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Date
Jun
06
2006

Impact of Obesity on Labor Market Outcomes of the Elderly

Presenter:

Francesco Renna

Authors:

Francesco Renna, Nidhi Thakur

Chair: Don Kenkel; Discussant: TBA Tue June 6, 2006 15:30-17:00 Room 121

Rationale: With increased longevity, the population of the retired is increasing at a fast pace. It is thus important to understand the factors that might lead to an even earlier onset of retirement than the usual 65th year of life. Since health is often cited as one such factor, it becomes imperative to understand how different constituents of health affect the labor market decisions of the elderly. We believe that obesity can impact employment decisions directly by creating functional disabilities, and/or indirectly by aggravating or actually causing other health ailments which can in turn impact employment status. While the impact of obesity along these two lines can be seen in almost all ages, amongst the elderly obesity can act as a catalyst in the labor market exit decisions, since ‘retirement’ is a concept much in their horizon than in the horizon of the younger obese.

Objectives: The objective of this paper is to estimate the direct and indirect impact of obesity on the labor market decisions of the older population.

Methodology: BMI varies from 18.5 for normal individuals to more than 40 for extremely obese. We compute the BMI for a sample of older workers, and then look at how changes in BMI affect their labor market outcomes for the next 8 years, during which time they make one of three choices: they either take an early retirement, apply for a DI/SSI benefit or change the number of hours worked. Each of these decisions is mutually exclusive, allowing for a multinomial logit approach. We also understand that since obesity is to a large extent also a self-control issue, it is possible that decisions regarding the labor market, like number of hours supplied, retirement or applying for DI assistance might be affected by the same time preferences of the individual which affect consumption decisions and subsequently affect the body weight. Thus in addition to controlling for various socio-economic characteristics of the older worker we also allow for individual heterogeneity through fixed effects. To estimate the direct and indirect impact of obesity, we control for physical or mental illnesses and their interaction with BMI. The data comes from the HRS.

Results: Preliminary analysis suggests that higher BMI increases DI applications and the probability of working part time. The effect of BMI on employment is ambiguous: BMI may decrease employment because obesity is generally associated with an increase of chronic conditions. Still, many obese might have an incentive to not retire till 65, since they do not qualify for Medicare and they are more likely to need medical assistance. We also expect to find that disability associated with physical illness may be smaller than recent statistics suggest after accounting independently for the role of obesity.

Conclusions: The paper suggests that obesity plays an important role in the late work life of elderly workers because of its effects on physical mobility and chronic conditions that determine the probability a worker will apply for DI, may need medical assistance, and ultimately withdraw from the labor force.

Is Being Overweight A Big Deal? Body Mass Index and Health Dynamics of Elderly Americans

Presenter:

Zhou Yang

Authors:

Zhou Yang

Chair: Don Kenkel; Discussant: TBA Tue June 6, 2006 15:30-17:00 Room 121

Abstract

There is much debate about whether being overweight is a serious concern of the health among American people recently. Up to the end of 1990s the general conclusion is the relationship between Body Mass Index (BMI) and mortality rate from all reasons is in a concave shape where the highest and lowest mortality rates are observed among people in the lowest and highest BMI level, and the optimal weight associated with lowest mortality rate was determined to be between 23.5 to 24.9 in men, and between 22.0 and 23.4 in women.

However, there has been much debate recently concerning the health risk related to obesity. The center of the debate is the publication on JAMA (Flegal et al.. ,2005 ) This study shows that the relative risk of death among obese people with BMI 30 or higher is significantly higher than the normal weight people (BMI 18.5 to 25), but the relative risk of death of overweight people with BMI between 25 and 30 is the same as the normal weight people. Other researchers questioned the results and methods of Flegal’s research, and specifically pointed out that the relationship between BMI and mortality is complicated with smoking, chronic diseases and natural aging process which involves loss of bone density and muscularity, and calls for longitudinal behavior research that could investigate the changes in weight, health care behaviors and health outcomes.

This study used a dynamic behavior model to explain that weight is a choice variable of each individual that relates to her health status, health care services consumption, personal habit, and life expectancy. At the same time, weight itself changes over time in a dynamic pattern.

A jointly estimated equation system is then developed based on the theoretical framework to estimate different aspects of dynamic changes of weight and health conditions. Longitudinal data of Medicare Current Beneficiary Survey from 1992 to 1998 was used in the empirical estimation. Discrete random error term was adopted in the maximum likelihood estimation to control for unobserved individual heterogeneity. Both a short-term simulation over the entire sample over 5 year, and a long-term simulation over 35 years on one cohort from 65 were conducted. The results showed that the econometric tools adopted in this study significantly controlled the possible estimation bias caused by unobserved individual heterogeneity. The highest mortality rate is observed among the obese and underweight cohort. The elderly who are overweight does experience higher mortality than the normal weight cohort. Survivors in all age of both the obese and overweight cohort have higher disability rate than the normal weight group. The average weight among the survivors in all age cohorts converge to BMI 24 over time. The obese cohort experienced the worse health outcomes, but highest health care expenditures in total, while the normal weight cohort have the best health and lowest health care expenditures. The optimal weight for the elderly is still suggested to be lower than, and close to 25 up to age 65 in this study.

The effect of obesity on labor market outcomes

Presenter:

Euna Han

Authors:

Euna Han

Chair: Don Kenkel; Discussant: TBA Tue June 6, 2006 15:30-17:00 Room 121

Rationale: Previous research suggests that obesity has potentially important effects on labor market outcomes. Obese people may be discriminated against by consumers or employers due to their distaste for obese people. Employers also may not want to hire obese people due to higher expected healthcare costs if the employers provide health insurance to their employees. These may result in lower wages, low likelihood of being employed and the sorting of obese people into jobs where slimness is not rewarded.

Objective: The objective of this study is to understand the effect of obesity on wages. Although other studies have linked obesity to wages, the validity of their estimation results remains questionable due to potential weaknesses in the strategies employed to control for the endogeneity of obesity. I identified the effect of obesity on wages with exogenous state-level variation in multiple variables. The over-identification of obesity with exogenous instruments will provide valid parameter estimates if the identification is supported.

Methodology: This study employed an amplified dataset based on the National Longitudinal Survey of Youth 1979 (NLSY79). NLSY79 provides ongoing panel information with a nationally representative sample of 12,686 young men and women who were 14 to 22 years old when first surveyed in 1979. I have augmented the publicly available data by obtaining confidential geographic information for individuals.

Body-mass index (BMI) was used to measure the extent of obesity. Wages were assessed separately by gender as a function of BMI splines and interactions of BMI splines with two race dummies (non-Hispanic Black and Hispanic).

This study used two-stage estimation techniques to identify the effect of obesity on wages in conjunction with individual fixed effects model. I specified an overidentified first-stage equation using exogenous state-level variation to instrument individual obesity. Instruments for obesity included the following state-level variables: cigarette prices, per capita number of restaurants, per capita number of food stores, fast-food price, cost of alcoholic drinks (inclusive of beer, wine, liquor), and cost of food.

A Heckman selection model was used to control for the selection into the labor force with the following state-level identifying instruments: unemployment rate, number of business establishments, and number of Social Security Program beneficiaries.

Results: Specification tests support the exclusion of the instruments from the main equation and the strength of the instruments in the first-stage equation. Preliminary study results indicate that an increase in BMI after being overweight has a negative effect on wage earnings for both males and females, even after adjusting for selection into the labor force.

Conclusion: The results will support the understanding of the economic cost of obesity to an individual that arise from sources other than adverse health effects. This spillover effect will increase the total cost of obesity to both individuals and society as a whole. The negative effect of obesity on labor market outcomes could raise further attention to the epidemic of obesity.

Prenatal Health Investments: What's the Child's Gender got to do with it?

Presenter:

Aparna Lhila

Authors:

Aparna Lhila, Kosali Simon

Chair: James Burgess; Discussant: TBA Tue June 6, 2006 15:30-17:00 Room 213

How individuals invest in their own health, and how parental resource allocation decisions translate into investments in child health, have long been a concern among social scientists. This paper studies one class of parental investment decisions that combines the two, i.e. prenatal health investments that impacts maternal health, but may ultimately be viewed as investments in child health. A large body of literature documents how son preference impacts health investments in developing countries, and recent evidence suggests that parents in the U.S. are guided by son preference in their marriage, fertility, divorce and custody decisions too. In this paper we examine whether gender preference among American parents affect their prenatal health investments, an outcome which to date has not been studied in the gender preference context in either the US or abroad. We pay particular attention to testing whether male-biased child health investments persist among first generation immigrant mothers who were born in countries with a history of son preference. Data from the 1989-2001 U.S. Natality Detail Files and the 1988 National Maternal and Infant Health Survey are used to compare the prenatal investment decisions of mothers who have an ultrasound and eventually have a girl versus a boy. Information on mothers who do not have an ultrasound is used to control for innate differences that may arise due to fetal gender. We find that knowing fetal gender is female is not systematically associated with any differences in prenatal health investments among the U.S. population. What is most striking is that Indian and Chinese immigrant mothers also do not exhibit son preference in any of their prenatal investment decisions.

Providing a Healthier State to Life: The Impact of Conditional Cash Transfers on Infant Mortality

Presenter:

Tania Barham

Authors:

Tania Barham

Chair: James Burgess; Discussant: TBA Tue June 6, 2006 15:30-17:00 Room 213

Every year more than 10 million children die from preventable diseases such as malnutrition and intestinal infections in developing countries. The majority of these deaths take place during infancy. Consequently, finding effective policies to reduce mortality among infants is a key part of the development agenda. Conditional cash transfer programs are a popular type of social investment tool designed, amongst other goals, to improve the health of children, but which may also lead to important reductions in infant mortality. However, empirically establishing causality between the implementation of conditional cash transfers and infant mortality is difficult because the death of an infant is a relatively rare event. Even large household surveys commonly do not have a sufficient number of observations to examine infant mortality. In 1997, Mexico implemented one of the first, largest, and most innovative conditional income transfer programs, Progresa. Owing to its extensiveness, Progresa provides an opportunity to test the causality of conditional cash transfers on the infant mortality rate (IMR). In this paper, I use non-experimental methods tp examine if this new policy tool reduced the rural IMR in Mexico.

Previous research on Progresa has taken advantage of a randomized treatment and control evaluation database to investigate if the program improved various aspects of children’s health. This research has shown that the nutritional status of children improved and the number of days a mother reported her child ill decreased for treatment households as compared to those from similar families that did do not receive the transfer. These findings indicate that there are some important nutritional benefits of conditional cash transfers. This paper therefore focuses on infant mortality, which is a broader and more objective measure of children’s health.

Since the Progresa randomized treatment and control database is too small to accurately estimate the impact of the program on infant mortality, I construct municipal-level panel data from 1992 to 2001. I take advantage of the phasing-in of the program over time both between and within municipalities to identify the impact of the program. The econometric model employs municipality and time fixed effects, and includes variables associated with the program phase-in rule to control for program timing bias. The analysis also explicitly controls for changes in the supply of health care in rural areas. Additionally, the identification strategy takes advantage of the fact that Progresa was not provided in urban areas prior to 2000, and uses the urban IMR to test whether unobservable municipal time-variant variables are biasing the results. We find that Progresa led to an 11 percent decline in rural infant mortality among treated households. Given the relatively high incidence of infant mortality in rural areas, and that it fell by less than one percent a year over the five years before Progresa, this is an important decline. Reductions were even higher in communities where the population all spoke some Spanish and had better access to piped water.

When Low Birth Weight Babies Grow Up: Can Parents Buffer Their Health Shock?

Presenter:

Shin-Yi Chou

Authors:

Ming-Jen Lin, Jin-Tan Liu, Shin-Yi Chou

Chair: James Burgess; Discussant: TBA Tue June 6, 2006 15:30-17:00 Room 213

The causes and consequences of adverse birth outcomes, particularly low birth weight (LBW), have long been a major concern for social scientists. This interest has largely tended to focus on the increased risk of LBW infants suffering later developmental difficulties, which can ultimately impose substantial costs upon society. The major advances in medical technologies over recent decades is a further factor for consideration, since such advances have also led to significant improvements in the survival rates of LBW infants in both developed and developing countries.

Some of the prior studies have identified various causal relationships between birth outcomes and family background factors, such as parental education, family income and maternal behavior. However, while there has been some examination of the short-term consequences of LBW, there remains a distinct gap in the literature with regard to the examination of the long-term consequences of LBW and the interactive effects with parental education.

Viewing birth weight as an ‘input’ into the production function (or the initial endowment of human capital), the prior studies have generally established a correlation between LBW and low test scores, violent crimes committed at the age of eighteen, poor adult health and lower wages. There is also some evidence to show the existence of a strong relationship between family background and children’s educational attainment. However, there has been precious little work undertaken with regard to observation of the interactive effects of parental background and the negative health shock on the long-term outcomes of children.

The prior literature has generally failed to establish the association between adverse birth outcomes and long-term developmental outcomes for two main reasons. First of all, there are relatively few datasets containing the necessary information on adverse birth outcomes in conjunction with long-term developmental outcomes on the same study sample, and secondly, it is even more difficult to obtain such a linkage at national level. The studies have therefore tended to rely heavily upon small and selective samples; clearly therefore, it may not be possible to generalize the findings to other contexts.

In this study, we set out to combine several unique datasets in order to examine the long-term outcomes of LBW and the effects of the interaction between such outcomes and parental education. Our main dataset is annual birth certificate records, with the birth information of the study sample then being matched to the College Entrance Examination and High School Entrance Examinations files to determine long-term educational achievements. Our main goals in using these unique datasets are to identify the long term effects of LBW and to investigate the interactive effects of LBW and parental education. Although our results show that LBW has significant negative long-term effects on educational attainment, they also suggest such negative effects can nevertheless be mitigated by parental education.

A Review and Synthesis of the Cost and Benefits of Health Facilities Regulation in the U.S.

Presenter:

Christopher Conover

Authors:

Christopher Conover, Ilse Wiechers

Chair: Joel Hay; Discussant: TBA Tue June 6, 2006 15:30-17:00 Room 225

Rationale: No one previously has developed a comprehensive estimate of the costs and benefits of health facilities regulation.

Objectives: The central objective of this paper is to develop a comprehensive estimate of the costs and benefits of health facilities regulation derived by summing the results of fine-grained cost estimates in 18 different domains of health facilities regulation; a companion objective is to identify domains of health facilities regulation in which regulation currently appears not to be cost-effective.

Methodology: A formal literature search was conducted for each separate domain of health facilities regulation, including regulations focused on access to care (e.g., EMTALA), cost control (e.g., certificate of need) and quality (e.g., nursing home accreditation and licensure. For each domain, a synthetic estimate of regulatory costs is obtained using a standardized procedure that systematically assembles evidence from the literature regarding government regulatory costs (such as monitoring and enforcement costs) and compliance costs (including both industry costs and patient time losses), and indirect costs such as costs associated with health losses (morbidity and mortality losses, all monetized using a common value of statistical life year) or increases in uninsured risk (monetized using a standardized estimate of the external cost of being uninsured and the monetized value of the increased mortality risk faced by the uninsured). Corresponding monetized estimates of benefits were developed based on empirical evidence of benefits derived from the literature, including efficiency gains, quality improvements or reductions in uninsured risk. Lower and upper bound estimates were derived using minimum and maximum parameter estimates for the various components used to calculate regulatory costs.

Results: The preliminary base case result for the cost of health facilities regulation in the U.S. is $47.7 billion (2002 $); the minimum estimate is $23.7 billion and the upper bound estimate is $277.6 billion. [final estimates updated to 2004 $ to be available in early February]

Conclusions: The domains of health facilities regulation having the highest net cost include hospital accreditation/licensure, hospital uncompensated care pools and Clinical Laboratory Improvement Act (CLIA). These areas warrant closer examination to determine how regulatory objectives might be achieved more cost-effectively.

Estimating the Cost of Capital for Pharmaceutical, Biotechnology, and Medical Device Firms

Presenter:

Scott Harrington

Authors:

Scott Harrington

Chair: Joel Hay; Discussant: TBA Tue June 6, 2006 15:30-17:00 Room 225

Author: Scott Harrington (harring@wharton.upenn.edu), Health Care Systems, Wharton School, University of Pennsylvania

Title: Estimating the Cost of Capital for Pharmaceutical, Biotechnology, and Medical Device Firms

Rationale: The financing, investment, and risk management decisions of pharmaceutical, biotechnology, and medical device firms are fundamentally important to the development and availability of innovative treatments to enhance health outcomes and the quality of life. A full understanding of these decisions is also important for the design and administration of government review and approval of new compounds and devices.

Objectives: This study provides new insight into health care research and development decisions by investigating factors that influence the cost of equity capital for publicly-traded pharmaceutical, biotechnology, and medical device firms, a subject that has received relatively little attention in the literature. The primary objective is to explore analytically the link between firms’ characteristics and risk factors that affect the cost of capital.

Methodology: According to conventional finance theory, the risk characteristics of firms and their associated effects on the cost of capital are of central importance in making optimal investment decisions. The study draws from corporate finance theory to develop an analytical model of how firm-specific characteristics and the “real option” features of pharmaceutical, biotechnology, and medical device firms’ investments affect their cost of capital and then investigates the empirical relation between those factors and capital costs. Two frameworks are employed for estimating firms’ cost of capital: (1) the traditional capital asset pricing model (CAPM), and (2) the empirically-driven three risk-factor model of Fama and French.

Results: The study provides evidence concerning three main questions:

  1. How does the cost of capital vary across pharmaceutical, biotechnology, and medical device firms and within firms in each sector?
  2. How do firm characteristics, including levels of R&D spending, product diversification, real option features, and primary care versus specialist focus affect firms’ cost of capital through their effects on risk factors that are priced in capital markets?
  3. Can evidence on the relationship between firm characteristics and firm-level cost of capital estimates be used to develop reasonable estimates of the cost of capital for classes of products for use as inputs to both expected net present value analysis and real options valuation methods?

The results should be useful to corporate managers in developing efficient investment and financing strategies and relevant to public policy related to such investment.

More Predictive Modeling of Total Healthcare Costs Using Pharmacy Claims Data: Adherence and Boosted Regression

Presenter:

M. Christopher Roebuck

Authors:

M. Christopher Roebuck

Chair: Joel Hay; Discussant: TBA Tue June 6, 2006 15:30-17:00 Room 225

OBJECTIVE A variety of disease state classification systems derived using claims data are used in risk stratification and predictive modeling applications. Algorithms based solely on pharmacy claims data have the advantages of timeliness, cleanliness, and availability, while still being robust to predicting prospective healthcare outcomes and costs relative to their integrated medical and pharmacy counterparts. Following on Powers et al. (2005), this study expands Pharmacy Health Dimensions (PHD) to include controls for patient adherence to drug therapy. The study also evaluates the use of boosted regression as an alternative to other econometric approaches for predicting commonly right-skewed and leptokurtotic healthcare cost data.

METHODS: Using 2003 and 2004 data from a large health plan (N=369,985), PHD is used to identify participants having any of five diseases: diabetes, congestive heart failure, asthma, hypercholesterolemia, and hypertension. A split-sample design is employed to train and validate the predictive models. For the base model, total healthcare costs in 2004 are estimated as a function of age, gender, 2003 pharmacy costs, and comorbidities using PHD. Subsequent models add two variables of patient adherence to drug therapy, a commonly used measure of compliance, Medication Possession Ratio (MPR), and a novel gauge of persistency, Maximum Gap in Therapy. It is hypothesized that MPR would be negatively related to future total healthcare costs, while Maximum Gap in Therapy would be positively associated with future total healthcare costs. Furthermore, the magnitude of these effects should vary substantially by disease state. Several econometric modeling techniques are explored included ordinary least squares (OLS), log-OLS, two-part modeling (with a generalized linear model second part), and boosted regression. Standard metrics of predictive model fit and accuracy are reported.

RESULTS: As expected, the inclusion of the two measures of adherence increased the proportion of explained variation in all five of the disease state models. Furthermore, MPR was significantly (p<0.10) and negatively related to future total healthcare costs in all models except for hypercholesterolemia and hypertension. Maximum Gap in Therapy was positively associated with future total healthcare costs in all model (p<0.10). As in the prior study (Powers et al., 2005), results from OLS regressions were comparable to those of log-OLS and two-part modeling approaches in terms of their validation R2, positive predictive value, and specificity. Boosted regressions, however, provided the most accurate predictive model of future total healthcare costs for several of the disease states.

CONCLUSION: Predictive modeling of future total healthcare costs using pharmacy claims only offers several advantages over using integrated medical and pharmacy data. The predictive power of basic models of demographic and disease classification can be enhanced by adding measures of patient compliance and persistency. The magnitude and significance of the relationship between adherence to drug therapy and future total healthcare costs varies substantially by health condition.

REFERENCE: Powers, C.A., C.M. Meyer, M.C. Roebuck, and B.Vaziri. 2005. Predictive Modeling of Total Healthcare Costs Using Pharmacy Claims Data: A Comparison of Alternative Econometric Cost Modeling Techniques. Medical Care 43(11): 1065-1072.

Effect of proximity to death on participation in the long-term care market

Presenter:

France Priez

Authors:

France Priez, Sally Stearns

Chair: Willard Manning; Discussant: TBA Tue June 6, 2006 15:30-17:00 Room 226

Increasing longevity raises concerns about the growth in the per capita demand for health care services. However, the aging of the population may not increase nursing home and paid home care use to the extent that proximity to death rather than age determines use at the end of life. As the elderly get closer to death, their use of long-term care (LTC) changes, not because they become older, but because their health deteriorates irreversibly. This study examines the effect of proximity to death on the participation in the nursing home and paid in-home care markets and how it interplays with availability of informal care that is a substitute to market-based LTC.

Proximity to death is hypothesized to increase the use of LTC. But availability of spousal care and support from children is hypothesized to mitigate this effect. Linear probability models estimate the effect of being within two years of death on the probabilities of nursing home and paid home care use. Proximity to death is interacted with availability of spousal care (being married) and available support from children (co-residence with an adult child). Unobserved heterogeneity is addressed by using individual and time fixed effects. The potential simultaneity between proximity to death, residing with an adult child and LTC use is addressed by using instrumental variables. Instruments for co-residing with an adult child are a set of characteristics of the person’s children. No valid instruments were found for proximity to death. The analysis is conducted on the 1993-2002 Health and Retirement Study data, the target sample being the 70+ elderly. The final five-wave data set has 27,879 observations.

Results indicate that proximity to death significantly increases the likelihood of nursing home and paid home care use, while age 85+ has a positive but smaller effect. Furthermore, proximity to death has significantly different effects by marital status for both types of LTC, and by co-residence with children for nursing home use only. Among married elderly, being within two years of death significantly reduces nursing home use, from 1.0 to 0.2 percent. This effect is similar among elderly co-residing with children. In contrast, for non-married elderly, nursing home use increases significantly from 4.9 to 16.6 percent in the last two years of life. For paid home care, proximity to death has a significant effect only among non-married elderly, the likelihood of use going from 6.9 to 9.6 percent. Proximity to death does not significantly affect paid home care use among married elderly or elderly co-residing with an adult child.

Proximity to death affects participation in the LTC market, but it plays a significantly different role whether the elderly persons have spousal care or children support available to them. The aging of the population may not substantially increase LTC use, not only if proximity to death rather than age is one of the main determinants of use, but also if the proportion of married elderly continues to increase, as observed over the last decade.

Spatial Analysis of Elderly Access to Primary Care Services: Informing the Debate on Physician Shortage in the U.S.

Presenter:

Lee Mobley

Authors:

Lee Mobley, Elisabeth Root, Luc Anselin, Nancy Gracia, Julia Koschinsky

Chair: Willard Manning; Discussant: TBA Tue June 6, 2006 15:30-17:00 Room 226

High rates of admissions for Ambulatory Care Sensitive Conditions (ACSCs) are signals of poor preventive care utilization. This paper examines the influence of geographic or market-level supply and demand factors on market-level rates of ACSC admissions among Original Medicare (FFS) beneficiaries in the latter nineties (1998-2000). This period follows implementation of the Balanced Budget Act of 1997, which reduced the level of prospective payments and introduced limits to home health care visits and other aspects of preventive care services for the elderly.

The conceptual model assumes that local area market conditions, serving as interventions along the pathways to healthcare utilization, can impact outcomes. Using natural markets defined by The Health Resources and Services Administration’s Primary Care Service Area (PCSA) Project, spatial regression is used to analyze admission rates for Ambulatory Care Sensitive Conditions (ACSCs) among all elderly FFS beneficiaries 1998-2000, controlling for disease severity using detailed information from the MEDPAR claims.

A spatial spillovers model is estimated to account for endogenous provider and beneficiary behavior across Primary Care Service Areas. Spatial multiplier effects are found to be quite large, suggesting that OLS estimates of marginal impacts from explanatory variables would be overstated by about 50 percent in magnitude of effect. GeoDa and R spatial analysis software, with additional code written in PYTHON, are used to estimate an instrumental variables version of the spatial lag model and conduct mis-specification and goodness-of-fit tests. R and Python are required to obtain robust estimates of parameters because the dependent variable does not meet the assumptions under the Maximum Likelihood estimation done in GeoDa (the dependent variable is highly skewed). Reported standard errors are robust to heteroskedasticity.

Our evidence suggests that elderly living in impoverished rural areas, or in sprawling suburban places, are about equally more likely to be admitted for ACSCs. Greater availability of physicians does not seem to matter, but greater prevalence of non-physician clinicians and international medical graduates, relative to traditional physicians, does seem to reduce ACSC admissions, especially in poor rural areas. The relative importance of these non-traditional physician groups in providing primary care in areas of greatest need can inform the ongoing debate regarding whether there is an impending shortage of physicians in the US.

Spend It While You Can Still Enjoy It: Health, Longevity, Aging, and Consumption in the Life Cycle

Presenter:

Lauren Olsho

Authors:

Lauren Olsho

Chair: Willard Manning; Discussant: TBA Tue June 6, 2006 15:30-17:00 Room 226

Simple life-cycle models based on the permanent-income hypothesis predict that individuals will smooth consumption over their lifetimes. However, empirical studies consistently find that consumption levels fall steadily late in life. In this paper, I examine declining health status as one potential factor contributing to this pattern. I estimate a life-cycle model treating health as a form of human capital investment, and predict substantial decreases in consumption after age 50 that are consistent with empirical observations. When health and consumption are complements, decreasing health capital results in falling marginal utility of consumption with age. Thus rational agents will consume at higher levels when they are younger and healthier.

This effect is particularly pronounced among low-income groups, whose health deteriorates more rapidly than the health of their higher-income counterparts. A faster rate of health deterioration results in a steeper decline in marginal utility of consumption late in life among the poor. Additionally, larger investments in health increase longevity in high-income groups relative to low-income individuals, leading to lower rates of consumption and higher rates of savings for the rich across all years. I find that this disparity in longevity, paired with differences in the rate of health deterioration, can largely account for the divergence in life-cycle consumption patterns between the top and bottom income and asset quartiles of the United States population.

The theoretical framework is a dynamic version of Grossman’s seminal 1972 health capital model. While Grossman’s work is frequently cited as a motivation for empirical work in health economics, there have been few if any serious attempts to quantitatively solve the model and closely examine its key implications. In the version of the model presented here, health exogenously deteriorates at an increasing rate with age. To counteract this health deterioration, individuals can invest a portion of their assets into health production each period. If the total health stock falls below some minimal level, the individual dies with certainty. Health investment increases the marginal utility of consumption within each period, and extends the total length of life. Additionally, health is a productive good in the sense that it increases the amount of time an individual can spend in the labor market, thereby augmenting earnings potential. A bi-directional relationship between health and wealth thus emerges: higher wealth induces greater health investment and increased longevity, while better health increases labor market productivity. This feature of the model makes it particularly suited for examining health, wealth, and consumption inequalities.

I estimate the model using data from the Health and Retirement Survey panel, 1992-2002. I construct a health index based on participants’ answers to a series of questions regarding mental health and physical limitations, and find that deteriorating health can account for an annual decline in median consumption levels of about 2 percent after age 50, as compared to an actual drop of around 3 percent. Failing health accounts for a 3 percent annual decline in consumption for individuals with income and assets below the 25th percentile, in contrast to a decrease of only 1 percent per year among individuals with income and assets above the 75th percentile.

Surplus Appropriation from R&D and Technology Assessment Procedures

Presenter:

Tomas Philipson

Authors:

Tomas Philipson

Chair: Catherine McLaughlin; Discussant: Daniel Eisenberg Tue June 6, 2006 15:30-17:00 Room 235

We discuss the difference between dynamic and static technology assessment criteria in healthcare. We argue that popular assessment criteria going under the rubric of “cost-effectiveness” often concern maximizing consumer surplus, which many times is consistent with maximizing static efficiency after an innovation has been developed. However, dynamic efficiency concerns aligning the social costs and benefits of R&D and is therefore determined by how much of the social surplus from the new technology is appropriated as producer surplus. We estimate that for the HIV/AIDS therapies that entered the market from the late 1980’s onwards, producers appropriated only 5% of the social surplus arising from these new technologies. We show how to translate standard findings of cost-effectiveness to estimates of innovator appropriation for standard studies of over 200 drugs, and find that these studies implicitly support a low degree of appropriation as well. Despite the high annual costs of drugs to patients, the low share of social surplus going to innovators raises concerns about advocating cost-effectiveness criteria that would further reduce appropriation by innovators, and hence further reduce dynamic efficiency.

Is Managed Care Restraining the Adoption of Technologies by Hospitals?

Presenter:

Janice Seinfeld

Authors:

Nuria Mas, Janice Seinfeld

Chair: Catherine McLaughlin; Discussant: Loren Baker Tue June 6, 2006 15:30-17:00 Room 235

Authors: Núria Mas (IESE Business School, Spain) and Janice Seinfeld (Universidad del Pacífico, Peru)

Title: Is Managed Care Restraining the Adoption of Technologies by Hospitals?

Rationale: As health care costs keep increasing, cost-control mechanisms such as the ones introduced by managed care, have become more widespread and it is crucial to understand their implications for the health care market and, in particular, for the adoption of new technologies, which are one of the main determinants of health care cost growth.

Objectives: This paper examines the relationship between managed care activity and hospitals´ technology adoption. The existing studies on this subject have been limited to only a few technologies over short periods of time. This paper extends previous work in several important dimensions: first, we examine thirteen different technologies from 1982 to 1995. Second, we distinguish between these that diffused in the eighties, when managed care was rare in the US, from these that diffused in the nineties, when managed care was already a widespread phenomenon, since we expect managed care effect to be stronger for the second group of technologies. Finally, we rank technologies according to their cost-benefit ratio since, given that managed care gives strong incentives to minimize costs, we expect its effect to be stronger for these technologies with high cost-benefit ratios.

Methodology and Results: Managed care may affect hospital´s decisions to take on new technologies by imposing financial pressure on providers, changing the incentives associated with the utilization and purchase of new technology equipment. We use a hazard rate model to investigate whether high levels of managed care market share are associated with a decrease in medical technology adoption during the period 1982-1995. We analyze annual data on 5,390 US hospitals regarding the adoption of 13 different technologies from the American Hospital association (AHA). After adjusting for hospital characteristics, demographics, regulation and local market characteristics, we find that managed care has a negative effect on hospitals´technology acquisition for each of the thirteen technologies in our study, and this effect is stronger for technologies diffusing in the 1990s, when managed care sector was at its largest. We also take into account that cost-benefit analysis is one of the main dimensions considered by hospitals when deciding about the adoption of new technologies. We find that managed are enrollment has a significantly more negative effect on the adoption of technologies with higher cost-benefit ratios.

Conclusions: the negative effect of managed care on technology adoption may have important policy implications, such as its ability to slow down health care costs growth. Our results provide evidence that managed care contributes to costs savings in the health care market by limiting availability of technologies, especially of the more expensive ones.

Does Liability for Medical Malpractice Drive Health Care Costs and Technology Adoption?

Presenter:

Seth Seabury

Authors:

Seth Seabury

Chair: Catherine McLaughlin; Discussant: Robert Town Tue June 6, 2006 15:30-17:00 Room 235

Liability for medical malpractice has been the focus of enormous controversy in recent years. Many have argued that it artificially inflates the price of medical services and limits access to health care. Our paper investigates the relationships between liability for medical malpractice, medical costs, and the adoption or utilization of new health care technologies. These relationships are complex, with causality running in different directions. Growth in litigiousness and liability could drive up the cost of receiving health care, as many charge. On the other hand, increases in the cost of medical care from other quarters could mechanically inflate the cost of recovering from medical errors. In this way, medical cost growth could be the cause of increased malpractice liability payments. Similarly, rapidly rising malpractice costs could stunt the adoption of new technology and make health care providers excessively risk-averse. On the other hand, malpractice risk may encourage the utilization of accepted technology and treatment methods; this is an important policy goal of the malpractice regime.

