Value of Statistical Life
Administering Entitlement: Governance, Public Health Care, and the Early American State
Gautham Rao
Law & Social Inquiry, forthcoming
Abstract:
This article explores the federal marine hospitals of the early republic, the first public health care system in US history. Beginning in 1798, the federal government collected twenty cents per month from mariners' wages and used this revenue to subsidize medical care for sick and disabled merchant mariners. Previous studies have traced links between marine hospitals and modern public policy. By studying governance from the bottom up, this article takes a different approach. I argue that jurists, physicians, and officials' regulation of sailors' entitlement to public health care facilitated and reflected a transformation of national authority. Between 1798 and 1816, sailors' entitlement was a local matter, based on the traditional paternalist understandings of maritime laborers as social dependents. By 1836, though, the federal Treasury redefined entitlement around a newly calculus of productivity: only the productive were entitled to care at the marine hospitals. This story about governance, federal law, and political economy in the early United States suggests that the early American state was a more vibrant participant in the market and society than has been previously understood.
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Anne Martin et al.
Health Affairs, January 2012, Pages 208-219
Abstract:
Medical goods and services are generally viewed as necessities. Even so, the latest recession had a dramatic effect on their utilization. US health spending grew more slowly in 2009 and 2010 - at rates of 3.8 percent and 3.9 percent, respectively - than in any other years during the fifty-one-year history of the National Health Expenditure Accounts. In 2010 extraordinarily slow growth in the use and intensity of services led to slower growth in spending for personal health care. The rates of growth in overall US gross domestic product (GDP) and in health spending began to converge in 2010. As a result, the health spending share of GDP stabilized at 17.9 percent.
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Does Retiree Health Insurance Encourage Early Retirement?
Steven Nyce et al.
NBER Working Paper, December 2011
Abstract:
The strong link between health insurance and employment in the United States may cause workers to delay retirement until they become eligible for Medicare at age 65. However, some employers extend health insurance benefits to their retirees, and individuals who are eligible for such retiree health benefits need not wait until age 65 to retire with group health coverage. We investigate the impact of retiree health insurance on early retirement using employee-level data from 64 diverse firms that are clients of Towers Watson, a leading benefits consulting firm. We find that retiree health coverage has its strongest effects at ages 62 and 63, resulting in a 3.7 percentage point (21.2 percent) increase in the probability of turnover at age 62 and a 5.1 percentage point (32.2 percent) increase in the probability of turnover at age 63; it has a more modest effects for individuals under the age of 62. A more generous employer contribution of 50 percent or more raises turnover by 1-3 percentage points at ages 56-61, by 5.9 percentage points (33.7 percent) at age 62, and by 6.9 percentage points (43.7 percent) at age 63. Overall, an employer contribution of 50 percent or more reduces the total number of person-years worked between ages 56 and 64 by 9.6 percent relative to no coverage.
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The Impact Of Mental Health Insurance Laws On State Suicide Rates
Matthew Lang
Health Economics, forthcoming
Abstract:
In the 1990s and early 2000s, a number of states passed laws requiring mental health benefits to be included in health insurance coverage. The variation in the characteristics and enactment date of the laws provides an opportunity to measure the impact of increasing access to mental health care on mental health outcomes, as evidenced by state suicide rates. In contrast with previous research, results show that when states enact laws requiring insurance coverage to include mental health benefits at parity with physical health benefits, the suicide rate decreases significantly by 5%. The findings are robust to a number of specifications and falsification tests.
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The Economic Benefits of Pharmaceutical Innovations: The Case of Cox-2 Inhibitors
Craig Garthwaite
American Economic Journal: Applied Economics, forthcoming
Abstract:
Despite dramatic improvements in medical technology, little attention has been paid to the role of these innovations in improving economic outcomes. This study estimates the labor supply effects of Cox-2 inhibitors, a widely prescribed class of pharmaceuticals used for the treatment of chronic pain and inflammation and primarily marketed under the brand names Vioxx, Celebrex, and Bextra. This paper exploits the removal of Vioxx from the market in 2004 as an exogenous change in drug use. This removal was associated with a 0.35 percentage point decrease in overall labor force participation and $19 billion in lost wages.
