Premium support

Kevin Lewis

September 10, 2012

Income and Health Spending: Evidence from Oil Price Shocks

Daron Acemoglu, Amy Finkelstein & Matthew Notowidigdo
Review of Economics and Statistics, forthcoming

Health expenditures as a share of GDP in the US have more than tripled over the last half century. A common conjecture is that this is a consequence of rising income. We investigate this hypothesis by instrumenting for local area income with time series variation in oil prices interacted local oil reserves. This strategy enables us to capture both partial equilibrium and local general equilibrium effects of income on health expenditures. Our central income elasticity estimate is 0.7, with 1.1 as the upper end of the 95 percent confidence interval, which suggests that rising income is unlikely to be a major driver of the rising health expenditure share of GDP.


What Does Health Reform Mean for the Healthcare Industry? Evidence from the Massachusetts Special Senate Election

Mohamad Al-Ississ & Nolan Miller
American Economic Journal: Economic Policy, forthcoming

We exploit the surprise election of Republican Scott Brown to the U.S. Senate to evaluate the market's assessment of the impact of the recent U.S. health reform legislation on the healthcare industry. We find that Brown's election was associated with abnormal returns of 2.1 percent and 6 percent for investments in the healthcare sector overall and managed-care firms, respectively. Investments in the pharmaceutical sector experienced abnormal returns of 2.8 percent, while healthcare facilities (e.g., hospitals) experienced abnormal losses of 3.5 percent. Firms involved with Medicare Advantage benefitted more while those involved with Medicaid Managed Care benefitted less from the election.


The Welfare Effects of Medical Malpractice Liability

Darius Lakdawalla & Seth Seabury
International Review of Law and Economics, December 2012, Pages 356-369

We use variation in the generosity of local juries to identify the causal impact of medical malpractice liability on social welfare. Growth in malpractice payments contributed at most 5 percentage points to the 33% total real growth in medical expenditures from 1990-2003. On the other hand, malpractice leads to modest mortality reductions; the value of these more than likely exceeds the costs of malpractice liability. Therefore, reducing malpractice liability is unlikely to have a major impact on health care spending, and unlikely to be cost-effective over conventionally accepted values of a statistical life.


Medical Malpractice Liability and Physician Migration

John Perry & Christopher Clark
Business Economics, July 2012, Pages 202-213

This paper uses national data on individual physicians and two control groups to provide evidence on the extent to which each of five medical malpractice reforms impacts the decision to move one's medical practice to another state. We find robust evidence that states that have implemented noneconomic damage caps experience less out-migration of physicians than states that do not have these reforms. In addition, we find some evidence that joint and several liability reforms and patient compensation funds also impact the migration decisions of physicians.


The impact of health care reform on hospital and preventive care: Evidence from Massachusetts

Jonathan Kolstad & Amanda Kowalski
Journal of Public Economics, forthcoming

In April 2006, Massachusetts passed legislation aimed at achieving near-universal health insurance coverage. The key features of this legislation were a model for national health reform, passed in March 2010. The reform gives us a novel opportunity to examine the impact of expansion to near-universal coverage state-wide. Among hospital discharges in Massachusetts, we find that the reform decreased uninsurance by 36% relative to its initial level and to other states. Reform affected utilization by decreasing length of stay, the number of inpatient admissions originating from the emergency room, and preventable admissions. At the same time, hospital cost growth did not increase.


The meaning of default options for potential organ donors

Shai Davidai, Thomas Gilovich & Lee Ross
Proceedings of the National Academy of Sciences, forthcoming

Rates of participation in organ donation programs are known to be powerfully influenced by the relevant default policy in effect ("opt-in" vs. "opt-out"). Three studies provide evidence that this difference in participation may occur in part because the requirement to opt-in or opt-out results in large differences in the meaning that individuals attach to participation. American participants in Study 1 rated participation as a significantly more substantial action when agreement was purportedly obtained under opt-in rather than opt-out conditions, and nonagreement as a greater abrogation of responsibility when that decision was made under opt-out rather than under opt-in conditions. Study 2 replicated these findings with respondents who live in Germany, which employs an opt-in donation policy, and in Austria, which has an opt-out policy. Study 3 required American participants to rate various actions that differ in the effort and self-sacrifice they demand. As predicted, the placement of organ donation on the resulting multidimensional scaling dimension differed significantly depending on whether it purportedly was made in an opt-in country (where it was considered roughly akin to giving away half of one's wealth to charity upon one's death) or an opt-out country (where it fell between letting others get ahead of one in line and volunteering some time to help the poor). We discuss the relationship between this change of meaning account and two other mechanisms - behavioral inertia and implicit norms - that we believe underlie the default effect in decision making and other effects of policies designed to influence decision-makers.


