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Choices, beliefs, and infectious disease dynamics.

A dynamic model of risky behavior in the midst of an epidemic is discussed. The key result is that pessimistic expectations over the future of the epidemic induce more current risky behavior. Numerical simulation of equilibrium epidemics shows that this effect can accelerate spread of the disease in an epidemic's early stages and that the effect of policy interventions, such as preventative vaccines, may depend on whether the intervention was anticipated.

AIDS Vaccines↗

Practice variation and physician-specific effects.

This study provides estimates of practice variation for primary physician services in Norway. Nearly all previous studies on practice variation have encompassed mainly specialist and hospital services. Thus we provide evidence for treatment variation for a health care sector where information about treatment variation is relatively scarce. Our analyses were carried out on a large set of data from individual physician practices. We estimated the extent of practice variation according to type of diagnosis and type of treatment option. The main finding is that variation in clinical practice between physicians is an important determinant of expenditure for primary physician services. Depending on the type of diagnosis, physician-specific effects explained 47-66% of the variation in expenditure for laboratory tests, 59-66% of the variation in expenditure for consultations lasting over 20min and 49-61% of the variation in expenditure for specific procedures. The age and gender of the patients explained only about 1% of the variation in expenditure. This finding supports the results from previous studies, which have shown that patients' age and gender are inadequate when used as risk adjusters. We also identified physicians who moved their practice from one municipality to another, i.e. they changed their patient population completely. Our results showed that those physicians who moved did not change practice style after they moved, i.e. that physician's style of practice is stabile. This indicates that practice style reflects a deeply rooted behaviour with respect to how to practice medicine.

Contract Services↗

Cream-skimming, incentives for efficiency and payment system.

Reform proposals of health care systems in several countries have advocated variations of a risk adjustment/capitation system. These proposals face a serious objection: incentives to risk selection are prevalent in the system. By now, considerable literature has been devoted to finding ways of mitigating, if not eliminating, this problem, while at the same time preserving incentives to efficiency. We contribute to this debate presenting a transfer system that, under some circumstances, attains both provider efficiency and no risk selection. The transfer system extends typical linear payment systems. It can be interpreted as a fixed transfer in the beginning of the period plus an ex-post fund at the end of the period. The novelty rests in the way contributions to this fund are defined.

Capitation Fee↗

Stationarity of health expenditures and GDP: evidence from panel unit root tests with heterogeneous structural breaks.

This paper re-examines the stationarity of national health care expenditures and GDP in a panel setting utilizing data from 20 OECD countries over the period from 1960 to 1997. Previous research in this area has recognized the drawback of not allowing for structural breaks in their unit root tests and noted that their empirical results may not be robust. We advance the literature by utilizing a recently developed panel LM unit root test that allows for heterogeneous level shifts. In contrast to previous analyses that did not consider breaks, our results reject the unit root null hypothesis for both series.

Data Interpretation, Statistical↗

The effect of financial pressure on the quality of care in hospitals.

This paper examines the effect of financial pressure on hospital quality, using health outcomes after treatment for acute myocardial infarction (AMI) as quality indicators. The financial pressure variables are: fiscal pressure from the Prospective Payment System (PPS) for inpatient care, and changes in health maintenance organization (HMO) penetration at the county level. The study shows that both types of financial pressures adversely affect short-term health outcomes, but do not affect patient survival beyond 1 year after patients' hospital admissions. Furthermore, the impact of HMO penetration appears to differ from that of Medicare payment changes for certain hospitals because HMO penetration encourages price competition.

Cardiology Service, Hospital↗

Technological development and medical productivity: the diffusion of angioplasty in New York state.

A puzzling feature of many medical innovations is that they simultaneously appear to reduce unit costs and increase total costs. We consider this phenomenon by examining the diffusion of percutaneous transluminal coronary angioplasty (PTCA)--a treatment for coronary artery disease--over the past two decades. We find that growth in the use of PTCA led to higher total costs despite its lower unit cost. Over the two decades following PTCA's introduction, however, we find that the magnitude of this increase was reduced by between 10 and 20% due to the substitution of PTCA for CABG. In addition, the increased use of PTCA appears to be a productivity improvement. PTCAs that substitute for CABG cost less and have the same or better outcomes, while PTCAs that replace medical management appear to improve health by enough to justify the cost.

Aged↗

Modelling health, income and income inequality: the impact of income inequality on health and health inequality.