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Martin Hackmann, Jonathan Kolstad & Amanda Kowalski
NBER Working Paper, January 2012
Abstract:
We implement an empirical test for selection into health insurance using changes in coverage induced by the introduction of mandated health insurance in Massachusetts. Our test examines changes in the cost of the newly insured relative to those who were insured prior to the reform. We find that counties with larger increases in insurance coverage over the reform period face the smallest increase in average hospital costs for the insured population, consistent with adverse selection into insurance before the reform. Additional results, incorporating cross-state variation and data on health measures, provide further evidence for adverse selection.
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Bryan Schmutz & Rexford Santerre
Health Economics, forthcoming
Abstract:
Unlike the pharmaceutical industry, no empirical research has focused on the factors influencing research and development (R&D) spending in the medical device industry. To fill that gap, this study examines how R&D spending is influenced by prior year cash flow and corporate market value using multiple regression analysis and a panel data set of medical device companies over the period 1962-2008. The empirical findings suggest that the elasticities of R&D spending with respect to cash flow and corporate market value equal 0.58 and 0.31, respectively. Moreover, based upon these estimates, simulations show that the recently enacted excise tax on medical devices, taken alone, will reduce R&D spending by approximately $4 billion and thereby lead to a minimum loss of $20 billion worth of human life years over the first 10 years of its enactment.
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The Evolution of Physician Practice Styles: Evidence from Cardiologist Migration
David Molitor
MIT Working Paper, November 2011
Abstract:
A large literature in medicine documents widespread variation in regional treatment intensity and resource use, but little is known about why physicians treat patients so differently across these regions. In this paper, I explore the role of physician-specific factors such as preferences and learned behavior versus environment-level factors such as hospital capacity and productivity spillovers on physician behavior. I exploit cardiologist migration across geographic regions and find that physicians who start off in the same region and subsequently move to dissimilar regions practice similarly before the move but very differently after the move. Based on this change in behavior, baseline estimates imply that the role of the environment on physician behavior is twice as important as physician-specific factors. Specifically, a one percentage point change in practice environment results in an immediate 2/3 percentage point change in physician behavior, with no further changes over time.
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Insurer Pricing and Consumer Welfare: Evidence from Medigap
Amanda Starc
University of Pennsylvania Working Paper, November 2011
Abstract:
While adverse selection is often blamed for inefficiently high insurance premiums, imperfect competition is also a pervasive feature of many health insurance markets. In Medicare Supplement insurance (Medigap), two firms control nearly three-fourths of the market and premiums exceed claims by thirty percent. I find that while adverse selection can restrain markups, a low price elasticity and consumers' brand preferences incentivize firms to engage in substantial marketing and price above cost. I conclude that the strategic behavior of insurers facing relatively inelastic demand is far more important than adverse selection in explaining poor market performance and loss of consumer surplus.
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Do consumers respond to publicly reported quality information? Evidence from nursing homes
Rachel Werner et al.
Journal of Health Economics, forthcoming
Abstract:
Public reporting of quality information is designed to address information asymmetry in health care markets. Without public reporting, consumers may have little information to help them differentiate quality among providers, giving providers little incentive to compete on quality. Public reporting enables consumers to choose highly ranked providers. Using a four-year (2000-2003) panel dataset, we examine the relationship between report card scores and patient choice of nursing home after the Centers for Medicare and Medicaid Services began publicly reporting nursing home quality information on post-acute care in 2002. We find that the relationship between reported quality and nursing home choice is positive and statistically significant suggesting that patients were more likely to choose facilities with higher reported post-acute care quality after public reporting was initiated. However, the magnitude of the effect was small. We conclude that there has been minimal consumer response to information in the post-acute care market.
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Carole Roan Gresenz et al.
NBER Working Paper, December 2011
Abstract:
We analyze the effects of states' expansions of CHIP eligibility to children in higher income families during 2002-2009 on take-up of public coverage, crowd-out of private coverage, and rates of uninsurance. Our results indicate these expansions were associated with limited uptake of public coverage and only a two percentage point reduction in the uninsurance rate among these children. Because not all of the take-up of public insurance among eligible children is accounted for by children who transfer from being uninsured to having public insurance, our results suggest that there may be some crowd-out of private insurance coverage; the upper bound crowd-out rate we calculate is 46 percent.
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The Effect of Canadian Imports on Prescription Drug Prices in the U.S.