Removing Financial Barriers to Organ and Bone Marrow Donation: The Effect of Leave and Tax Legislation in the U.S.

Nicola Lacetera, Mario Macis & Sarah Stith
NBER Working Paper, August 2012

In an attempt to alleviate the shortfall in organs and bone marrow available for transplants, many U.S. states passed legislation providing leave to organ and bone marrow donors and/or tax benefits for live and deceased organ and bone marrow donations and to employers of donors. We exploit cross-state variation in the timing and passage of such legislation to analyze its impact on organ donations by living and deceased persons, on measures of the quality of the organs transplanted, and on the number of bone marrow donations. We find that these provisions did not have a significant impact on the quantity of organs donated. The leave legislation, however, did have a positive impact on bone marrow donations. We also find some evidence of a positive impact on the quality of organ transplants, measured by post-transplant survival rates. Our results suggest that these types of legislation work for moderately invasive procedures such as bone marrow donation, but may be too low for organ donation, which is riskier and more burdensome to the donor.


Who's worried about turkeys? How ‘organisational silos' impede zoonotic disease surveillance

Colin Jerolmack
Sociology of Health & Illness, forthcoming

Though emerging infectious diseases ignore boundaries between species, the agencies that respond to them do not. Based on interviews with state and federal epidemiologists, veterinarians, and physicians and on case studies of disease events, this article examines how the jurisdictional and cultural divides that exist among human and animal health agencies hinder efforts to successfully contain species-jumping diseases (zoonoses). I argue that newly emergent zoonoses make these agencies' organisational cultures function as silos because the institutionalised thinking and practices developed to address the diseases that traditionally concerned each agency constrain members from building the inter-organisational bridges required to manage the latest ‘hybrid' diseases. The silo effect is evident both across the human-animal health divide and within the landscape of animal health, as agencies that monitor livestock and wildlife follow distinct and sometimes competing agendas. The article also touches on moments of inter-agency cooperation in order to specify how health practitioners can begin making connections between ‘organisational silos'. This article encourages sociologists of health to explore the crucial link between animal and human health; and it introduces the concept of organisational silos to capture the relational dilemmas that arise when a ‘hybrid' problem systemically links agencies with disparate organisational cultures.


In Amenable Mortality - Deaths Avoidable Through Health Care - Progress In The US Lags That Of Three European Countries

Ellen Nolte & Martin McKee
Health Affairs, September 2012, Pages 2114-2122

We examined trends and patterns of amenable mortality - deaths that should not occur in the presence of timely and effective health care - in the United States compared to those in France, Germany, and the United Kingdom between 1999 and 2007. Americans under age sixty-five during this period had elevated rates of amenable mortality compared to their peers in Europe. For Americans over age sixty-five, declines in amenable mortality slowed relative to their peers in Europe. Overall, amenable mortality rates among men from 1999 to 2007 fell by only 18.5 percent in the United States compared to 36.9 percent in the United Kingdom. Among women, the rates fell by 17.5 percent and 31.9 percent, respectively. Although US men and women had the lowest mortality from treatable cancers among the four countries, deaths from circulatory conditions - chiefly cerebrovascular disease and hypertension - were the main reason amenable death rates remained relatively high in the United States. These findings strengthen the case for reforms that will enable all Americans to receive timely and effective health care.


