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Average vs. Marginal Benefit of Medical Treatment

December 8, 2009 in Academic Articles | No comments

“The weak relationship between aggregate spending and health outcomes is in stark contrast to evidence showing pronounced medical benefits for use of specific medical devices, procedures, or pharmaceuticals. For example, advances in the treatment of heart attacks reduced the one-year mortality rate for these patients by 5 percentage points between 1984 and 1991 (Cutler et al., 1998). The use of anti-retroviral drugs among HIV/AIDS patients is associated with approximately a 70 percent drop in mortality…”

A paper by Evans and Garthwaite aim to see if the marginal benefit of additional time in the hospital for newborns improves the baby’s health.  A traditional OLS regression will likely show that a shorter postpartum hospital stay is correlated with better health.  However, this is because doctors release healthier babies from the hospital sooner than they do for sick babies; shorter postpartum hospital stays do not cause an improvement in health.  

To identify the causal affect of newborn initial hospital stay, the authors use an instrumental variables specification.  The instruments are a series of federal and state laws passed in the late 1990s increased considerably postpartum stays for newborns.  This lead to an increase in the length of postpartum hospital stays that is unrelated to the baby’s health.  

With the 2SLS, the authors find little average effect (LATE) of longer postpartum hospital stays on the probability of hospital readmission (a course measure of the baby’s health).  However, the authors also look at the effect of the laws on high risk babies.  This include babies born via C-section, or those with other significant risk factors.  For these high risk babies, longer hospital stays did decrease the probability of hospital readmission.  

Thus, while the average benefit of longer postpartum hospital stays may not be cost-effective for the average baby, it can be highly cost effective for high risk babies.

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Does competition improve health care quality?

January 30, 2009 in Academic Articles, Health Insurance, Quality, Supply of Medical Services | 3 comments

If economists decided to re-write the Ten Commandments, “Thou shalt love Competition” may make the list.  However, does competition always improve quality?  Even in the case of health care?

A paper by Scanlon et al. (2008) “…found no evidence of a strong and consistent relationship between HMO competition (measured either by the HHI or the number of HMOs) and plans’ scores on the CAHPS and HEDIS measures of health plan performance.”  The authors did find, however, that increased competition can lead to lower health premiums.  

Because price is easily observable and quality is not, it seems sensible that increased competition will push down prices, but may not improve quality.  Further, more competition means more fragmented medical care, which can increase the cost to provide quality health care services. 

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Evidence that Women are the stronger sex: Mortality after the death of a spouse

September 30, 2008 in Academic Articles | Permalink

A few papers have found that mortality rises after the death of the spouse.  Some researchers have inferred that this is due to a causal effect of this emotionally traumatic event.  Further, married individuals generally live longer, so the loss of this “marriage protection” could be the cause of increased mortality.  On the other hand, it could be the case that spouses “select” to partner with each other and engage in similar eating and exercise habits and thus have similar mortality.  Further, spouses often partner on the basis of income-generating capacity and education which are also correlated with mortality.  So does the death of a spouse cause an increase in mortality or is this just a case of marriage selection?

This question is what a paper by Espinosa and Evens (JHE 2008) tries to uncover.  This authors look at informative deaths–deaths due to health an individual’s health condition–compared with uninformative deaths (e.g., motor vehicle accident, homicide).  The authors find that men have a significant increase in mortality after the death of their spouse even when the death is “uninformative.”  This authors conclude that for males, this bereavement effect of losing a wife is causing increased mortality.

For women, “The bereavement effect for surviving wives when their husband dies of an uninformative cause is small but with a large standard error, making it statistically indistinguishable from the effect for informative causes.” Thus, there seems that the death of a woman’s husband does not cause increased mortality.

Here is some scientific evidence that women are the stronger sex.

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Maternal Leave and Maternal Health

August 5, 2008 in Academic Articles | Permalink

Does taking time off of work help to improve maternal health after pregnancy? A recent NBER working paper by Pinka Chatterji and Sara Markowitz attempts to answer this question. The abstract of the paper is below:

  • In the United States, almost a third of new mothers who worked during pregnancy return to work within three months of childbirth. Current public policies in the U.S. do not support long periods of family leave after childbirth, although some states are starting to change this. As such, it is vital to understand how length of family leave during the first year after childbirth affects families’ health and wellbeing. The purpose of this paper is to examine the association between family leave length, which includes leave taking by mothers and fathers, and behavioral and physical health outcomes among new mothers. Using data from the Early Childhood Longitudinal Study – Birth Cohort, we examine measures of depression, overall health status, and substance use. We use a standard OLS as well as an instrumental variables approach with county-level employment conditions and state-level maternity leave policies as identifying instruments. The results suggest that longer maternity leave from work, both paid and un-paid, is associated with declines in depressive symptoms, a reduction in the likelihood of severe depression, and an improvement in overall maternal health. We also find that having a spouse that did not take any paternal leave after childbirth is associated with higher levels of maternal depressive symptoms. We do not find, however, that length of paternal leave is associated with overall maternal health, and we find only mixed evidence that leave length after childbirth affects maternal alcohol use and smoking.