We employ several identification strategies to sort through these channels of causation and examine whether malpractice risk substantially contributes to health care costs. We first exploit county-level variability in the “generosity” of jury verdicts. Juries in certain parts of the country have exhibited a willingness to award larger damages for substantially similar transgressions. Jury generosity affects local malpractice claims levels, but plausibly has no direct effects on medical costs or technology adoption/utilization. We also exploit variability in non-malpractice measures of medical costs, such as practice expenses and the relative wage compensation paid to highly skilled workers. These arguably affect medical costs without having direct effects on malpractice payments. Finally, we exploit variation in malpractice premia and technology adoption across different specialties. These analyses will provide us with important evidence about how medical malpractice liability really impacts the functioning of the health care system.

A Multimodal Model of Health Care Prices

Presenter:

Benjamin Craig

Authors:

Benjamin Craig, Partha Deb

Chair: Dave Vanness; Discussant: Christopher Hollenbeak Mon June 6, 2006 15:30-17:00 Room 235

In the demand for health care, price is a central determinant, yet the modeling of out-of-pocket prices is poorly understood. This paper studies the multimodality of out-of-pocket prices using a mixture of Gaussians that allows for the estimation of modal shifts and variation around the modes. We describe how prices may vary continuously due to market fluctuations, and may shift between modes because of contracts, search costs, bulk purchasing, and price discrimination. A better understanding of the endogeneity of out-of-pocket prices not only improves our ability to identify the demand for health care, these models better characterize the financial burden of poor health. To illustrate this point, we examine 1992-2002 data from the Medicare Current Beneficiary Survey, specifically the bimodality of medication prices among seniors.

The Impact of Malpractice Liability Claims on Physician Outcomes and Practice Patterns

Presenter:

Gilbert Gimm

Authors:

Gilbert Gimm

Chair: Edward Norton; Discussant: Hua Wang Tue June 6, 2006 15:30-17:00 Room 309

ABSTRACT

Author: Gilbert W. Gimm, Ph.D. (ggimm@mathematica-mpr.com), Health Researcher, Mathematica Policy Research, Washington, DC.

Title: “The Impact of Malpractice Liability Claims on Physician Outcomes and Practice Patterns: Evidence from the State of Florida (1992-2000)”

Key Terms: malpractice claims, physician behavior, outcomes, quality

Objectives: Since the late 1960s, a dramatic rise in medical malpractice premiums has sparked both debate and concern among physicians and health policymakers. However, empirical evidence is limited to a few studies, which rely on market-level variation, so the impact of claims on the individual response of physicians is not well understood. This study examines whether malpractice claims have an impact on individual physician behavior, with respect to delivery volume, adverse outcome rates, and C-section rates. It also analyzes the factors that contribute to the likelihood of physician exit.

Methodology: This study uses a micro-level panel data set, which links inpatient deliveries in the state of Florida to malpractice claims from 1992-2000, with unique physician identifiers. The identification strategy for the impact on delivery volume is a fixed-effect OLS levels regression that controls for time-invariant, unobservable characteristics of individual physicians. Explanatory claim variables include whether the closing of a claim occurred in a specific year, as well as the award size and severity index measure associated with a malpractice claim. Other control variables include patient characteristics and medical risk factors. Finally, a binary logistic regression is used to estimate the likelihood of physician exit.

Results: Physicians perform 6-10 fewer inpatient deliveries per year in response to the closing of a malpractice claim, after controlling for fixed effects. However, malpractice claims do not appear to have a significant impact on the adverse outcome rate. Also, an incident occurrence is associated with a higher C-section rate among older physicians. Finally, physicians with a malpractice claim award of $500,000 or more have a significantly greater likelihood of exit from performing inpatient deliveries altogether. These empirical results suggest that malpractice claims do have a significant effect on individual physician practice patterns.

Disclosure Statement: This research study was funded by an AHRQ dissertation grant number 1-R36-HS014515-01.

The Impact of Liability on the Physician Labor Market

Presenter:

Mark Showalter

Authors:

Eric Helland, Claremont McKenna, Mark Showalter

Chair: Edward Norton; Discussant: Jinny Kim Tue June 6, 2006 15:30-17:00 Room 309

Medical malpractice reform is a contentious issue. Despite the fact that states have implemented a variety of reforms over the past three decades, the implications of these reforms are still in dispute. Reductions in liability exposure have been shown to reduce malpractice premiums (Born and Viscusi, 1998), but the extent and magnitude of physicians’ direct behavioral responses are unclear. Some researchers have found evidence of a large physician response. Perhaps the best known empirical papers are by Kessler and McClellan (1996, 2000) which examine how health expenditures for Medicare recipients vary with changes in state liability reforms. They find that up to nine percent of expenditures on treatment for heart disease and heart attacks can be attributed to excessive care due to physicians practicing ‘defensive’ medicine, defined as care that would not be done in the absence of a liability risk. However, other researchers have tended to find smaller effects. For example, Dubay et al (1999, 2001) examine data on cesarean section procedures and find relatively small effects attributable to liability reform. Other work by Sloan et al. (1995) and the Congressional Budget Office (2003) also find little effect of liability reform on expenditures.

Our study reexamines the issue of liability reform and its implications for physician behavior. We develop a model in which physicians are unable to fully insure against liability risk, opening the possibility for ‘defensive’ medicine. We then use data on actual physician behavior from the Physician Practice Costs and Income Survey (PPCIS, 1983 and 1988). This data includes physician work hours, insurance level, patient mix, treatment practices, practice structure, among other variables, and we match this data with information on state-level changes in liability law. We investigate changes in physician behavior that correspond to changes in the legal climate. These two nationally representative surveys bracket a period of substantial state-level reform which provides the variation for our empirical strategy.

We use several measures of liability reform, but one measure unique to this paper is derived from malpractice litigation data for Florida from 1980 to 1985. This data allows us to estimate the impact of a damage cap on the distribution of awards by specialty and state. We estimate the impact of liability reform on hours worked per year, the hours spent working in emergency rooms, retirement, number of patients treated and the types of patients treated (i.e. uninsured, Medicaid or Medicare patients). We estimate the impact semi-parametrically using a full set of state-specialty controls. Our preliminary results suggest that doctors reduce their hours worked overall, reduce their hours worked in the emergency room and alter their patient mix in ways that are consistent with avoiding liability exposure. The results also suggest that physicians are unable to fully insure against liability risk through the purchase of malpractice insurance.

Medical Malpractice: Examining its Effect on Hospital Efficiency

Presenter:

Shalini Bagga

Authors:

Shalini Bagga

Chair: Edward Norton; Discussant: Partha Deb Tue June 6, 2006 15:30-17:00 Room 309

Authors: Shalini Bagga (sbagga@tulane.edu); M. Mahmud Khan (khan@tulane.edu); Praveen Dhankhar (pdhankm@tulane.edu)

Title: Medical Malpractice: Examining its Effect on Hospital Efficiency

Rationale/Objective: There is a growing fear among the physicians that they will not be able to buy medical malpractice liability insurance due to the sharp increases in the malpractice premiums nationwide. A part of the increase in health care expenditures can be attributed to an increase in hospital expenditure. One way of decreasing expenditure on hospitals would be to increase the efficiency of hospitals. We attempt to look at one such dimension in this paper: how does malpractice pressure impact the efficiency of our health-care system, in particular, the efficiency of our hospitals? This side of the story has been neglected so far in the literature, and our paper attempts to fill this gap and introduce a new perspective.

Methodology: Data was combined from four sources: Nationwide Inpatient Sample, American Hospital Association’s Annual Survey, and Medicare Cost Reports, for the year 2001; National Practitioner Data Bank’s Public Use File for years 1998, 1999, and 2000. Malpractice variables were entered as a lag. Efficiency was estimated through the stochastic frontier analysis. We explicitly controlled for output heterogeneity and quality of the services provided: teaching status, location, ownership, region, insurance status, mortality. Two different types of malpractice variables were used: frequency of claims and severity of claims. Severity was in turn represented by: mean payments and median payments.

Results: Our results indicate that malpractice does affect the efficiency of hospitals. In fact, greater malpractice pressure, as given by the mean and median payments, increases technical efficiency of hospitals. The effect is larger for median payment. The sign for frequency of payments is also in the right direction, though insignificant. A point to be made: the existence of ‘corporate shield’ results in underreporting of cases in the NPDB. Therefore, the malpractice results that we present in this paper are going to represent the lower bounds in terms of their effects.

Discussion: The recent focus by the American Medical Association and physicians about the dramatic increases in medical malpractice insurance premiums, and their suggestion of a cap on non-economic damages, deserves a closer look. According to Baicker and Chandra (2004), increases in premiums are not affected by past or present malpractice payments, but may increase due to other unrelated factors. Chandra, Nundy, and Seabury (2005) find that the rising cost of medical services may explain the bulk of the growth of “compensatory awards”. They also find that the greatest ten percent of the malpractice payments have grown at a smaller pace than the average payment for the years 1991 and 2003. This means that the “medical malpractice crisis” is not necessarily fueled by the growth in malpractice payments. Furthermore, malpractice pressure actually forces our hospitals to be technically more efficient. This implies that existence of the medical malpractice system is beneficial, and its strength should not be diluted by either putting caps on non-economic damages or by decreasing the statute of limitations.

The Effects of Specialty Hospitals on General Hospital Operating Margins, 1997-2003

Presenter:

John Schneider

Authors:

John Schneider, Robert Ohsfeldt, Michael Morrisey, Pengxiang Li, Bennet Zelner, Thomas Miller

Chair: Kathleen Carey; Discussant: Ginger Jin Tue June 6, 2006 15:30-17:00 Room 313

Authors: John E. Schneider (1,2) (john-schneider@uiowa.edu); Robert L. Ohsfeldt (3); Michael A. Morrisey (4); Pengxiang Li (1); Bennet A. Zelner (5); and Thomas R. Miller (1). [(1) Department of Health Management and Policy, University of Iowa; (2) Center for Research in the Implementation of Innovative Strategies in Practice (152) Iowa City VA Medical Center; (3) Department of Health Policy and Management, School of Rural Public Health, Texas A&M Health Science Center; (4) Department of Health Care Organization and Policy, and Lister Hill Center for Health Policy, University of Alabama Birmingham; (5) Haas School of Business, University of California Berkeley]

Title: The Effects of Specialty Hospitals on General Hospital Operating Margins, 1997-2003

Rationale: A recently expired moratorium on Medicare payments to new specialty hospitals was predicated in part on concern that the financial stability of general hospitals was being eroded by competition from specialty hospitals, thereby impairing their ability to cross-subsidize indigent care. If this were the case, general hospital operating margins in markets with specialty hospitals are expected to be lower, controlling for other factors affecting operating margins.

Objectives: Using a database of U.S. general hospitals and a sample of specialty hospitals from 1997 to 2003, we conduct econometric analyses of general hospital operating margins in markets with and without specialty hospitals.

Methodology: Data is from Medicare HCRIS Cost Reports, the American Hospital Association, a survey of specialty hospitals, and the Area Resource File. These sources were combined to form a panel data set of approximately 3000 hospitals over the seven year time period 1997 to 2003. Four different model specifications were compared: (1) exogenous entry with hospital random effects; (2) exogenous entry with hospital fixed effects; (3) endogenous entry with hospital fixed effects, where lagged mean county-level general hospital profit margin and certificate of need (CON) status serve as the instruments; and (4) endogenous entry with hospital fixed effects, using only CON status as an instrument.

Results: Counties with at least one specialty hospital consistently had higher mean operating margins than counties without specialty hospitals (p ≤ 0.05). In all four models, including the endogenous entry models, the presence of one or more specialty hospitals in the market was associated with higher general hospital profit margins (p ≤ 0.05).

Conclusions: Contrary to the conjecture that entry by specialty hospitals erodes the overall operating profits of general hospitals, general hospitals residing in markets with at least one specialty hospital have higher profit margins than those that do not compete with specialty hospitals.

The Influence of Competitors' Performance on Hospital Efficiency

Presenter:

Vivian Valdmanis

Authors:

Gary Ferrier, Vivian Valdmanis

Chair: Kathleen Carey; Discussant: Katherine Ho Tue June 6, 2006 15:30-17:00 Room 313

Rationale: The focus to date of “peer effects” and “social interactions” has been on individuals. One important exception to this is the idea of “yardstick competition”-a regulatory scheme under which the performance of firms is compared in order to determine the appropriate level of prices and subsidies (see Schleifer, 1983).

In this paper we examine the role of “peer effects” on firm behavior. Specifically, we estimate the influence of a firm’s competitors’ efficiency levels on a firm’s own level of efficiency. In sports one often hears that a team “plays to the level of the competition;” we ask whether the same is true of hospitals. Given the evolving nature of competition in the hospital industry, this is an important question. .

Objectives: To determine the role of market interactions and peer effects in explaining variations in hospital efficiency.

Methodology: Hospital efficiency is measured by Farrell input-oriented technical efficiency scores whereby all inputs are proportionately scaled back until the observed levels of output are still just feasible. The input-orientation, rather than an output-orientation, is used because it is consistent with the goal of cost containment in the hospital industry. The efficiency scores are calculated using the linear programming approach of data envelopment analysis (DEA). The technical efficiency scores thus obtained were then used as the dependent variable in a regression model that seeks to explain variability in efficiency scores across hospitals. The focus of this second stage of the analysis is the effect of the average performance of peers on a hospital’s own performance. Thus the following regression was performed: (4) where Eff-i is the mean efficiency of hospital i’s peers and Xi includes a variety of other factor that might be expected to influence a hospital’s efficiency level. The other factors include the radius of a hospital’s market, the number of competitors within the radius, the HHI of each market, ownership status, network/alliance membership, teaching status, the share of Medicaid patients among all patients served by a hospital, and hospital size (proxied by number of beds).

Results: 38% of the variation in technical efficiency is explained by the model. The traditional measures of competition-the number of competitors and the Herfindahl-Hirschman Index-appear to have little effect on a hospital’s efficiency. Peer efficiency; however, does appear to influence how efficiently hospitals operate. A 10% increase in peers’ efficiency would result in a just over a 2% increase in a hospital’s own efficiency.

Other influences on efficiency include ownership form-both not-for-profit and public hospitals appear to be more efficient than their for-profit counterparts, teaching status-teaching hospitals are more efficient than non-teaching hospitals, and payer mix appears to matter as well-as the share of Medicaid patients increases, hospital efficiency declines. The regressions based on the radii from which 75% of a hospital’s patients are drawn. Qualitatively similar results were obtained when data based on the 90% radii were used instead.

Single Specialty Hospitals and Competition in the Hospital Industry

Presenter:

Kathleen Carey

Authors:

Kathleen Carey, Gary Young, James Burgess

Chair: Kathleen Carey Tue June 6, 2006 15:30-17:00 Room 313

OBJECTIVES. Single specialty hospitals (SSHs) are a small but rapidly growing genre among U.S. hospitals. These providers, the majority of which are owned by physicians who refer patients to them, have raised considerable controversy over whether they promote economic efficiency though specialization or engender unfair competition. We undertake a broad based approach to investigating several benchmarks that jointly assess whether physician-owned SSHs are enhancing the competitive process in the U.S. hospital industry. These include cost efficiency, economies of scale and scope, and pricing for private payers.

DATA AND MEASURES. The primary databases are the Medicare Cost Reports, the American Hospital Association Annual Survey, and state discharge abstracts for the three states in which physician-owned SSHs are most heavily concentrated: Texas, California and Arizona. We examine three specialties: cardiac, orthopedic, and surgical hospitals for the years 1998 through 2004. For comparison, we choose competitor hospitals defined as those offering the same services and located in the same markets (identified as Hospital Referral Regions in the Dartmouth Atlas of Health Care). Key variables include measures of hospital total cost, discharges, length of stay, outpatient visits, case-mix, severity, quality, input price, disproportionate share of poor patients, teaching, ownership, and system affiliation.

ANALYSES. The basic analytic structure is a multiple output hospital total variable cost function estimated using stochastic frontier regression techniques for longitudinal data. This method will allow us to produce hospital specific inefficiency measures. We develop several groupings by which we compare inefficiency differences among SSH and competitor hospitals using parametric and non-parametric test of significance, and taking into account for-profit status, and system membership. We also estimate the cost functions for SSH and competitors separately in order to calculate measures of scale and scope economies for each hospital type. Finally, we construct average SSH vs. competitor hospital price indexes based on prevalent DRGs, standardized to control for patient characteristics, case-mix, and severity. We perform several analyses of mean price differences across various hospital groupings using parametric and nonparametric tests of significance.

SIGNIFICANCE. As of December 2003, Congress has declared a moratorium on physician referrals of Medicare and Medicaid patients to SSHs. The hospital industry is strongly advocating that the moratorium be made permanent. Yet in a March 2005 Report to Congress in support of the moratorium, MedPAC explicitly stated that it does not want to put an end to development of SSHs before gaining a fuller understanding of their efficiency benefits. Yet to date, no one has established the knowledge base that would support a laissez-faire policy. This research offers the first solid evidence on this matter by informing Congress as well as hospitals, judges, and policy makers on the economic logic of organization of hospital services around single specialties.

Hospital Reimbursement and Treatment Intensity

Presenter:

Richard Lindrooth

Authors:

Richard C. Lindrooth, Gloria J. Bazzoli, Jan P. Clement, Mei Zhao

Chair: Gloria Bazzoli; Discussant: Jack Zwanziger Tue June 6, 2006 15:30-17:00 Room 325

Recent research suggests that a ‘new medical arms race’ may be beginning among hospitals due to the shift to less selective contracting and payment methods that do not motivate efficiency and also the emergence of new competitors (e.g., physician-owned specialty hospitals and diagnostic centers). In the context of the shift, we examine the extent to which a hospital’s service offerings explain its financial performance and test whether the importance of service mix relative to payer mix has changed over time. In doing so, we quantify the amount of variation in hospital financial performance that is due to service mix, payer mix, operational decisions, market characteristics, and ownership/mission. First, we regress hospital operating margins and cash flow ratios from the Medicare Cost Reports on the share of hospital inpatients in the 100 most common DRGs and MDC categories, payer mix, and a variety of ownership, market, and staffing variables. Next we calculate the partial (and adjusted) R-squared for each variable category. We then use inter-quantile regressions to assess which characteristics define poor versus strong financial performance. Finally, we control for the endogeneity of service offerings to assess the causal effect of service offerings on financial performance. Our sample includes all nonfederal, general short-term hospitals in operation between 1995 and 2002 in 11 states. Our service and payer mix variables are developed from inpatient admissions data reported in the HCUP-SID data for these states. The measures are combined with operating margins and cash flow data from the Medicare cost reports; hospital characteristics from the AHA Annual Survey; and market characteristics from the Area Resource file. The analysis controlling for endogeneity of service mix is based on a subset of 16 MSAs. Specifically, we estimate multinomial logits in the first stage for each MSA and include the residual from the multinomial logit in the second stage. Based on an initial analysis of 1995 to 2000 data, the OLS results and the quantile analysis for high performers indicate that hospital service mix became much more important in determining hospital financial performance beginning in 1997. Payer mix, in contrast, declined from being the most important determinant in 1995 to the third most important determinant in 2000. Looking specifically at hospitals with poorer than median performance, however, unprofitable payer mix remained the most important factor. The presence of uncompensated care and low reimbursement for Medicaid patients put hospitals with large shares of these patients at a significant competitive disadvantage. Certainly, a major factor that defines a strong performer is making the correct decisions about adding services that yield improvements in profitability. Strong performers also have more internal resources and access to capital to facilitate service expansions. Overall, this has led to an unequal distribution of financial performance among hospitals. This divergence in performance is likely to increase over time as long as the DRG weights of the Medicare Prospective Payment System make some services more profitable than others and as long as exogenous restraints on entry exist and are binding.

The Effect of Hospital Safety Reports and a Tiered Hospital Network on Inpatient Referrals

Presenter:

Dennis Scanlon

Authors:

Dennis P. Scanlon, Jon B. Christianson, Eric W. Ford, Coleen Lucas

Chair: Gloria Bazzoli; Discussant: Jennifer Troyer Tue June 6, 2006 15:30-17:00 Room 325

Recent years have seen a movement towards both ‘consumer directed’ and ‘pay for performance’ programs in health care. Many of these programs utilize ‘tiered networks’ for hospital care, where consumer out-of-pocket co-payments vary based on the hospital chosen. While most of the early tiering efforts were based on hospitals’ charges only, there is an increasing movement towards placing hospitals into tiers based on efficiency and quality/safety indicators. However, little has been published about consumer response to tiered hospital benefits or the impact of tiered networks on hospital admissions and revenues. This paper examines a tiered hospital benefit in a commercially insured employed population. In conjunction with its major labor unions, the Boeing Company instituted the Hospital Safety Incentive (HSI) for union (i.e., hourly) employees enrolled in Boeing’s Traditional Medical Plan (TMP) in July 2004. The TMP is an ERISA self-funded health plan administered for Boeing by Regence Blue Shield of Washington. The HSI is unique because it gives patients a financial incentive to choose hospitals that meet the Leapfrog Group’s three patient safety leaps. While the TMP’s standard coverage for hospital care is 95% of allowed hospital charges (up to the annual out-of-pocket maximum), union beneficiaries enrolled in the TMP can achieve a benefit of 100% for hospital care if admitted to a hospital that meets the Leapfrog standards. Boeing’s actuaries have estimated the average value of the 5% payment to be approximately $450 per admission. We estimate the effect of the HSI on patients’ selection of hospital in two of Boeing’s major employment hubs (Seattle, WA and Wichita, KS). We utilize a pre-post study design and take advantage of the fact that the HSI did not apply to non-union (i.e., salaried) employees. We identify the effect by comparing the change in hospital admissions of hospitalized hourly and salaried beneficiaries after the HSI went into effect. To gauge awareness of the HSI, we also examine differences, pre-post, between hourly and salaried non-hospitalized beneficiaries. We identify enrolled beneficiaries from claims data, and while we examine changes in hospital market shares, our primary outcome variables come from answers collected during a 20 minute telephone survey. The telephone survey was necessary since patients are referred to hospitals by their physicians, and thus it is not clear if admissions decisions are made by patients, physicians, or jointly. Targeted respondents were randomly sampled from four groups in each period (union/non-union, hospitalized/non-hospitalized). The key outcomes include questions regarding the degree to which the patient was involved in the choice of hospital and awareness of the HSI. We completed approximately 1,200 interviews in each period and achieved a 60% survey participation rate…

Effects of Financial Stress from Price Competition on Hospital Quality of Care

Presenter:

Kevin Volpp

Authors:

Kevin Volpp, R. Tamara Konetzka, Julie Sochalski, Jingsan Zhu

Chair: Gloria Bazzoli; Discussant: Leemore Dafny Tue June 6, 2006 15:30-17:00 Room 325

Hospital competition in the United States shifted from a quality/amenity basis to a price basis with the growth of managed care in the 1980s and 1990s. However, a significant managed care backlash starting in the mid-to-late 1990s may have blunted its effectiveness in reducing the rate of increase in hospital costs. This may have altered the balance between price and quality competition in hospitals over time. Preliminary analysis using hospital financial data from California showed that while from 1991-96 the mean annual rate of increase in hospital expenses was lower in markets with higher managed care penetration, these effects are reversed from 1997-2001. The difference in the rate at which expenses increased between high and low competition areas narrowed over these two time periods as well, suggesting that managed care no longer effectively facilitated price competition between hospitals during this later period. To assess the impacts on quality of the change in the effects of managed care penetration (MCP) in influencing hospital competition, we use annual hospital financial and patient-level discharge data from 1991 through 2001 linked with state death certificates from California to examine effects on 30-day mortality for a group of 4 common and severe conditions (AMI, stroke, GI bleed, hip fracture) as well as failure to rescue (death after post-operative complications) during two different time periods (1991-96, 1997-2001). Since managed care is expected to have a stronger effect in more competitive areas, our design incorporates interaction effects between market competitiveness and MCP. We control for baseline costs and quality in more competitive areas and adjust for differences in patient severity. We focus on testing whether the nature of competition between hospitals shifts from favoring price competition (1991-96) to greater emphasis on quality competition (1997-2001). We use long-difference regressions to examine the effect of changes in MCP on outcomes and the effects of changes in MCP in more and less concentrated hospital markets. Preliminary evidence suggests that increases in managed care penetration reduce mortality risk overall but to a lesser degree in more competitive markets. Hospital market concentration is also associated with better mortality outcomes. Next steps will include testing for differences in the relationship between managed care and hospital market concentration with outcomes in different time periods. In addition, we will explore effects by payer group and whether potentially more vulnerable populations, such as the uninsured, were adversely affected to a greater degree than the insured in terms of either the quality or quantity of services received. This work is important to developing a better understanding of how the nature of hospital competition has evolved in conjunction with significant changes in recent years in the effects of managed care. These results will contribute to debates on payment policy, cost containment, and quality improvement efforts.

Understanding Local Variation in Physician Employment Arrangements: The Market for Hospitalist Services

Presenter:

Lorens Helmchen

Authors:

Lorens A. Helmchen, Guy David

Chair: Frank Sloan; Discussant: Alvin Headen Tue June 6, 2006 15:30-17:00 Room 326

The Determinants of Public versus Private Provision of Emergency Medical Services

Presenter:

Guy David

Authors:

Guy David, Arthur Chiang

Chair: Frank Sloan; Discussant: Judith A. Shinogle Tue June 6, 2006 15:30-17:00 Room 326

The value that Americans place on Emergency Medical Services (EMS) has increased due in part to its improved capacity to respond to, stabilize and transport trauma patients, such as from myocardial infarction, car crashes or incidents of violence. The increase is due as well to the role these services play in saving lives and limiting casualties after large-scale catastrophic events, such as terrorist attacks or natural disasters. The viability and success of EMS hinges on infrastructure and flexibility. Municipalities delegate authority to emergency resources by awarding a contract to either governmental entities (e.g. fire districts) or to private ambulance service providers. In awarding such contracts, local governments consider not only costs of deploying existing municipal infrastructure, but also incentives for persistent implementation of novel technologies and fresh ideas. Economists’ views are controversial on the choices government should make between inhouse provision and contracting out. In order to analyze the organizational structure and the economics of emergency medical services, the paper advances a theoretical model drawing on spatial economics and scope of government ownership theory. To test our theoretical predictions, we study the empirical relationship between the organizational structure of EMS, local market and demographic characteristics, and system performance. To do so, we analyze a cross-section of the 200 largest US cities, combining data on EMS providers from the Journal of Emergency Medical Services (JEMS) with data from the National Fire Department Census, the Bureau of Labor Statistics (BLS), the FBI Uniform Crime Reporting (UCR), and the 1990 and 2000 US Census. Approximately 25% of Americans reside in the 200 largest cities. These cities provide a unique laboratory for studying the determinants of different EMS organizational forms, as only half rely solely on in-house provision of EMS, while the other rely either on private or a public-private mix.

Pregnancy and the Labor Market over the Business Cycle

Presenter:

Melinda Pitts

Authors:

M. Melinda Pitts, Mary Beth Walker

Chair: Frank Sloan; Discussant: Rebecca Stein Tue June 6, 2006 15:30-17:00 Room 326

This study examines health outcomes resulting from participation in a prenatal social program established for Medicaid eligible women in the state of Georgia during the period 1994 through 2003, which included a period of rapid growth and a period of recession, as well as a period of rapid change in the welfare system. It is expected that the characteristics of the Medicaid recipients during this time period varied due to both welfare reform and the business cycle. Thus it is expected that there will be a differential impact of participation in health care programs designed for Medicaid beneficiaries. The impact of the change in characteristics is unknown. For example, one might expect that individuals moving on to Medicaid during the recession may not benefit from program participation as those already on Medicaid as these individuals have higher levels of income prerecession. Conversely, the benefit may be greater if the individuals moving on to Medicaid rolls were part of the uninsured working poor and thus come onto Medicaid with a lower stock of health. In this research, we examine the impact of the Perinatal Case Management program in Georgia, which is designed to assist pregnant women who are Medicaid eligible to gain access to medical, nutritional, social, and educational services. The goal of this research is to estimate the impact of program participation on prenatal care utilization, birth weight, and length of gestation, while considering the selectivity resulting from using the sample of live births to estimate these variables of interest and changes in welfare coverage and the business cycle. Estimation is carried out using both parametric and semi-parametric methods. The models are estimated using a rich data set covering women who gave birth in the years 1994-2003 in the state of Georgia. This data set includes information on the named parent(s)’s socioeconomic and demographic conditions and medical data on the pregnancy and related and unrelated comorbid conditions. The data is merged with information on employment histories from the state unemployment insurance data, as well as data on welfare program participation and neighborhood (tract level) characteristics. Preliminary results from one year of analysis (1997) indicate that the consumption of prenatal care is higher for participating women than non-participants. Furthermore, there is a positive direct impact on length of gestation and thus, an indirect benefit to birth weight.

Employment of individuals with mental retardation in South Carolina, 1996-2003

Presenter:

Melayne Morgan McInnes

Authors:

Joshua R. Mann, Suzanne McDermott, Melayne M. McInnes, Huafeng Zhou

Chair: Frank Sloan; Discussant: Rebecca Stein Tue June 6, 2006 15:30-17:00 Room 326

Employment of adults with mental retardation is a central aspect of participation in society. It is important to identify factors that result in meaningful employment in this population, as knowledge of these factors can lead to policy and practice improvements. Each year since 1996, we have surveyed local South Carolina disability providers for information about each client’s occupational status, including an estimate of weekly hours worked and wages earned, in addition to employer identity. We also obtained descriptive information for individuals served by the South Carolina Department of Disabilities and Special Needs during the time period, including birth dates, IQ, and the presence or absence of a job coach. A weekly income of $50 was used as the cutoff defining employment. Approximately 3000 (18%) individuals who received some disability services earned $50 per week or more at some time between 1996 and 2003, and 244 worked for all 8 years. We will describe where individuals worked and what jobs they held. An analytic model will be presented showing the relationship between individual, community, and disability service provider characteristics and job acquisition, job tenure and job loss. Predictors of employment, job tenure, and wages will be examined, including job coach activities. Implications for policy and practice in supportive employment will be discussed.

State Liquor Policies, Maternal Substance Use, and Child Outcomes

Presenter:

Tara Watson

Authors:

Angela Fertig, Tara Watson

Chair: Michael Grossman; Discussant: Ellen Meara Tue June 6, 2006 15:30-17:00 Room 332

State regulations on the consumption of alcohol by minors are widely credited with reducing teen drinking and alcohol-related traffic fatalities. Less often emphasized is the potential effect of these laws on pregnancy and drinking while pregnant, and subsequent outcomes for infants. Surprisingly little is known about whether, by reducing drinking by young women, these regulations also improve birth and infant outcomes. We focus on the changes in minimum legal drinking age (MLDA) laws that occurred in many states in the late 1970s and early 1980s. The principal objective of the study is to evaluate the consequences of drinking laws and maternal substance use on birth and infant outcomes. There are two channels by which substance use among teenagers affects the health of the next generation. First, by increasing risky sexual behavior, youth alcohol consumption could change the composition of births towards younger mothers and unintended pregnancies. Second, dependent of the compositional effect, drinking alcohol during pregnancy may directly cause poor health outcomes. Because alcohol and tobacco are often used jointly, minimum drinking age laws may affect maternal smoking as well. The specific aims of our project are: 1. To estimate the effects of MLDA laws and enforcement on substance use, with a particular emphasis on alcohol and tobacco use by young women and pregnant women. 2. To estimate the effects of MLDA laws and enforcement on sexual behavior, pregnancies, and births to young women. 3. To evaluate the impact of maternal alcohol and tobacco consumption on birth and early childhood outcomes, using changes in MLDA laws as a source of exogenous variation in alcohol and tobacco use. We use both the restricted version of the NLSY 79 (National Longitudinal Survey of Youth) and Vital Statistics microdata to address these questions. Preliminary results are as follows: 1. MLDA laws reduce alcohol and tobacco use for affected cohorts, and reduce drinking among pregnant young women (see Table 1). 2. The effect of MLDA laws on sexual activity and births is small, but may be larger for some sub-groups. 3. MLDA laws are associated with reduced incidence of low birthweight among infants born to affected cohorts (see Table 2).

Does Greater Exposure to WIC Affect Maternal Behavior and Improve Infant Health? Evidence from the Pregnancy Nutrition Surveillance System

Presenter:

Cristina Yunzal

Authors:

Ted Joyce, Cristina Yunzal

Chair: Michael Grossman; Discussant: Robert Kaestner Tue June 6, 2006 15:30-17:00 Room 332

Benefits of the Supplemental Program for Women, Infants and Children (WIC) that may impact maternal behavior and birth outcomes include nutritional supplementation, nutritional counseling, health care referrals, and breastfeeding promotion. We propose to test whether earlier and sustained exposure to program benefits results in less maternal smoking, greater weight gain, more breastfeeding and therefore healthier pregnancies and infants. However, instead of comparing WIC to non-WIC participants, we compare women who enroll in WIC in the first trimester of pregnancy to women who either enroll later in pregnancy or in the postpartum period. In other words, everyone in our sample will have “selected” into WIC between conception and the first postpartum visit. We appreciate that many of the selection issues present in comparisons of WIC and non-WIC women may also be present in an analysis of WIC participants only. Therefore, we stratify the analysis by the parity and the timing of the first prenatal care visit in order to lessen selection within WIC participants. Specifically, we focus on women with no previous live births, all of whom begin prenatal care in the first trimester. Some are certified for WIC in the first trimester and some not until after birth. The key to our empirical strategy is data with a large number of WIC participants, detailed information on the timing of their WIC certification, and a rich set of maternal behaviors. The Pregnancy Nutritional Surveillance System (PNSS) in North Carolina and New Jersey meets these requirements.(http://www.cdc.gov/pednss/). The systems in North Carolina and New Jersey collect information on approximately 40,000 women and their infants each year. We will analyze data from both states from 1995-2003 and thus have upwards of 600,000 observations. The PNSS collects data on body mass index, hematocrit level, smoking cessation, and breastfeeding. The greater detail makes PNSS superior to birth certificates along numerous dimensions. However, like birth certificates the samples are large and thus we are able to stratify the analysis not only by the parity and the timing of prenatal care, but race and ethnicity as well. Preliminary results indicate that greater exposure to WIC is uncorrelated with smoking session and weight gain during pregnancy. Consistent with these findings, we find no difference in birth outcomes among women who enrolled in WIC in the first trimester, second or third trimester. These results are in agreement with recent work that has challenged a causal association between prenatal WIC participation and improved birth outcomes.