Jonathan Hamilton
Regional Science and Urban Economics, forthcoming
Abstract:
Reimportation of prescription drugs by American consumers from Canada has been a high-visibility policy issue. The large price discrepancies for some patented drugs arise from market pricing in the U.S. and a system of administered pricing in Canada. The model assumes that there are two classes of U.S. consumers: one group who cannot reimport drugs at any cost, and a second group with a distribution of reimportation costs. Under the assumption that the group who can reimport drugs has lower willingness to pay, reimportation serves as a mechanism for price discrimination in the U.S. market. The results include the following: 1) a decline in the Canadian price may raise the U.S. price; 2) a shift down in the distribution of reimportation costs may similarly raise the U.S. price; 3) a shift down in the distribution of reimportation costs may raise drug manufacturer profits.
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The Mayo Clinic Value Creation System
Stephen Swensen et al.
American Journal of Medical Quality, January/February 2012, Pages 58-65
Abstract:
The authors present Mayo Clinic's Value Creation System, a coherent systems engineering approach to delivering a single high-value practice. There are 4 tightly linked, interdependent phases of the system: alignment, discovery, managed diffusion, and measurement. The methodology is described and examples of the results to date are presented. The Value Creation System has been demonstrated to improve the quality of patient care while reducing costs and increasing productivity.
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Robb Cohen et al.
Health Affairs, January 2012, Pages 110-119
Abstract:
The Affordable Care Act of 2010 authorized the continued availability of Medicare Advantage Chronic Condition Special Needs Plans (C-SNPs). This case study examines the model of care used by the largest such plan, Care Improvement Plus, and compares utilization rates among its diabetes patients with those of other beneficiaries enrolled in fee-for-service Medicare in the same five states. This special-needs plan emphasizes direct contacts with patients to help identify gaps in care and promote primary and preventive health care. The comparative analysis indicates that people with diabetes in the special-needs plan - particularly nonwhite beneficiaries - had lower rates of hospitalization and readmission than their peers in fee-for-service Medicare. For example, risk-adjusted hospital days per enrollee among special-needs plan participants were 19 percent lower than for fee-for-service Medicare enrollees (27 percent lower for nonwhite enrollees). Risk-adjusted physician office visits were 7 percent higher among C-SNP enrollees than among comparable fee-for-service enrollees (26 percent higher for nonwhite enrollees). Although this study does not include a cost analysis, we believe that savings from reduced hospitalizations are likely to more than offset the additional costs of enhanced primary care programs. Our study suggests that the Centers for Medicare and Medicaid Services may be able to adapt methods used by the C-SNP program to improve care and outcomes for beneficiaries with a broad range of chronic diseases.
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Frank Lichtenberg
NBER Working Paper, January 2012
Abstract:
I examine the effect of pharmaceutical innovation on the functional status of nursing home residents using cross-sectional, patient-level data from the 2004 National Nursing Home Survey. This was the first public-use survey of nursing homes that contains detailed information about medication use, and it contains better data on functional status than previous surveys. Residents using newer medications and a higher proportion of priority-review medications were more able to perform all five activities of daily living (ADLs), controlling for age, sex, race, marital status, veteran status, where the resident lived prior to admission, primary diagnosis at the time of admission, up to 16 diagnoses at the time of the interview, sources of payment, and facility fixed effects. The ability of nursing home residents to perform activities of daily living is positively related to the number of "new" (post-1990) medications they consume, but unrelated to the number of old medications they consume. If 2004 nursing home residents had used only old medications, the fraction of residents with all five ADL dependencies would have been 58%, instead of 50%. During the period 1990-2004, pharmaceutical innovation reduced the functional limitations of nursing home residents by between 1.2% and 2.1% per year.
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Pharmaceutical High Profits: The Value of R&D, or Oligopolistic Rents?
Janet Spitz & Mark Wickham
American Journal of Economics and Sociology, January 2012, Pages 1-36
Abstract:
Pharmaceutical firms attribute high prices and high profits to costs associated with researching and developing the next generation of life-saving drugs. Using data from annual reports, this article tests the validity of this claim. We find that while pharmaceutical firms do invest in R&D, they also enjoy strong rents; between 1988 and 2009, pharmaceuticals enjoyed profits of 3 to 37 times the all-industry average, depending on the years, while investing proportionately less in R&D than other high-R&D firms. Costs of pharmaceutical drugs have successfully flown below the radar in much of the current health care debate, with producers managing to obstruct alternative sourcing as well as payment cuts. While health care is examined for savings in other areas, sustained high pharmaceutical profits suggest that as a new health care policy develops in the U.S., the pharmaceutical industry should not be excluded from examination for significant savings in health care costs.
