The extent to which increasing longevity increases per capita demand for long-term care depends on the degree to which utilization is concentrated at the end of life. We estimate the marginal effect of proximity to death, measured by being within two years of death, on the probabilities of nursing home and formal home care use, and we determine whether this effect differs by availability of informal care —i.e. marital status and co-residence with an adult child. The analysis uses a sample of elderly aged 70+ from the 1993-2002 Health and Retirement Study. Simultaneous probit models address the joint decisions to use long-term care and co-reside with an adult child. Overall, proximity to death significantly increases the probability of nursing home use by 50.0 percent and of formal home care use by 12.4 percent. Availability of informal support significantly reduces the effect of proximity to death. Among married elderly, proximity to death has no effect on institutionalization. In conclusion, proximity to death is one of the main drivers of long-term care use, but changes in sources of informal support, such as an increase in the proportion of married elderly, may lessen its importance in shaping the demand for long-term care.
Proximity to death; long-term care; informal care
We estimate a health investment equation, derived from a health capital model that is an extension of the well-known Grossman model. Of particular interest is whether the health production function has constant returns to scale, as in the standard Grossman model, or decreasing returns to scale, as in the Ehrlich-Chuma model and extensions thereof. The model with decreasing returns to scale has a number of theoretically and empirically desirable characteristics that the constant returns model does not have. Although our empirical equation does not point-identify the decreasing returns to scale curvature parameter, it does allow us to test for constant versus decreasing returns to scale. The results are suggestive of decreasing returns and in line with prior estimates from the literature. But when we attempt to control for the endogeneity of health by using instrumental variables, the results become inconclusive. This brings into question the robustness of prior estimates in this literature.
health investment; lifecycle model; Grossman model; optimal control
We formulate a stylized structural model of health, wealth accumulation and retirement decisions building on the human capital framework of health and derive analytic solutions for the time paths of consumption, health, health investment, savings and retirement. We argue that the literature has been unnecessarily restrictive in assuming that health is always at the “optimal” health level. Exploring the properties of corner solutions we find that advances in population health decrease the retirement age, while at the same time individuals retire when their health has deteriorated. This potentially explains why retirees point to deteriorating health as an important reason for early retirement, while retirement ages have continued to fall in the developed world, despite continued improvements in population health and mortality. In our model, workers with higher human capital invest more in health and because they stay healthier retire later than those with lower human capital whose health deteriorates faster.
health; demand for health; health capital; medical care; labor; retirement
For many disorders, patient heterogeneity requires physicians to customize their treatment to each patient’s needs. We test for the existence of customization in physicians’ prescribing for bipolar disorder, using data from a naturalistic clinical effectiveness trial of bipolar disorder treatment (STEP-BD), which did not constrain physician prescribing. Multinomial logit is used to model the physician’s choice among five combinations of drug classes. We find that our observed measure of the patient’s clinical status played only a limited role in the choice among drug class combinations, even for conditions such as mania that are expected to affect class choice. However, treatment of a patient with given characteristics differed widely depending on which physician was seen. The explanatory power of the model was low. There was variation within each physician’s prescribing, but the results do not suggest a high degree of customization in physicians’ prescribing, based on our measure of clinical status.
Bipolar disorder; pharmaceuticals; prescribing decisions; personalization
Reflecting drug use patterns and criminal justice policies throughout the 1990s and 2000s, prisons hold a disproportionate number of society’s drug abusers. Approximately 50% of state prisoners meet the criteria for a diagnosis of drug abuse or dependence, but only 10% receive medically based drug treatment. Because of the link between substance abuse and crime, treating substance abusing and dependent state prisoners while incarcerated has the potential to yield substantial economic benefits. In this paper, we simulate the lifetime costs and benefits of improving prison-based substance abuse treatment and post-release aftercare for a cohort of state prisoners. Our model captures the dynamics of substance abuse as a chronic disease; estimates the benefits of substance abuse treatment over individuals’ lifetimes; and tracks the costs of crime and criminal justice costs related to policing, adjudication, and incarceration. We estimate net societal benefits and cost savings to the criminal justice system of the current treatment system and five policy scenarios. We find that four of the five policy scenarios provide positive net societal benefits and cost savings to the criminal justice system relative to the current treatment system. Our study demonstrates the societal gains to improving the drug treatment system for state prisoners.