Violence and Birth Outcomes

Presenter:

Anna Aizer

Authors:

Anna Aizer

Chair: Michael Grossman; Discussant: TBA Tue June 6, 2006 15:30-17:00 Room 332

Everyday roughly 14 thousand women in the US are battered and four are killed by their intimate partners, prompting former Surgeon General C. Everett Koop to label domestic violence “the single most important health issue in the US.” In this paper, we examine the impact of violence against women on birth outcomes. Estimates from the medical literature suggest that as many as one in five pregnant women is the victim of intimate partner violence. Trauma during pregnancy is associated with poor birth outcomes including low birth weight, preterm birth and neonatal mortality. Using a unique dataset that combines data on hospitalization for assaults with birth outcomes from vital statistics records for the state of California for 1990-2000, we estimate the impact of violence on birth outcomes. Because violence is highly correlated with poverty and other risk factors associated with poor birth outcomes, we instrument for violence using variation in the prosecution of domestic violence across counties and over time. Over this period, policies regarding the prosecution of domestic violence offenses changed dramatically and the probability that a man convicted of spouse abuse increased considerably. We use variation in these policies to instrument for the probability of assault. Based on the IV results, we find that reductions in violence are responsible for roughly three quarters of the improvements in birth outcomes witnessed over the last decade. This work sheds new light on the health production process as well as observed income gradients in health. Violence is considerably more prevalent among low income families. We find that violence against women is responsible for roughly 15 percent of observed income gradients in health.

The Role of Patient vs. Provider-Level Factors in Treatment Patterns and Outcomes Under Managed Behavioral Health Care

Presenter:

Susan Ettner

Authors:

Susan Ettner

Chair: Susan H. Busch Tue June 6, 2006 15:30-17:00 Room 335

The Effects of Expanded Mental Health Benefits on Treatment Costs

Presenter:

Anthony LoSasso

Authors:

Anthony T. LoSasso, Ithai Z. Lurie, Jhee Un Lee, Richard C. Lindrooth

Chair: Susan H. Busch Tue June 6, 2006 15:30-17:00 Room 335

Estimating the Family Burden of Children with Mental Health Disorders

Presenter:

Susan Busch

Authors:

Colleen Barry, Susan Busch

Chair: Susan H. Busch Tue June 6, 2006 15:30-17:00 Room 335

Human cost of disease in Italy

Presenter:

Francesco Mennini

Authors:

Francesco Mennini, Fabio Palazzo, G Stirparo, Susanna Conti, G Minelli, R Solimini, V Toccaceli

Chair: Melayne McInnes; Discussant: TBA Tue June 6, 2006 13:45-15:15 Room 121

Introduction: Mortality data represents essential elements for the quantification of health problems and, from an economic perspective, the most important element among human costs. They are recorded all over the country and coded following current and internationally approved criteria.

Death counts and related rates are among the simplest indicators to analyze mortality. They are a short and clear measure of a population’s mortality pattern, that may be used to establish and monitor health priorities or objectives. In particular, within the actual federal framework of the Italian health system, a mortality analysis at a regional level provides specific information which allows for detection of health priorities and objectives for each region.

Methodology: Official mortality data recorded and coded by ISTAT (Italian National Statistics Institute) in accordance with the IX Revision of the International Classification of Disease (ICD IX) were analyzed. The data refers to deaths occurred in Italy among the resident population during the year 2001 (most recent available year).

Taking mortality data, as a starting point, it is possible to calculate a series of indicators, such as: life expectancy, standardized mortality rates, Years of Potential Life Lost (YPLL) and rates of YPLL, which allow us to compare mortality through time and space.

Median ages at death were also calculated (in demography: “median life”) for both men and women and each cause of death. The median age is an indicator of longevity in a population and technically it is the age at which the reference population (i.e. regional population) halves. The causes of death taken into account are the most relevant in Italy: they contributed about 90% to the absolute number of deaths in our country in 2001.

Moreover, other causes of death were analyzed, according to their impact on general mortality and their relative weight within the above mentioned groups of causes. In particular, Acute Myocardial Infarction, Malignant Neoplasms such as Lung cancer, Breast cancer and Colon-rectum cancer, among Violent causes of death, Road accidents and Suicide.

Taking into account the federal debate and related problems, it is useful to underline that the spatial distribution of these indicators allows a comparison among regions in terms of years of potential life lost and age at death for each specific cause of death.

Results: From a federal perspective, YPLL and median ages at death result to be effective indicators of possible lack of the Regional Health Services. It is worth noticing the variability among Regions of the median age at death for Breast cancer; it is well known nowadays that mortality from this cause can be reduced thanks to early diagnosis and treatment, consequently regional values of the median ages lower than those at national level could suggest, apart from any possible epidemiological and clinical difference regarding women affected by this pathology, also the lack of effective screening programmes as well as treatments the Regional Health Services are in charge of. This analysis supports the financial and organizational considerations on different impacts of the Regional Health Services in Italy.

Strategies to identify relevant behaviors and costs in family asthma management

Presenter:

Sheryl Magzamen

Authors:

Sheryl Magzamen, Sylvia Brandt, Ira Tager

Chair: Melayne McInnes; Discussant: TBA Tue June 6, 2006 13:45-15:15 Room 121

Despite promulgation of national and international guidelines on the effective management of pediatric asthma, asthma-related morbidity among urban children remains disproportionately high. While there is ample evidence of persistent health disparities by race/ethnicity and income, there is a lack of understanding of the causal mechanism(s)for these disparities. The lack of conception of the relevant causal pathway proves challenging for the implementation of interventions designed to mitigate the burden of asthma in urban communities. Further, without an appropriate causal model, measuring changes in health outcomes due to interventions, as well as determining the economic value of these changes, becomes problematic. These two methodological issues are central concerns in benefit-cost studies. Each of these issues are complicated by the correlation between poor health outcomes and socioeconomic characteristics. Models of the impact of health interventions on specific health endpoints are likely to be biased due to unobservable variables that determine health outcomes and are correlated with standard SES variables. The problem is especially likely to occur in cases of health programs that target high-risk populations such as urban children who suffer from asthma.

In this presentation, we outline how a methodology to value non-market goods, contingent valuation, can be used to collect data for both 1) modeling household behavior and asthma outcomes and 2) cost-benefit assessment of a health intervention program. We will provide empirical data obtained from a CDC asthma intervention, in Oakland, CA, targeting urban adolescents and their families. Our focus will be on the ecological and familial influences on health-related decisions using contingent valuation to elicit an individual’s willingness to pay (WTP) for a particular non-market good (i.e. a reduction in asthma symptoms) using a hypothetical scenario that characterizes a realistic market good that affords the non-market benefit of interest. The association of WTP with asthma severity and health beliefs points to factors to explicate family demand for asthma management programs. The degree and nature of family participation in asthma management may partially explain the observed disparities in asthma morbidity by socioeconomic and demographic characteristics. With respect to pediatric asthma, contingent valuation is useful framework to understand how families would assign a monetary value to reduce asthma severity and improve quality of life for their children. The correlation between change in behaviors and symptoms and WTP can identify sub-populations that may benefit the most from community-based asthma interventions.

In addition, utilizing this approach, assessment of non-market costs related to asthma can inform the design of interventions to mitigate the burden of asthma among urban populations. Although direct and indirect costs related to asthma care have been well established, the non-market costs of asthma provide a more accurate picture of the overall economic burden of asthma. The use of these non-market costs to measure asthma morbidity and gauge the effectiveness of programs to improve asthma management has profound implications for the delivery and the evaluation interventions designed to reduce asthma prevalence in urban communities.

The Economic Burden of Experiencing a Major Complication during Percutaneous Coronary Intervention

Presenter:

Kirsten Long

Authors:

Kirsten Long, Erin McMurtry, Kent Bailey, James Naessens, Kurt Jacobson, Charanjit Rihal

Chair: Melayne McInnes; Discussant: TBA Tue June 6, 2006 13:45-15:15 Room 121

Objectives: Technological advances (including coronary stents and new anti-thrombotic regimens) have significantly reduced rates of ischemic complications and enabled percutaneous coronary intervention (PCI) to be applied to expanding indications. However, escalating costs are of concern to patients, providers and payers. This study assessed the incremental medical costs of treating major in-hospital procedural complications incurred by patients undergoing PCI.

Methods: We considered all patients undergoing elective, urgent, or emergent PCI at Mayo Clinic Rochester between 3/1/1998-3/31/2003 in analyses. Exclusions included elective, staged procedures during hospitalization (atypical events) and episodes for patients who denied research authorization. Clinical, angiographic, and outcome data were derived from the Mayo Clinic PCI Registry. In-hospital PCI complications included major adverse cardiac and cerebrovascular events (MACCE) (defined as death, myocardial infarction [MI], emergent coronary bypass surgery, repeat PCI, or stroke) and bleeding of clinical significance. Administrative data was used to estimate total costs (hospital and physician) in standardized, year 2004 constant-dollars. We used generalized linear modeling (inverse Gaussian with log link) to estimate the incremental costs associated with complications adjusting for demographic, clinical, angiographic, and procedural characteristics.

Results: 8,109 eligible PCIs episodes (7,027 treated patients) occurred during the study duration. In 1,071 (13.2%) of these episodes, patients experienced at least one of the selected complications during hospitalization. Both MACCE and bleed events occurred in 147 (13.7%) of these complicated procedural cases. Patients experiencing complications were older, more likely to present with emergent PCI, recent or prior MI, multi-vessel disease, B2/C type lesions, and comorbid conditions than patients who did not experience these events. Unadjusted total costs were, on average, $27,865 + $39,424 for patients who experienced any complication compared to $12,279 + $6,796 for those who were free of complications (p<0.001). A nearly 5-fold increase in inpatient costs was observed among patients with and without MACCE and major bleeding complications ($55,230 vs. $12,279, respectively; p<0.001). Adjusted mean total cost were $7,000 higher for patients experiencing complications compared with patients who were complication free (95% CI of cost difference: $5,854, $8,145). Incremental costs associated with only bleeding events, only MACCE, or for patients experiencing bleeding and MACCE events were $5,813, $5,151, and $15,699, respectively (p<0.001).

Conclusions: This observational study highlights the significant economic burden associated with in-hospital procedural complications. Bleeding complications alone contribute significantly to inpatient cost of care. Interventions to reduce the risk of adverse events likely enhance financial as well as clinical performance.

The Impact of Antibiotic Resistant Infection Levels, Outbreaks, & Control Measures on Hospital Expenses-per-Admission

Presenter:

Gwendolyn Morrison

Authors:

Gwendolyn Morrison, Kim McCoy, Bradley Doebbeling

Chair: Michael Hagan; Discussant: Ed Miller Tue June 6, 2006 13:45-15:15 Room 213

Background: Antibiotic resistant infections are an increasing problem in hospitals in terms of the number of resistant organisms and their prevalence. Consequently, the costs of these infections, in terms of mortality, disability, and money, are also increasing. Antibiotic resistance (AR) increases the costs of care in various ways including increased length of stay, more admissions to ICU, and more intensive resource use by inpatients. Furthermore, these additional costs of care often go unreimbursed. Despite the implied incentive to adopt infection prevention guidelines to reduce these AR related costs, hospitals have implemented these guidelines to varying degrees.

Implementing clinical practice guidelines improves health care quality but, because providers incur the implementation costs while resulting savings accrue to payors, the third party payment system typically poses a barrier to guideline implementation. However, implementing infection prevention guidelines may generate provider savings by reducing hospital acquired, including AR, infections. If AR infection levels are to be contained or reduced, economic research must first focus on potential cost savings to the entity with the greatest influence over the adoption and implementation of preventive interventions-the hospital. In this study, we sought to assess the impact of AR levels, outbreaks, and control measures on hospital level expenses-per-admission.

Methods: We surveyed a nationally representative sample of 670 hospitals (stratified by bed size, teaching status, geographic region, and VA versus non-VA status) regarding levels and outbreaks of AR, their adherence to recommended AR prevention and control guidelines, and availability of information technology. Survey data were linked to the American Hospital Association Annual Survey to incorporate other hospital level financial and operational capacity characteristics. We use regression analysis to assess the impact of AR levels, outbreaks, and control measures on hospital expenses-per-admission.

Results: We estimate two cost models with expenses-per-admission as the dependent variable: one assesses the impact of AR levels and outbreaks; the other the impact of specific infection prevention measures. We find that hospital expenses-per-admission increase with levels of MRSA (the most common AR organism). This result was consistent both when pooling VA and non-VA hospitals, and analyzing non-VA hospitals separately. For non-VA hospitals, higher expenses-per-admission are also related to more recent outbreaks of another AR organism, K-ESBL. Cost models incorporating infection prevention measures found that, for non-VA hospitals, (1) using information technology to automate decisions to reduce errors (including, but not limited to, antibiotic prescribing) have lower expenses-per-admission, and (2) hospitals reporting active involvement of their infection control committee in AR prevention and control have higher expenses-per-admission. The former suggests a cost-saving means for hospitals equipped with the necessary IT, while the latter may just reflect the cost of improving quality.

Discussion: The successful implementation of infection prevention and control measures cannot occur without hospital administration support, and administrators will not support such measures until there is evidence that they are associated with cost savings. In presenting evidence that AR increases costs at the hospital level, the results of this study are a first step in providing the business case for improving infection prevention and control.

Market Power in Dutch Hospital Sector: Bargaining between Hospitals and Insurers

Presenter:

Misja Mikkers

Authors:

Rein Halbersma, Misja Mikkers, Evgenia Motchenkova, Ingrid Seinen

Chair: Michael Hagan; Discussant: Herb Wong Tue June 6, 2006 13:45-15:15 Room 213

Rationale: Competition was introduced in parts of the hospital market in the Netherlands in 2005. According to a monitoring report of the Dutch Health Care Authority, the introduction of competition lead to an average increase of 5% of the estimated cost prices. However, prices differ amongst hospitals, diagnosis and regions. In this paper we investigate the consequences of market power and bargaining power of both hospitals and insures on prices after the institutional change. We have a unique dataset consisting of about 60.000 observations of both list prices per product and prices per product contracted between hospitals and insurers.

Objectives: In this paper we would like to show the effects of buyer and seller concentration on the price of hospital care. Next we investigate whether hospitals strategically interact in a transitional phase, just after the introduction of competition. Furthermore, we will try to identify possible unilateral market power of certain hospital types. Finally we estimate the relative bargaining power of hospitals and insurers in determining the negotiated prices.

Methodology: First we use a traditional Structural Conduct Performance model to estimate the effects of market structure on price mark-ups in the competitive segment of the hospital market. These models normally are based on the Cournot model in which it is assumed that there is strategic interaction between sellers.

Using the SCP model we will estimate to which extend hospitals are able to coordinate their actions in the period just after the introduction of competition. Within the SCP framework we identify possible unilateral market power by introducing dummy variables for different types of hospitals (e.g. academic hospitals).

We also model the interaction between a hospital and an insurer in the context of a bargaining model (similar to Brooks et al., 1997), by estimating the share a hospital receives (defined by the contracted price minus the cost price) from the total gain of contracting (defined as a list price for non insured consumers minus the cost price).

Conclusions: Preliminary estimation results show that hospitals are, just after the introduction of competition, unable to coordinate their actions. The concentration of hospitals does not have a significant effect on the observed price mark-ups. However, large insurers can negotiate significantly lower prices. Furthermore, academic hospitals are able to negotiate significantly higher prices for hospital services than general hospitals. Since patients are willing to travel larger distances to get a treatment from an academic hospital, we conclude that academic hospitals are able to exert unilateral market power. On average insurers have more bargaining power. We will also investigate the effect of the market structure on the division of bargaining power between hospitals and insurers.

Possible Extensions: We will try to include simultaneous testing for excessive pricing, predatory pricing, and countervailing power by insurers in the model. Furthermore, we might extend the paper with a spatial regression model, which would estimate the spatial interaction between neighboring hospitals.

Hospital Financial Condition and Operational Decisions Related to Quality of Care

Presenter:

Gloria Bazzoli

Authors:

Gloria Bazzoli, Richard Lindrooth, Jan Clement, Hsueh-Fen Chen

Chair: Michael Hagan; Discussant: Michael Hagan Tue June 6, 2006 13:45-15:15 Room 213

Over the last decade, the US hospital industry has experienced intensifying financial pressures as labor and other costs grew rapidly relative to slower increases in hospital payments. In fact, the Medicare Prospective Payment Advisory Commission reported that nearly one-third of hospitals had negative total margins in 2003. These pressures have raised concern. Some institutions may close limiting access to care in some communities. However, closure may not be the biggest issue given existing research showing that hospitals frequently continue to operate despite dire financial circumstances. Instead, hospitals may be forestalling closure by reducing the quality of their services. Our research examines if this is the case, assessing the relationship between hospital financial condition and operational decisions related to quality of care.

Our theoretical model draws directly on economic theory of production. We model product quality as a derivative of the production process and hospital choice of inputs. A number of studies have examined the effect of financial pressures on hospital staffing decisions, but few have examined its effect on hospital processes and infrastructure supporting the care-giving process or on the upkeep of hospital facilities. We examine proxies for these latter dimensions, specifically hospital compliance with certain Joint Commission on the Accreditation of Healthcare Organization (JCAHO) performance areas and hospital investments in plant and equipment.

Although many JCAHO standards are not difficult to meet, a subset is viewed as being particularly challenging by the accreditation agency, with annual compliance rates as low as 50%. We focus on this subset, which includes such things as hospital procedures for ensuring medication or anesthesia safety. Our net hospital plant assets measure, on the other hand, relates to the quality of equipment and technology available for patient care. Low levels of net plant assets, for example, likely mean that antiquated facilities and technology are not being replaced.

For our empirical work, we examine a 6-year longitudinal database on 3,000 US general hospitals that were operational between 1995 and 2000. This database blends data from: the AHA Annual Survey; Medicare hospital cost reports; selected JCAHO performance areas; Area Resource File; and InterStudy. We estimate instrumental variables fixed and random effects models that control for unmeasured hospital and market characteristics. We use overidentification tests to assess the validity of our instruments, and Hausman specification tests to assess the adequacy of various models.

To date, our analysis has found that the quality of hospital infrastructure and management processes decline with reductions in cashflow and revenues per patient day. These negative effects are most apparent for our net plant assets measure and for selected JCAHO performance areas that relate to the infrastructure that supports initial patient assessment, ongoing staff competency assessment, standardization of patient data, and maintenance of infection control standards. Overall, our research is yielding new insights about the relationship between hospital financial condition and operational decisions related to patient care and outcomes, especially as they pertain to the quality of hospital infrastructure and processes to support patient care.

Financial Incentives for Adherence to Diabetes Care Pathways: Discerning Pay-for-Performance Impact from Increasing Trends

Presenter:

James Burgess

Authors:

James Burgess, Gary Young, Dan Berlowitz, Bert White, Mark Meterko, Barbara Bokhour, Errol Baker, Karen Sautter, Howard Beckman, Robert Greene, Kathleen Curtin

Chair: Richard C. Lindrooth; Discussant: TBA Tue June 6, 2006 13:45-15:15 Room 225

Many organizations around the world have begun designing and implementing pay-for-performance or pay-for-quality programs for physicians as a way of attempting to induce practice behavior changes in physicians and improve patient outcomes. Quality improvement also can be occurring for other reasons even if physician payment schemes do not account for quality of service. Difference-in-difference approaches using state and national controls can be used to discern the intervention impact from the trend. We employ a three year pre-intervention and three year post-intervention design measuring an array of adherence scores on diabetes care pathways (Hemoglobin A1C, Microalbumin urinalysis, LDL cholesterol, and Retinal eye exam) that led to financial payouts based on rank ordering of provider outcomes in a large Independent Practice Association (IPA) to accomplish this test of pay-for-performance plans. We review the theory and practice of incentive experiments in this area. In the current sparse literature on physician pay-for-performance, e.g. Rosenthal et al. (2005), careful distinctions between the incentive designs and intended effects have not always been clear. Measures with a fixed threshold of performance have quite different incentive for behavior change than rank ordering methods that are dependent upon relative improvement across all subjects. Physicians already above a threshold do not have to improve further to gain the incentive, so the focus is not so much on gain or improving quality as on paying the highest performing physicians more. While physicians improving nominal scores as other physicians improve by more can get paid less under a rank ordering system, but the incentive for improvement is clearer across the range of all providers. In addition, the patient panels for a chronic disease like diabetes can be quite small for some physicians, which may offer a large reward to a small amount of effort. Results indicate that adherence scores are increasing over time for all measures of diabetes care; however, only some of the measures exhibit a change attributable to the pay-for-performance intervention. We track individual physicians over the six year period and test effects of the size of the exposed diabetes panel and changes in the size of the panel over the period as well as the effect of personal characteristics of the physicians on the results.

Intended and Spillover Effects of Pay-for-Performance on Quality of Care

Presenter:

Meredith Rosenthal

Authors:

Meredith Rosenthal, Richard Frank, Zhonghe Li, Arnold Epstein

Chair: Richard C. Lindrooth; Discussant: TBA Tue June 6, 2006 13:45-15:15 Room 225

The number of health plans and purchasers in the United States that have adopted pay-for-performance mechanisms for quality improvement is growing rapidly. However, most of these programs are in the early stages of trial, evaluation, and adjustment. Although there is intense interest in and optimism about pay-for-performance programs among many policy makers and payers, there is little published research on pay-for-performance in health care. In fact, there are only a few studies demonstrating that pay-for-performance leads to improved quality of care.

We evaluated a natural experiment with pay-for-performance using administrative reports of physician group quality from a large health plan for an intervention group (California physician groups) and a contemporaneous comparison group (Pacific Northwest physician groups). Quality improvement reports were included from October 2001 through April 2004 issued to approximately 300 large physician organizations.

We examine the impact of the program on three targeted measures of clinical quality: cervical cancer screening, mammography, and hemoglobin A1c testing as well as a set of untargeted measures, including Chlamydia screening, appropriate asthma medication, and emergency room visits for asthma. Improvements in clinical quality scores were as follows: for cervical cancer screening, 5.3% for California vs 1.7% for Pacific Northwest; for mammography, 1.9% vs 0.2%; and for hemoglobin A1c, 2.1% vs 2.1%. Compared with physician groups in the Pacific Northwest, the California network demonstrated greater quality improvement after the pay-for-performance intervention only in cervical cancer screening (a 3.6% difference in improvement [P=.02]). In total, the plan awarded $3.4 million (27% of the amount set aside) in bonus payments between July 2003 and April 2004, the first year of the program. For all 3 measures, physician groups with baseline performance at or above the performance threshold for receipt of a bonus improved the least but garnered the largest share of the bonus payments. Patterns of improvement for untargeted measures were mixed, suggesting the existence of both positive and negative spillovers.

The effect of financial incentives on the volume of diagnostic imaging ordered by physicians

Presenter:

Mythreyi Bhargavan

Authors:

Mythreyi Bhargavan, Cristian Meghea, Jonathan Sunshine

Chair: Richard C. Lindrooth; Discussant: TBA Tue June 6, 2006 13:45-15:15 Room 225

Rationale: Medical imaging is a large component of health care costs in the United States, with an estimated annual cost almost $100 billion, and has one of the fastest growth rates (approximately 10% per year) among all medical services. Imaging is usually provided through physician referral, and therefore, may be influenced by financial incentives faced by the referring physician.

In this study, we analyze the differences in imaging utilization between self-referring and radiologist-referring physicians, while controlling for patient characteristics and diagnoses. If a patient has an office visit and a subsequent related image, and the same physician bills for both events, the physician is identified as a self-referrer with a financial interest in the imaging procedure to which he or she refers the patient. If the image is performed by a radiologist, then the referring physician is flagged as having no financial interest in the referral. (Referrals to physicians other than radiologists are analyzed as a separate category because the incentives are unclear.)

Objective: To measure the effect of physician financial incentives, as captured by self- versus radiologist-referral, on the utilization of imaging studies, controlling for patient demographics and co-morbidities, geographic location, practice setting (physician office, outpatient hospital, or inpatient hospital), and other physician-related factors.

Methods: We use claims data from a large national employer plan for five years (1999-2003). We identify patients with certain conditions such as acute upper respiratory tract symptoms, headache, and knee pain. We construct episodes of care and for each episode, observe whether an image was ordered, the type of image, total imaging costs, and total patient care costs. Each medical condition is analyzed indepently. Outcomes of interest for each patient are (a) percent of episodes with imaging, (b) total costs of imaging, and (c) total medical costs, with costs measured in measured in global relative value units (RVUs) to control for price differences. Logit regression is used to analyze outcome (a) and log-linear regression for outcomes (b) and (c).

Preliminary Results: For cardiac imaging the number of images per patient is higher when the treating physician does his/her own imaging than when the patient is referred to a radiologist (2.8 ultrasounds and 2.9 nuclear medicine images per patient by self-referrers versus 2.6 and 2.7 respectively for radiologist-referrers). But the number of images per patient is even larger when patients are referred to an independent clinic (2.9 ultrasounds and 3 nuclear medicine procedures), and the financial motivations are unclear. Controlling for patient and neighborhood characteristics, and state physician supply, physicians who performed their own imaging for heart disease performed 6% more images than physicians who sent the patient to a different physician.

Conclusions: There is some evidence that imaging utilization is higher if a physician self-refers patients than if the patient is referred to a radiologist or a different physician. Analysis of costs of imaging may reveal sharper differences between self-referring and radiologist-referring physicians. The results of this study will assist policy makers and payers in designing effective incentive structures to ensure appropriate utilization.

Does Participation in the Food Stamp Program Affect the Incidence of Obesity and Health Care Costs?

Presenter:

Yuriy Pylypchuk

Authors:

Yuriy Pylypchuk, Chad Meyerhoefer

Chair: Tom Selden; Discussant: TBA Tue June 6, 2006 13:45-15:15 Room 226

The Food Stamp Program (FSP) is a cornerstone of public assistance and poverty alleviation efforts in the United States, serving nearly 24 million individuals at a cost in excess of 25 billion dollars in 2004. Though the program plays an important role in alleviating hunger by supplementing food budgets and freeing income for non-food purchases, some have raised concerns that it may be contributing to the high incidence of overweight and obesity among the poor. Furthermore, many FSP participants are Medicaid recipients, so higher rates of obesity due to program participation may result in greater financial burden on public insurance programs if obesity-attributable medical expenditures increase. Several studies have shown that participation in the FSP leads to higher food expenditures and a greater marginal propensity to consume food out of program benefits than out of cash income (Fraker, 1990). However, higher expenditures on food do not necessarily translate into greater caloric intake. For example, a recent study by Mathematica Policy Research (2000) finds inconsistent and insignificant effects of program participation on the number of servings consumed, level of micronutrient intake, and indices of overall dietary quality for adults. Both Gibson (2002) and Chen et al. (2005) find that participation in the FSP is associated with higher rates of obesity for woman, but neither of these studies provides rigorous identification of the link between program participation and obesity.

We investigate the impact of participation in the FSP on adult obesity for the food stamp eligible population using the 2000 - 2002 Medical Expenditure Panel Survey (MEPS), a nationally representative survey of the U.S. civilian, non-institutionalized population. To identify the effect of program participation on overweight status we use instrumental variables methods that exploit exogenous variation in program exclusion criteria at the national level and differences in state level program rules and measures of access. We also make use of the longitudinal dimension of the MEPS to estimate random effects discrete factor models. These models are less sensitive to exclusion restrictions than single-equation instrumental variables methods and allow us to explicitly control for individual level time-invariant unobservables (Morz, 1999). We subsequently estimate the impact of FSP participation on medical expenditures, both directly, and indirectly through changes in overweight status. Obesity attributable increases in medical expenditures are then determined for the Medicaid eligible population as well as the sub-population of individuals suffering from certain chronic conditions, such as diabetes and hypertension. These estimates will help policy makers determine whether to investigate alternative benefit delivery mechanisms or provide supplemental nutrition education through the FSP.

Labor Income Risk and Health Outcomes

Presenter:

Timothy Halliday

Authors:

Timothy Halliday

Chair: Tom Selden; Discussant: TBA Tue June 6, 2006 13:45-15:15 Room 226

This paper uses data from the Panel Study of Income Dynamics (PSID) to investigate the impact of earnings risk on health. We show that good health exhibits pro-cyclical variation in the PSID for working-aged men and women. To identify the impact of shocks to income and labor supply on health, we estimate a dynamic, linear model using moment restrictions that allow for health to impact labor supply. Doing this, we find that income shocks exert strong negative impacts on the health of working-aged men, but macroeconomic conditions do not impact health once we control for income and labor supply. For women, however, macroeconomic conditions still impact health even after controlling for income and labor supply. We provide some indirect evdence that suggests that this is reflecting the impact of shocks to the husband’s income on the health of the wife.

You Can Never Be Too Rich or Too Thin: Causal Impact of Income on Obesity

Presenter:

Kosali Simon

Authors:

Kosali Simon, John Cawley, John Moran

Chair: Tom Selden; Discussant: TBA Tue June 6, 2006 13:45-15:15 Room 226

Over the past 25 years, many countries have experienced increases in obesity, which the World Health Organization attributes in part to increases in income. The link between income and obesity is also important for understanding racial differences in the prevalence of obesity in the U.S., and patterns of obesity across socioeconomic status among women in the U.S. A parallel literature examines whether low-income elderly in the U.S. have poor nutrition. All of these literatures relate to the impact of income on obesity, of which there is little evidence.

This paper estimates the causal impact of income on weight by exploiting a natural experiment: an error in the way Social Security benefits were calculated that led some retirees to receive windfall payments from the Social Security system. We exploit this natural experiment, known as the Social Security benefits notch, by estimating instrumental variables and reduced form models using data from the first wave of the Asset and Health Dynamics Among the Oldest Old (AHEAD). We find evidence that exogenous increases in Social Security income raise weight for relatively light low-income women. These changes in weight are economically meaningful; we estimate that the value of statistical lives saved because of changes in weight caused by the Social Security notch totals $7.4 billion.

Web Analysis - Research on Members' Health Plan Website Use and Impact on Health Care Utilization

Presenter:

Mona Shah

Authors:

Charlotte Wu, Regina Levin, Ross Owen, Carole Bashaw, Mona Shah

Chair: Randall Ellis; Discussant: Jenny Kenney Tue June 6, 2006 13:45-15:15 Room 235

Rationale: A primary premise of consumer driven healthcare is that members will use reliable resources of information for healthcare decision making. Benefit, network and pricing information is specific to health plans and members must therefore rely upon their plan for this information. The health plan web site is a convenient way to make this information available to members. This study examines the prevalence of plan website use, what information members access, and the impact on health care utilization.

Objectives: To evaluate consumers’ pattern of use of a leading consumer-driven health plan member website, and to examine the relationship between web use and health outcomes and health care utilization behaviors.

Methodology: Our study population is all members enrolled in a leading consumer-driven health plan during the plan years of 2003 or 2004, which includes approximately 185,000 members from 70 employers. Using 2003 and 2004 clickstream data, we examined web site use overall and by the area accessed: “My Account”, “My Benefits”, “Doctors & Hospitals”, “Pharmacy”, “Healthcare Costs” and “Health Resources”. Family is used as the analysis unit since members of the same family will log onto website with subscriber’s identification. We categorized families into groups by number of times they logged on and compared these groups’ illness burden, their utilization behavior including office visits, ER visits, hospital admissions, and drug use. We also examined differences in when the Health Reimbursement Account was exhausted and the deductible was met. In addition, families were categorized by their aggregated illness burden into four groups and their web usage and healthcare utilization were examined by these different risk groups. Linear regression model was used to determine the effect of using any area on website on total healthcare cost, adjusted by their illness burden.

Results: More than half of members accessed the health plan website. In general, members who used web more have higher utilization of health care services. However, for members with high burden of illness, web-users have lower emergency room visits and hospital admissions than non-web-users, and their overall cost were not statistically significantly different from non-web-users. The frequency of access to some areas is strongly related to members’ healthcare cost after adjusting for their illness burden: cost increases with more access to “Doctors & Hospitals” information while decreases with use of “Healthcare Costs”.

