services↗

An economic appraisal of alternative strategies for the delivery of MCH-FP services in urban Dhaka, Bangladesh.

The strategy of distributing maternal and child health and family planning (MCH-FP) services at the doorsteps of the clients--through routine visits to the eligible couples by trained fieldworkers--has been instrumental in increasing the contraceptive prevalence rate (CPR), reducing fertility and attaining a considerably high immunization coverage of children and women in Bangladesh. The doorstep strategy, however, appeared to be labour-intensive and costly. With the maturity of the programme, priorities of the national MCH-FP programme have shifted to a stage that calls for more cost-effective service-delivery strategies, capable of offering a broader package of reproductive and other essential health services. The main objective of the present study was to examine the cost and effectiveness implications of the alternative strategies of delivering services from fixed sites--field-tested within an ICDDR,B operations research--in comparison to the conventional (existing) doorstep strategy. The key findings of the economic appraisal indicated that, at the end of the operations research intervention, both cost per birth averted and cost per QALY gained were lowest for the option of delivering services from static (fixed-site) clinics: US$13 and US$17 compared with the corresponding values of US$18 and US$42 for the doorstep strategy. Provision of health and family planning services from clinics--complemented with a reduced system of outreach workers to inform and target the hard-to-reach clients--was found to be the most cost-effective service-delivery alternative.

Adolescent↗

Societal cost of workplace homicides in the United States, 1992-2001.

BACKGROUND: The Census of Fatal Occupational Injuries (CFOI) reported 8,672 workplace homicide victims between 1992 and 2001. Although rarely calculated, cost estimates are important for prevention and research efforts. METHODS: Societal costs were estimated using the cost-of-illness approach applied to CFOI data. The cost calculation model incorporated medical expenses, future earnings summed from the year of death until the year the decedent would have been 67, and household production losses (includes activities such as child care and housework). RESULTS: Workplace homicide had a total cost of nearly 6.5 billion dollars and a mean cost of 800,000 dollars between 1992 and 2001. The retail trade industry division had the highest number of homicides and total cost, 2.1 billion dollars, for males and 556,000 dollars for females. CONCLUSIONS: Estimates of the cost of work-related homicides can be used to improve occupational injury prevention and control program planning, policy analysis, evaluation of safety and health interventions, and advocacy for a safer work environment.

Adolescent↗

Direct medical costs and their predictors in patients with rheumatoid arthritis: a three-year study of 7,527 patients.

OBJECTIVE: To estimate total direct medical costs in persons with rheumatoid arthritis (RA) and to characterize predictors of these costs. METHODS: Patients (n = 7,527) participating in a longitudinal study of outcome in RA completed 25,050 semiannual questionnaires from January 1999 through December 2001. From these we determined direct medical care costs converted to 2001 US dollars using the consumer price index. We used generalized estimating equations to examine potential predictors of the costs. Monte Carlo simulations and sensitivity analyses were performed to evaluate the varying prevalence and cost of biologic therapy. RESULTS: The mean total annual direct medical care cost in 2001 for a patient with RA was 9,519 US dollars. Drug costs were 6,324 US dollars (66% of the total), while hospitalization costs were only 1,573 US dollars (17%). Approximately 25% of patients received biologic therapy. The mean total annual direct cost for patients receiving biologic agents was 19,016 US dollars per year, while the cost for those not receiving biologic therapy was 6,164 US dollars. RA patients who were in the worst quartile of functional status, as measured by the Health Assessment Questionnaire, experienced direct medical costs for the subsequent year that were 5,022 US dollars more than the costs incurred by those in the best quartile. Physical status as determined by the Short Form 36 physical component scale had a similar large effect on RA costs, as did comorbidity. Medical insurance type played a more limited role. However, those without insurance had substantially lower service utilization and costs, and health maintenance organization patients had lower drug costs and total medical costs. Increased years of education, increased income, and majority ethnic status were all associated with increased drug costs but not hospitalization costs. Costs in all categories decreased after age 65 years. CONCLUSION: Estimates of direct medical costs for patients with RA are substantially higher than cost estimates before the biologic therapy era, and costs are now driven predominantly by the cost of drugs, primarily biologic agents. RA patients with poor function continue to incur substantially higher costs, as do those with comorbid conditions, and sociodemographic characteristics also play an important role in determination of costs.

Activities of Daily Living↗

Service costs for severe personality disorder at a special hospital.

BACKGROUND: Much attention has been given to the reform of services for people with personality disorder in the UK, yet little is known of the cost of existing services, particularly in secure forensic settings. Existing cost estimates almost always rely on aggregate estimates of the cost of care rather than individual-level costing, but the latter is necessary for the economic evaluation of new services. METHOD: This paper uses a new instrument for recording service use in secure forensic settings to report the service use and care package costs of 16 patients being considered for the dangerous and severe personality disorder programme in the Personality Disorder Directorate at Rampton, a high secure hospital in Nottinghamshire, UK. RESULTS: The mean cost over a six-month period was 65,545 UK pounds (approximately 131,000 pounds per annum) but there was considerable variation within this figure, with a range of 59,119 to 82,709 UK pounds. CONCLUSIONS: Aggregate costs for individuals in secure hospital settings hide substantial variation between individuals. This paper demonstrates the feasibility of estimating the cost of individual care packages in a secure forensic setting.

Data Collection↗