International Comparisons in Health Economics: Evidence from Aging Studies

James Banks & James Smith
Annual Review of Economics, 2012, Pages 57-81

We provide an overview of the growing literature that uses microlevel data from multiple countries to investigate health outcomes, and their link to socioeconomic factors, at older ages. Because the data are at a comparatively young stage, much of the analysis is at an early stage and limited to a handful of countries, with analysis for the United States and England being the most common. What is immediately apparent as we get better measures is that, between countries, health differences amongst those at older ages are real and large. Countries are ranked differently according to whether one considers life expectancy, prevalence, or the incidence of a specific condition. Moreover, the magnitude of international disparities may vary according to whether measures utilize doctor-diagnosed conditions or biomarker-based indicators of disease and poor health. But one key finding emerges - the United States ranks poorly on all indicators, with the exception of self-reported subjective health status.


The Trillion Dollar Conundrum: Complementarities and Health Information Technology

David Dranove et al.
NBER Working Paper, August 2012

We examine the heterogeneous relationship between the adoption of electronic medical records (EMR) and hospital operating costs at thousands of US hospitals between 1996 and 2009. Combining data from multiple sources, we first identify a puzzle that has been seen in prior studies: Adoption of EMR is generally associated with a slight increase in costs. We draw on the literature on information technology as a business process innovation to analyze why this average effect arises, and explain why it masks important differences over time, across locations, and across hospitals. We find evidence consistent with this approach, namely, that: (1) EMR adoption is initially associated with a rise in costs; (2) EMR adoption at hospitals in favorable conditions - such as urban locations - leads to a decrease in costs after three years; and (3) Hospitals in unfavorable conditions experience a sharp increase in costs even after six years.


Payer-Provider Collaboration In Accountable Care Reduced Use And Improved Quality In Maine Medicare Advantage Plan

Thomas Claffey et al.
Health Affairs, September 2012, Pages 2074-2083

Patient-centered, accountable care has garnered increased attention with the passage of the Affordable Care Act and new Medicare regulations. This case study examines a care model jointly developed by a provider and a payer that approximates an accountable care organization for a Medicare Advantage population. The collaboration between Aetna and NovaHealth, an independent physician association based in Portland, Maine, focused on shared data, financial incentives, and care management to improve health outcomes for approximately 750 Medicare Advantage members. The patient population in the pilot program had 50 percent fewer hospital days per 1,000 patients, 45 percent fewer admissions, and 56 percent fewer readmissions than statewide unmanaged Medicare populations. NovaHealth's total per member per month costs across all cost categories for its Aetna Medicare Advantage members were 16.5 percent to 33 percent lower than costs for members not in this provider organization. Clinical quality metrics for diabetes, ischemic vascular disease, annual office visits, and postdischarge follow-up for patients in the program were consistently high. The experience of developing and implementing this collaborative care model suggests that several components are key, including robust data sharing and information systems that support it, analytical support, care management and coordination, and joint strategic planning with close provider-payer collaboration.


Racial/Ethnic Disparity Trends in Children's Mental Health Care Access and Expenditures from 2002 to 2007

Benjamin Lê Cook, Colleen Barry & Susan Busch
Health Services Research, forthcoming

Objective: To examine trends in disparities in children's mental health care.

Data: 2002-2007 Medical Expenditure Panel Survey.

Study Design: We used the Institute of Medicine (IOM) definition of health care disparities and estimated two-part expenditure models to examine disparity trends in any mental health care use, any outpatient care, and psychotropic drug use, as well as expenditures in these three categories, conditional on use. We used 2-year longitudinal panel data to determine disparities in care initiation among children with unmet need.

Principal Findings: Assessing trends over time between 2002 and 2007, we identified that disparities persist for blacks and Latinos in receipt of any mental health care, any outpatient care, and any psychotropic drug use. Among those with positive mental health care expenditures, Latino-white disparities in overall mental health care expenditures increased over time. Among children with unmet need, significant disparities in initiation of an episode of mental health care were found, with whites approximately twice as likely as blacks and Latinos to initiate care.

Conclusions: Disparities in children's mental health care use are persistent and driven by disparities in initiation, suggesting policies to improve detection or increase initial access to care may be critical to reducing disparities.