Conclusions: Members are active in managing their healthcare utilization by accessing their health pan website. Members with higher utilization are more likely to use the health plan web site. When controlling for illness burden strata, in high health risk group the web-users’ costs were similar to non web-users’ with a reduction in use of acute health care services. This study suggests that there is a relationship between seeing health care costs and actual healthcare spending. Although a direct cause-effect relationship has not yet been established, we believe our findings provide a positive feedback on the benefit of using web-based consumer health information on cost savings.

The Effects of Health Plan Performance Measurement and Reporting on Quality of Care for Medicare Beneficiaries

Presenter:

Kate Bundorf

Authors:

Kate Bundorf, Kavita Choudhry, Laurence Baker

Chair: Randall Ellis; Discussant: Margaret Byrne Tue June 6, 2006 13:45-15:15 Room 235

Background: Significant resources have devoted to the development and public dissemination of reports comparing the performance of health plans. The objective of these consumer report cards is to improve the quality of healthcare by providing consumers with the information necessary to incorporate quality into their decisions and plans with information on how their performance compares with others. While a number of studies have documented that these report cards have had relatively little effect on consumer choice of plans, relatively few studies have examined their impact on quality of care.

Objectives: The objective of this research is to examine the effect of health plan quality measurement and reporting on the use of measured services by Medicare beneficiaries. We examine how the implementation of mandatory health plan participation in standardized quality measurement and reporting affected the utilization of measured services among Medicare beneficiaries enrolled in these plans as well as those enrolled in traditional Medicare.

Methods: The primary data source for our analysis is the Medicare Current Beneficiary Survey, an annual survey of Medicare beneficiaries conducted by CMS. Using these data, we examine the utilization by Medicare beneficiaries of 4 services that correspond to performance indicators for Medicare Managed Care plans, including mammograms, flu shots, drugs for controlling high blood pressure, and beta blocker after heart attack. We also define a set of control indicator that includes services, such as pap smear, that are similar to, but not included in, the HEDIS performance indicator set. These models provide an empirical test of whether our findings for the performance indicators are due to report cards rather than other unobserved trends in service utilization. We examine the effect of performance measurement by comparing utilization of performance indicators among Medicare beneficiaries enrolled in managed care plans before and after the implementation of mandatory health plan participation, using the Medicare fee-for-service population as a control group. We use data on Managed Care market penetration to test for the impact of selection of beneficiaries across sectors and spillovers from the managed care to the FFS sector on our results.

Results: We find little evidence that the implementation of quality reporting increased rates of either flu shots or mammograms, both performance indicators. While rates of use of these services increased among Medicare Managed Care enrollees after the implementation of mandatory health plan quality reporting, rates of utilization of the performance indicators also increased among Medicare FFS enrollees who were not directly affected by the program.

Conclusions: Our findings to date indicate that the implementation of mandatory health plan quality reporting had little effect on the utilization of two performance indicators among Medicare beneficiaries enrolled in managed care plans. Our analysis will examine two additional performance indicators and also determine whether spillover or selection effects are driving these results.

Patient information and pharmaceutical prices

Presenter:

Nicklas Rudholm

Authors:

Nicklas Rudholm

Chair: Randall Ellis; Discussant: Ting Liu Tue June 6, 2006 13:45-15:15 Room 235

Rationale: The most common motivation for regulating health care markets has been that the difference in information between the producer of health care and the patient is large, giving the producers of health care market power. In its most extreme form, this could lead to so called supplier induced demand, where producers of health care sell unnecessary treatments to uninformed patients. In other, less extreme cases, the information gap between producer and patient still gives the producer the possibility to charge prices above marginal cost. In this paper, the effects of increased consumer information about price differences in medically equivalent treatments (branded and generic drugs) on the market power of health care producers (pharmaceutical firms) will be examined.

Objective: The objective of this paper is to estimate the effect of increased consumer information about price differences between brand name and generic drugs on pharmaceutical prices.

Methodology: In October 2002, the Swedish pharmaceuticals market was reformed. The reforms required that pharmacists substitute the prescribed pharmaceutical product to the cheapest available generic product. The reforms also require that pharmacist inform the patient that there are substitute products available and that the products will be switched. However, they also have to inform the patient of the opportunity to buy the prescribed pharmaceutical product instead of the generic, paying the difference in price between the products themselves. This means that under the new regulations, patients have more information about the price difference between the prescribed (in most cases brand name) product and the cheapest available generic alternative. As such, the introduction of the substitution reform can be seen as a natural experiment where the information available for patients concerning price differences in medically equivalent treatments has been increased. Using a unique dataset covering 1.5 million pharmaceutical prescriptions made out in the county of Västerbotten, Sweden during the period January 2001 until June 2003, regression analysis is used to test how the increase in patient information has affected pharmaceutical prices.

Results: The results show that increased patient information about the price difference between available generic products and brand name drugs do lower the price of brand name pharmaceuticals.

Conclusions: The results from this paper indicate that increased patient information decreases the market power of pharmaceutical firms. This, in turn, means that it might be possible to reduce health care costs by increasing patient information about available treatments and the price differences between those treatments.

Strategies and performances in the pharmaceutical Italian market

Presenter:

Lara Gitto

Authors:

Francesco Mennini, Lara Gitto, Marco Ratti

Chair: Richard Frank; Discussant: Chris Roebuck Tue June 6, 2006 13:45-15:15 Room 309

A structural analysis has put in evidence how variations in the economic results of pharmaceutical firms may be due both to exogenous and endogenous factors. The implementation of an innovating strategy based on the introduction of new products (due to a higher portion of investments in R&D activities), for example, might lead to higher profits. At the same time, the strategy selection process might depend on some structural “exogenous” factors, such as regulatory issues, concentration in the market, changes in the institutional framework, etc., likely to influence firms’ performances.

The aim of the present paper is to focus on the first of the two aspects above mentioned: here, a micro analysis, aimed at studying the behaviour of Italian pharmaceutical firms, that, across the period 1994-2004, achieved the 75% of total sales, is performed. We even analysed two sub-periods of time (1994-1999 and 1999-2004), characterised by a different regulatory interventions, to better understand the effects of regulation on pharmaceutical strategies.

At the same time, this paper aims at providing useful information to gain an insight into a few typical behaviors of businesses in the Italian pharmaceutical market and how business strategies changed in the last decade.

Variations in economic results might depend on the adoption of a given strategy (conservative vs. innovating), on the number of new products and/or best seller drugs marketed, on the circumstance that the firm belongs to an established group or experienced a merger in order to consolidate its position in the market, or on a combination of all these factors.

A limited impact of the latter would indicate how increasing profits are mainly due to institutional “exogenous” factors, likely to be investigated through a macro analysis.

Results of this paper are useful to understand trends in pharmaceutical industry in Italy and may be used in international comparisons, to analyse the impact of some “exogenous” factors that influence, for example, EU pharmaceutical market performance.

The Market for Follow-On Biologics

Presenter:

David Ridley

Authors:

Henry Grabowski, David Ridley, Kevin Schulman

Chair: Richard Frank; Discussant: Francesco Mennini Tue June 6, 2006 13:45-15:15 Room 309

The Food and Drug Administration is examining whether biologics can and should be treated like pharmaceuticals with regard to generics. Follow-on biologics differ from generic pharmaceuticals in that equivalence of safety and efficacy is more challenging to demonstrate. Because of these differences, generic biologics are often referred to as “follow-on biologics.” The focus of the debate on follow-on biologics has been on legal and health concerns, but there are important economic questions. How will differences in development and manufacturing costs and associated regulations affect the market for follow-on biologics? Will follow-on biologics be as competitive and provide the substantial financial savings provided by generic pharmaceuticals?

Generic pharmaceuticals provide a substantial price discount over branded products. Nevertheless, it is not the mere presence of a generic product in the market but competition between multiple firms that results in aggressive price competition and discounting. To assess the potential economic advantages to consumers from follow-on biologic products we must assess the potential for firm entry into this new market and whether competition among manufacturers of follow-on biologics is likely to be as vigorous as that of manufacturers of generic pharmaceuticals.

We analyze market entry and prices for follow-on biologics in the United States using four analogs. First, we analyze the U.S. market for generic pharmaceuticals. We report estimates of the number of generic competitors as a function of expected returns. We then report estimates of relative generic prices as a function of the number of generic competitors. We use IMS Health’s Generic Spectra data. Second, we analyze the U.S. market for human growth hormone (HGH). In this market some patents have expired and there are multiple competitors, but none of the products entered through an abbreviated process bypassing clinical trials. We will use price data on the HGH market from Drug Topics Redbook. Third, while there are no generic biologics yet sold in the U.S., Australia became the first regulated market to approve a generic biologic. We will analyze price data for Omnitrope, a generic biologic human growth hormone approved by the Australian Therapeutic Goods Administration in October 2004. Fourth, we will report prices of biologics in emerging markets such as Brazil, China, India, and Mexico to provide insight on manufacturing costs and generic competition.

Given uncertainty about the market for follow-on biologics, it is challenging to accurately predict how the market will evolve. Nevertheless, these four analogs can provide a better understanding of the likely market for follow-on biologics. Policy makers should be cautious in projecting large financial benefits for follow-on biologics for consumers and payers based on the experiences of generic pharmaceuticals. They need to consider how follow-on biologics will differ in terms of economics as well as scientific and regulatory factors.

An investigation of first-mover advantage in pharmaceutical advertising

Presenter:

Winghan Kwong

Authors:

Winghan Kwong

Chair: Richard Frank; Discussant: Richard Frank Tue June 6, 2006 13:45-15:15 Room 309

Rationale: Pharmaceuticals are experience goods because physicians often choose medications based on their clinical experience and they may be reluctant to try a new product due to uncertainty about its quality. Because of imperfect information, products that enter the market earlier may have a competitive advantage over new entrants.

Objective: The objective of this study was to determine if there is an asymmetry in the effectiveness of advertising between earlier and later entrants that would support the presence of a first-mover advantage in pharmaceutical advertising.

Study Design: Effectiveness of advertising was evaluated using estimates of advertising elasticity of demand (i.e., the percent change in a product’s sales per each percent change in its advertising expenditures). Advertising elasticity of demand of existing products and new entrants in the periods following new entry was estimated using time and disease fixed effects estimation. Because the effect of advertising on product sales is not immediate, one-period and two-period lag models were estimated. For instance, if a new product entered the market during period t, the advertising expenditures for existing products and the new product in period t+1 or t+2 were analyzed. The logarithm of a product’s sales was regressed on its own advertising expenditure, the total advertising expenditure of competing products in the same market, the number of competing products, number of years the product has been on market, a dummy variable indicating whether the product is a new entrant, and an interaction term between the dummy variable and the product’s own advertising expenditure.

Populations Studied: Advertising expenditure and product sales data were obtained from Scott-Levin Market Research Audit data. New product entry data were from United States Pharmacopeia Drug Information, Orange Book and the Scott-Levin Market Research Audit data. Data from January 1995 to December 2001 were used. The analysis was conducted on a quarterly basis. Products from eight therapy markets were examined: asthma, migraine, obesity, Parkinson’s disease, seizure, depression, lipid disorder, and gastric and duodenal ulcer.

Results: In both lag models, product sales significantly increased with a product’s own advertising expenditure, and significantly decreased with the total advertising expenditure of competing products and the number of competing products. For existing products, advertising elasticity of demand was estimated to be 0.068% in the one-period lag model and 0.062% in the two-period lag model. The elasticity estimates for new entrants was lower at 0.046% and 0.044%, respectively but not significantly different from existing products. Comparing results of the two lag models, advertising elasticity of demand depreciated at 8.7% per quarter.

Conclusion: The analysis did not find any significant first-mover advantage in the effectiveness of advertising between earlier and later entrants that would support the entry deterrence effect of advertising in the pharmaceutical market.

Consequences of Serving in Vietnam for Health-Related Behaviors Later in Life

Presenter:

Daniel Eisenberg

Authors:

Daniel Eisenberg, Brian Rowe

Chair: Ching-to Albert Ma; Discussant: Christopher Carpenter Tue June 6, 2006 13:45-15:15 Room 313

Studies have shown that men who served in Vietnam were more likely to smoke, drink alcohol, and use other substances later in life than their peers who did not serve. It is not clear to what extent these differences are due to service-related effects or to differences in personal characteristics that cannot be controlled for in analyses (e.g. different preferences regarding health risks, or higher discount rates). We address this issue using an instrumental variable (IV) approach where the IV is based on draft numbers, which were randomly assigned in 1970, 1971, and 1972 to eligible men born between 1944 and 1953 according to their birth dates. This type of analysis has been previously conducted looking at outcomes such as mortality due to accidents and wages. These studies show that because draft numbers are based on random selection of birth dates, groups defined by draft numbers are unlikely to differ significantly by personal characteristics. Data are taken from two sources. First, draft numbers according to birth dates are published in tables by the Selective Service Commission. Second, individuallevel data on smoking habits and other characteristics are taken from all of the annual National Health Interview Survey (NHIS) data sets between 1980 and 2002. These data sets include approximately 3 million observations, of which approximately 200,000 are men who were potentially eligible for the Vietnam drafts (born between 1944 and 1953). We have secured access to restricted NHIS data (with birth dates) via the National Center for Health Statistics’ Research Data Center. Analysis of the data is ongoing. Our findings will improve the understanding of the health-related consequences of military service. This understanding should be helpful for optimizing care for current veterans and making informed decisions related to military service policies.

Parity for Whom? Exemptions and the Extent of State Mental Health Parity Laws

Presenter:

Tom Buchmueller

Authors:

Tom Buchmueller, Mireille Jacobson, Philip Cooper, Samuel H. Zuvekas

Chair: Ching-to Albert Ma; Discussant: Christopher Carpenter Tue June 6, 2006 13:45-15:15 Room 313

The fact that private insurance coverage is typically more restrictive for mental health than for other types of medical care was the impetus for the 1996 Mental Health Parity Act (MHPA). While this Federal law was hailed by some as landmark legislation, it is fairly weak in terms of its effect on employers and the health benefits they offer. In the years since the MHPA was enacted, there has been considerable state-level legislative activity aimed at enhancing mental health benefits in private insurance policies, with many states passing laws that go far beyond the MHPA. However, the number of workers who are subject to these parity laws is limited by the fact that self-insured employer-sponsored health plans are not subject to state regulations and several state laws provide further exemptions for small firms. Using repeated cross-section data from a set of nationally representative employer surveys conducted between 1997 and 2003, we examine trends in the number of insured workers affected by different types of parity laws. The data are from the Medical Expenditure Panel Survey-Insurance Component (MEPS-IC). The MEPS-IC surveys provide detailed information on firm characteristics and health insurance offerings, which allow us to explicitly account for the effect of exemptions for different types of firms. The results show that the percentage of private sector workers potentially affected by strong state parity legislation increased steadily over this period. The growth in potential coverage varied regionally, and by firm size. However, the exemptions for small firms and those that self-insure substantially reduced the number of workers actually affected by these laws. Roughly half of workers potentially covered by state parity mandates are actually affected by the laws. The dilution of parity legislation by these exemptions is one possible reason why prior studies have found these laws to have little effect on access to care and utilization.

Implications of Mental Illness and Nativity for Labor Market Participation and Health Insurance Outcomes

Presenter:

Victoria Ojeda

Authors:

Victoria D. Ojeda, Richard Frank, Thomas McGuire, Todd Gilmer

Chair: Ching-to Albert Ma; Discussant: Haiden Huskamp Tue June 6, 2006 13:45-15:15 Room 313

Some research indicates worse socioeconomic status and labor market outcomes for the mentally ill persons due to factors such as lower human capital, income, and fragmented labor market participation. Nevertheless, there is little research on the relationship between mental illness and nativity, vis-à-vis labor market and health insurance outcomes. The diversity, size, and permanence of the immigrant population in the U.S. call for an increased understanding of how mental illness may affect immigrant adults’ connections to the labor market as well their access to both public and private sources of health insurance coverage. We examine health insurance coverage since unmet need for mental health conditions is high in the U.S., and also related to financial factors. Overall, immigrants have high uninsured rates, a situation that poses challenges to receipt of timely and affordable health and mental health services. This research pools data from the nationally representative 2001 and 2002 National Survey on Drug Use and Health and focuses on non-elderly working adults ages 18-64. The unweighted sample includes 61,418 U.S.-born and 8,528 foreign-born adults, of whom 635 meet DSM-IV criteria for Serious Mental Illness. We examine sociodemographic and employment characteristics of adults stratifying by mental health status and nativity, and use both descriptive and multivariate logistic regression analyses. Preliminary findings from logistic regression models suggest that mentally ill immigrant adults exhibit similar total involvement in the labor market as a healthy, native-born control group, even after controlling for demographic, human capital, and time-cost factors. In contrast, native-born adults with serious mental illness are more likely to be out of the labor market than healthy natives. Differences in the unadjusted rates of disability between foreign and native-born adults with serious mental illness are also evident. Unadjusted rates of health insurance coverage demonstrate that foreign-born persons, both with and without serious mental illness, are highly vulnerable to being uninsured. The proportion of uninsured persons is similar in both immigrant groups. There is a slightly higher rate of access to public coverage, though, among mentally ill immigrants. Findings from this research especially have implications for policy discussions relating to the provision of public coverage and public policy formulation as these affect vulnerable populations, including immigrants and their families.

The Changing Demand for Mental Health Treatment

Presenter:

Chad Meyerhoefer

Authors:

Chad D. Meyerhoefer, Samuel H. Zuvekas

Chair: Ching-to Albert Ma; Discussant: Todd Gilmer Tue June 6, 2006 13:45-15:15 Room 313

The availability of new pharmacological treatment alternatives and rapid rise of managed behavioral health care organizations during the 1990s have significantly influenced utilization patterns of mental health services in the United States. While inpatient costs were reduced through managed care and more effective outpatient treatment, the use of pharmacotherapy by specialty mental health providers and primary care physicians increased substantially. We seek to understand the underlying behavioral and economic dynamics driving changing utilization patterns, and in particular, the rising demand for pharmacotherapy and substitution between this treatment approach and behavioral therapy. Therefore, we derive a mental and non-mental health care demand model that incorporates the relevant costs influencing consumption decisions, including out-of-pocket payments (cost-sharing) for ambulatory services, out-of-pocket prescription drug costs, and insurance premiums. The model makes use of the expected end-of-year price concept (Ellis, 1986; Ellis and McGuire, 1986), to derive theoretically consistent measures of out-of-pocket price. Our model of the joint demand for pharmacotherapy, behavioral therapy, and non-mental health treatment is estimated using the 1996-2002 Medical Expenditure Panel Survey (MEPS), a nationally representative survey of the U.S. civilian, non-institutionalized population. We exploit the longitudinal dimension of the MEPS to control for the endogeneity of out-of-pocket prices and health insurance coverage using a correlated random effects specification (Chamberlain, 1982). This allows us to relax the untenable assumption of standard random effect models that out-of-pocket price and health insurance are uncorrelated with the individual specific random effects as well as account for time invariant measurement error processes. In addition, we use a Zero-Inflated Ordered Probit specification to model the skewed distribution of ambulatory visits and prescription drug fills. Elasticity estimates from the model suggest that the demand for ambulatory mental health treatment is now much less elastic than it was during the RAND Health Insurance Experiment. In fact, consumers are now less responsive to the price of ambulatory mental health treatment than non-mental health treatment. The elasticity of demand for mental health drugs, however, is found to be relatively large, and higher than the elasticity of demand for non-mental health drugs. In order to check the robustness of our findings, we re-estimate Horgan’s two-part model (1986) of the demand for specialty providers and find that the price elasticity of demand she estimated for 1977 has likewise decreased substantially. We also provide alternative instrumental variables estimates. The findings of our study suggest that moral hazard problems associated with the coverage of ambulatory mental health services may be less severe than previously thought, with the implication that coverage could be expanded without substantially increasing use of mental health services.

Will Mandatory Nurse Staffing Ratios Lead to Better Patient Outcomes in Hospitals?

Presenter:

Jingsan Zhu

Authors:

Julie Sochalski, R. Tamara Konetzka, Jingsan Zhu, Kevin Volpp

Chair: Sally Stearns; Discussant: David Grabowski Tue June 6, 2006 13:45-15:15 Room 325

U.S. Congress require mandatory minimum nurse staffing ratios in hospitals, and are motivated by several prominent cross-sectional studies reporting significant associations between higher nurse staffing levels and better patient outcomes. Yet legislating arbitrary mandatory nurse staffing ratios for all hospitals on the basis of evidence from cross-sectional studies without knowing if and when changing the staffing levels to meet such ratios improves outcomes could result in an inefficient allocation of resources that may or may not improve quality. Using 1991-2003 panel data from California hospitals, which are broadly representative of hospitals nationally, this study pursues the following aims: (1) determining whether increasing nurse staffing improves patient outcomes, (2) characterizing the marginal benefit of increasing staffing, and (3) identifying subgroups of hospitals that benefit the most from increasing staffing levels. Staffing measures include patients-per-nurse ratios for RNs, LVNs, and nurse aides, as well as RN skill mix (i.e., the percent of nursing personnel that are RNs). Four inpatient quality indicators—30-day mortality among patients with a principal diagnosis of acute myocardial infarction, stroke, hip fracture, or gastro-intestinal hemorrhage—and two patient safety indicators—failure-to-rescue rate and rates of post-operative pulmonary embolism or deep vein thrombosis among general and orthopedic surgical patients—that are from AHRQ’s inventory of quality indicators will serve as outcome measures. We use multivariate regression analyses to determine whether changes in nurse staffing over this twelve year period contributed to changes in patient outcomes. We control for differences in the mix of patients across hospitals using validated and well-established severity-adjustment methods, and for secular changes over time that could influence overall staffing levels. We characterize the marginal benefit of staffing increases by examining whether the returns to quality diminish as staffing levels increase and whether there are thresholds in the relationship between staffing and outcomes. Stratified analyses of subgroups of hospitals are undertaken to identify hospitals demonstrating the greatest improvement in outcomes with changes in nurse staffing. We employ standard panel data techniques of fixed or random effects as appropriate and correct standard errors to account for clustering of patients within hospitals. This study extends prior work through its longitudinal design, its use of refined measures of nurse staffing uniquely available in California and nurse sensitive outcome measures from AHRQ’s quality indicators, and its thorough examination of the marginal benefit of increasing nurse staffing across all and subgroups of hospitals. The findings will help to explicate the quality and cost implications of increasing nurse staffing in hospitals and guide payers and policy makers on the development of strategies to achieve their quality goals.

Nursing Staff Reductions, Workload Increases, and Adverse Events in Florida Hospitals 1992-2004: New Variable and Longitudinal Approaches

Presenter:

Lynn Unruh

Authors:

Lynn Unruh, Keon Lee, Ning Zhang

Chair: Sally Stearns; Discussant: Joanne Spetz Tue June 6, 2006 13:45-15:15 Room 325

Nurse staffing/outcomes studies have primarily used common staffing measures and crosssectional or repeated measures approaches. However, given new explanatory variables such as “nursing staff reductions” and “workload,” a latent response variable called “patient outcomes,” longitudinal data, and the use of growth curve modeling, additional information and more causal conclusions can be derived. This study examines the relationship between nursing staff reductions, workload increases, and patient adverse events in Florida hospitals, 1992-2004. Hypotheses are: 1) An increase in nursing workload during a one year period is associated with a proportional increase in adverse events in that same year; 2) A 5 percent or more reduction of the licensed nursing staff during year ti-1 is associated with higher rates of adverse events and worse patient outcomes in year ti-1 and year ti; 3) A 5 percent or more reduction of the licensed nursing staff during year ti-1 is associated with a higher nursing workload in year ti-1 and year ti; 4) A hospital characteristic such as for-profit status is associated with higher nursing workloads, and vice versa for a characteristic such as teaching status; and 5) Higher nursing workloads in year ti are associated with higher rates of adverse events and worse patient outcomes in year ti. Nursing staff reductions in year ti is a dichotomous variable defined as a drop in licensed nursing staff of 5 percent or more measured from the beginning of time ti-1 to the beginning of time ti. Nursing workload is the ratio of adjusted patient days of care to the numbers of RNs and LPNs taken separately and together (licensed nurses). Patient days of care are adjusted for outpatient care and for patient turnover, which affects the intensity of nursing care. Adverse events are hospital-level rates of nursing sensitive events such as urinary tract infections, atelectasis, pneumonia, decubitus ulcers, and failure to rescue. The patient outcomes variable is a latent measure derived from the adverse events rates in the measurement model. Other measures are patient case mix, and hospital characteristics such as ownership, size, location and teaching status. Staffing measures and hospital characteristics are from the American Hospital Association Annual Survey. Adverse events and case mix are extracted from patient discharge records obtained from the Agency for Health Care Administration in Florida. Multi-wave, multivariate, latent growth curve modeling is used to define the relationships between the trajectories of endogenous and exogenous variables over 13 waves of data, time invariant and time-varying covariates included. The time invariant variables are the hospital characteristics, while the time varying variables are the rest of the variables. Rates of adverse events are transformed into approximately normally distributed variables prior to introduction into the model. Maximum likelihood estimation methods are used.

Nursing Home Staffing and Quality of Care

Presenter:

Jeongyoung Park

Authors:

Jeongyoung Park, Sally Stearns

Chair: Sally Stearns; Discussant: Sally C. Stearns Tue June 6, 2006 13:45-15:15 Room 325

Most studies have found that higher nursing home staffing leads to higher quality of care. The implications of previous findings for an association between staffing and quality of care, however, may not reflect the true relationship. Existing estimates of the magnitude of the effect may be biased because most of these analyses were based on limited model specifications and did not control for the potential endogeneity of staffing. This study attempts to remove bias in estimates of the relationship between staffing and quality of care by controlling for endogeneity in staffing choices made by the facilities using fixed effects (FE) or fixed effects with instrumental variables (FE-IV). The analyses are conducted using facility-level data from the Online Survey and Certification Reporting (OSCAR) system from 1998 to 2003. OSCAR data are linked to data on specific market conditions and state policies. Quality is measured by facility-level total survey deficiencies, the incidence of contractures and pressure sores. Staffing level is measured by hours per resident day. Staffing mix is measured by the proportion of RNs hours compared to total staff hours. State policies, market (county) level nurse supply and demand variables are chosen as instruments to predict the staffing changes over time. Instrumental variables are incorporated in the model in order to (a) identify how nursing homes respond to the changes in the exogenous state policy shocks (i.e., state minimum staffing standards, Medicaid payment rates, a wage pass-through legislation), the relative competitiveness of the market and local resource constraints, and (b) investigate how these changes interact with staffing to yield changes in quality of care. The results from the study will be useful for understanding the contributions of staffing level and mix to the quality of nursing home care. The analysis also has two other dimensions of assessment. First, the estimation will allow an assessment of the effect of policies including state minimum staffing standards and wage pass-through provisions. Second, the magnitude and direction of the effect of staffing on quality of care is hypothesized to differ, contingent upon variations in facility characteristics (e.g., payer mix, case mix, size) and market environments (e.g., market competition, excess demand). Structural differences in the relationship between staffing and quality of care for different types of facilities may suggest different policy implications.

Disease Status and Health-Specific Moral Hazard Effects

Presenter:

Cagatay Koc

Authors:

Cagatay Koc

Chair: Richard Hirth; Discussant: Alan Monheit Tue June 6, 2006 13:45-15:15 Room 326

The effect of insurance on the demand for medical care depends on the marginal utility of health since medical care services are inputs to health production. Given that marginal utility of health is highly related to the consumer’s initial health, additional medical care used by the insured, i.e., the moral hazard, likely varies by health. This health-specific moral hazard may vary by dimension of health. A consumer may exhibit different actions in his/her decisions toward care associated with serious chronic conditions than toward care associated with less serious medical conditions. Consequently, the extent of the health-specific moral hazard may differ across medical care services associated with different disease states. Using a clinical classification code based on ICD-9-CM condition codes, this paper classifies medical care services by disease status in three groups: services associated with serious chronic conditions, services associated with acute conditions of any sort and minor chronic conditions, and services associated with no medical conditions. Using data from the Medical Expenditure Panel Survey and its Medical Conditions supplement, the paper examines the variation in the health-specific moral hazard across disease-specific medical care services. The paper illustrates that the welfare implications of health insurance depends on both the type of medical care service and the disease status associated with that service. The empirical analysis suggests that both efficient and inefficient moral hazard may exist depending on the disease status and type of care. These results may have implications for designing disease-specific insurance policies across medical care services.

Fairness to All Parties: Resolving Utilization Review Disputes under ERISA with the Contingent Claims Contract Model

Presenter:

Dahlia Remler

Authors:

Dahlia K. Remler, Kamiar Khajavi

Chair: Richard Hirth; Discussant: Alan Monheit Tue June 6, 2006 13:45-15:15 Room 326

Insurance coverage decisions today are frequently clinical medical decisions made on an individual basis, as part of utilization review (UR). Coverage denials under UR have become the subject of legal disputes. The law surrounding these cases has proven to be confusing and unsatisfactory. The 2004 Supreme Court decision, Davila, has essentially left managed care organizations (MCOs) associated with ERISA-protected plans with no liability for the consequences of UR-based coverage denials. Such protection is alleged to bolster MCO automatic denial policies that do not consider the merits of individual cases. Despite widespread dissatisfaction with this state of affairs, both Congress and the courts are reluctant to expand MCO liability, apparently because they fear something like the medical malpractice situation will occur, undermining costcontainment strategies, raising health care expenditures, raising premiums, and increasing the number of uninsured. We review the history of court decisions on UR coverage denials, illustrating how all attempts to disentangle the medical and contractual/economic elements have proven impossible, resulting in the recent Davila decision. We build on the view that, for these UR disputes, contract law is preferable to tort law (Havighurst 1995, Danzon 1997). We illustrate how contract law with consequential damages could be applied to individual medical decisions using a contingent claims contract (CCC) model. We examine the ways in which real world health insurance contracts could become more like CCCs, by enhancing clinical specificity through a variety of means. We also analyze how transactions costs, selection, cognitive limitations, behavioral economics, and technological change limit the ability of real world health insurance to mimic CCCs. Thus, any real world contract will inevitably fall far short of such an ideal. Nonetheless, we illustrate the further value of the CCC model in providing courts with a conceptual test that can be used to settle UR-based coverage disputes. Specifically, in an economic framework, patient/plaintiffs are entitled to coverage for more expensive care if they have paid the higher actuarially fair premium needed to cover the more expensive care. The courts can ask if plaintiffs could reasonably think that they had purchased such coverage and if insurers reasonably thought that they had sold it. Such after-the-fact assessments of “meeting of minds” are common in contract law. We illustrate the forms of evidence that courts could use in coming to such decisions.

The Effect of Private Health Insurance on Health Care Purchases and on Health in Brazil

Presenter:

John Nyman

Authors:

John A. Nyman, Nathan Barleen

Chair: Richard Hirth; Discussant: Alan Monheit Tue June 6, 2006 13:45-15:15 Room 326

The goal of health insurance programs in developing countries is often to allow citizens to gain access to additional health care, but according to conventional theory, this additional care–the moral hazard–is welfare decreasing. This paper uses data from the Living Standard Measurement Study (LSMS) Survey for Brazil, collected by the World Bank during 1996-7, to estimate the net welfare gain that is generated by the additional care that is in turn purchased because of having private health insurance. The paper uses logit regression analysis to show that those with private health insurance purchase more health care. Separate analyses are reported for those with an acute disease, a chronic disease, and for all respondents. Having established that those with insurance purchase more health care, a probit regression analysis is used to determine the effect of health insurance on health, as measured by changes in the probability of falling into the self-reported health status categories of excellent, very good, good, fair, and poor. We find that those with health insurance are more likely to categorize themselves as excellent, very good, or good, and less likely to categorize themselves as fair or poor. The welfare gain is determined by associating health-related quality of life scores with the various self-reported health states, and determining the increase in the average quality of life score that is generated by the change in the probabilities of a respondent classifying himself or herself in the various states that is caused by having private insurance. The change in health related quality of life score is then compared to the private insurance premium, a conservative, upper bound estimate of the cost of the moral hazard. We find that the cost of generating these additional quality-of-life gains appears to be consistent with incremental cost-utility ratios that would be deemed welfare increasing for new medical technologies. Sensitivity analysis is performed with regard to estimates of the cost of private insurance in Brazil, of various estimates of the healthrelated quality of life of self-reported health status, and of the value of a quality adjusted life year in Brazil, in order to determine the robustness of the results. The results generally suggest that private insurance in Brazil is welfare increasing.

Why So Few Integrated Plans? Simulating the Impact of an Alternative Health Insurance Strategy

Presenter:

Katherine Ho

Authors:

Katherine Ho

Chair: David Dranove ; Discussant: Andrew Sfekas Tue June 6, 2006 13:45-15:15 Room 332

The Welfare Consequences of Hospital Mergers

Presenter:

Robert Town

Authors:

Robert Town, Douglas Wholey, Roger Feldman, Lawton R. Burns

Chair: David Dranove ; Discussant: David Dranove Tue June 6, 2006 13:45-15:15 Room 332

Patient Learning and Advertising in the diffusion of Cox-2 Inhibitors

Presenter:

Ginger Jin

Authors:

Pradeep Chintagunta, Renna Jiang, Ginger Jin

Chair: David Dranove ; Discussant: Leemore Dafny Tue June 6, 2006 13:45-15:15 Room 332

Effects of Time Costs on the Quantity and Intensity of Physical Exercise

Presenter:

David Meltzer

Authors:

David Meltzer, Bapu Jena

Chair: David Meltzer Tue June 6, 2006 13:45-15:15 Room 335

The cost of time is the major determinant of the cost of exercise, but increasing intensity of exercise provides an approach to reduce the time costs of a given amount of exercise. This paper examines the choice of mode f exercise from this perspective of producing exercise in the context of high time costs. Our results suggest that increasing the intensity of exercise is an important response to higher time costs.