benefits; costs; substance abuse treatment; inmates; simulation
Newer technologies to treat many mental illnesses have shown substantial heterogeneity in diffusion rates across states. In this paper, I investigate whether variation in the level of managed care penetration is associated with changes in state-level diffusion of three newer classes of psychotropic medications in fee-for-service Medicaid programs from 1991-2005. Three different types of managed care programs are examined: capitated managed care, any type of managed care and behavioral health carve-outs. A fourth order polynomial fixed effect regression model is used to model the diffusion path of newer antidepressant and antipsychotic medications controlling for time-varying state characteristics. Substantial differences are found in the diffusion paths by the degree of managed care use in each state Medicaid program. The largest effect is seen through spillover effects of capitated managed care programs; states with greater capitated managed care have greater initial shares of newer psychotropic medications. The influence of carve-outs and of all types of managed care combined on the diffusion path was modest.
diffusion; managed care; psychotropic; medication; mental health
One of the most intractable problems in international health research is the lack of comparability of health measures across countries or cultures. We develop a cross-country measurement model for health in which functional limitations, self-reports of health, and a physical measure are interrelated to construct health indices. To establish comparability across countries, we define the measurement scales by the physical measure while other parameters vary by country to reflect cultural and linguistic differences in response patterns. We find significant cross-country variation in response styles of health reports along with variability in genuine health that is related to differences in national income. Our health indices achieve satisfactory reliability of about 80% and their gradients by age, income, and wealth for the most part show the expected patterns. Moreover, the health indices correlate much more strongly with income and net worth than self reported health measures.
health measurement; latent variables; LISCOMP
We examine the link between employment status and suicide risk using a panel of US states from 1996 to 2005 with monthly data on suicides, the duration of unemployment spells and the number of job losses associated with mass layoff events. The use of aggregate data at the monthly level along with the distribution of unemployment duration allows us to separate the effect of job loss from the effect of unemployment duration, an important distinction for policy purposes, especially for the timing of potential interventions. Our results are consistent with unemployment duration being the dominant force in the relationship between job loss and suicide. Nevertheless, mass layoffs may be powerful localized events where suicide risk increases shortly afterward. Implications for the design of unemployment insurance are discussed.
Suicide; Unemployment; Mortality; Aggregate panel data
This paper argues that health economists should consider the costs and benefits of preventing rather than treating disease. It sketches a developmental approach to health that examines the costs and benefits of interventions over the life cycle.
Health; Prevention; Remediation; Capabilities; Technology of Capability Formation
Reduced crime provides a key benefit associated with substance abuse treatment (SAT). Armed robbery is an especially costly and frequent crime committed by some drug-involved offenders. Many studies employ valuation methods that understate the true costs of robbery, and thus the true social benefits of SAT-related robbery reduction. At the same time, regression to the mean and self-report bias may lead pre–post comparisons to overstate crime reductions associated with SAT.
Using 1992–1997 data from the National Treatment Improvement Evaluation Study (NTIES), we examined pre–post differences in self-reported robbery among clients in five residential and outpatient SAT modalities. Fixed-effect negative binomial regression was used to examine incidence rate reductions (IRR) in armed robbery. Published data on willingness to pay to avoid robbery were used to determine the social valuation of these effects. Differences in IRR across SAT modalities were explored to bound potential biases.
All SAT modalities were associated with large and statistically significant reductions in robbery. The average number of self-reported robberies declined from 0.83/client/year pre-entry to 0.12/client/year following SAT (p < 0.001). Under worst-case assumptions, monetized valuations of reductions in armed robbery associated with outpatient methadone and residential SAT exceeded economic costs of these interventions. Conventional wisdom posits the economic benefits of SAT. We find that SAT is even more beneficial than is commonly assumed.
drug treatment; robbery; contingent valuation; cost-benefit; substance abuse
New evidence suggests that individuals do not always make rational decisions, especially with regard to health habits. Smoking, misuse of alcohol, overeating and illicit drug use are leading causes of morbidity and mortality. Thus, influencing health habits is critical for improving overall health and well-being. This editorial argues that economists should take a more active role in shaping individuals’ health habits.
Two recent innovations in economic theory pave the way. One change is that some economists now view rationality as bounded and willpower in short supply. Another, related to the first, is a more accepting perspective on paternalism, authorizing economists to help individuals make better choices when the neoclassical model breaks down. Findings from psychology offer incentive-based approaches; specifically, contingency management (CM). Economists could use this approach as a basis for developing public and private policies.