Big Pharma, little science?: A bibliometric perspective on Big Pharma's R&D decline

Ismael Rafols et al.
Technological Forecasting and Social Change, forthcoming

There is a widespread perception that pharmaceutical R&D is facing a productivity crisis characterised by stagnation in the numbers of new drug approvals in the face of increasing R&D costs. This study explores pharmaceutical R&D dynamics by examining the publication activities of all R&D laboratories of the major European and US pharmaceutical firms during the period 1995-2009. The empirical findings present an industry in transformation. In the first place, we observe a decline of the total number of publications by large firms. Second, we show a relative increase of their external collaborations suggesting a tendency to outsource, and a diversification of the disciplinary base, in particular towards computation, health services and more clinical approaches. Also evident is a more pronounced decline in publications by both R&D laboratories located in Europe and by firms with European headquarters. Finally, while publications by Big Pharma in emerging economies sharply increase, they remain extremely low compared with those in developed countries. In summary, the trend in this transformation is one of a gradual decrease in internal research efforts and increasing reliance on external research. These empirical insights support the view that large pharmaceutical firms are increasingly becoming ‘network integrators' rather than the prime locus of drug discovery.


Introducing Decision Aids At Group Health Was Linked To Sharply Lower Hip And Knee Surgery Rates And Costs

David Arterburn et al.
Health Affairs, September 2012, Pages 2094-2104

Decision aids are evidence-based sources of health information that can help patients make informed treatment decisions. However, little is known about how decision aids affect health care use when they are implemented outside of randomized controlled clinical trials. We conducted an observational study to examine the associations between introducing decision aids for hip and knee osteoarthritis and rates of joint replacement surgery and costs in a large health system in Washington State. Consistent with prior randomized trials, our introduction of decision aids was associated with 26 percent fewer hip replacement surgeries, 38 percent fewer knee replacements, and 12-21 percent lower costs over six months. These findings support the concept that patient decision aids for some health conditions, for which treatment decisions are highly sensitive to both patients' and physicians' preferences, may reduce rates of elective surgery and lower costs.


Consumer Inertia and Firm Pricing in the Medicare Part D Prescription Drug Insurance Exchange

Keith Marzilli Ericson
NBER Working Paper, September 2012

I use the Medicare Part D prescription drug insurance market to examine the dynamics of firm interaction with consumers on an insurance exchange. Enrollment data show that consumers face switching frictions leading to inertia in plan choice, and a regression discontinuity design indicates initial defaults have persistent effects. In the absence of commitment to future prices, theory predicts firms respond to inertia by raising prices on existing enrollees, while introducing cheaper alternative plans. The complete set of enrollment and price data from 2006 through 2010 confirms this prediction: older plans have approximately 10% higher premiums than comparable new plans.


The Impact of Obstetric Unit Closures on Maternal and Infant Pregnancy Outcomes

Scott Lorch et al.
Health Services Research, forthcoming

Objective: To define the association between large-scale obstetric unit closures and relative changes in maternal and neonatal outcomes.

Data Sources/Study Setting: Birth and death certificates were linked to maternal and neonatal hospital discharge records for all births between January 1, 1995 and June 30, 2005 in Philadelphia, which experienced the closure of 9 of 19 obstetric units between 1997 and 2005, and five surrounding counties and eight urban counties that did not experience a similar reduction in obstetric units.

Design: A before-and-after study design with an untreated control group compared changes in perinatal outcomes in Philadelphia to five surrounding control counties and eight urban control counties after controlling for case mix differences and secular trends (N = 3,140,782).

Results: Relative to the preclosure years, the difference in neonatal mortality (odds ratio (OR) 1.49, 95 percent CI 1.12-2.00) and all perinatal mortality (OR 1.53, 95 percent CI 1.14-2.04) increased for Philadelphia residents compared with both control groups between 1997 and 1999. After 2000, there was no statistically significant change in any outcome in Philadelphia county compared with the preclosure epoch.

Conclusions: Obstetric unit closures were initially associated with adverse changes in perinatal outcomes, but these outcomes ameliorated over time.