The Effect of Retirement on Weight Gain

Presenter:

Darius Lakdawalla

Authors:

Darius Lakdawalla

Chair: David Meltzer Tue June 6, 2006 13:45-15:15 Room 335

Work and occupation are powerful predictors of weight, since individuals’ exercise patterns are heavily influenced by the kind of work they do. As a result, retirement can have very different effects on weight and health for different kinds of workers. We show that workers retiring from sedentary jobs end up losing weight, as they are no longer paid to be sedentary during the day. Conversely, workers retiring from strenuous jobs gain weight, since they are no longer paid to exercise. In spite of similar weight trajectories pre-retirement, retirees from strenuous jobs gain about 0.5 more BMI units than retirees from sedentary jobs.

Title IX, School Sports Participation and Adolescent Health

Presenter:

Robert Kaestner

Authors:

Robert Kaestner

Chair: David Meltzer Tue June 6, 2006 13:45-15:15 Room 335

The primary goal of this research is to obtain estimates of the effects of the dramatic increase in girls’ participation in high school sports, as a result of Title IX legislation, on the physical activity, health and health behaviors of adolescent women. This large and unprecedented increase in girls’ sports participation provides a unique opportunity to study the effects of school-based interventions targeted at increasing physical activity of youth.

The Impact of Diabetes and Diabetes Management on Labor Productivity: A Genetic IV Approach

Presenter:

Henry Brown

Authors:

Henry Brown

Chair: Michael Grossman; Discussant: Curtis Florence Tue June 6, 2006 10:45-12:15 Room 121

Authors: H. Shelton Brown (shelton.brown@utb.edu), School of Public Health, University of Texas, Jose A Pagan, University of Texas-Pan American, Craig Hanis, School of Public Health, University of Texas

Title: The Impact of Diabetes and Diabetes Management on Labor Productivity: A Genetic IV Approach

Rationale: Diabetes has been shown to have a detrimental impact on employment and labor market productivity, which results in lost work days and lower wages. However, unobservables are correlated with diabetes and labor productivity, leading to endogeneity problems in estimates. Brown, Pagan and Bastida have recently shown that ignoring endogeneity results in an overestimate (underestimate) of the negative impact of diabetes on female (male) employment (2005). With endogeneity addressed, there was no effect of diabetes on female working propensity in their study. It is possible that gender differences in diabetes management, where female diabetics adhere to management better than males, may account for the differential impact of diabetes on labor productivity.

Objective: To determine whether diabetes, when managed, is related to labor productivity by gender.

Methodology: To account for the endogeneity of diabetes, we use family history of diabetes as genetic instrumental variables in determining diabetes. In order to determine the level of self-management, diabetes is interacted with laboratory-measured blood-sugar levels. Note that in our data, diabetes is measured rather than self-reported. Wage equations and working propensity equations are estimated, by gender. The data are from a new random sample from a largely Mexican-American community in Texas on the border of Mexico.

Results: Self-management is an important, but heretofore, unobservable effect in labor supply. Our results are particularly relevant in the case of populations where genetic predisposition has an important role in the etiology of diabetes.

Conclusions: Our results shed light on the reasons for the differential impact of diabetes on male and female labor productivity. Further, our results inform policy-makers about how to allocate health care resources between prevention of diabetes and diabetes management for those already diagnosed with diabetes.

Disclosure information: Nil.

Do Workplace Health Promotion Programs Improve Health-Related Behavior?

Presenter:

Curtis Florence

Authors:

Curtis Florence

Chair: Michael Grossman; Discussant: Henry Brown Tue June 6, 2006 10:45-12:15 Room 121

Rationale: Many employers offer workplace health promotion (WHP) programs, such as smoking cessation programs and exercise facilities. There at least two possible economic rationales for employers offering these programs. First, they may offer them in an attempt to improve the health and productivity of their workforce. Second, they may offer them as non-wage compensation to compete for workers. While these two rationales are not mutually exclusive, if the “employment benefit” rationale dominates the “health improvement” rationale, workplace health promotion programs may simply provide an outlet for healthier behavior to workers who would have participated in these activities anyway. For example, and employer who provides exercise facilities may attract workers who are likely to exercise, and offering the facility will not change the probability a worker exercises.

Objective: The objective of this paper is to estimate the effect of workplace health promotion programs on health related behavior, controlling for the potential endogeneity of the availability of the program.

Methodology: The 1998 National Health Interview Survey Prevention Module has extensive information on the availability of WHP programs and health related behavior for workers. It is possible to determine if a worker has access to a given WHP program and whether or not they participate in the given health related activity (either at work or outside of the workplace). I estimate bivariate probit models with two outcomes: whether or not the worker has access to a given type of WHP program, and whether or not they participate in the health related behavior. The WHP outcome is an endogenous variable in the health behavior equation. The model is identified by the number of employees at the workplace, which is assumed to affect the likelihood of the program being offered, but does not have an independent effect on health related behavior. I estimate the model for the following types of programs and health related behaviors: smoking cessation, exercise, screening for hypertension, hyperlipidemia and cancer, and nutrition/weight control.

Results: When ignoring the endogeneity of program availability, all of the programs except for smoking cessation are shown to be positively associated with increases in the given health-related behavior. However, when the endogeneity of program availability is controlled for, the only programs that show a significant and positive influence on health-related behaviors are the three types of screening programs. Exercise and nutrition/weight control WHP programs do not increase the rate of the targeted health-related behavior.

Conclusions: The continuing growth in health care expenditures has lead many employers to offer WHP programs. The results of this study show that these programs do not uniformly increase healthy behavior. Smoking cessation programs, exercise facilities and programs and nutrition/weight loss programs do not increase the likelihood that workers will participate in these health promoting activities-at least as these programs are currently constituted. The results could indicate a need for greater information and outreach to encourage employees to access the programs they are offered.

Effect of Disability on the Employment of Other Household Members

Presenter:

Stephen Mennemeyer

Authors:

Stephen Mennemeyer

Chair: Michael Grossman; Discussant: Reagan Baughman Tue June 6, 2006 10:45-12:15 Room 121

Rationale: While much work has been done on the return-to-work of persons with disabilities, surprising little is know about how the employment of other members of a household is affected by the onset of a disability.

Objective: We examine how household labor decisions are affected by the onset of a disability and by the subsequent “aging” of the disability condition. The main interest here is the extent to which the disability encourages others to go to work to offset the income lost by the person with a disability or to stay home to help with caregiving.

Methodology: We use the Survey of Income and Program Participation 1996 to identify households where members have disabilities, either old (existing prior to the SIPP survey) or new (concurrent with the Survey). We estimate panel data models of employment for both the person with the disability and other household members that control for the type and age of the disability as well as various characteristics of the household and its members.

Results: Results are currently available for stroke with other conditions now under analysis. We find that the occurrence of a stroke tends to permanently reduce the labor supply of the victim. For the non-victims, there is an asymmetric effect: male household members tend to only mildly decrease their employment whereas females make a substantial reduction in employment that tends to persist.

Conclusions: Estimates of the lifetime cost of disabilities need to take account of the lost earnings of other household members

Reducing Direct Care Turnover: Do Wage Subsidies Matter?

Presenter:

Reagan Baughman

Authors:

Reagan Baughman, Kristin Smith

Chair: Michael Grossman; Discussant: Stephen Mennemeyer Tue June 6, 2006 10:45-12:15 Room 121

Rationale: The aging of the baby boom cohort is likely to put a significant strain on the market for long term care services provided by direct care workers like nursing and home health aides. In fact, many states are already experiencing shortages and high turnover rates that are affecting the quality of patient care. In contrast to a relatively large literature devoted to the labor market for RNs, there is little in the way of systematic analysis of the labor market for direct care workers.

Objectives: The objectives of this paper are twofold. The first objective is to provide a descriptive analysis of the dynamics of direct care workforce behavior, including estimates of employment durations for direct care workers and comparison occupation groups. The second objective is to assess the effects of two types of wage subsidies on the length of time that direct care workers stay in a given job (or stay in the direct care workforce). One of wage subsidy policies that we consider, the Earned Income Tax Credit, represents an income rather than occupation-targeted subsidy. The other wage subsidy that we consider, “wage pass-through” provisions in state Medicaid programs, is a policy directed exclusively at direct care workers.

Methodology: We use data covering the years 1996 to 2000 from the 1996 Survey of Income and Program Participation to measure employment spells for the workers in the sample. This dataset provides information on 786 workers in direct care occupations and allows us to observe approximately 80 percent of direct care employment spells at the monthly level without censoring. We will use these spell measures to estimate discrete-time hazard models of the effects of both income-targeted and occupation-targeted subsidies on employment durations. The fact that the SIPP identifies state of residence for all but 5 states allows us to identify the effects of policy using state-level variation. By 2000 (the last year in our panel), 13 states had state-level EITCs, and many of these states had changed the real values of their credits during the preceding four years. The majority of the 26 states that currently have wage or benefit pass-throughs in their Medicaid programs either implemented or expanded programs during the late 1990s.

Results: Descriptively, we find that spells of employment for direct care workers are slightly lower than those for other workers. The median spell for direct care workers (all workers) is 17 months (19 months) and the mean spell is 40 months (51 months). Spells for direct care workers are longer than those for child care workers (median = 10 months; mean = 22 months) but much shorter than those for a group of better-educated health care workers, including R.N.s and therapists (median = 32 months; mean = 58 months). The second part of the analysis, focusing on the impact of wage subsidies, is currently in progress.

Are Care Givers More Risk Averse Than Patients? Acceptable Tradeoffs between Efficacy and Adverse-Event Risks

Presenter:

Semra Ozdemir

Authors:

Semra Ozdemir, F. Reed Johnson, Carol Mansfield, Steven Hass, Jeff White

Chair: James Burgess; Discussant: TBA Tue June 6, 2006 10:45-12:15 Room 213

Understanding patients’ own risk perceptions and their willingness to accept risks in return for treatment benefits can help inform risk-management decision making. In the case of children, parent caregivers are responsible for treatment decisions and their risk tolerance may be quite different than adult patients’ risk tolerance.

This study compares utility-theoretic estimates of adult patients’ and parents’ willingness to accept adverse event risks in return for increased treatment efficacy for the treatment of an inflammatory bowel disease (IBD). There are a number of medications used to treat symptoms of IBD. However, treatments vary in efficacy and may be associated with risks of serious adverse events including death from tuberculosis, polyomavirus infection, and lymphoma. Treatment decisions thus often require weighing treatment efficacy against adverse-event risks.

Stated-choice (SC) or choice-format conjoint analysis is increasingly being used by health economists to quantify the relative importance of treatment processes and outcomes. SC methods postulate that the utility a person derives from a product or service can be expressed as a function of the positive and negative features of the product or service. The pattern of observed choices among a series of hypothetical treatment and outcome comparisons reveals the implicit relative importance of each attribute and marginal rates of substitution among attributes. The estimated marginal rates of substitution between efficacy and adverse-event risks facilitate calculating maximum acceptable risk (MAR) for various changes in health states.

This study used a pretested SC instrument to elicit patients’ and parents’ preferences for a range of treatment attributes, including various levels of both the benefits and risks of the treatments. The analyzed data were from 345 patients over the age of 18 and 150 parents of a child under the age of 18. Survey subjects were randomly sampled from a large internet panel.

We found that both patients and parents are willing to accept adverse-event risks in return for treatment efficacy. Risk tolerance increases with larger improvements in treatment efficacy and varies by the type of adverse-event risk. We find significant differences between MARs of patients and parents. Parents are more risk averse and have MARs about half as large as patients. Patients with more severe symptoms have higher MARs, but this is not the case for parents whose child has more severe symptoms.

These results confirm that caregivers and patients have different risk perceptions. Parents are more cautious about exposing their child to health risks, which is consistent with previous studies. Nevertheless, both parents and patients are willing to accept some risk in return for increased efficacy. These results may help inform clinical and regulatory decision making, as well as help identify more effective risk-management strategies.

Psychosocial Consequences and Perceived Risk Following Screening for Lung Cancer

Presenter:

Margaret Byrne

Authors:

Margaret Byrne, Mark Roberts, Joel Weissfeld

Chair: James Burgess; Discussant: TBA Tue June 6, 2006 10:45-12:15 Room 213

Background: New technologies offer a promise of earlier detection and thus earlier treatment for lung cancer. Although there is still debate as to whether screening and early detection in fact decreases mortality from lung cancer, the incidence of individuals being screened for lung cancer has been increasing in recent years. However, 30-40% of individuals screened with scanning CT receive a finding of an “indeterminate non-calcified lung nodule”, with a recommendation for further periodic (annual) screening. The goal of this research is to measure the psychological and health care resource utilization consequences for individuals participating in a lung cancer screening program.

Methods: 400 participants were enrolled as they enrolled in a study exploring the efficacy of lung cancer screening. Participants completed surveys prior to screening and immediately following receipt of the screening results. Survey instruments included questionnaires on: health perceptions, cancer worry, social support, anxiety, and health care utilization. Demographic information and screening results were obtained from the original lung cancer screening study. Screening results were classified as 1) no diagnostic follow-up or physician referral recommended (n=200); 3) advise periodic follow-up CT for one or more indeterminate non-calcified lung nodule (n=133), and 4) strong physician referral for lung cancer suspicion (n=25). The results below consider the change in survey scores between the baseline and post-screening surveys.

Results: The overall score on health perceptions fell significantly for all participants, but most for those in categories 3 and 4. Similarly, the effects of worrying about cancer (e.g. having trouble sleeping) increased significantly for all categories, and the level of worry about having cancer increased for categories 3 and 4. There were no significant changes in any measures of social support. Individuals in categories 3 and 4 had significantly higher measures for state anxiety, and those in category 1 had neither a reduction in anxiety, nor in the level of worry that they might have or get cancer.

Individuals’ perceived risk that they had lung cancer currently (~20%) or would develop cancer over their life time (~30%) was similar for all categories at baseline. This is substantially higher than the true risk of approximately 1-3%. Following screening, perceived risk in category 1 individuals dropped slightly, and did not change for category 3 participants. Perceived risk in category 4 individuals increased significantly to 39% for current cancer and 49% for every developing lung cancer. Actual risk of cancer in category 4 individuals, which was relayed to them following screening, is approximately 15%, indicating that individuals do not update their believes efficiently.

Conclusions: Anxiety and worries that they might have cancer increased in those individuals who received an “indeterminate” finding from lung cancer screening. Individuals with a negative screen did not appear to have less anxiety or worries following screening. Individuals did not rationally update their perceived risk of cancer following screening and information dissemination. Recommendations for screening and screening decisions should be informed by these results.

Quantifying Patients' Risk-Benefit Tradeoff Preferences: A Conceptual and Empirical Comparison of Methods

Presenter:

Reed Johnson

Authors:

Reed Johnson, George Van Houtven, Carol Mansfield, David W. Miller

Chair: James Burgess; Discussant: TBA Tue June 6, 2006 10:45-12:15 Room 213

OBJECTIVE: To compare conceptual models, empirical measurement, and results of alternative methods for measuring patients’ willingness to trade off risks of severe adverse events for specified health gains. METHODS: We define and compare the theoretical foundations of standard gamble (SG) and multi-attribute conjoint analysis (CA) methods. SG derives from von Neumann-Morgenstern expected-utility theory, while CA applies McFadden random-utility theory to hypothetical choices. We define theoretical conditions under which the two methods provide equivalent measures of health preferences, including linearity, separability, and risk-neutrality. We evaluate accepted empirical methods used in SG and CA studies and propose methods for incorporating risks as CA treatment attributes. We then compare empirical maximum acceptable-risk estimates from CA studies of multiple sclerosis and Crohn’s disease patients with and without restrictive SG assumptions, as well as with published SG estimates from other disease interventions. RESULTS: We find that SG can be used to estimate MARs for specific health outcomes only by imposing more restrictive assumptions on patient preferences than CA methods require. We show that CA methods can be used to test various theoretical restrictions imposed by the SG assumptions and find that risk neutrality and linearity are rejected statistically in most cases. By imposing SG assumptions on CA results and by comparing CA results to published SG estimates for chronic conditions, we find that SG assumptions increase MAR estimates by 20% to 150% relative to those obtained by CA methods. CONCLUSIONS: CA methods can be used to replicate SG tradeoff tasks and to test the restrictions required to interpret SG estimates as risk-preference measures. CA offers a more flexible and conceptually rigorous method than SG as conventionally applied for measuring treatment preferences and risk-benefit tradeoffs. Most importantly, multiattribute CA methods can more realistically simulate clinically relevant risk-benefit tradeoff ?_????

Nurse staffing and skill mix and association with cost in the Veterans Health Administration

Presenter:

Anne Sales

Authors:

Anne Sales, Yu-Fang Li, Elliott Lowy, Chuan-Fen Liu

Chair: TBA; Discussant: TBA Tue June 6, 2006 10:45-12:15 Room 225

Rationale: Several large scale studies have found associations between nurse staffing and mortality outcomes for hospitalized patients, aggregated to the facility level. In this study, we provide the first large-scale analysis using nursing unit-level data to examine staffing levels, skill mix, and costs of care.

Objective: To examine the association between nurse staffing, skill mix, and costs of care at the unit and facility levels. We define skill mix as the mix between different types of nursing provider, with different levels of training and receiving different wage rates.

Methodology: Data came from several sources: DSS nursing labor input files (ALBCC); VA National Patient Care Databases for demographic, comorbidity, complication and utilization data on all patients admitted to VHA inpatient acute care between 2/03-6/03; Decision Support System (DSS) TRTIPD files, a DSS extract file linking inpatients to nursing units; and DSS cost extracts for patient level costs of care for each admission. We estimate costs of inpatient care for each admission by regressing on patient risk of complications (estimated in a prior analysis), and staffing hours by type of nurse provider (registered nurse- RN, licensed practical nurse- LPN, nurse aide- NA), divided into tertiles, and including interaction terms among staffing level tertiles of different types of nurse providers. We stratify the analysis by whether the first inpatient unit was intensive care or non-intensive acute care, and will conduct sensitivity analyses varying patient cohort definition, for example, by stratifying by whether or not the patient received any intensive care vs. those who have no intensive care. We will use GLM as our primary estimator, controlling for clustering at the unit and facility level, as well as multilevel modeling using Stata’s recently added xtmixed procedures with two levels of clustering, and controlling for market variation in wages using real dollars. We will accomplish this last piece by controlling for the Medicare/Medicaid wage index, which is specific to local markets in the United States.

Results: The analyses includes 126,382 patients from 463 nursing units in 119 VAMCs, admitted between February and June 2003. 184 units are intensive care, and 279 non-intensive acute care units. In prior analyses, we have found that skill mix and staffing have a non-linear, U-shaped association with mortality risk in both ICU and non-intensive care patients, and that multi-level modeling, adequate patient risk adjustment, and careful modeling of non-linear relationships are critical. One major finding in the analyses to date, which are ongoing, is that the curvilinear relationship in skill mix between different types of nurse provider has a significant impact on risk service utilization, including length of stay. As we complete our analyses, we anticipate that this difference will result in major differences in cost of care in nursing units using different skill mixes, controlling for quality of care. Differences in wage rates between RN and NA in the United States can be as high as five times greater wages for RNs than NAs. Analyses are ongoing, and we anticipate completion of these cost analyses by February 2006.

The Effects of Competition on Community-Based Nursing Wages

Presenter:

Dara Zarnett

Authors:

Dara Zarnett, Audrey Laporte, Eric Nauenberg, Diane Doran, Peter Coyte

Chair: TBA; Discussant: TBA Tue June 6, 2006 10:45-12:15 Room 225

In 1997, Ontario’s Community Care Access Centres (CCACs) were given the authority to purchase home care services from for-profit and not-for-profit providers through a competitive bidding process. The purpose of this reform was to encourage competition between home care providers, with the twin objectives of lowering costs and increasing service quality. This paper investigates how competition amongst home care service providers in Ontario affected the gross nursing wages of private home care providers between 1995 and 2000. Regression analyses were performed to ascertain the relationship between measures of competition (Hirschman-Herfindahl Index (HHI), Participant Index (PI)), profit status of the provider agencies, and gross nursing wages for Registered Nurses (RN) and Registered Practical Nurses (RPN), while holding other factors constant. Using the HHI and PI as measurements of competition, RN gross wages significantly decreased by 11.7% and 0.9% respectively. The PI measured a significant decline in RPN gross wages of 1.5% in an increasingly competitive market. Furthermore, for-profits paid lower gross RN wages, by 6.8%, compared to not-for-provider agencies. It was also observed that there the distribution between for-profit and not-for-profit agencies has changed dramatically, and there have been large increases in the number and volume of for-profit service contracts. This implies that the for-profit agencies are winning more contracts and crowding out the not-for-profits. These findings correspond with previous literature which reports that competition can lead to lower staff wages and differential payments by provider types. These findings have the potential to lead to a destabilized labour market, which can negatively impact quality of care.

Which Patients with Congestive Heart Failure (CHF) Benefit Most from Nurse-based Disease Management?

Presenter:

Paul Hebert

Authors:

Paul Hebert, Jane Sisk

Chair: TBA; Discussant: TBA Tue June 6, 2006 10:45-12:15 Room 225

Rationale: Several recently conducted randomized controlled trials (RCT) have demonstrated the benefits of a nurse-based disease management programs for patients with CHF. Most, although not all, trials have found that patients randomized to a nurse management program have fewer subsequent hospitalizations than patients in usual care. However, no studies have addressed whether the benefits of nurse management are limited to patients with certain clinical or socio-demographic characteristics. If this is true, administrators and policy makers may improve the cost effectiveness of nurse management by targeting patients most likely to benefit.

Objective: The objective of this paper is to reanalyze data from a successful RCT of nurse management for CHF to assess which patients benefited most from nurse-based disease management.

Methods: In the RCT, 406 patients with CHF from the four hospitals serving East and Central Harlem in New York City were randomized to nurse management (n=203) or usual care (n=203). Nurse managers gave patients information on CHF and tools designed to improve self-management, and worked with patients’ clinicians to optimize drug therapy. The outcome for this reanalysis was physical functioning as measured by the Short Form 12 (SF-12) questionnaire, which was measured at baseline and every 3 months for 1 year. We estimated the benefit of nurse management for each patient in the treatment group by estimating a random effects linear regression of SF-12 scores on time and patient characteristics at baseline for patients in the control group. We then used parameters from this model to estimate what functioning would have been for each patient in the nurse group if he/she had not received the intervention. The difference in actually and expected functioning for patients in the treatment group was then regressed on baseline patient characteristics to find characteristics of patients who benefited more than others.

Results: 406 patients provided 1693 follow-up observations. The patients were diverse in terms of age (59.4±13.7), race/ethnicity (46% black, 32% Hispanic, 15% White), education (46% < high school degree), and health literacy (28.9% inadequate). Nurse patients maintained better SF-12 functioning scores than control patients throughout the study (difference at 12 months +4.0, 95% C.I. (2.2, 5.9)). Preliminary results, suggest that Black patients (+4.1 ; p=0.021) and Hispanic (+5.9; p=0.005) benefited more than white Non-Hispanic patients. Patients age 40-59 faired better than patients age <40 (p<0.001). We found little evidence that patients with low health literacy skills, those who had been recently hospitalized, or those with more severe heart failure at baseline benefited more from nurse management.

Conclusion: Although these results are preliminary, they suggest that re-analyses of data from nurse management RCT may help to target patients with CHF who are most likely to benefit from nurse management programs.

Middle School Behavioral Problems, High School Completion and Employment Outcomes in Early Adulthood

Presenter:

Mustafa Karakus

Authors:

Mustafa Karakus, David Salkever, Eric Slade, Nichalos Ialongo

Chair: Dan Polsky; Discussant: Daniel Polsky Tue June 6, 2006 10:45-12:15 Room 226

Rationale: High school completion is an important educational outcome in order to receive higher educational credentials and compete for better occupational prospects. ‘No Child Left Behind Act’ of 2002 aims to improve high school graduation by focusing on improvements of achievement scores such as gpa and standardized tests. However, simply focusing on these measures may not be sufficient to improve outcomes in high school graduation. Government data suggests that majority of adolescents who drop out of school present some level of behavioral problems. Thus, paying special attention to the needs of students with behavioral problems can increase the likelihood of education achievement and future occupational prospect.

Objectives: The objective of this study is to use data from the Fourth Follow-up to the National Education Longitudinal Study of 1988 (NELS 2000) to explore a causal relationship between middle school behavioral problems, high school completion, and subsequent labor market outcomes.

Methodology: We apply several statistical methods (multinomial logit, nested logit, and bivariate probit) that include a reduced form model as well as a structural model to test effects of middle school behavioral problems on high school graduation and future employment outcomes. We also test the possibility that both educational achievement and employment outcome may be caused by a common unobserved factor. Thus, our analysis includes school level instrumental variables and implements an instrumental variables methodology to control for possible endogeneity issues.

Conclusions: Preliminary results suggest that behavioral problems are important factors in explaining high school graduation and future employment prospects. Middle school behavioral problem indicators such as performing below ability, being passive or being disruptive in class and those students who are frequently absent are less likely to graduate from high school. Evidence on this relationship is stronger for male students. In addition, connection between high school graduation and employment outcome also differs by gender. Interestingly, unobserved characteristics that cause male students to drop out of school also produce more likelihood of employment. We do not observe the same result among female students. Policies that aim to improve educational achievements and future employment prospects should not be based on only observable characteristics such as gpa and other standardized test scores. We should pay special attention to the effects of behavioral problems and gender specific factors on educational and occupational success.

The Impact of Illness on Family Labor Supply and Earnings

Presenter:

Virginia Wilcox-Gok

Authors:

Virginia Wilcox-Gok

Chair: Dan Polsky; Discussant: Kosali Simon Tue June 6, 2006 10:45-12:15 Room 226

As the population of the United States ages, Alzheimer’s disease has become, and will continue to be, a major public health concern. Because of the millions of individuals afflicted by AD, there are many more millions of family members indirectly burdened by the disease. The goal of this research is to estimate the indirect effects of illness on the labor market outcomes of family members.

Cost-of-illness studies examining labor market costs have generally focused on the primary caregiver and used small data sets that are not representative of the United States population. In this research, we estimate the labor market effects of illness for all family members using data from the Medical Expenditure Panel Survey (MEPS). MEPS is a large, nationally representative data set that contains information describing labor force outcomes, sociodemographics, and medical diagnoses and measure of severity of illness. By are able to link the records of persons living in the same household, thereby permitting examination of the effects of Alzheimer’s disease on the labor market outcomes of family members.

Our measures of labor market outcomes are labor force participation, employment, hours worked, and earnings. First we estimate a wage equation for all employed family members and predict a market wage for individuals who are not employed. We then estimate the effects of illness on labor force participation, employment, hours of work, and earnings using the predicted wage in a model allowing self-selection out of the labor force. This analytical model controls for the endogeneity between the market wage rate and the decision to be a fulltime caregiver.

Our preliminary findings indicate that the presence of a family member with Alzheimer’s disease increases the probability that a woman will drop out of the labor force. Further, among women who work, the presence of a family member with Alzheimer’s disease has a negative effect on weekly hours of work and annual earnings. In comparison, while men’s labor force participation is unaffected, we find that the average effect for men is to increase hours of work per week and increase annual earnings. This is the first empirical evidence that male family members respond to the family member’s illness by increasing hours of work. Our results indicate that average family earnings fall, reflecting the relatively larger magnitude of the effect on women’s earnings.

By examining the effects of the disease on all members of the family, rather than solely the primary caregiver, we provide a broader and more accurate picture of the family burden of illness. Our estimates demonstrate that there is substitution among family members to compensate for lost market earnings when one member reduces labor supply to provide caregiving. However, this compensation is insufficient to totally offset the loss in family earnings.

The Effects of Mental Illness on Schooling

Presenter:

Noelle Molinari

Authors:

David Kalist, Noelle-Angelique Molinari

Chair: Dan Polsky; Discussant: Rosalie Pacula Tue June 6, 2006 10:45-12:15 Room 226

We examine how psychiatric disorders such as major depression and mild chronic depression (i.e., dysthymia) affect educational attainment, with the results presented separately for men and women. The Diagnostic Statistical Manual IV characterizes the psychiatric diagnoses. Using the first wave of the National Epidemiologic Survey on Alcohol and Related Conditions 2001-2002, we find that early onset of psychiatric disorders, especially before the age of 19, negatively affects level of schooling. Estimates from logit regressions indicate that for men early onset dysthymia reduces the probability of finishing high school by approximately 17 percent, whereas early onset major depression reduces the probability by 8 percent. For women the effect of early onset dysthymia is estimated less precisely; however, the negative effect on schooling of early onset major depression is similar to men. In addition to estimating standard logit models, we estimate censored ordered logit models, which take into account that some of the individuals in the sample are currently attending school. We further present results, from survival analysis regressions, showing how the onset of psychiatric disorders affects time to graduation.

This paper also adds to the economic literature on suicide by controlling for suicide attempts and thoughts of suicide. In general, we find that attempted suicide is associated with lower levels of schooling.

Informal payments in developing countries

Presenter:

Ting Liu

Authors:

Ting Liu

Chair: Richard Scheffler; Discussant: Chris Garmon Tue June 6, 2006 10:45-12:15 Room 235

Rationale: Informal payments, which are payments to physicians in cash or in kind made outside official channels for services that are covered by the public health care system, are a widespread phenomenon in many developing countries. Various policies have been proposed by policy makers to deal with this problem. However, few studies investigate the rationale behind informal payments and the welfare implications of different policies.

Objectives: This paper examines the rationale for why patients offer informal payments and compares the effectiveness and welfare implication of various policies at alleviating this problem.

Methodology: We adopt a game theoretical approach to model the rise and spread of informal payments. There are two doctors, a skilled doctor and a naive doctor; two patients, a needy patient and a less needy patient. Each patient demands one unit of service while each doctor offers one unit service. Patients can distinguish doctors and prefer to be seen by the skilled doctor; however, the needy patient has a bigger incremental increase in utility if he is treated by the skilled doctor instead of the naive doctor. Government can not observe the difference in doctors, therefore set the same price for both types. Excess demand thus leads to competition between the two patients who simultaneously offer informal payments to the skilled doctor. Informal payments become sunk cost once patients pay. The skilled doctor treats the one who offers a higher informal payment. In case of a tie, he randomly picks one patient to treat. We derive the Nash Equilibrium in the game, which has implications for the size and the pattern of informal payments. Furthermore, we compare the welfare implication of three different regimes: informal payment banned, informal payment allowed, selling the right to choose doctors, i.e. the patient pays the highest price has the right to choose which doctor to see.

Results: We find that selling the right to choose doctors is always the best choice in three different regimes. When the difference in patients’ willingness to pay is small, banning informal payments is superior to allowing it; when the difference in patients’ willingness to pay is large, allowing informal payment is superior to banning it.

Conclusion: On one hand, in presence of asymmetric information between government and patients, allowing informal payments gives needy patient a bigger chance to be seen by the skilled doctor, therefore improves allocation efficiency; on the other hand, it may lead to wasteful competition between patients. The trade-off hinges on the heterogeneity in consumers’ willingness to pay for the difference services. When the heterogeneity is large, government should allow informal payments, otherwise it should ban informal payments

International Comparison of Out-of-Pocket Costs and Medication Compliance

Presenter:

Richard Hirth

Authors:

Richard Hirth, John Piette, Scott Greer, Justin Albert, Eric Young

Chair: Richard Scheffler; Discussant: Jean Mitchell Tue June 6, 2006 10:45-12:15 Room 235

Background: Pharmaceutical spending has contributed disproportionately to increases in health care spending, causing drug costs to become a prominent health policy issue. Many studies have attempted to quantify cross-national drug price differences. This literature has focused on the full price of pharmaceuticals, regardless of who pays for the drug. However, across countries, and across patients within a country, the burden of these prices falls to differing extents on government health insurance systems, private insurers, and patients themselves. While variation in the full price of drugs across countries has policy implications for total health care expenditures, variation in OOP costs is more salient to clinical issues such as therapy adherence and patient outcomes. Little is known about differences across countries in the out-of-pocket (OOP) costs faced by patients.

Objective: The ability to study international variation in OOP costs and its effects on compliance has been hampered by the lack of comparable data from different countries. This paper analyzes a unique international survey that overcomes this limitation.

Data and Methods: The Dialysis Outcomes and Practice Patterns Study includes 10,398 randomly selected hemodialysis patients from 12 countries (US, Japan, Australia, New Zealand, Belgium, Canada, France, Germany, Italy, Spain, Sweden, and UK). Focusing on one illness and mode of treatment creates a more clinically homogeneous population across countries than would be the case with a more general survey. We compare rates across countries of patient-reported OOP costs for medication and non-purchase of medications due to cost. Logistic regression models identify characteristics associated with positive OOP costs and not purchasing medications due to cost.