A framework is developed to analyse the impact of the distribution of income on individual health and health inequality, with individual health modelled as a function of income and the distribution of income. It is demonstrated that the impact of income inequality can generate non-concave health production functions resulting in a non-concave health production possibility frontier. In this context, the impact of different health policies are considered and it is argued that if the distribution of income affects individual health, any policy aimed at equalising health, which does not account for income inequality, will lead to unequal distributions of health. This is an important development given current UK government attention to reducing health inequality.

Health Policy↗

A note on the effect of unemployment on mortality.

In this note we test if unemployment has an effect on mortality using a large individual level data set of nearly 30,000 individuals in Sweden aged 20-64 years followed-up for 10-17 years. We follow individuals over time that are initially in the same health state, but differ with respect to whether they are employed or unemployed (controlling also for a number of individual characteristics that may affect the depreciation of health over time). Unemployment significantly increases the risk of being dead at the end of follow-up by nearly 50% (from 5.36 to 7.83%). In an analysis of cause-specific mortality, we find that unemployment significantly increases the risk of suicides and the risk of dying from "other diseases" (all diseases except cancer and cardiovascular), but has no significant effect on cancer mortality, cardiovascular mortality or deaths due to "other external causes" (motor vehicle accidents, accidents and homicides).

Adult↗

A comparison of two methods for eliciting contingent valuations of colorectal cancer screening.

Willingness-to-pay (WTP) is being used increasingly in health technology assessment, although a number of methodological issues remain unresolved. Using data obtained from a randomised questionnaire survey, we investigated the metrical properties of two WTP formats, the open-ended question versus the payment scale, in the context of screening for colorectal cancer. Approximately, 2800 responses were analysed. Household income, attitudes toward health promotion and personal risk perceptions were the principal determinants of the nature and value of response. In comparison with the open-ended format, the payment scale achieved a higher completion rate and generated higher valuations. We believe that a framing effect is the most plausible explanation for these differences in performance. In contrast to previous findings, we do not find subjects' perceptions of the resource cost of interventions to be a convincing explanation for either their WTP values or inconsistencies between values and preferences. Although a proportion of respondents protested at the notion of valuation, the majority offer positive valuations, although typically of a lower value that non-protesters.

Adult↗

Public health care with waiting time: the role of supplementary private health care.

We consider an economy where most of the health care is publicly provided, and where there is waiting time for several types of treatments. Private health care without waiting time is an option for the patients in the public health queue. We show that although patients with low waiting costs will choose public treatment, they may be better off with waiting time than without. The reason is that waiting time induces patients with high waiting costs to choose private treatment, thus reducing the cost of public health care that everyone pays for. Even if higher quality (i.e. zero waiting time) can be achieved at no cost, the self-selection induced redistribution may imply that it is socially optimal to provide health care publicly and at an inferior quality level. We give a detailed discussion of the circumstances in which it is optimal to have waiting time for public health treatment. Moreover, we study the interaction between this quality decision and the optimal tax/subsidy on private health care.

Humans↗

Supply-side cost sharing when patients and doctors collude.

Doctors and patients generally share a common interest in maximizing the quality of care. Purchasers of health care on the other hand, desire cost-effective levels of quality. We consider the purchaser's problem of implementing supply-side cost sharing when patients and doctors are asymmetrically informed and can collude to advance their own joint interests in maximal quality. Such collusion can be interpreted as the sort of informal side-payments that are observed in transitional and developing economies. It may also be interpreted as a "formal" (but unregulated) case of physician balance billing. We show that both collusion-proof schemes and collusion-inducing schemes can implement cost-effective care. A number of policy implications are discussed. In particular, more permissive advertising of referred services (such as pharmaceuticals) and more informed patients will increase the cost of implementing collusion-proof mechanisms. If patients have a high willingness to pay or are informed, then allowing collusion may be preferred.

Attitude of Health Personnel↗

Risk selection and the specification of the conventional risk adjustment formula.

We argue that a sharp distinction must be made between the empirical problem of finding the best equation for explaining medical expenditures and the normative question of deriving capitations which give health plans the appropriate incentives. We propose a procedure, taken from the social choice literature, to go from the estimated equations to the capitations. If the estimated equations are not additively separable in legitimate and illegitimate risk-adjusters, it is impossible to remove all incentives for risk selection while respecting at the same time a straightforward requirement of horizontal equity. This has immediate implications for the choice of the functional form. Moreover, in so far as the conventional risk adjustment literature only includes so-called "legitimate" risk-adjusters in the estimations, its results may suffer from omitted variables-bias. We illustrate our general methodological points with empirical results, obtained from a cross-section of 321,111 Belgian patients.