The Effect of Expanding Access to Health Insurance on the Health and Mortality of Social Security Disability Insurance Beneficiaries

Robert Weathers & Michelle Stegman
Journal of Health Economics, forthcoming

We use a social experiment to estimate the impact of expanding health insurance coverage on the health and mortality of newly entitled SSDI beneficiaries who lacked health insurance. Our intent-to-treat estimates show that expanding health insurance has significant effects on self-reported health at one year following health insurance enrollment, positive effects on mental health and physical health at one year following health insurance enrollment, and no significant effects on mortality within our observation period. About 30 percent of control group members obtained health insurance coverage within one year following enrollment. We use two-stage least square models to estimate the impact on those who would not have obtained health insurance coverage without the demonstration project and find larger effects on self-reported health and mental health among these SSDI beneficiaries. Finally, we examine distributional impacts to show that mean impacts miss meaningful effects.


Out-of-Pocket Spending in the Last Five Years of Life

Amy Kelley et al.
Journal of General Internal Medicine, forthcoming

Background: A key objective of the Medicare program is to reduce risk of financial catastrophe due to out-of-pocket healthcare expenditures. Yet little is known about cumulative financial risks arising from out-of-pocket healthcare expenditures faced by older adults, particularly near the end of life.

Design: Using the nationally representative Health and Retirement Study (HRS) cohort, we conducted retrospective analyses of Medicare beneficiaries' total out-of-pocket healthcare expenditures over the last 5 years of life.

Participants: We identified HRS decedents between 2002 and 2008; defined a 5 year study period using each subject's date of death; and excluded those without Medicare coverage at the beginning of this period (n = 3,209).

Main measures: We examined total out-of-pocket healthcare expenditures in the last 5 years of life and expenditures as a percentage of baseline household assets. We then stratified results by marital status and cause of death. All measurements were adjusted for inflation to 2008 US dollars.

Results: Average out-of-pocket expenditures in the 5 years prior to death were $38,688 (95 % Confidence Interval $36,868, $40,508) for individuals, and $51,030 (95 % CI $4,7649, $54,412) for couples in which one spouse dies. Spending was highly skewed, with the median and 90th percentile equal to $22,885 and $89,106, respectively, for individuals, and $39,759 and $94,823, respectively, for couples. Overall, 25 % of subjects' expenditures exceeded baseline total household assets, and 43 % of subjects' spending surpassed their non-housing assets. Among those survived by a spouse, 10 % exceeded total baseline assets and 24 % exceeded non-housing assets. By cause of death, average spending ranged from $31,069 for gastrointestinal disease to $66,155 for Alzheimer's disease.

Conclusion: Despite Medicare coverage, elderly households face considerable financial risk from out-of-pocket healthcare expenses at the end of life. Disease-related differences in this risk complicate efforts to anticipate or plan for health-related expenditures in the last 5 years of life.


Saving Teens: Using a Policy Discontinuity to Estimate the Effects of Medicaid Eligibility

Bruce Meyer & Laura Wherry
NBER Working Paper, August 2012

This paper uses a policy discontinuity to identify the immediate and long-term effects of public health insurance coverage during childhood. Our identification strategy exploits a unique feature of several early Medicaid expansions that extended eligibility only to children born after September 30, 1983. This feature resulted in a large discontinuity in the lifetime years of Medicaid eligibility of children at this birthdate cutoff. Those with family incomes at or just below the poverty line had close to five more years of eligibility if they were born just after the cutoff than if they were born just before. We use this discontinuity in eligibility to measure the impact of public health insurance on mortality by following cohorts of children born on either side of this cutoff from childhood through early adulthood. We examine changes in rates of mortality by the underlying causes of death, distinguishing between deaths due to internal and external causes. We also examine outcomes separately for black and white children. Our analysis shows that black children were more likely to be affected by the Medicaid expansions and gained twice the amount of eligibility as white children. We find a substantial effect of public eligibility during childhood on the later life mortality of black children at ages 15-18. The estimates indicate a 13-18 percent decrease in the internal mortality rate of black teens born after September 30, 1983. We find no evidence of an improvement in the mortality of white children under the expansions.


from the


A weekly newsletter with free essays from past issues of National Affairs and The Public Interest that shed light on the week's pressing issues.


to your National Affairs subscriber account.

Already a subscriber? Activate your account.


Unlimited access to intelligent essays on the nation’s affairs.

Subscribe to National Affairs.