Results: The proportion of patients paying OOP costs varies from 29% in France to 99% in Australia. The proportion of patients reporting non-purchase due to cost varies from 3.1% in Japan to 28.6% in the US. Japanese and Swedish patients were less likely to skip medications, and German patients were more likely to skip medications, than would be expected on the basis of costs, indicating that cultural factors or other aspects of the health care system influence cost-related compliance. The odds of paying positive OOP costs increased with income, education, private insurance, and membership in their country’s ethnic majority. Relative to Europe, the odds of facing OOP costs were higher in the US and Canada, and lower in Japan. The odds of cost-related non-purchase were higher for those who faced OOP costs, whose OOP costs exceeded their country’s average, had lower incomes, were younger, unemployed, and members of ethnic minorities. Relative to Europe, non-purchase was less likely in Japan and more likely in the US.

Conclusions: Substantial variation exists across countries in OOP costs and cost-related non-purchase of prescriptions. Few studies have considered the factors that modify patients’ adherence choices in response to medication cost pressures, leaving clinicians with few clues for how to support patients’ medication adherence given the costs that they will incur. The current study represents a significant advance by taking advantage of the variation in cost-sharing and other influences on patients’ medication use across 12 counties.

The Impact of Cost-Sharing and Benefit Reductions in the Oregon Health Plan

Presenter:

Neal Wallace

Authors:

Neal Wallace, Kenneth McConnell, Charles Gallia

Chair: Richard Scheffler; Discussant: Tim Brown Tue June 6, 2006 10:45-12:15 Room 235

Rationale: In response to state budget shortfalls in 2003, the Oregon Health Plan imposed cost-sharing and eliminated some benefits for adult beneficiaries who were not part of the categorically eligible Medicaid population. Co-payments were imposed for inpatient care; emergency department use; hospital, clinic and individual practitioner ambulatory care; lab and x-ray services; and, prescription drugs. Coverage of specialty outpatient treatment for mental health and substance abuse, durable medical equipment and general medical supplies, eye care and dental services were eliminated. Limited experience and empirical evidence exists to assess the impact of these types of benefit changes on low-income individuals.

Objectives: This study estimates the impact of cost-sharing and benefit reductions on average monthly expenditures and rates of utilization per beneficiary, as well as average expenditures per service user, in total and by service type (inpatient, hospital outpatient, ambulatory professional, lab & radiology, emergency department and pharmaceuticals).

Methodology: The study uses a quasi-experimental design with a non-equivalent comparison group. Policy effects are identified as the difference in difference between non-categorically eligible adults affected by the policy change (known as “Standard” beneficiaries) and TANF eligible adults before and after policy implementation. FFS claims, MCO encounter data and monthly enrollment data for Oregon Health Plan beneficiaries were the primary data sources. Only services covered pre- and post- policy were analyzed. Expenditures per claim/encounter were calculated at the average “full” FFS payment rate during the study period (i.e. without reductions for co-pays, third party reimbursement or other adjustments). Individuals were included in the study sample if they were from 18-64 years old; had at least 6 months enrollment in each of two 12-month periods before and after the policy; and had at least 3 months enrollment in each of the two 6-month periods within the pre- and post-policy study periods. This yielded a study sample of 15,200 Standard and 7,540 TANF eligible subjects. Subjects were grouped into 94 primary care service areas (PCSAs). Average monthly expenditures, average expenditures per month with service use, and the average percentage of beneficiaries using service per month were calculated for the two eligibility groups, four 6-month study periods and 94 PCSAs yielding 752 aggregate observations. Fixed effects estimation is used to identify policy impacts. Expenditure changes are reported as percentage change from pre-policy levels.

Results: Average expenditures per beneficiary increased by 16% after cost-sharing and benefit reductions were imposed relative to the TANF control group. This was driven almost entirely by relative increases in inpatient care expenditures. Relative levels of expenditure were not different from the TANF controls for any of the other service categories. Use of ambulatory professional and lab/radiology services did decrease for the policy-affected group but expenditures per user rose at an equal rate.

Conclusions: The imposition of cost-sharing and benefit reductions for low-income adults in the Oregon Health Plan were found to raise expenditures per beneficiary and potentially shift treatment from ambulatory to inpatient settings. Expenditure increases were shared among consumers, providers and the state of Oregon due to the cost-sharing provisions.

Before you advocate, do your sensitivity analysis: The evidence for reforming the Medicare physician payment system

Presenter:

Martey Dodoo

Authors:

Martey Dodoo, Robert Phillips

Chair: Timothy McBride; Discussant: TBA Tue June 6, 2006 10:45-12:15 Room 309

Rationale: Even though physician practice costs continue to grow, the formulae for updating the physician fees for Medicare services are projected to cut the fees by about 5% annually for several years beginning 2006. These projected cuts have raised concerns about appropriateness of the system for updating physician fees and physicians’ continued participation in Medicare. As they have done many times, physician groups decried the projected cuts and advocated for revisions in the formulae. Surprisingly, apart from a mandated GAO report in 2004, there have been no published quantitative studies assessing the sensitivity of the formulae to proposed revisions. This study contributes by filling that gap.

Objectives: To assess the sensitivity of the Medicare physician reimbursement rate formulae to the revisions proposed by various stakeholders.

Methods: We specified a model that simulated calculation of the Medicare physician fee conversion factor. We used the model to check sensitivity of the fee conversion factor to changes in five main parameters: Evaluation and Management (E&M) weights, GDP, SGR, MEI, and target expenditures over 10 years.

Results: Changes in all five parameters tested had no lasting net effects on the fee schedule. Five percent increases in MEI averted physician fee cuts only in the short-run.

Conclusion: This study shows that: (1) It would require a replacement of the entire reimbursement system to avoid physician fee cuts. (2) There is superior value in rigorous assessment of proposed policies and sensitivity analysis before undertaking advocacy.

Physician Billing Behavior in Two State Programs

Presenter:

Eric Seiber

Authors:

Eric Seiber

Chair: Timothy McBride; Discussant: TBA Tue June 6, 2006 10:45-12:15 Room 309

Rationale: Physician billing is treated as exogenous in the academic literature, and has attracted very little econometric attention. A similar disinterest exists among Federal policy makers, with the Government Accountability Office frequently criticizing the reliance on generally weak state oversight and the lack of federal resources overseeing the $174 billion federal dollars contributed to the Medicaid program (2004). This weak oversight regime raises questions about whether a profit maximizing physician would accept their billing decisions as exogenously determined.

In state programs, physician prices are typically set by a fixed price schedule or through negotiations with the payer. Although price is fixed, physicians still have the power to choose the complexity level or billing code for the visit. If oversight is weak and probability of detection low, physicians can be expected to choose higher reimbursement codes or “upcode” on the margin.

Objectives: This study tests (1) whether physicians bill office visits at equal levels of complexity across state programs and (2) whether the billing behavior changes over time (a.k.a. code creep).

Methodology: The study uses 2001-2003 health care claims data (n=680,000) from the South Carolina Medicaid program and SC State Employee Health Plan to estimate a fixed effects ordered probit model of physician office visit billing where the provider assigns one of five complexity levels (billing codes) for the visit. An array of program dummies and physician-specific fixed effects and interaction terms control for physician practice and program wide differences, while an interaction term between the physician fixed effects and the Medicaid dummy test for differential billing between the two programs. Simulations demonstrate the magnitude of the effects on the two programs.

Results: Despite serving different demographics and the presence of 20% co-insurance in one program, physicians participating in both programs bill in a remarkably similar manner; the model found no significant difference between Medicaid and State Health Plan physician billing. Physicians participating in only one program or who bill under separate tax numbers deviated from this pattern and billed at 8% higher complexities. Some individual physicians demonstrated substantial differences between the two programs, with top 10% billing over 75% higher. Finally, all physicians demonstrate substantial annual “code creep”, with billing of higher complexity codes increasing 10% per year.

Conclusions: The results suggest that physicians do have pricing power, but the same results reject the hypothesis of differential billing. Physicians in this sample proved equally aggressive towards both state programs, increasing their diagnosis codes in every year of the sample. With similar billing patterns for both programs, the few outlying physicians billing higher complexities in one program compared to the other merit future attention, with their differential billing behavior meriting some degree of administrative review.

Risk Adjusting Episodes of Care to Account for Illness Burden in Payment and Evaluation

Presenter:

Sharada Weir

Authors:

Sharada Weir, Rong Yi, Marilyn Kramer, Arlene Ash, Randall Ellis

Chair: Timothy McBride; Discussant: TBA Tue June 6, 2006 10:45-12:15 Room 309

There are many instances when it is convenient to use an ‘episode of care’ (e.g., a bout of pneumonia) as the unit of analysis rather than a patient-level measure (e.g., annual health care cost). The episode approach groups health care claims data into clinically homogenous periods of care typically based on diagnoses, procedures and dates. Episodes are widely used by health plans in profiling and in payment schemes to evaluate healthcare providers and are seen as constituting the critical analytic link between process and outcome measures, potentially providing an efficient tool for measuring quality of care. One criticism of the episode approach is that the classification system is too coarse and that some diagnosis data at the patient level are often ignored. Providers and analysts alike are concerned that episodes alone may not sufficiently account for the diversity of comorbidity among patients that may influence both total cost and therapeutic treatment choices within an episode. This paper explores this issue by evaluating the effect of risk-adjusting episodes of care with two years of data from MedStat’s MarketScan® database of large commercial employers. Episodes were created using Episode Treatment Group (ETG) software from Symmetry Health Data Systems Inc., and patient-level disease burden is computed using DxCG’s Hierarchical Condition Categories (HCCs) to predict concurrent year risk.

ETGs account for severity of illness and comorbid conditions by taking note of the presence of relevant surgical procedures and comorbid complicating conditions. For tractability reasons, included comorbidities are specific to an ETG. For instance, osteoporosis is a comorbidity when the diagnosis is arthritis but not a comorbidity for congestive heart failure. This approach is intuitively appealing and helps distinguish between more and less costly patients with a particular condition. However, ETGs stop short of fully risk adjusting for illness burden of the patient. This is illustrated by comparing predicted cost without risk-adjustment for paired ETGs, one with comorbidity and the other without. As expected, predicted cost for the ETG with comorbidity is higher that for the ETG without comorbidity. However, for many ETGs, the remaining variation in actual cost was found to be high and is further explained by the overall disease burden of the patient.

We compare the predictive power of unadjusted ETGs versus risk-adjusted ETGs by regressing actual episode payment separately as a function of: (1) unadjusted episode dummies (R2=0.29); and (2) risk-adjusted episode dummies (R2=0.34). However, part of the predictive power of the ETGs comes from grouping conditions with surgery separately from conditions without surgery, thereby classifying patients based on observed treatment rather than the disease condition alone. When ETGs are pooled so that only diagnoses are used and the regressions re-run, the gap widens (R2=0.31 for risk-adjusted ETGs vs. R2=0.24 for unadjusted ETGs). These findings support the case for risk adjusting episodes of care to promote fairness in comparing provider performance at the episode level and encourage efficient allocation of resources.

Time allocation in primary care with competing demands

Presenter:

Ming Tai-Seale

Authors:

Ming Tai-Seale, Thomas McGuire

Chair: Michael Morrisey; Discussant: Jessica Vistnes Tue June 6, 2006 10:45-12:15 Room 313

Rationale: In analyses of physician behavior, how physicians allocate their time plays a central role. The time a physician spends during a visit is often put forward as the example of the “effort” the physician puts into a visit. Effort (time) is costly to the physician and the main input into the quality of a visit. In spite of its central importance, little is known about what determines how much time physicians spend with patients. While observable by the patient, time is regarded as not contractible. Empirical examination of how physicians spent clinic time is scarce.

Objectives: To develop a theoretical model of physician time allocation building on Becker’s theory of the allocation of time and to test the model, with videotaped behavior of physicians and patients. We study how time is allocated during a visit across the problems patients bring to the attention of their doctors.

Methodology: Direct observation of videotapes of 390 routine office visits that took place between 1998 and 2000 from three primary care practice sites in the Midwest and Southwestern regions of the U.S and surveys of participating patients and physicians inform the study. We break visits into “topics,” a natural unit of clinical decision making, and document how clinical time is spent. Using a mixed-level duration model, we analyze the effects of the nature of topics, the dynamics of time, and characteristics of patient, physician, and physician’s practice setting on how clinic time is spent.

Results. The average visit in our sample lasted 17.4 minutes and covered 6.5 topics. Patient and physician each spoke, on average, less than 1 minute per topic. Out of over 2,500 topics examined, more than 70% of the topics addressed biomedical issues. Psychosocial topics were 12%, and personal habits, 7%. Less than 4% of the topics involved mental health concerns. What happens in clinic is influenced by the contents of the discourse, physician practice setting characteristics, patient’s gender and race, and physician’s gender. When a topic was introduced during the visit and how much time has already been spent on it are also significant determinants of time allocation.

Conclusions. Physicians are likely to reduce time spent on a topic if it is raised later during the visit when the opportunity cost of physician time is higher. A large number of topics are discussed during a primary care visit, with little time spent on each topic. Efforts to improve the quality of primary care need to recognize the time pressure on both patients and physicians, and the time costs of improving information exchange.

Physician Responses to Gainsharing

Presenter:

Jonathan Ketcham

Authors:

Jonathan Ketcham, Michael Furukawa

Chair: Michael Morrisey; Discussant: John Brooks Tue June 6, 2006 10:45-12:15 Room 313

Rationale: Financial incentives influence physician treatment decisions, yet regulation has limited the arrangements between hospitals and physicians. Hospital costs are the single largest component of health care spending, and clinical preference items (devices and drugs) account for up to 80 percent of the total cost spent on each patient, particularly for cardiology and orthopedics. The Office of Inspector General (OIG) has recently approved several gainsharing arrangements for cardiac care, where physicians receive equal shares of a hospital’s savings in a given service area. The aim of gainsharing is to control costs by promoting standardization of physicians’ treatment decisions. Although these incentives may influence behavior, a number of factors may limit their ability, including strong financial ties with device manufacturers, preference for non-taxable in-kind remuneration rather than cash, or free-riding. This paper provides empirical evidence about the impact of gainsharing from ongoing programs.

Objectives: We estimate the impact of hospital-physician gainsharing in the cardiac cath lab on hospital costs, quality of care, and access to technology. First, we decompose the sources of cost savings due to lower device utilization, lower price per item, and substitution of lower-priced items. Second, we assess the implications for patient care, including outcomes and complications, and the types of patients receiving treatment. Finally, we examine the impact on the availability of devices, adoption of new devices (e.g., drug eluting stents), and the extent of product standardization.

Methodology: The study uses data from Goodroe Healthcare Solutions from 2000-2005 for both gainsharing and non-gainsharing hospitals. These data include detailed information on patient demographics and risk-factors, physician identifiers, procedures and tests performed, which drugs and devices were used and what the hospital paid for them. Four hospitals have begun gainsharing for cardiac care since 2002. Difference-in-difference regression analyses are performed at the level of hospital, medical group, and physician. Although the difference-in-difference design eliminates a number of potential sources of bias, our estimates of gainsharing may be biased upward if, for example, physicians that participate are more responsive to financial incentives than average. We rely on propensity matching and instrumental variables to address such issues.

Results: We find evidence of significant cost savings due to gainsharing. One hospital reduced costs by $4.3 million and paid participating physicians $41,000. The majority of savings appears to be due to lower prices for a given device, and some due to fewer devices per patient. Treatment did not become more standardized, and neither patient outcomes nor risk factors changed.

Conclusions: Although preliminary results indicate large savings due to gainsharing, it has had little effect on standardization. It is unclear whether these savings are sustainable or whether they represent a onetime reduction in prices from manufacturers. The work will further consider which types of physicians appear most responsive to gainsharing. The findings of the study have important implications for a number of stakeholders, including supply chain managers and health systems who are considering the adoption of gainsharing, as well as government regulators and health services researchers.

Geographic Variations in Medicare Physician Costs: The Role of Market Factors, Reimbursement, and the Practice Organization

Presenter:

James Reschovsky

Authors:

James Reschovsky

Chair: Michael Morrisey; Discussant: Michael Morrisey Tue June 6, 2006 10:45-12:15 Room 313

Authors. James Reschovsky (jreschovsky@hschange.org), Center for Studying Health System Change

Title: Geographic Variations in Medicare Physician Costs: The Role of Market Factors, Reimbursement, and the Practice Organization

Rationale: There are large geographic variations in Part B Medicare costs, even after controlling for differences in patient health status. There is a large literature, largely by John Wennberg and his Dartmouth colleagues, documenting these differences. However, their analyses of the underlying causes are limited because their data is largely at an ecological level. This analysis provides greater understanding of the factors underlying geographic cost variations using micro level data on physicians and their Medicare patients.

Objectives: The objective of this paper is to estimate a theoretically consistent model of physician provision of services to their Medicare patients that incorporates information regarding patient demand, the physician, his/her practice (including methods of physician compensation and revenue sources), Medicare payment and other market factors. Using this model, reasons underlying geographic cost variations will be explored.

Methodology: This uses a unique dataset containing information on a nationally representative sample of physicians from the 2000-01 Community Tracking Study Physician Survey merged with Medicare claims data on their patients. We examine how patient, physician, practice (size, type, how physicians are compensated, etc.), market, and Medicare programmatic factors contribute to the large geographic variations in Medicare physician costs. The CTS data are gathered in 60 representative local markets nationwide. Costs per beneficiary are specified as the product of the number of physicians per beneficiary in the market, the average quantity of services per beneficiary (in RVUs) among physicians treating Medicare patients, and the payment per RVU. Each is estimated in a theoretically consistent manner. The latter two components follow from previous work (Hadley and Reschovsky, 2005), in which physicians’ Medicare service volume was estimated using a specification that followed the theoretical work of McGuire and Pauly (1991). It recognized that the Medicare fee was potentially endogenous and that physicians might induce demand. In this paper, I decompose geographic variations in beneficiary costs into components that are attributable to patient, physician, practice, payment, and market factors.

Results: Preliminary results confirm that there are sizable variations in the average cost of treating Medicare patients across sites. Physician supply, the local mix of specialists and primary care physicians and demand factors all contribute to geographic variations, in part by influencing how intensively physicians treat their Medicare patients. Medicare’s fee system, in which physicians are, for the most part, paid a uniform rate according to the costs of providing services, also influences treatment patterns and serves to accentuate geographic cost differences.

Conclusions: Medicare’s payment system fails to incorporate both local demand side and supply side market differences that influence the quantity of services provided to beneficiaries. Hence, the uniform payment system encourages disparities in treatment patterns, and implicitly in the efficiency by which care is delivered across areas. Consideration should be given to setting localized sustainable growth rates or setting fees according to market characteristics in an effort to more closely resemble market prices.

A Cost-Benefit Analysis of Female Primary Education as a Means of Reducing HIV/AIDS in Tanzania

Presenter:

Robert Brent

Authors:

Robert Brent

Chair: David Bishai; Discussant: TBA Tue June 6, 2006 10:45-12:15 Room 325

HIV-AIDS has affected Sub-Saharan Africa more than any other region, with the December 2004 estimate by UNAIDS being 26 million out of a world total of 39 million. One estimate of the consequences of this pandemic has it lowering life expectancies by a quarter, from 64 to 47 years. Much of the development progress in the region in the last half-century is in danger of being reversed. Intervention is clearly required. In order to establish priorities, cost-benefit analysis (CBA) is required as resources are very limited in Africa.

The issue as to which type of interventions to finance is especially important given the gender and age dimension of the Sub-Saharan African HIV-AIDS epidemic. The December 2003 UNAIDS update points out that African women are 1.2 times more likely to be infected with HIV than men. Among young people aged 15-24 (a good index of the number of new cases) women were 2.5 times more likely to be infected. Some of the gender differential is due to biological factors. But, some of the cause is due to the sociological power structure between the sexes in Sub-Saharan Africa. Interventions that seek to empower females, especially young females, would seem to be especially worth evaluating. Female education has been identified by the World Bank (2002) as one of most promising ways of combating HIV-AIDS because of the empowerment it provides.

In this article we carry out a CBA of female primary education in Tanzania based on panel data for 20 Mainland regions over the period 1994-2001. Schooling clearly targets the young. In Tanzania, primary schooling is the predominate form. 61% of females in 2000/1 had been through some primary education, while only 4% has been to secondary school, and 1% had a diploma or degree. The center-piece of our analysis involves establishing the effectiveness of female primary enrollments to reduce HIV-AIDS. This is the main contribution of the paper as there is an extensive literature which finds a positive relation between education and infection rates, contrary to most expectations. We treat this positive relation as the direct effect of schooling and regard it as coming from a static estimation framework. We then identify an indirect effect of education working through changes in income that has the opposite effect. Using a dynamic estimation approach developed by Arellano and Bond (1991) we are able to show that the indirect effect outweighs the direct effect, producing the net effect that education lowers infection rates.

The CBA that follows involves valuing the estimated number of HIV cases averted by their earnings, i.e., using the human capital approach, and comparing this with the costs for the enrollment numbers that generated the reduced number of infections. While the magnitude of the net-benefits depends crucially on the size of the discount rate used, our best estimate is that the benefits are between 1.3 to 2.9 times the costs. We highlight the role of external effects of female education as being the mechanism generating the favorable cost-benefit outcome.

A Lower Price of Child Survival Lowers Fertility: Testing Quality Quantity Tradeoff In Africa

Presenter:

David Bishai

Authors:

Feng Zhao, David Bishai

Chair: David Bishai; Discussant: TBA Tue June 6, 2006 10:45-12:15 Room 325

The economist’s version of demographic transition theory stresses the role of price above the role of income in lowering first mortality and then fertility. Prior to the 19th century, households could not purchase significant improvements in child survival regardless of income. Technological developments that lowered the price of child survival are thought to have induced rapid substitution away from child quantity towards child quantity. According to this view: better child survival prices are the leading impetus for fertility reduction. The difficulty of measuring the price of child survival has impeded empirical tests of this central theory in economic demography.

We studied 15 Demographic and Health Surveys (DHS) from 9 sub-Saharan African countries. We theorized that there would be geographical variation in the ability of households to trade money for child survival. Using household level data stratified across 97 regions within the database we identified the regional price of child survival as the coefficient on the household asset score in a logistic regression on whether a child died before age 5. This produced a set of 97 regional coefficients (Pquality) which we interpreted as signifying geographical differences in the ability of households to trade wealth for child survival. In the second stage, we regressed the regional fertility rate against Pquality and aggregate indicators of economic development. In accordance with theory we found a positive elasticity of 1.71 (95% CI: 0.901 to 2.526) for the price of child quality on fertility and an elasticity of -0.193 (95% CI: -0.244 to -0.142) for the effects of regional wealth on regional fertility. A positive cross price elasticity between child quality and child quantity suggests that these are substitutes.

Our evidence is consistent with Becker’s theory of quality quantity tradeoff and emphasizes the central role of making child survival more affordable before expecting to see fertility declines in a population. When child quality (i.e. survival) was more expensive, households appeared to substitute towards child quantity. These results predict that if an uncontrolled epidemic (such as AIDS) makes child survival less affordable that fertility will rise even if educational attainments and household incomes remain constant or rise

Is More Aggressive Treatment of Severe Brain Injuries in Children Worth It?

Presenter:

Mick Tilford

Authors:

Mick Tilford, Allen Goodman, P. David Adelson

Chair: David Bishai; Discussant: TBA Tue June 6, 2006 10:45-12:15 Room 325

Rationale: Management of traumatic brain injury varies according to treatments and in terms of aggressiveness. Variations in treatment aggressiveness are related to concerns over poor outcomes in survivors. Data describing health outcomes of children following traumatic brain injury that can be used in economic evaluations is scant.

Objective: To provide information on preference scores of children who survived a severe traumatic brain injury and use this information to calculate incremental cost-effectiveness ratios.

Methods: Information on life years gained and acute care costs from longitudinal hospital studies were combined with follow-up data on survivors. Follow-up data was based on telephone interviews with the primary caregiver of surviving children. In addition to demographic and insurance information, caregivers of survivors described use of services following discharge from the acute care hospital and reported on health-related quality of life using the Quality of Well-being (QWB) scale. Cost-effectiveness ratios were formed from the QWB scores and costs of acute and rehabilitative care.

Results: Over a 12-year period, approximately 6,500 children survived a traumatic brain that otherwise would have expired without more aggressive treatment. Follow-up data at 3 and 6-months following hospital discharge indicated a range in preference scores from 0.093 to 1.0 with a mean of 0.507 (0.201) at 3 months and 0.579 (0.227) at 6 months. Scores were related to probabilities of dying at the time of hospital admission. Children lacking health insurance had higher probabilities of dying and worse outcomes. Cost per quality adjusted life year was approximately $12,000 for the mean preference score estimates and $67,000 for the worst scores.

Conclusions: This study suggests that aggressive treatment in children with traumatic brain injury is warranted. Future research should further examine rehabilitation service use of uninsured children in relation to injury severity and outcomes.

End-of-Life Transfers and the Decision to Care for a Parent

Presenter:

Meta Brown

Authors:

Meta Brown, Mark O. Wilhelm

Chair: Sally Stearns; Discussant: France Priez Tue June 6, 2006 10:45-12:15 Room 326

The largest and most common transfers from parents to children take the form of investments during childhood and early adulthood, while the largest and most common transfers from children to parents occur in parents’ old age. The life-cycle structure of intergenerational transfers poses a challenge for both theoretical and empirical analysis of transfer motives. Hypothesized transfer motives fall into three broad categories: social exchange, two-sided altruism, and role-modeling or demonstration. We use the recently available data from the HRS/AHEAD on both parents’ payment for their children’s college education and children’s supply of attention and informal care during their parents’ old age to investigate the predictions of these three theories. Within-family and within-gender variation in transfers is used to distinguish among them.

Informal Care and Medicare Expenditures

Presenter:

Edward Norton

Authors:

Courtney Van Houtven, Edward Norton

Chair: Sally Stearns; Discussant: France Priez Tue June 6, 2006 10:45-12:15 Room 326

Long-Term Care of the Disabled Elderly: Do Children Increase Caregiving by Spouses?

Presenter:

Liliana Pezzin

Authors:

Liliana Pezzin, Robert A. Pollak, Barbara S. Schone

Chair: Sally Stearns; Discussant: Hua Wang Tue June 6, 2006 10:45-12:15 Room 326

How do adult children affect the care that their elderly parents provide to each other? We develop two models in which the anticipated behavior of adult children provides an incentive for elderly parents to provide more care for their disabled spouses than they otherwise would. Our first model is based on a “demonstration effect” — adult children learn from a parent’s example that family caregiving is appropriate behavior. Our second model is based on a “punishment effect” — if the nondisabled spouse fails to provide care for the disabled spouse, then the children may respond by not providing future care for the nondisabled spouse when care becomes necessary. Both models assume that the nondisabled elderly parent recognizes that his or her caregiving behavior will affect the children’s willingness to provide care in the future. Moreover, the demonstration effect and the punishment effect increase the likelihood that nondisabled spouses will provide care for disabled spouses if they have children or, more precisely, if they have joint children. Joint children act as a commitment mechanism, increasing the probability that elderly spouses will provide care for one another. Stepchildren, depending upon the agree of parental attachment, provide weaker incentives than joint children for spousal care. Preliminary estimates find strong evidence that spouses provide more care when they have children with strong parent attachment.

Certificate of Need Regulation in the Nursing Home Industry: Has it Outlived its Usefulness?

Presenter:

Barbara Caldwell

Authors:

Barbara Caldwell

Chair: Gabriel Picone; Discussant: Edward J. Schumacher Tue June 6, 2006 10:45-12:15 Room 332

In 1974 the United States Congress passed The National Health Planning and Resources Development Act (P.L. 93-641). The primary goals of this legislation were to (1) contain health care costs and (2) increase the accessibility and quality of health services. Certificate of need (CON) regulation is one attempt to constrain health care costs by limiting the supply of certain medical care facilities. In general, a CON program involves the regulation of the building, expansion, and modernization of health care facilities and capital equipment on the part of institutional health care providers, including hospitals, nursing homes, and home health agencies. With respect to the nursing home industry, prospective nursing home owners/operators are required to demonstrate that a “need” exists for more nursing home beds. Some States also imposed a construction moratorium that prevented any expansion of existing facilities or construction of new facilities regardless of whether or not a “need” existed. These CON/moratoria programs impose a supply side constraint that creates a potential barrier to entry and in the presence of excess demand may cause a nursing home bed shortage for those patients covered by Medicaid. In 1986 Congress allowed the Federal CON requirement to lapse due to its perceived anticompetitive and excessively regulatory nature. Today forty-one States and the District of Columbia continue to have a CON, a construction moratorium, or both for nursing home facilities. Yet maintaining these regulations comes at a cost. Since quality remains a controversial subject, access to care for Medicaid-eligible persons remains an issue in many States, and medical care expenses for nursing homes continue to climb, one might question the effectiveness of retaining these regulations. This paper investigates if any differences exist in the quality of nursing home care and the access to care for nursing home residents between those States that have continued with CON and/or construction moratoria and those States that have eliminated such policies. Using data for the years 1991 through 2003 for all Medicaid-certified nursing home facilities in the United States and employing the method of difference-indifferences we find that access to care for Medicaid residents is less in those States that still employ some type of regulation than those States that have eliminated the regulation. With respect to quality of care the results are mixed depending on the measure of quality that is employed. With the risk of becoming a nursing home patient at the age of 65 at 39 percent and at the age of 85 at 49 percent as well as the aging of the current population, the areas of access to care and quality of care remain important policy issues in the nursing home industry.

Specialization and Sorting in the Obstetrics Market

Presenter:

Sean Nicholson

Authors:

Andrew Epstein, Jonathan Ketcham, Sean Nicholson

Chair: Robert Town; Discussant: TBA Tue June 6, 2006 10:45-12:15 Room 335

Asymmetric Information in Physician Agency

Presenter:

Albert Ma

Authors:

Philippe Chone, Albert Ma

Chair: Robert Town; Discussant: TBA Tue June 6, 2006 10:45-12:15 Room 335

Evaluating Estimators of Treatment Effects Using Detailed Measures of Illness Severity From Medicare Claims Data

Presenter:

Justin Trogdon

Authors:

Justin Trogdon, Ahmed Khwaja, Gabriel Picone, Martin Salm

Chair: Gabriel Picone; Discussant: Joe Terza Tue June 6, 2006 10:45-12:15 Room 332

An old and constant problem in health economics has been to estimate the effects of choices made by doctors or patients on health outcomes in the presence of unobserved heterogeneity. Economists have a broad range of estimators available, which fall into two categories. The first assumes that treatment is exogenous conditional on a set of covariates (selection on observables). Estimators based on this approach include ordinary least squares with a large number of controls, flexible regression methods, propensity score methods, and matching estimators. The second approach uses instrumental variables to identify the treatment effects of interest. However, each of these estimators makes different sets of assumptions and may even estimate different effects. In this study we compare these different estimators through their ability to estimate the effects of different treatments on survival outcomes for individuals with Acute Myocardial Infarction (AMI). The treatment effects studied are the effects of: (i) catheterization, (ii) admission to for-profit hospitals, and (iii) admission to low-volume hospitals. Our dependent variables are 30-day and one-year mortality following the AMI. We use data from the Cooperative Cardiovascular Project (CCP) merged with the American Hospital Association’s (AHA) annual survey of hospitals and the National Inpatient Survey (NIS). One significant limitation of the Medicare claims data used previously to study these treatment effects is that it does not contain complete measures of severity of illness. The strategy of this study is to use a richer data set to analyze how sensitive different estimators are to the addition of detailed severity of illness measures. Severity of illness is a primary factor driving selection into treatments and if omitted from the estimation leads to bias in the estimation of the treatment-outcome relationship. Lacking a combination of experimental and non-experimental data, as used in previous studies comparing treatment effect estimators, we use the availability of detailed severity of illness to compare the performance of different estimators. Our results show that for estimating average treatment effects, methods that rely on the selection on observables assumption produce almost identical results using similar sets of control variables and there are no advantages over using a standard least squares regression. Across methods, the addition of controls for severity of illness reduces the estimated average treatment effects. In fact, conditional on detailed patient data, the addition of hospital characteristics has little impact on the average treatment effects. Methods that rely on instruments tend to be very unstable across specifications with different sets of controls. We conclude that in estimating treatment effects there may be no alternative but to rely on good data.