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Randolph Beard et al.
Empirical Economics, February 2012, Pages 261-277
Abstract:
This article provides an econometric analysis of the relationship between live and deceased (cadaveric) kidney donations in the United States for the period 1992:IV-2006:II. Utilizing a cointegration representation and impulse-response analysis, we find strong evidence for deceased donor kidneys "crowding out" living donations, potentially undermining conventional efforts to reduce the shortage.
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Dominic Wilkinson & Julian Savulescu
Bioethics, January 2012, Pages 32-48
Abstract:
There are not enough solid organs available to meet the needs of patients with organ failure. Thousands of patients every year die on the waiting lists for transplantation. Yet there is one currently available, underutilized, potential source of organs. Many patients die in intensive care following withdrawal of life-sustaining treatment whose organs could be used to save the lives of others. At present the majority of these organs go to waste. In this paper we consider and evaluate a range of ways to improve the number and quality of organs available from this group of patients. Changes to consent arrangements (for example conscription of organs after death) or changes to organ donation practice could dramatically increase the numbers of organs available, though they would conflict with currently accepted norms governing transplantation. We argue that one alternative, Organ Donation Euthanasia, would be a rational improvement over current practice regarding withdrawal of life support. It would give individuals the greatest chance of being able to help others with their organs after death. It would increase patient autonomy. It would reduce the chance of suffering during the dying process. We argue that patients should be given the choice of whether and how they would like to donate their organs in the event of withdrawal of life support in intensive care. Continuing current transplantation practice comes at the cost of death and prolonged organ failure. We should seriously consider all of the alternatives.
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Do Timely Outpatient Follow-up Visits Decrease Hospital Readmission Rates?
Deanne Kashiwagi et al.
American Journal of Medical Quality, January/February 2012, Pages 11-15
Abstract:
It is widely believed that timely follow-up decreases hospital readmissions; however, the literature evaluating time to follow-up is limited. The authors conducted a retrospective analysis of patients discharged from a tertiary care academic medical center and evaluated the relationship between outpatient follow-up appointments made and 30-day unplanned readmissions. Of 1044 patients discharged home, 518 (49.6%) patients had scheduled follow-up ≤14 days after discharge, 52 (4.9%) patients were scheduled ≥15 days after discharge, and 474 (45.4%) had no scheduled follow-up. There was no statistical difference in 30-day readmissions between patients with follow-up within 14 days and those with follow-up 15 days or longer from discharge (P = .36) or between patients with follow-up within 14 days and those without scheduled follow-up (P = .75). The timing of postdischarge follow-up did not affect readmissions. Further research is needed to determine such factors and to prospectively study time to outpatient follow-up after discharge and the decrease in readmission rates.
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Physician Patient-sharing Networks and the Cost and Intensity of Care in US Hospitals
Michael Barnett et al.
Medical Care, February 2012, Pages 152-160
Background: There is substantial variation in the cost and intensity of care delivered by US hospitals. We assessed how the structure of patient-sharing networks of physicians affiliated with hospitals might contribute to this variation.
Methods: We constructed hospital-based professional networks based on patient-sharing ties among 61,461 physicians affiliated with 528 hospitals in 51 hospital referral regions in the US using Medicare data on clinical encounters during 2006. We estimated linear regression models to assess the relationship between measures of hospital network structure and hospital measures of spending and care intensity in the last 2 years of life.
Results: The typical physician in an average-sized urban hospital was connected to 187 other doctors for every 100 Medicare patients shared with other doctors. For the average-sized urban hospital an increase of 1 standard deviation (SD) in the median number of connections per physician was associated with a 17.8% increase in total spending, in addition to 17.4% more hospital days, and 23.8% more physician visits (all P<0.001). In addition, higher "centrality" of primary care providers within these hospital networks was associated with 14.7% fewer medical specialist visits (P<0.001) and lower spending on imaging and tests (-9.2% and -12.9% for 1 SD increase in centrality, P<0.001).
Conclusions: Hospital-based physician network structure has a significant relationship with an institution's care patterns for their patients. Hospitals with doctors who have higher numbers of connections have higher costs and more intensive care, and hospitals with primary care-centered networks have lower costs and care intensity.