The time trade-off is widely used in population-based surveys to estimate health-state valuations. Typically, respondents may characterize states as being better than or worse than dead. However, worse-than-dead responses can produce strongly negative mean values, so various analytic transformations of these responses have been suggested. The episodic random utility model (eRUM), operationalized using a linear regression estimator, was proposed as an alternative to these transformations, in part because of its theoretical appeal. We analyzed the eRUM estimator’s mathematical properties and found that it violates monotonicity under certain patterns of survey responses, such that improvement in some individual valuations would imply a lower overall valuation for a given health state. Consequently, it is possible that orderings of alternative strategies based on eRUM valuations could lead a decision-maker to choose a strictly dominated strategy. Re-analyzing data from a large population-based EQ-5D valuation survey in the United Kingdom, we found 27% of all time trade-off responses (63% of all worse-than-dead responses) met the conditions for violation of monotonicity, and 74% of all respondents had at least one such response. These results present some challenge to the use of the eRUM estimator in generating health-state valuations for population health measurement and economic evaluation.
Quality-Adjusted Life Years; Quality of Life; Statistical Model; Utility Theory
In this paper, we present evidence on the health effects of a health insurance intervention targeted to poor children using data from a randomized policy experiment known as the Quality Improvement Demonstration Study (QIDS). Among study participants, using a difference-in-difference regression model, we estimated a 9-12 and 4-9 percentage point reduction in the likelihood of wasting and having an infection, as measured by a common biomarker C-reactive Protein, respectively. Interestingly, these benefits were not apparent at the time of discharge; the beneficial health effects were manifest several weeks after release from the hospital.
Health; Occupational Characteristics
The primary statistical challenge that must be addressed when using cross-sectional data to estimate the consequences of consuming addictive substances is the likely endogeneity of substance use. While economists are in agreement on the need to consider potential endogeneity bias and the value of instrumental variables estimation, the selection of credible instruments is a topic of heated debate in the field. Rather than attempt to resolve this debate, our paper highlights the diversity of judgments about what constitutes appropriate instruments for substance use based on a comprehensive review of the economics literature since 1990. We then offer recommendations related to the selection of reliable instruments in future studies.
instrumental variables (IV); endogeneity; substance use
marijuana; high school completion; propensity scores
This essay discusses research on incentive-based interventions to promote healthy behavior change, contingency management (CM) and conditional cash transfers (CCT). The overarching point of the essay is that CM and CCT are often treated as distinct areas of inquiry when at their core they represent a common approach. Some potential bi-directional benefits of recognizing this commonality are discussed. Distinct intellectual traditions probably account for the separate paths of CM and CCT to date, with the former being rooted in behavioral psychology and the latter in microeconomics. It is concluded that the emerging field of behavioral economics, which is informed by and integrates principles of each of those disciplines, may provide the proper conceptual framework for integrating CM and CCT.
contingency management; conditional cash transfers; incentive-based interventions
The number of Americans who are overweight or obese has reached epidemic proportions. Elevated weight is associated with health problems and increased medical expenditures. This paper analyzes Waves 1 and 2 of the National Epidemiological Survey of Alcohol and Related Conditions (NESARC) to investigate the role of alcohol consumption in weight gain. Alcohol is not only an addictive substance but also a high-calorie beverage that can interfere with metabolic function and cognitive processes. Because men and women differ in the type and amount of alcohol they consume, in the biological effects they experience as a result of alcohol consumption, and in the consequences they face as a result of obesity, we expect our results to differ by gender. We use first-difference models of body mass index (BMI) and alcohol consumption (frequency and intensity) to control for time-invariant unobservable factors that may influence changes in both alcohol use and weight status. Increasing frequency and intensity of alcohol use is associated with statistically significant yet quantitatively small weight gain for men but not for women. Moreover, the first-difference results are much smaller in magnitude and sometimes different in sign compared to the benchmark pooled cross-sectional estimates.
alcohol; body weight; BMI; obesity; fixed-effects
This study uses the second National Family Health Survey (NFHS-2) of India to estimate the effect of state-level public health spending on mortality across all age groups, controlling for individual, household, and state-level covariates. We use a state’s gross fiscal deficit as an instrument for its health spending. Our study shows a 10 % increase in public spending on health in India decreases the average probability of death by about 2%, with effects mainly on the young, the elderly, and women. Other major factors affecting mortality are rural residence, household poverty, and access to toilet facilities.
health spending; mortality; India; multi-level; instrumental variable Running head: Public spending on Health and Mortality India
There is a debate about the extent to which the effect of prenatal smoking on infant health outcomes is causal. Poor outcomes could be attributable to mother characteristics which are correlated with smoking. I examine the importance of selection on the effect of prenatal smoking by using three British cohorts where the mothers’ knowledge about the harms of prenatal smoking varied substantially. I find that the effect of smoking on the probability of a low birth weight birth conditional on gestation is slightly more than twice as large in 2000 compared to 1958, implying that selection could explain as much as 50 percent of the current association between smoking and birth outcomes.
smoking; child health; selection
Quantile regression; Instrumental variables; Prenatal care; Birth weight; Infant health; Health production