Compensating Wage Differentials and AIDS Risk

Presenter:

Jeff DeSimone

Authors:

Jeff DeSimone, Edward J. Schumacher

Chair: Gabriel Picone; Discussant: Sara Markowitz Tue June 6, 2006 10:45-12:15 Room 332

In the past two decades, AIDS has emerged as a top public health issue and had a profound effect on the health care sector; yet its impact on health care labor markets has not been studied. This paper examines how HIV infection risks affect the earnings of registered nurses (RNs) and other health care workers. From the standard theory of compensating wage differentials, we expect health care workers, particularly patient care providers, to require monetary compensation for the potential risk of contracting HIV and the burden of increased precautions required to avoid this risk, relative to similar jobs that do not involve HIV risk. Using annual CPS outgoing rotation group data from 1993– 2003, we estimate separate AIDS wage differentials for RNs, licensed practical nurses and nursing aides, and other non-physician health care workers. Our econometric specification allows both the wage effects of AIDS and wage trends to vary across sectors. We proxy for HIV infection risk proxy using state-specific AIDS prevalence rates, allocated to metropolitan areas using the fraction of state cumulative AIDS cases each year that occur in each metropolitan area, and include metropolitan area and year fixed effects in our regressions. Estimates show that a 10 percent rise in AIDS is associated with a wage increase, relative to workers outside the health care sector, of 1.3 percent for RNs and 0.9 percent for non-nursing health practitioners. Additional results suggest that these effects do not spuriously represent the impact of working in a hospital, are not driven by metropolitan areas with particularly high AIDS prevalence rates, and are unrelated to the introduction of antiretroviral drugs during the sample period. These findings imply that policies that reduce the prevalence of HIV and AIDS will reduce the wage necessary to attract individuals into jobs involving patient care; in particular, a 10 percent AIDS rate decline would save over $1 billion per year in RN wage payments.

Testing the latest empirical approach to hospital mergers and market power evaluation

Presenter:

Yunwei Gai

Authors:

Yunwei Gai, Gary Fournier

Chair: Gabriel Picone; Discussant: Gabriel Picone Tue June 6, 2006 10:45-12:15 Room 332

Mergers of hospitals in the same locality raise interest because they restrict the choices that patients have when hospital care is consumed, and they give hospitals market power in contracting with the local insurers and managed care organizations. For at least the past twenty years, little progress has been made in quantifying the market structure and market power of hospitals for lack of convincing methodology. The inability to demonstrate the exercise of market power in local hospital markets has significant policy implications: over the past 12 years or more, the federal government has lost every major antitrust case involving mergers of local hospitals, often for lack of a convincing market delineation method. In effect, existing techniques assume patients have full insurance and have the mobility and savings to search out the better hospitals outside the general vicinity of their residential location, while in truth the ‘silent majority’ of patients have incomplete insurance arrangements from managed care organizations that restrict their choice set. This paper uses Florida hospital discharge and financial data and a new econometric approach (Capps et al. 2003) to study hospital market power and to show how it affects pricing and the efficiency of hospital care. The econometric model is flexible enough to detect groups of patients who must rely on local hospitals. The Capps et al. study demonstrated, with some success, its application on San Diego, Ca. data. But at this early stage the reliability of the empirical methodology remains unverified and needs to be subjected to further scrutiny. The current paper will examine several questions about the implementation of these methods on hospital mergers in Florida in the 1990s. Is this a truly feasible method that can be readily applied to many other situations in the market? Does the model produce stable and reliable estimates of the effects, particularly given the acute demands of merger litigation? How does it change our thinking about the extent of the problem of hospital market power in local markets and its impact on consumers?

Using Quality Reports to Improve Health Care Markets

Presenter:

Jacob Glazer

Authors:

Jacob Glazer, Thomas McGuire

Chair: Robert Town; Discussant: TBA Tue June 6, 2006 10:45-12:15 Room 335

Demand for Health under ex ante Moral Hazard

Presenter:

Rui Wang

Authors:

Rui Wang, Gerard Russo

Chair: James Burgess; Discussant: TBA Tue June 6, 2006 8:00-9:30 Room 121

Authors: Rui Wang (ruiw@hawaii.edu) and Gerard Russo (russo@hawaii.edu), Department of Economics, University of Hawaii at Manoa

Title: Demand for Health under ex ante Moral Hazard

Rationale: Although the United States ranks highest in health care spending per capita among the industrialized societies and it has the most advanced medical technology available to public, health status of Americans consistently ranks poorly relative to that of residents of other industrialized nations. One possible cause of this puzzle, which has been largely neglected by researchers, is insufficient preventive care and increased population risk factors as a result. Unlike social insurers in most other industrialized countries, private insurers in the United States do not have long term incentives to subsidize preventive healthcare since most insurance policies cover the insured for only a relatively short period of time. A lack of preventive care could explain the coexistence of high medical expenditure and poor population health outcomes.

Objectives: The objective of this paper is to develop a dynamic, stochastic framework of demand for health that examines individual lifecycle behavior of health investment and addresses the issue of ex ante moral hazard under insurance incentives.

Methodology: Following the line of literature beginning with Michael Grossman’s famous human capital model, this paper develops a demand for health framework that employs a random process and optimal control. It explicitly recognizes illness as random utility loss which could be compensated with curative medical care. Illness occurs over time according to a non-homogeneous Poisson process, whose intensity is inversely related to health stock. A representative individual’s lifecycle behavior of consumption and investment in health capital is then examined. With the introduction of health insurance, individual behavior under ex ante moral hazard is examined and conditions for optimal social insurance under ex ante moral hazard are derived.

Results: Under incentives of health insurance, individuals tend to invest sub-optimally in their health capital, which in turn leads to higher morbidity and increased curative health spending. Such distorted incentives under ex ante moral hazard are mitigated when subsidy to preventive care is provided. Under optimality the rate of such subsidy should be equal to the rate of reduction in utility loss by curative care paid for by insurance.

Conclusions: Investment in health during early ages is efficient because it serves the individual for a relatively long period of time under relatively low depreciation rates. Society should subsidize medical indigent families with young kids out of efficiency considerations besides preference for health equity. Private insurers do not have strong enough incentives to subsidize preventive healthcare. Lack of preventive care leads to higher morbidity and increased health spending, which may partially explain the American puzzle of high health spending coupled with relatively poor health outcomes.

Disclosure information: Rui Wang is a Ph.D. candidate and Dr. Gerard Russo is an associate professor in the Department of Economics, University of Hawaii at Manoa. This research is part of Rui’s dissertation project.

Separating selection and moral hazard effects in Swiss health insurance - a nonparametric bounds analysis

Presenter:

Robert Leu

Authors:

Robert Leu, Michael Gerfin

Chair: James Burgess; Discussant: TBA Tue June 6, 2006 8:00-9:30 Room 121

There is an ongoing debate in health economics whether cost sharing in health insurance changes the behaviour of patients. The well documented negative correlation between the degree of cost sharing and health care costs can be attributed to changes in behaviour (reduction of moral hazard) or selection (more healthy people select higher cost sharing). Previous empirical evidence for Switzerland, which was obtained based on strong identification assumptions using non-experimental data, is mixed. In this paper we employ nonparametric bounding techniques to minimise statistical assumptions. This methodology yields the minimum and maximum value a treatment effect can take given the assumptions made. If nothing can be assumed about the data generating process we obtain the so-called no assumption (or worst case) bounds. These bounds can be tightened if we are willing to impose additional assumptions.

Treatment is ordered in our application. We consider three possible treatment states: low deductible, medium deductible and high deductible. These deductible levels are chosen by the individuals at the start of their health insurance contract. The outcome variable is the probability of going to the doctor. Our empirical analysis shows that we need some assumptions to tighten the bounds; the no-assumption bounds are too wide to be useful. We consider two further assumptions: treatment response is mean independent of an instrument, and treatment response is monotone (i.e. we assume the sign of the treatment effect to be known). The mean independence assumption is also weakened by assuming that mean response varies weakly monotonically with the instrument. Under the first two assumptions we estimate bounds for the treatment effect of the high deductible compared to the low deductible that are below zero. Hence given these two assumptions we conclude that there is a negative treatment effect (i.e. there is a change in behaviour) of at least -0.08. Given that the observed difference is -0.24 at least one third of the difference in the probabilities of going to a doctor can be attributed to a reduced moral hazard effect. Weakening the mean independence assumption reduces the treatment effect to -.04, but it remains different from zero. This finding is in contrast to previous empirical analyses based on the same data.

Cost-Effectiveness Analysis under Uncertainty: Investigating the Role of the Cost-Effectiveness Frontier (CEF)

Presenter:

Gary Zarkin

Authors:

Gary Zarkin, Jeremy Bray, Debanjali Mitra, Mohan Bala, David Couper

Chair: James Burgess; Discussant: TBA Tue June 6, 2006 8:00-9:30 Room 121

Rationale: Several methods of handling uncertainty of cost-effectiveness ratios exist. A limitation of these methods is that they do not adequately address the uncertainty associated with interventions being dominated. If an intervention is dominated in either a strong (greater cost and lower effectiveness) or weak sense (greater cost-effectiveness ratio), it is no longer included in the cost-effectiveness frontier and it drops out of further cost-effectiveness analysis. Existing methods of dealing with uncertainty in CE ratios do not adequately incorporate variability in the CEF.

Objectives: The objective of this methodological paper is to introduce uncertainty of the CEF into cost-effectiveness analysis. The paper lays out the methodology that researchers should follow to address uncertainty in the CEF. We demonstrate how this uncertainty changes the typical cost-effectiveness analysis.

Methodology: We assume that the cost and effectiveness realizations for each intervention arm are drawn from a bivariate normal (BVN) distribution. We draw a cost and effectiveness pair from each BVN distribution and calculate the implied CEF. We draw N=1000 draws for each intervention arm and calculate the implied CEF for each draw. Based on these outcomes, we calculate the probability associated with each realization of the CEF.

We propose to use cost and effectiveness data from the COMBINE trial to estimate the parameters for the BVN distribution. These parameters include the mean cost, mean effectiveness (measured by days heavy drinking), the standard deviation of cost and effectiveness, and the correlation of cost and effectiveness for each of the 9 arms of the COMBINE trial. An advantage of using the COMBINE data is that it provides an anchor to actual clinical trial, which increases the relevance of the analyses.

Healthcare Markets, the Safety Net, and Access to Care Among the Uninsured

Presenter:

Carole Gresenz

Authors:

Carole Gresenz, Jeannette Rogowski, Jose Escarce

Chair: Joel Hay; Discussant: TBA Tue June 6, 2006 8:00-9:30 Room 213

Research Objective : We use nationally representative data including observations on more than 8,000 uninsured adults to provide new insight into the relationship between access to care and not only the structure and capacity of the safety net but also the healthcare market more generally.

Study Design: We use Medical Expenditure Panel Survey (MEPS) data linked with data from multiple secondary sources. To describe the healthcare safety net and market structure in each individual’s location, we derive variables from the American Hospital Association Annual Survey of Hospitals, Area Resource File, the InterStudy Regional Market Analysis database, the Bureau of Primary Healthcare (BPHC) Physicians Uniform Data System, the Current Population Survey, Census of Governments, and the Census Bureau’s Annual Survey of State and Local Government Finances. A major innovation of this research is the calculation of detailed measures of safety net availability: We calculate the distance between each uninsured individual and the nearest BPHC provider, public hospital and emergency room. We analyze outpatient care utilization (office-based physician and non-physician visits, emergency department visits) and medical expenditures. We simulate utilization for a number of health care market and safety net values using standardized predictions.

Population Studied: Uninsured adults in the U.S.

Findings: Distances between the rural uninsured and safety net providers such as hospital emergency rooms, public hospitals, migrant health centers, public housing primary care programs, and community health centers are significantly associated with utilization of a variety of healthcare services. In urban areas, we find that the percentage of individuals in the area who are uninsured and the pervasiveness and competitiveness of managed care have a significant relationship with healthcare utilization.

Conclusions: Absent the universal provision of health insurance, policy approaches to alleviating the barriers to access facing the uninsured include incremental efforts to increase the affordability and availability of public or private health insurance as well as measures to increase the accessibility of healthcare for the remaining uninsured. Our findings shed light on areas of focus for the latter class of measures. Facilitating transport to safety net providers and increasing the number of such providers are likely to improve access to care among the rural uninsured. ur findings for urban areas suggest that particular attention be paid to the uninsured living in areas where many of those insured are covered by managed care, and especially so where little competition among managed care organizations exists. Ironically, the “backlash” against managed care may result in improved access to care for some uninsured, although the salutary effects would be offset to the extent that the backlash also results in increasing healthcare costs, greater numbers of uninsured, and more competition for healthcare resources.

Managed Care and the Safety Net. More Pain for the Uninsured?

Presenter:

Nuria Mas

Authors:

Nuria Mas

Chair: Joel Hay; Discussant: TBA Tue June 6, 2006 8:00-9:30 Room 213

Author: Núria Mas, IESE Business School

Title: Managed Care and the Safety Net. More Pain for the Uninsured?

Rationale: Health care insurance in the US has changed enormously in the last 20 years, since managed care radically altered incentives to providers. The impact of the managed care boom has been subject to close scrutiny. However, most of the literature has concentrated either in the role of managed care in bringing efficiency gains to the health care market or on studying its effect on utilization and quality of care for its enrollees. Research analyzing the impact of managed care on the uninsured and on safety net hospitals has been minimal.

Objectives: This paper contributes to fill this gap and analyses the impact of managed care on access to care and quality of care for the uninsured.

Methodology: The United States has always relied on an institutional safety net to meet the basic health care needs of the uninsured. Traditionally, hospitals in the US had been able to finance charity care through a complex system of cross-subsidies where privately insured patients were charged higher prices. By imposing stricter financial restrictions to hospitals and doctors, managed care reduced prices charged to their insured patients, making it very difficult for hospitals to obtain excess funds for their uncompensated care. In this paper we test the hypothesis that this increased financial pressure has worsened both access to care and quality of care for the uninsured, by affecting the safety net hospitals. We expand Frank and Salkever’s (1991) model to analyze hospitals’ decisions to provide charity care and use a probit model to test the results empirically. We use hospital data from the American Hospital Association and patient data from the Office of Statewide Healthcare Planning and Development (OSHPD). Managed care data is obtained from the Area Resource File.

Results: First, using US data, our results show that manage care has increased safety net hospital closures and it has encouraged the termination of those services (ER, obstetrics, etc) most frequently used by the uninsured, hence negatively affecting their access to care. Second, our results confirm that uninsured patients shift toward government hospitals. The results also seem to point toward the possibility of a trade-off between the number of charity care patients and the quality of care provided. Finally, we directly analyze the impact of managed care on health outcomes for the uninsured (as measured by the probability of dying after a heart attack). Our results indicate that managed care penetration has a negative impact on the health of charity care patients and also of those that go to government hospitals.

Conclusions: the results of this paper confirm that the impact of managed care goes beyond its effect on its enrollees and on efficiency. They also have important policy implications since the gap between socioeconomic groups could widen if the uninsured not only see their access to care reduced, but also go to hospitals which quality is declining.

Partially Identifying Treatment Effects in the Presence of Unobserved Treatments: Covering the Uninsured

Presenter:

Steven Hill

Authors:

Brent Kreider, Steven Hill

Chair: Joel Hay; Discussant: TBA Tue June 6, 2006 8:00-9:30 Room 213

Policymakers have long been interested in identifying the number of people lacking health insurance, the consequences of uninsurance for access to health care, and the potential cost of covering the uninsured. Household surveys provide the primary source of information about the uninsured, but many validation studies find some respondents misreport insurance status. Reporting errors may lead to inaccurate estimates of the number of uninsured and bias estimates of the effects of insurance on access, use, and costs. Using data from the 1996 Medical Expenditure Panel Survey (MEPS), we investigate what can be learned in the presence of arbitrary health insurance reporting errors about (a) the gap between the insured and uninsured in the use of health services and (b) the impact of universal insurance coverage on the use of services. We exploit information from insurance cards, policy booklets, and follow-back interviews with employers and insurance companies to construct validation data for a nonrandom portion of the sample. There are 18,851 nonelderly in the 1996 MEPS, and about two-thirds of them have evidence from at least one source validating their reported insurance status. Extending the theoretical literature on nonparametric bounds and treatment effects, we formally characterize the identification problem and assess the identifying power of a variety of verification, monotonicity, and independence assumptions. Molinari’s (2002) “missing treatments” bounds are tightened when there is information about the potential degree of reporting error within the subpopulation without validation data. For some results, we estimate rates of false negatives and false positives on a small subsample whose employers responded to the follow-back interviews and use them to extrapolate potential rates of reporting errors to the third of the sample that does not have validation data. Under a set of relatively strong nonparametric assumptions, we preliminarily estimate that coverage the uninsured would increase the proportion of the population using health care in a month by no more than 2.5 percentage points for adults (an 11% increase) and by no more than 0.8 percentage points for children (a 4.8% increase).

Perspective in Drug Abuse Treatment Economic Evaluations

Presenter:

William Cartwright

Authors:

William Cartwright, Paul Solano

Chair: Willard Manning; Discussant: TBA Tue June 6, 2006 8:00-9:30 Room 225

Rationale: Economic evaluation of drug abuse treatment must consider the perspective of the study and the standing of those potentially affected by the intervention. Economic evaluations are often presented form the taxpayer’s point of view without sufficient analysis of the implications of this adoption.

Objectives: This paper defines the issues related to perspective and standing in economic evaluations. In particular, the problems related to evaluating drug abuse policies and interventions are discussed. Adjustments are recommended to the cost-benefit estimates in the usual cost saving approach. In addition, the willingness-to-pay approach is recommended to adjust questionnaires and target populations.

Methodology: The recommendations are developed in light of public finance issues surrounding the raising of revenue through taxation to fund government expenditures for drug abuse treatment. Both the cost saving approach and the willingness-to-pay approach of cost-benefit analysis are utilized for valuation.

Results: The recommended adjustments for the typical cost-benefit analysis involve adjusting benefits with the marginal cost of financing the government program. The financing mix in a federal system alters the marginal cost of financing and thus requires a further analysis of the specific state and local tax structure in line with the Federal tax structure. The actual standing of the drug abuse treatment client is a standing issue for which no definitive recommendations can be made. With regards to theft losses, treating these as transfers is not recommended because of the lack of standing that the criminal would have. However, many policy options certainly require standing be given to drug users and those in treatment. The willingness-to-pay approach must be designed with sensitivity to the issues of perspective and standing.

Conclusions: Some fairly straightforward adjustments can be made to standard cost-benefit analysis. Issues of standing require the analyst to establish the correct target population for the study, weighting of that population, and sensitivity to the various population groups affected by a particular intervention or policy.

Longevity Bias in Cost-Effectiveness Analysis

Presenter:

Liqun Liu

Authors:

Liqun Liu, Andrew Rettenmaier, Thomas Saving

Chair: Willard Manning; Discussant: TBA Tue June 6, 2006 8:00-9:30 Room 225

The stated goal of medical CEA is to maximize health outcomes for a given amount of resources allocated to health care (Weinstein and Stanson 1977). The rationale for this goal seems to be that, for the overall optimality of health care resource allocation (which includes not only the allocation of a given health care budget but also the determination of the size of the budget), maximum health benefits must be achieved under any chosen health care budget. This characterization of the goal of medical CEA is so widely accepted that in many unresolved debates regarding the theoretical foundation and appropriate execution of CEA, both sides of the debate claim to abide by this goal.

Using a utility specification consistent with the QALY (quality-adjusted life-year) measure of health outcomes, we study both the “fixed budget problem” and the “optimal budget size problem” in medical resource allocation. The fixed budget problem is about how a given health budget should be allocated between improving longevity and improving health-related quality of life. The logically subsequent optimal budget size problem is about whether or not further increase in the size of health budget is welfare enhancing.

We compare two approaches to the fixed budget problem: the health gain approach that maximizes the QALY measure for a given budget and the total gain approach that maximizes the total utility for a given budget. The health gain approach implements the stated goal of CEA but it is the total gain approach that is consistent with welfare maximization. We show that the health gain approach or CEA results in a longevity bias: the CEA-based division of a given total medical expenditure between extending life and improving health gives the former a larger share than is called for by welfare maximization.

After discussing the fixed budget problem, we then study the optimal budget size problem and relate it to the issue of indirect costs of medical interventions (e.g., Garber and Phelps 1997 and Meltzer 1997). Under either approach (the incorrect health gain approach or the correct total gain approach) to the fixed budget problem, the fixed budget phase of resource allocation generates a QALY function with the size of the health budget as its argument. When considering whether to expand the health budget, one must compare the QALY gains with the consumption losses from such an expansion. We will show that regardless of the approach adopted in the fixed budget phase, the criterion for evaluating an expansion in the health budget is characterized by a cost-effectiveness ratio that includes, in its numerator, not only the direct health care costs, but also the indirect consumption costs and earnings from longer life. This means that appropriately accounting for indirect costs in the evaluation of new interventions (increases in the medical budget) alone cannot correct the longevity bias resulting from the maximization of QALYs under a given medical budget.

Towards a Consistent Payer Perspective: A Microeconomic Approach to Economic Evaluation

Presenter:

Scott Grosse

Authors:

Scott Grosse

Chair: Willard Manning; Discussant: TBA Tue June 6, 2006 8:00-9:30 Room 225

Rationale: Conventional cost-effectiveness analysis (CEA) and cost-benefit analysis (CBA) are regarded by many decision makers as largely irrelevant. One reason is that most studies do not model the costs and benefits unique to different economic agents. Second, the outcomes that are modeled do not necessarily match decision makers’ objective function. Third, the comparators may not represent relevant alternatives. Even CEAs that purport to represent the payer perspective rarely do so in a way that is consistent with realistic models of decision making.

Objectives: The objective of this paper is to outline a framework for conducting economic evaluations from the perspective of payers and purchasers, including individual consumers, health plans, integrated health care delivery systems, and employer and government purchasers of health care.

Methodology: This paper reviews analytic methods used to evaluate health care interventions, including CEA, CBA, cost-minimization analysis (CMA), budget impact analysis (BIA), and return on investment (ROI) analysis. These methods are compared in terms of which costs are included, how costs are measured, analytic horizons, use of discounting, and the distribution of costs and benefits. The types of outcomes considered and the valuations placed on each outcome vary by method and intended audience. A hypothetical screening test scenario is modeled to compare the usefulness of the different approaches for distinct types of payers.

Results: A hypothetical screening test, which together with standard treatments is assumed to reduce mortality from X disease at an average delay of 5 years, provides net economic benefits from the societal perspective and is classified as cost-effective using conventional CEA methods. Using BIA and ROI methods, the financial impact is not favorable to private payers. Using CEA and CBA methods adapted to the perspective of different payers, including adjustment for differential discount rates and attrition or turnover among the covered population, the results are intermediate between societal CEA and ROI findings.

Conclusions: Each type of method has strengths and limitations. Economic evaluations should model the distribution of costs and benefits among different types of payers and assess the economic attractiveness of the intervention from each group’s perspective. This can make economic evaluations more relevant to health insurers, employers, and other payers or purchasers of health care and increase their use in resource allocation decisions.

The Health Care Crisis for People with Disabilities Who Do Not Receive Social Insurance Benefits

Presenter:

Tricia Johnson

Authors:

Tricia Johnson, William Johnson

Chair: Catherine McLaughlin; Discussant: Dan Polsky Tue June 6, 2006 8:00-9:30 Room 226

Rationale: The increasing number of people with disabilities under age 65 will profoundly affect public policy towards disability by increasing the administrative burden on programs such as Social Security Disability Insurance (SSDI) and Medicare. The aging of the baby boom population will substantially increase the number of people with disabilities who do not qualify for disability benefits. Failure to address the health care needs for persons with disabilities prior to retirement is likely to increase long terms costs to Medicare by increasing the severity of illness once these persons reach retirement age.

Objectives: This paper estimates the number of people with disabilities under age 65 who do not receive disability benefits and projects the number without benefits through 2025 to quantify the uncompensated health care burden of disability. A number of simulations are conducted to understand how changes in the underlying characteristics of the population will affect these projections.

Methodology: This study first estimates the number of people with disabilities in the population using a logistic regression model. Second, the proportion of people with disabilities who do not receive SSDI is estimated from this model. Third, health care expenditures for people with disabilities who do not receive benefits are estimated using a two-part generalized linear model. Finally, a simulation model is developed to explore the effects of different assumptions about the demographic characteristics and health conditions of the population on the prevalence of disability and health care expenditures. The 1996 panel of the Survey of Income and Program Participation is used to estimate the number of people with disabilities who do not receive benefits. The 1997 to 2000 Cost and Use Files of the Medicare Current Beneficiary Survey are used to estimate health care expenditures for people with disabilities who do not receive benefits, simulating costs as if they received benefits.

Results: Nearly 23% (2.8 million [M]) of people with disabilities did not receive SSDI benefits and had no recent work experience in 2000, and 67% (8.9M) of those with disabilities did not receive SSDI benefits overall. These estimates will increase to 3.7M and 11.4M respectively by 2025. Health care expenditures for people with disabilities without recent work experience and no SSDI benefits were estimated at $20.7 billion (B) in 2000 and will increase to $29.3B in 2025.

Conclusions: People with disabilities who do not receive SSDI benefits represent the hidden population of Americans with disabilities. The reported prevalence of disability is sharply reduced if only Social Security statistics are used. Results emphasize that the problem of uninsured losses among Americans with disabilities who do not qualify for social insurance benefits will be one of the most important, unsolved dilemmas for society created by the baby boom generation.

Do transportation brokerage services decrease expenditures and improve health outcomes of Medicaid children?

Presenter:

Jinkyung Kim

Authors:

Jinkyung Kim, Edward Norton, Sally Stearns

Chair: Catherine McLaughlin; Discussant: Jenny Kenney Tue June 6, 2006 8:00-9:30 Room 226

Research Objective: To help poor or disabled patients with transportation needs, Medicaid pays for non-emergency medical transportation (NEMT). Tight state budgets and rising Medicaid costs have prompted states to find efficient way of providing the mandatory NEMT services. Twenty-one states now contract with private brokerage companies, which coordinate and finance all service delivery under capitated payments. This study analyzes the effect of transportation brokerage services on Medicaid beneficiaries’ access to care.

Study Design: The study uses retrospective data analysis with a quasi-experimental design. Georgia implemented statewide transportation brokerage services in October 1997. We specified a 21-month pre- and a 21-month post-period using four calendar years of Georgia Medicaid Eligibility and Claims Data, 1996-1999. We use two-part models to predict the effect of transportation brokerage services on monthly Medicaid expenditures, controlling for personal characteristics and month. The dependent variables of interest are total, inpatient, and outpatient Medicaid expenditures. Total expenditures are the sum of all types of expenditures except transportation expenditures.

Population Studied: The study sample is a 20% random sample of children with asthma in Georgia. We identified children with asthma using ICD-9 diagnosis codes and national drug codes. The final study sample had 938,141 observations on 42,157 children at the person-month level. Inpatient, outpatient, and emergency room expenditures are analyzed.

Principal Findings: The shift to transportation brokerage services decreased the probability of any inpatient expenditures by 1.9 percentage points (from a mean of 2 percent) and the probability of outpatient expenditures by 7.4 percentage points (mean of 28 percent). The monthly expenditures per person per month also decreased by $77.28 for inpatient and by $34.35 for outpatient services. Separate analysis for children age 1-2 and age 3-18 revealed that the bulk of savings are from younger children. Incremental effects of per person per month expenditures are statistically significant using bootstrapped standard errors. The probability of any emergency room use decreased by 1.1 percentage points (mean of 6.7 percent), but the decreased emergency room expenditures were not statistically significant. The probability of any emergency room use due to asthma attack is decreased by .2 percentage points (mean of .8 percent).

Conclusions: Transportation brokerage services are associated with an overall decrease in inpatient and outpatient Medicaid expenditures and the probability of using Medicaid services. A larger decrease in inpatient expenditures is offset by a relatively smaller decrease in outpatient expenditures due to greater number of outpatient services users than inpatient services users. Decreased Medicaid expenditures are cost effective if beneficiaries’ health is not compromised. The decreased probability of emergency room visits due to asthma attack provides some evidence that health outcomes for Medicaid children with asthma improved with transportation brokerage services.

Safety Net Health Care as Low-Quality Universal Coverage: Can it be Optimal?

Presenter:

John Goddeeris

Authors:

John Goddeeris

Chair: Catherine McLaughlin; Discussant: Stephen Zuckerman Tue June 6, 2006 8:00-9:30 Room 226

Despite decades of national debate about creating a system of universal health coverage, a substantial segment of the US population remains without formal health insurance. The persistence of this situation suggests that in some sense universal coverage is too costly to be provided in political equilibrium. Yet the uninsured have some access to health care beyond what they can pay for, through social safety net institutions, largely publicly funded (Hadley and Holahan, Health Affairs, 2003). The health care safety net can in fact be viewed as providing some level of health insurance for all, albeit at a low quality level, arguably lower than many of the uninsured would choose for themselves if the safety net did not exist.

This paper explores, using theory and numerical simulations, the conditions under which a low quality safety net can be part of an optimal income redistribution scheme. Safety net health care is modeled as a publicly-provided good which consumers may accept or opt out of, but may not supplement (that is, those who acquire their own insurance do not have access to the safety net). In a model of optimal nonlinear income taxation, with two types of individuals distinguished by ability, public provision of a private good without supplementation can only enhance social welfare when demand for the good has certain characteristics that do not seem to apply to health insurance. However, if available policy tools are more limited (for example, if only an optimal linear income tax is available), public provision of a good at a level that those of low ability will accept but those of high ability will not can be social-welfare enhancing under broader conditions. Nonetheless, depending on various parameters, it may not be possible to improve upon what can be accomplished with tax and cash transfer policy alone, or optimal public provision may be at a higher quality than consumers of low ability would choose for themselves. I explore the sensitivity of (a) whether such public provision of a safety net can be welfare-enhancing and (b) the optimal quality of the safety net, to several factors, including: the distribution of abilities in the population, the income elasticity of demand for health insurance and its substitutability with leisure, the wage elasticity of labor supply, and the degree of aversion to inequality in the social welfare function. The implications for optimal public coverage of an inability to commit not to provide some minimum quality safety net (because of a Samaritan’s dilemma (Coate AER, 1995)) are also explored. I comment on the relevance of the findings to the current US health care financing system.

Do Risk-takers Floss?: Experiments and Health

Presenter:

Julian Jamison

Authors:

Julian Jamison

Chair: David Bradford; Discussant: TBA Tue June 6, 2006 8:00-9:30 Room 235

Experimental economics methodologies provide a valuable and broad set of new tools with which to approach many issues in population health. The underlying idea is to create controlled decision problems (either strategic games or single-person decisions) in a laboratory or field environment, and to pay subjects in cash in order to induce truthful (i.e. incentive compatible) responses. These problems can be used to measure a wide variety of attributes, including: risk and time preferences, fairness/generosity, trust, cooperation/coordination, theory of mind, strategic reasoning, reciprocity, and so on.

There are two main ways to incorporate such methods into health research. The first is to ask subjects about their health behaviors (smoking, exercise, flossing, etc.) and to correlate these answers with their responses in the [context-free] decision problems described above. This has been done so far with a sample of approximately 150 Berkeley MPH students, after which we created an index of health behaviors (with higher scores corresponding to more health-protective behaviors). Interestingly, we find that this index is not correlated with time preference (financial patience), but it is correlated with risk-avoidance (in a financial gamble over losses). This suggests that policy interventions based solely on ‘investment in the future’ are unlikely to be effective. We will be extending this work in the coming months to subject populations in Africa and elsewhere in order to check the robustness of the results in other relevant settings.

The other application of these methods is to utilize them as measures of cognitive response following various stimuli. Specifically, ongoing projects are looking at the effects of alcohol (in a population of young social drinkers) and of sleep deprivation (in a population of emergency medicine residents). In both studies, we will be able to use the economic decision problems in order to assess the cognitive behavioral changes in a novel manner (when compared with the standard psychological tools). Finally, it is possible to use these games as a more fine-tuned instrument to analyze the exact pathways affected by physiological reactivity (e.g. cortisol levels) for determination of health behaviors. The policy implications in all of these cases include both intervention design and more effective targeting of vulnerable populations.

The Effects of Family Health on Health Insurance Status in Fragile Families

Presenter:

Hope Corman

Authors:

Hope Corman, Kelly Noonan, Nancy Reichman, Anne Carroll

Chair: David Bradford; Discussant: TBA Tue June 6, 2006 8:00-9:30 Room 235

Children’s characteristics may affect both a father’s willingness to both maintain a close relationship with the mother and to invest in the child. A number of studies found that married couples are more likely to divorce when their child has a serious health problem. Reichman, Corman and Noonan (2004) found even stronger effects among a sample of mostly unwed parents. That study found that one-year-old children with serious health problems are less likely than their healthy peers to live with their fathers and that their parents’ relationship commitment is more likely to have declined since they were born. This may translate to fewer paternal investments in the child.

The purpose of this study is to systematically explore the determinants of unmarried fathers’ financial and non-financial investments in their three- year-old children, focusing on the role of the child’s health status (i.e., whether they are very low birth weight or have serious health deficits) and other characteristics (gender, multiple birth, birth order), but also considering the nature and trajectory of the parents’ relationship as well as detailed individual characteristics of both parents.

We use data from the Fragile Families and Child Wellbeing (FFCWB) study, a national longitudinal birth cohort study of 5,000 sets of new parents with children born between 1998 and 2000. By design, three-quarters of the births were to unmarried parents. Interviews were conducted with both parents directly following the birth, and again one and three years later. We hypothesize that unmarried fathers will provide less support when they have children of lower quality (i.e., are unhealthy).