Adolescent↗

Resource allocation for control of infectious diseases in multiple independent populations: beyond cost-effectiveness analysis.

Traditional cost-effectiveness analysis (CEA) assumes that program costs and benefits scale linearly with investment-an unrealistic assumption for epidemic control programs. This paper combines epidemic modeling with optimization techniques to determine the optimal allocation of a limited resource for epidemic control among multiple noninteracting populations. We show that the optimal resource allocation depends on many factors including the size of each population, the state of the epidemic in each population before resources are allocated (e.g. infection prevalence and incidence), the length of the time horizon, and prevention program characteristics. We establish conditions that characterize the optimal solution in certain cases.

Communicable Disease Control↗

The opportunity costs of informal care: does gender matter?

In this paper, we investigate the costs borne by both male and female carers in terms of their forgone formal employment opportunities. Traditionally, informal care was supplied by women but nowadays women are not only more likely to work, but also likely to be significant contributors to family finances. For women, this implies that the size of any forgone earnings cost of informal care is increasing. At the same time, population ageing is making for increasing numbers requiring care. From a policy perspective it is therefore helpful to consider a less traditional but nevertheless important source of informal care, men. We find that both male and female carers bear indirect costs in that they are less likely to be in paid work than otherwise similar non-carers and when they are in paid work they earn significantly less. However, we find that the motivation for lower employment participation is not the same for men as it is for women.

Adolescent↗

Stochastic demand, production responses and hospital costs.

This paper considers the production responses to demand uncertainty within the hospital sector. It is noted that such responses have an impact on hospital cost structures. An empirical model is specified. Estimation is undertaken on a sample of UK hospitals over the period 1993-1995, differentiating between hospital output which arises from uncertain demand (emergency treatment) and output considered to be predictable (elective treatment). The model estimates that the cost of an elective admission is approximately 45% of the cost of an emergency admission. Demand uncertainty imposes a direct cost equivalent to around 5% of the total cost of emergency admission.

Elective Surgical Procedures↗

Hospital quality choice and market structure in a regulated duopoly.

This paper analyzes the optimal structure of a regulated health care industry in a model in which the regulator cannot enforce what hospitals do (unverifiable quality of health) or does not know what hospitals know (incomplete information about production costs) or both. We show that if quality is unverifiable the choice between monopoly and duopoly does not change with respect to the verifiable case but, if there are fixed costs (assumed to be quality dependent) and the monopoly is the optimal market structure, the quality level of the operative hospital decreases. Asymmetry of information introduces informational rents that can be reduced by increasing the most efficient hospital's market share. A monopoly is chosen more often.

Economic Competition↗

Estimating price elasticities when there is smuggling: the sensitivity of smoking to price in Canada.

A central parameter for evaluating tax policies is the price elasticity of demand for cigarettes. But in many countries this parameter is difficult to estimate reliably due to widespread smuggling, which significantly biases estimates using legal sales data. An excellent example is Canada, where widespread smuggling in the early 1990s, in response to large tax increases, biases upwards the response of legal cigarette sales to price. We surmount this problem through two approaches: excluding the provinces and years where smuggling was greatest; and using household level expenditure data on smoking. These two approaches yield a tightly estimated elasticity in the range of -0.45 to -0.47. We also show that the sensitivity of smoking to price is much larger among lower income Canadians. In the context of recent behavioral models of smoking, whereby higher taxes reduce unwanted smoking among price sensitive populations, this finding suggests that cigarette taxes may not be as regressive as previously suggested. Finally, we show that price increases on cigarettes do not increase, and may actually decrease, consumption of alcohol; as a result, smuggling of cigarettes may have raised consumption of alcohol as well.

Canada↗

Exploring the health-wealth nexus.

The causal links between health and economic resources have long concerned social scientists. We use four waves of data from the Panel Study of Income Dynamics (PSID) to analyze the impact of wealth upon an individual's health status. The difficulty in approaching this task that has bedeviled previous studies is that wealth may be endogenous; a priori, it is just as likely that changes in health affect wealth as vice versa. We argue that inheritance is a suitable instrument for the change in wealth, and implement a straightforward instrumental variables strategy to deal with this problem. Our results suggest that the causal relationship running from wealth to health may not be as strong as first appears. In the data, wealth exerts a positive and statistically significant effect on health status, but it is very small in magnitude. Instrumental variables estimation leaves the point estimate approximately the same, but renders it insignificantly different from zero. And even when the point estimate is increased by twice its standard error (S.E.), the quantitative effect is small. We conclude that the wealth-health connection is not driven by short run changes in wealth.

Causality↗