The FFCWB data set is particularly suitable for this analysis because it includes detailed information on unmarried fathers even if they never lived in the child’s household-including how much time they spend in the child’s household, how much time they spend with the child, and the extent of support they provide in the form of money (both formal and informal child support) and goods. In addition, the survey captures the fluidity of relationships between unmarried parents; at each wave, parents were asked about their cohabitation status, changes in relationship status, and other aspects of their relationship. Finally, we have collected detailed information from the hospital medical records of the mothers and children, enabling us to better characterize serious child health problems than with the surveys alone, and have merged information on the availability of prenatal health inputs at the neighborhood level.

We consider three potential sources of paternal support during the child’s first three years of life: money, goods, and time. We estimate the effect of the child’s health status and other characteristics on paternal support, controlling for maternal and paternal characteristics including race/ethnicity, education, age, work history, health status, children with other partners, and wantedness of the child, all of which may be associated with both the child’s health and the father’s ability or willingness to provide support.

Do Your Neighbors Influence Your Health?

Presenter:

Heather Bednarek

Authors:

Heather Bednarek, Rowena Pecchenino, Sally Stearns

Chair: David Bradford; Discussant: TBA Tue June 6, 2006 8:00-9:30 Room 235

Recent trends in the U.S. suggest that the health of Americans is on the decline as measured by the increased percentage of obese and overweight individuals and their decreased physical activity. Several explanations for these trends have been put forth in both the theoretical and empirical literature. Hypotheses include technological change that makes production of food cheaper and time spent at work more sedentary, the rise in the number of restaurants, addiction to calories, reduction in smoking, changes in rates of time preference, urban sprawl and the increased reliance on automobiles. The role of social norms on health has also been discussed as a possible factor affecting weight, mostly in a theoretical context.

Social norms matter when it comes to relative comparisons of income, savings, consumption, or happiness as suggested by several studies. However, less has been done to examine such relative comparisons of healthiness. We examine whether, and in what direction, social norms influence one’s relative healthiness. For example, observing a larger number of overweight or obese individuals may provide comfort or acceptance of that level of health for an individual. Alternatively, it may be provide the impetus for an individual to maintain a healthier weight.

Using the National Health Interview Survey (NHIS), we empirically examine the relationship between healthiness and social norms. Health is measured in terms of weight (body mass index), self-reported health, and time spent at leisure healthy activities. Measures of health social norms are constructed from the health information of others in the local geographic region around a given individual. The standard complement of socio-demographic and economic controls for individual characteristics is also included.

If public health officials and policymakers believe there is a role for public policy in improving the health via decreased obesity and increased exercise of individuals, then it is critical to know how social norms influence the weight and physical activity of an individual. Preliminary results suggest that, indeed, social norms matter. If one is surrounded by others with high BMIs, then that increases one’s own weight. Similar results are found with regard to physical activity; the more (less) you see your neighbors engage in exercise, the more (less) you exercise. It appears that when individuals make comparisons of outwardly visible indicators of health, “peer effects” act as a negative force on health whereby an individual feels comfort that he is one among many overweight individuals. Thus, for any policy to be effective at improving health, it must target not just the individual but the entire community.

Overweight in Adolescents and Implications for Health Expenditures

Presenter:

Alan Monheit

Authors:

Alan Monheit, Jessica Vistnes, Jeannette Rogowski

Chair: Albert Okunade; Discussant: TBA Tue June 6, 2006 8:00-9:30 Room 309

Rationale: Adolescents who are overweight (> 95th percentile of the age and gender-adjusted body mass index [BMI] distribution) or at risk of overweight (85th to 95th percentiles) are likely to become overweight adults and be at risk for health conditions associated with high adult health expenditures. However, little is known as to whether being overweight leads to higher health expenditures during adolescence compared to those of normal weight and thus, whether the health expenditures of overweight adults are also present during adolescence. Moreover, little is known regarding the relative contribution of economic factors, parental and family characteristics, and neighborhood attributes in explaining variation in adolescent bodyweight.

Objectives: This paper has two objectives. First, we examine the contribution of economic factors, parental and family attributes, and neighborhood characteristics to adolescent bodyweight, the likelihood of being overweight, or being at risk for overweight. Controlling for parent’s BMI, and thus for adolescent susceptibility to being overweight, we consider whether adolescent weight status is responsive to the price and availability of fast food, the labor supply, educational levels, and health habits of parents, and neighborhood characteristics. Next, we consider the relationship between adolescent bodyweight and health expenditures, controlling for health insurance status, parental educational levels, and household attributes. We consider the sensitivity of our findings to possible endogeneity arising from unobserved attributes of adolescent health status that may be correlated with bodyweight and expenditures, and from measurement error in reported bodyweight.

Methodology: We use data from the Medical Expenditure Panel Survey (MEPS) merged with geographic data on the price/availability of fast food and neighborhood attributes to model variation in bodyweight status among adolescents aged 12 to 19. Our models include a crucial and often omitted variable: parental bodyweight which can reflect both genetic predisposition for adolescent overweight as well as attitudes toward good nutrition. These models also include a comprehensive set of variables capturing economic, household, and neighborhood characteristics. We estimate models of health expenditures to consider whether overweight in adolescents results in enhanced levels of medical spending, and use these results to predict expenditures for adolescents by bodyweight status. We examine the sensitivity of our expenditure estimates to alternative models and to the use of instrumental variable estimates of adolescent bodyweight using parents’ bodyweight and prices of fast and convenience foods as instruments.

Results: Preliminary econometric results restricted to parental and household characteristics reveal that adolescents who are overweight/at risk for being overweight have increased health expenditures compared to those of normal weight in both single-parent and two-parent families. Adolescent overweight is strongly correlated with parental bodyweight and to other factors such as parental educational levels, smoking activity, and high family incomes.

Conclusions: Our findings to date indicate that adolescents who are overweight/at risk of being overweight incur higher health expenditures than those of normal weight. Thus, it appears that high health expenditures associated with being an overweight adult may also be present during adolescence.

Participation in Food Assistance, Maternal Employment, and Child Obesity

Presenter:

Haiyong Liu

Authors:

Haiyong Liu

Chair: Albert Okunade; Discussant: TBA Tue June 6, 2006 8:00-9:30 Room 309

Rationale: The effect of Food Stamp Program (FSP) participation on mitigating food insecurity and childhood obesity is likely to be confounded with maternal employment decisions. For instance, supplemental food subsidies may free up mothers’ time spent in home production, namely food preparation, and enable them to work away from home. It is important to account for the potential income effect and substitution effect when assessing the effects of the FSP on weight health outcomes because both income and maternal time are crucial inputs for child health.

Objectives: The objective of this study is to evaluate the impacts of poverty, FSP, and maternal employment on the risk of obesity in early childhood.

Methodology: This study investigates the interactions between poverty, FSP participation, and maternal employment, as well as their impacts on the risk of obesity among children who are raised in single mother families. The main data source in this study is from the matched mother/child data from the National Longitudinal Survey of Youth (NLSY79). Utilizing the full information maximum likelihood (FIML) method, the empirical model estimates the joint decisions of FSP enrollment and maternal employment along with child health (weight) production function simultaneously to account for the potential endogeneity of these health inputs. The identification strategy used in this paper exploits the time series interactions of all current and lagged exogenous variables and a set of instruments that capture the variations of welfare regulations across states and over time.

Results: The results suggest that FSP participation mitigates the risk of childhood obesity among the poor while maternal employment is positively linked to incidents of obesity over the whole socio-economic spectrum. Both findings are statistically significant. In addition, the racial gap of the weight health problem is widening over years, even after accounting for family income and maternal employment. Finally, estimation methods without adequate control for endogeneity of FSP participation and maternal employment are likely to yield biased results.

Conclusions: The childhood health disparities among different socio-economic stratums are widening, especially for racial minorities. The food assistance programs modestly mitigate the risk of obesity among impoverished children while the risk could be aggravated because of mother’s excessive time spent in the labor market. These findings imply that when single mothers transitioning from welfare to the labor market, policy considerations should be given to their family, especially on relaxed eligibility rules for food assistance.

The Connection between Maternal Employment and Childhood Obesity: Inspecting the Mechanisms

Presenter:

Rusty Tchernis

Authors:

Angela Fertig, Gerhard Glomm, Rusty Tchernis

Chair: Albert Okunade; Discussant: TBA Tue June 6, 2006 8:00-9:30 Room 309

This paper investigates the channels through which maternal employment affects childhood obesity. We use time diaries and interview responses from the Child Development Supplement of the Panel Study of Income Dynamics which combine vital information on children’s time allocation and mother’s labor force participation. Our empirical strategy involves estimating the effect of children’s activities and meal routines on children’s body mass index (BMI), estimating the effect of maternal employment on these activities and routines and then combining these two estimates. We find that the effect of activities on BMI and the effect of maternal employment on activities vary greatly by the mother’s educational status. In particular, when mothers are highly educated, mother’s employment significantly increases time spent watching TV, which in turn, significantly increases a child’s BMI, while when mothers have little education, mother’s employment significantly increases time spent in school, which in turn, significantly decreases a child’s BMI. However, both groups share the same nutritional effect - higher levels of employment reduce the number of meals consumed per day by children, which increases their BMI.

Demand Response of Mental Health Services to Cost Sharing Under Managed Care

Presenter:

Chunling Lu

Authors:

Chunling Lu, Thomas McGuire, Richard Frank

Chair: Glenn Blomquist; Discussant: Mark Dickie Tue June 6, 2006 8:00-9:30 Room 313

Rationale: Demand-side cost sharing on mental health services is usually higher than that on general health services, based on the efficiency rationale that because the demand for mental health care is more responsive to insurance coverage than for general health care services, the welfare loss associated with insurance is higher. Previous studies of price elasticity of demand for mental health services under traditional health care delivery systems, which were mainly done in 80s, provide the supporting evidence by demonstrating a large, statistically significant effect of demand-side cost sharing on the utilization level of mental health services. The new feature of mental health care delivery since 1980s - managed care - was not considered in these studies. The role of demand-side cost sharing in controlling expenditures is different between traditional indemnity plans and managed care plans. Under an indemnity plan, demand-side cost sharing is the only plan policy affecting utilization, whereas in managed care plans, both demand-side cost sharing and managed care mechanisms play roles in determining individuals’ expenditures.

Objective: Demand response under managed care could well be less than under traditional plans, and such a finding would have important implications for designing insurance coverage for mental health care. Although some studies of demand response in managed care have been conducted, none have made an explicit comparison of demand response in traditional and managed care plans. In this study, we use 1996 Medical Expenditure Panel Survey data to examine the demand response of mental health services to demand-side cost sharing under managed health care.

Methodology: The 1996 data are used because this is the only year in which sufficient detail is available on coverage and forms of insurance in order to make the desired comparison. To address the selection problem, we focus on employees (and their dependents) who are privately insured and who have no choice of health plan, a strategy for minimizing the adverse selection problem at least with respect to choice of insurance plans. Couples with more than one insurance plan are also excluded from the analysis. We use logit models to analyze the effect of prices on the probability of any ambulatory mental health uses. We compare the estimated demand response to demand-side cost sharing between managed care plans and non-managed care plans by examining how demand prices affect the likelihood of seeking mental health services.

Results: In the ranges observed, deductibles have no impact on the likelihood of utilization or the level of spending. The coinsurance rate has significantly negative effects on the likelihood of seeking mental health services under conventional plans.

Conclusion: The effect of coinsurance rate on likelihood of seeking mental health services under managed care plan is smaller than that under conventional plans but not significant, implies that demand response to a coinsurance rate under managed care plans is less than that under conventional plans.

Financing and Use of Public Mental Health Services and Costs Among the Seriously Mentally Ill

Presenter:

Todd Gilmer

Authors:

Todd Gilmer

Chair: Glenn Blomquist; Discussant: Mark Dickie Tue June 6, 2006 8:00-9:30 Room 313

Background: Research has shown that how mental health services are financed affects the types and amounts of services provided. Most of these studies have considered differences between fee-for-service (FFS) providers and capitated provider groups. To our knowledge, no published study has examined the characteristics of contractual relationships typical of county-based public mental health systems in California.

Objectives: To analyze the relationship between financing and service delivery in a large community public mental health system among three provider types: county providers, county-contracted providers, and FFS providers.

Research Design: We examined outpatient services, hospitalizations and use of emergency services, and costs for persons treated for schizophrenia, bipolar disorder, or major depression in San Diego County in fiscal years 2002-2003 and 2003-2004 (N=20,562). We assigned clients to one of the three provider types based on where they received the majority of their medication management services. Costs were determined by detailed examination of contracts and cost reports, and were linked to individual level encounter data. Multivariate models were used to adjust for a number of socio-demographic and clinical characteristics expected to affect service use.

Results: Outpatient service use was greatest, and total costs lowest, among clients of county-contracted providers. Clients of FFS providers were more likely than clients of county or county-contracted providers to be admitted to an acute psychiatric facility.

Conclusions: Mental health services use and costs in this population are related to provider type.

The Effect of Health Literacy on Mental Health Service Outcomes in Adult Medicaid Patients

Presenter:

Richard Smith

Authors:

Richard Smith, Christine Davis, Mary Armstrong, Louis de la Parte

Chair: Glenn Blomquist; Discussant: Mark Dickie Tue June 6, 2006 8:00-9:30 Room 313

Rationale: There is growing consensus about the importance of involving health care consumers in medical decisions, as manifested in the rise of consumer-driven insurance plans. The recently proposed reforms for Florida Medicaid represent the introduction of a more consumer-driven model to populations with low economic and social resources. Consumer involvement is a challenge for those who cannot effectively understand health information. Poor health literacy has been found to result in poor health outcomes and excess costs in the tens of billions annually. Little is known, though, about the impact of health literacy on health outcomes within more disadvantaged populations.

Objective: The objective of this study is to develop an empirical model to examine the relationship of patient mental health literacy to utilization, cost, health service quality, and quality of life among current and former Medicaid recipients of mental health services in Florida.

Data: The data for this analysis comes from two sources: 1) the 2002-03 Florida Medicaid claims data, as furnished by the Florida Mental Health Institute (FMHI), and 2) the 2003 Florida Health Services Survey (FHSS), also from FMHI. These cross-sectional data are linked, consisting of all Medicaid-eligible, non-elderly adult consumers, age 20 to 65, who responded to the 2003 FHSS.

Methodology: We specify a three-equation model of the relationship between an individual consumer and his or her mental health care provider, in which outcomes are utilization, quality of care, and quality of life (cost is an outcome derived from utilization). Following earlier theoretical approaches to the provider-patient relationship, and which have recently been extended by one of the authors, we model the relationship as a two-stage process, in which the provider determines quality in the first stage, while the patient, after observing the level of quality, determines quantity (i.e. utilization) in the second stage. In addition, the model tests for consumer “empowerment” (i.e. patient control over care and having it meet needs) as a mediating determining factor between literacy and mental health care outcomes.

We employ two methods for estimating the model. Under the assumption that consumer literacy and empowerment are unrelated, independent determinants in each equation, we use the method of ordinary least squares (OLS) to estimate the model. However, under the assumption that health literacy is mediated in its effect on utilization, quality of care, and quality of life by consumer empowerment, we use the method of two-stage least squares (2SLS) to estimate the model. With 2SLS, the measure of health literacy serves as the identifying instrument for consumer empowerment. We run a standard Hausman specification test to determine which estimating approach (OLS or 2SLS) produces consistent results.

Results: Results are pending and expected to be available by December, 2005. We will relate these results to earlier work by the presenter on the relationship between patient health knowledge and outcomes in the area of general health.

Conclusions: The results will offer initial insights on applying more consumer-driven plans to public health insurance programs intended for low-income and other disadvantaged populations.

Bodyweight and Academic Performance in High School

Presenter:

Edward Schumacher

Authors:

Edward J. Schumacher, Jeff DeSimone

Chair: Glenn Blomquist; Discussant: Alison Evans Cuellar Tue June 6, 2006 8:00-9:30 Room 325

Although childhood obesity has become a major public health issue in the U.S., little evidence exists regarding the impact of being overweight on academic performance. This paper accordingly examines the relationship between bodyweight and grades, using data on high school students in the 2001 and 2003 Youth Risk Behavior Surveys. We isolate a causal effect of bodyweight by specifying an instrumental variable model in which indicators of self-assessed weight relative to the ideal serve as instruments for actual weight. To control for likely sources of deviations between the instruments and actual bodyweight, we also include proxies for time preference and self-esteem. Empirically, our identification strategy works quite well for boys: extremely large partial correlations between the instruments and observed weight produce standard errors sufficiently small to allow for precise inferences, and little heterogeneity with residuals from the academic performance equations is evident. Estimates indicate that additional pounds, being overweight and obesity each reduce grades by a significant amount that exceeds the corresponding OLS effect. Results are similar for girls, though the validity of our procedure is suspect in some specifications.

The Relationship between Education and Health Behaviors: Is it Causal?

Presenter:

Adele Kirk

Authors:

Adele Kirk

Chair: Glenn Blomquist; Discussant: Judith Shinogle Tue June 6, 2006 8:00-9:30 Room 325

An extensive body of literature documents a relationship between formal education and health that is strong, broad, and persistent. When presented with such a robust association, it is natural to make the leap, implicitly if not explicitly, to a presumption of causality. However, some have questioned the causal link on both conceptual and empirical grounds, arguing that the apparent relationship between education and health might in fact be due in some part to third factors, such as time preferences or self-efficacy, common to both educational attainment and health, but generally omitted from empirical models. The omitted-variables problem is exacerbated by the nature of most health-specific surveys. Such surveys, while rich in health data, generally provide sparse socioeconomic information about respondents, and in particular, do not provide much, if any, information about the respondent’s family background and socioeconomic circumstances in youth, when educational intentions and possible determinants of adult health behaviors, such as time preferences, are formed. This paper uses a relatively data-rich longitudinal dataset (NLSY79) and instrumental variables methods to investigate the nature of the observed relationship between educational attainment and health behaviors in midlife (ages 35-40), including smoking, heavy drinking, exercise, recent check-up, and weight control. I first estimate a series of models and compare the estimated effects of education on behaviors when other key variables, such as family background measures, a measure of ability (AFQT), and a measure of locus of control, are omitted and then included. I then estimate instrumental variables (IV) models for each dependent variable, using college proximity, area unemployment rates at the time of schooling, and availability of household reading materials in youth as instruments for educational attainment. Preliminary analyses indicate modest but persistently significant effects for education that are generally robust to the inclusion of covariates in OLS and logit/probit models. IV models of drinking and BMI yield estimates that are comparable in magnitude to OLS/probit models but with considerably larger standard errors. But for models of exercise frequency, recent checkup, and smoking, the IV estimates are larger in magnitude than the naïve estimates, and remain significant. Tests of exogeneity indicate that education is exogenous in models of drinking, BMI, and smoking, but endogenous in models of exercise and recent checkup. Overidentification tests indicate that all instruments are excludable except for unemployment in the case of drinking and household reading materials in the case of smoking. Because theory would suggest that naïve estimates are biased upwards, further analyses will explore why some IV estimates are larger in magnitude, not smaller as expected.

High School Substance Use and Young Adult Labor Market Outcomes

Presenter:

Pinka Chatterji

Authors:

Pinka Chatterji, Jeff DeSimone

Chair: Glenn Blomquist; Discussant: Sandra Decker Tue June 6, 2006 8:00-9:30 Room 325

This paper uses data from the National Education Longitudinal Study (NELS) to estimate the association between high school alcohol and marijuana use and labor market outcomes in young adulthood. Our empirical strategy is twofold. First, we estimate standard OLS models that incrementally add variables that may confound an observed association between substance use and labor market outcomes. These variables draw on the rich, longitudinal data available in NELS and include personal characteristics, family background, and achievement test scores. Next, we instrument for alcohol use using parental beliefs regarding adolescent substance use (measured when the respondent was in high school) as identifying variables – these factors would be expected to be highly correlated with high school substance use, but not directly related to labor market outcomes of the respondent, after controlling for indirect pathways. Overidentification tests support our identification strategy. Our results offer evidence that marijuana use detracts from adult labor market outcomes but findings for alcohol use are less consistent.

Overweight Status and Suicidal Behaviors among Adolescents: Correlation or Causation?

Presenter:

Dhaval Dave

Authors:

Dhaval Dave, Inas Rashad

Chair: Glenn Blomquist; Discussant: Zhun Cao Tue June 6, 2006 8:00-9:30 Room 325

Suicide is the third leading cause of death for adolescents. The suicide rate for individuals 15-19 years of age in 2002, while having recently declined, still remains twice that in 1960. At the same time, the prevalence of being overweight has also steadily risen among adolescents. In 2002, 16.1 percent of adolescents ages 12-19 were overweight, compared to 4.6 percent in 1968. This study utilizes data from the Youth Risk Behavioral Surveillance System (1991-2003) and the National Comorbidity Survey (1991) to explore the causal relationship between overweight (and the perception of overweight) on suicide ideation and attempts. Studies have shown a high degree of correlation between overweight, depressive disorders, and suicidal behaviors. Overweight or the perception of overweight may have a causal impact on depressive disorders, may lead to or reinforce other problem behaviors, and in turn may trigger suicidal thoughts and attempts. On the other hand, adolescents may not be randomly selected into overweight and suicidal behaviors, in which case the unobserved heterogeneity may be driving the association. Propensity score matching and constrained bivariate probit methods are used to assess the degree to which the observed correlation between overweight status and suicidal behaviors is driven by systematic selection rather than true causality. If overweight status is found causally to raise the propensity of engaging in suicidal ideation and attempts, then risk of suicide should be added to the economic costs of obesity. Isolating causal risk factors for suicidal behaviors may also guide targeted interventions for identifying and assisting atrisk youths.

A Healthy Economy Can Break Your Heart

Presenter:

Christopher Ruhm

Authors:

Christopher J. Ruhm

Chair: Thomas C. Buchmueller; Discussant: John Cawley Tue June 6, 2006 8:00-9:30 Room 326

This paper uses panel data econometric methods on data from thods the 20 largest states over the period from 1979 to 1998 to investigate how the risk of death from acute myocardial infarction (AMI) varies with macroeconomic conditions after controlling for demographic factors, fixed state characteristics, general time effects and state-specific time trends. The results indicate that a one percentage point reduction in unemployment is associated with a 1.3 percent increase in the AMI mortality rate. This effect corresponds to 2,500 additional deaths. The increase in relative risk is similar for males and females and is larger for 20 to 44 year olds than for older adults. Nevertheless, because the absolute AMI rate is higher for senior citizens, they account for a greater number of deaths. This suggests the importance of factors like air pollution and traffic congestion that increase with economic activity, are linked to coronary heart disease and may have particularly strong effects on vulnerable segments of the population, such as the frail elderly. AMI mortality risk quickly rises when the economy strengthens and then increases further if the favorable economic conditions persist. This is consistent with strong effects of other short-term factors on heart attack risk and with health being a durable capital stock that is affected by flows of lifestyle behaviors and environmental conditions whose affects accumulate over time.

Local Labor Market Conditions and Health: Is there a Connection and for Whom?

Presenter:

Philip DeCicca

Authors:

Philip DeCicca, Kerwin Charles

Chair: Thomas C. Buchmueller; Discussant: John Cawley Tue June 6, 2006 8:00-9:30 Room 326

Our paper examines the relationship between local labor market conditions and several measures of health and health behaviors for a sample of individuals living in the fifty-eight largest metropolitan areas in the United States. Since the effect of labor market conditions on health may depend on the extent to which one’s employment status is impacted by them, we split our sample into groups whose employment prospects are potentially more and less likely to be affected by such fluctuations. For example, we allow the impact of local labor market conditions to vary with individuals’ ex-ante employment probability. We also allow it to vary by race and education level since previous research suggests the labor market outcomes of non-white and less educated individuals are relatively more affected by economic fluctuations. In preliminary models, we find evidence of procyclical relationships for body weight and psychological well-being for men with low employment probabilities, but no systematic relationships for a variety of health behaviors including cigarette smoking, heavy alcohol consumption, and various levels of physical exercise for these same men. Separate estimates suggest worsening labor market conditions lead to weight gains and reduced psychological well-being among African American men and lower psychological well-being among less educated males. Among these findings, those related to psychological well-being are most pronounced.

Macroeconomic Conditions, Mortality and Health: Evidence from France

Presenter:

Michel Grignon

Authors:

Michel Grignon, Thomas Buchmueller, Marc Perronnin, Florence Jusot

Chair: Thomas C. Buchmueller; Discussant: Sara Markowitz Tue June 6, 2006 8:00-9:30 Room 326

In contrast to the conventional belief that health deteriorates during economic downturns, a growing body of research suggests that mortality and morbidity decline when the economy temporarily weakens. Most studies in this area use data from the U.S. As a result, it is not clear whether this relationship holds in other countries or is an artifact of the unique features of the U.S. health care system and social safety net. This paper extends the literature by using aggregate and individual-level data from France to investigate the relationship between macroeconomic conditions and health outcomes. The aggregate analysis is based on data on mortality and unemployment rates from each of France’s 95 départementes for the period 1982 to 2004. In addition to examining the relationship between overall mortality and unemployment, we conduct separate analyses by source of mortality. The individual-level data come from the Enquête sur la Santé et la Protection Sociale (ESPS), a survey of the French population that has been conducted biennially since 1988. The ESPS provides detailed information on health status, health behaviors and the utilization of medical care. We relate several health outcomes to local economic conditions, controlling for individual demographic and socioeconomic characteristics, general time trends and area fixed effects.

Keeping Up with the Jones and Staying Ahead of the Smiths: Evidence from Suicide Data

Presenter:

Mary Daly

Authors:

Mary C. Daly, Daniel Wilson

Chair: Thomas C. Buchmueller; Discussant: Sara Markowitz Tue June 6, 2006 8:00-9:30 Room 326

A growing theoretical literature posits that individuals’ happiness is a function of both absolute income and relative income. Empirical work on this issue is much more limited, generally relying on surveys of happiness or experimental economics. While such empirical studies point to a role for relative income in the utility function, the extent of inferences based on subjective data or the artificial (and nonrandom) environments of experiments is quite limited. Considering suicide as a revealed preference, we show theoretically how suicide data may be used to draw inferences on utility. We build a simple theoretical model of utility which depends on own income and income relative to a reference group. Suicide is treated as a choice variable reflecting one’s assessment of current and expected future utility. Within this model are nested a number of hypotheses that have been suggested in the theoretical literature on interdependent preferences and relative status. We take this model to a dataset containing suicide rates by county, gender, age, and race cells along with measures of absolute and relative income (by county) and numerous control variables thought to be related to suicide risk. We find strong support the notion that individuals look to others when evaluating their own utility and, in fact, care about the status of those above as well as those below them. Suicide risk for those near the middle of the income distribution rises as inequality in the upper tail (90/50 income ratio) rises. Consistent with a basic keeping-up with-the-Jones model, the suicide risk for the low income population rises with inequality in the lower tail (50/10 ratio). Importantly, we also find that individuals care about the income of those below them: suicide risk for the middle income population falls as inequality in the lower half of the income distribution (50/10) rises, while suicide risk for the high income population falls as inequality in the upper tail (90/50) rises. Overall, these results point to an important role for relative income in models of individual utility.

The Association between Tobacco Marketing Practices and Youth Smoking Attitudes, Beliefs and Behavior

Presenter:

Frank Chaloupka

Authors:

Frank J. Chaloupka, Sandy Slater

Chair: Michael Grossman; Discussant: Amy Wolaver Tue June 6, 2006 8:00-9:30 Room 332

Existing evidence suggests tobacco remains the least regulated consumer product in the U.S. and childhood experimentation with cigarettes and progression to regular use remains a public health concern. Therefore, the purpose of the present study was to examine the association of tobacco point-of-purchase (POP) marketing practices on youth smoking behavior using a nationally representative sample of adolescents. The study used cross-sectional data collected during a five-year period (1999 through 2003) from a nationally representative sample of 8th, 10th and 12th grade students and the communities in which they reside. For the five years of data, there are a total of 109,308 students and 966 community areas. Students were surveyed about their smoking attitudes, beliefs and behavior and tobacco marketing retail information on cigarette placement, advertising, promotions, and prices, as well as tobacco store density, and industry sponsored and health-related tobacco control signage was collected from the communities. Because students were clustered within communities, a generalized estimating equations (GEE) approach was used for empirical analyses with weighted data. All analyses controlled for demographic and socioeconomic characteristics. Lower cigarette prices, less self-service placement, increased levels of tobacco store density, and advertising were found to be associated with more positive attitudes and beliefs about smoking. In addition, lower cigarette prices, self-service placement, higher levels of advertising, and promotions were found to be associated with increased youth smoking behavior. Results vary by attitudinal and behavioral outcome, but, overall, higher cigarette prices had the strongest impact on increasing disapproval and perceived harm, and decreasing prevalence and consumption. The impact of price on youth smoking behavior is conservative when compared to existing literature. However, analyses indicate by accounting for other important dimensions of tobacco marketing practices that previous research did not, may have resulted in the effects of price on youth smoking behavior being overstated. Results also suggest the tobacco retail environment works both directly and indirectly through attitudes and beliefs on behavior. Analyses indicate the tobacco retail environment does influence youth smoking attitudes, beliefs, and behavior, and additional research is need to help translate these findings into successful policies and tobacco control programs.

Access to Fast Food and Food Prices: The Relationship with Fruit and Vegetable Consumption and Overweight Status among Adolescents

Presenter:

Lisa Powell

Authors:

Lisa Powell, M. Christopher Auld, Frank J. Chaloupka, Patrick M. O’Malley, Lloyd D. Johnston

Chair: Michael Grossman; Discussant: Kerry Anne McGeary Tue June 6, 2006 8:00-9:30 Room 332

This study examines the extent to which food prices and restaurant outlet density are associated with adolescent fruit and vegetable consumption, body mass index (BMI) and the probability of overweight. We use repeated cross-sections of individual-level data on adolescents from the Monitoring the Future Surveys from 1997-2003 combined by geocode identifiers with fast food and fruit and vegetable prices obtained from the American Chamber of Commerce Researchers Association and fast food and full-service restaurant outlet density measures obtained from Dun & Bradstreet. The results suggest that the price of a fast food meal is an important determinant of adolescents’ body weight and eating habits: a 10% increase in the price of a fast food meal leads to a 3.0% increase in the probability of frequent fruit and vegetable consumption, a 0.3% decrease in BMI, and a 5.5% decrease in prevalence of overweight. The price of fruits and vegetables and restaurant outlet density are less important determinants, although these variables typically have the expected sign and are often statistically associated with our outcome measures. Despite these findings, changes in all observed economic and socio-demographic characteristics together only explain roughly one-quarter of the change in mean BMI and one-fifth of the change in overweight over the 1997-2003 sampling period.

The Effects of Point-of-Purchase Alcohol Marketing and Promotion on Youth Drinking Behaviors

Presenter:

Lan Liang

Authors:

Lan Liang, Frank J. Chaloupka

Chair: Michael Grossman; Discussant: Shin-Yi Chou Tue June 6, 2006 8:00-9:30 Room 332

Point-of-Purchase (POP) alcohol marketing is widespread in stores frequented by U.S. teenagers and young adults. The alcohol industry has credited substantial increases in alcoholic beverage sales to these on-site marketing campaigns. Little is known, however, about the extent to which POP alcohol marketing contributes to the underage drinking and binge drinking problems. To fill in this gap in the literature, we collected POP alcohol marketing information for a sample of stores in the catchments areas of the schools that participated in the Monitoring the Future Surveys in each of the five years from 1999 to 2003. We then merged this information to the Monitoring the Future Surveys to analyze the effects of these POP marketing practices on the prevalence and frequency of youth drinking and binge drinking. The POP information collected included the placement and intensity of exterior and interior alcohol advertisement, sales and promotion of alcohol, alcohol-branded functional objects, placement of beers, and anti-alcohol signage. Analysis based on the merged data provides evidence on which POP marketing and counter marketing device is an important determinant of youth drinking and binge drinking. This research will help design a more nuanced guideline on POP marketing to curb sales practices that might cause increased underage risky drinking and its related negative outcomes.

Competition and Charity Care

Presenter:

Chris Garmon

Authors:

Chris Garmon

Chair: Deborah Haas-Wilson; Discussant: Gloria Bazzoli Tue June 6, 2006 8:00-9:30 Room 335

Buyer/Seller Bargaining in Option Demand Networks

Presenter:

David Dranove

Authors:

David Dranove, Mark Sattherwaite

Chair: Deborah Haas-Wilson; Discussant: James Langenfeld Tue June 6, 2006 8:00-9:30 Room 335

Hospital Mergers and the Consequences for Underserved Populations

Presenter:

Robert Town

Authors:

Robert Town

Chair: Deborah Haas-Wilson; Discussant: Ted Frech Tue June 6, 2006 8:00-9:30 Room 335

ASHEcon

3rd Biennial Conference: Cornell on June 20-23 2010

Welcome to ASHEcon

The American Society of Health Economists (ASHEcon) is a professional organization dedicated to promoting excellence in health economics research in the United States. ASHEcon is an affiliate of the International Health Economics Association (iHEA). ASHEcon provides a forum for emerging ideas and empirical results of health economics research.