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Value of Life in General Equilibrium

August 4, 2008 in Academic Articles | Permalink

Economists believe that the value of life increases as life expectancy increases. While this is generally true, a paper by Jena, Mulligan, Philipson, and Eric Sun (2008) shows that while people value living for a long time, the value this longer life expectancy more when their friends and family also live longer. In the authors own words:

“Put simply, living with others who live 78 years is different than living with others who live only 48 years, so that valuing the extra 30 years of life is not simply a matter of valuing the extra years a single individual lives”

Economists have figured out what Tuck Everlasting had shown be to true many years prior.

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Cochrane Review: The effect of capitation, fee-for-service (FFS) and mixed payment systems on primary care physician behavior

July 21, 2008 in Academic Articles, Physician Compensation | Permalink

Primary care physicians can be compensated in a number of ways. The most popular are capitation, fee-for-service, salary, or some mixture of the three. But how does the physician compensation method affect care levels? This is the question Gosden et al. (2000) try to answer in their Cochrane review. The authors search the literature for randomized trials or controlled before and after studies in order to see how changing physician compensation affects the quantity and quality of care.

A summary of the 4 papers which met Gosden et al.’s criteria is below.

Category Davidson 1992 Hickson 1987 Krasnik 1990 Hutchinson 1996
Country US US Denmark Canada
Type Randomized Trial Randomized Trial Before-and-After Before-and-After
Payment i) age-adjusted capitation; ii) Medicaid FFS; iii) more lucrative FFS i) FFS; ii) Salary Control: Cap/FFS mix; Intervention: Capitation only, changes to Cap/FFS mix Before: FFS; After: mixed capitation, ambulatory care incentive
Physicians Primary Care Providers (PCPs) Residents General Practitioners (GPs) GPs/Family Physicians
Results Comparing FFS and capitation, there was no difference in the number of PCP visits. There was no difference in the number of patients attended The number of face-to-face and phone visits was higher in the control group than the intervention group. Hospital days decrease in all groups, but the change is similar across all payment types.

Controlling for covariates, there were 0.5-0.6 more visits for the capitation group compared to the Medicaid FFS. There were more ER visits for the salaried group compare to the FFS group. After the FFS was implemented in the intervention group, visits increased and converged to that of the control group.

The new, more lucrative FFS increase PCP visits by .8-.9 per patient compared to the Medicaid FFS. Salaried doctors have fewer well-child visits per enrollee After the FFS implementation [intervention group], the number of diagnostic and curative services order increased.

PCPs paid via capitation used fewer specialist and hospital resources After the FFS implementation [intervention group], the number referrals to specialists fell

Patients were less likely to reach recommended visit levels in capitation compared to FFS

The original four articles:

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Would you give up some life expectancy to know the day you will die?

July 11, 2008 in Academic Articles | Permalink

  • “The best-laid schemes o’ mice an’ men. Gang aft agley” – Robert Burns

The only certainty in life is uncertainty. Individuals make plans for their future without knowing how long they will live in reality. Retirement planning, for instance, is very difficult due to uncertain life expectancy. Would you be willing to trade some of your life expectancy in order to be more certain of the date you will perish?

This is the question Ryan Edwards attempts to answer in his 2008 NBER working paper. Countries such as the U.S. and France have a relatively high variance of life expectancy while Sweden and Japan have very low levels of life expectancy variance.

He calculates that “one less year in standard deviation is worth about half a mean life year.” Further, “health inequality must be larger between rich and poor countries than is implied by life expectancy alone, since life-span uncertainty is surely higher in developing countries.”

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Absenteeism and Presenteeism

April 30, 2008 in Academic Articles, Labor Economics | 1 comment

Should employers provide health insurance to their employees? There are many reasons why they should. One is that employees are attracted to firms that offer health insurance, especially since their are tax and cost advantages to group health insurance purchased through an employer. Another reason is that if a worker becomes sick, that reduces productivity. But how much does it cost a firm when either 1) a worker is absent from work (absenteeism) or 2) the worker shows up for work but their productivity is impaired (presenteeism)?

A paper by Pauly et al. (2008) attempts to quantify these costs. Unlike most studies, they use manager estimates of lost productivity. While workers may have better information regarding how much productivity is lost during an illness, workers may have an incentive to answer strategically and further, managers will be the ones ultimately deciding how much health care preventing employee illness is truly worth.

The authors hypothesize that jobs with the following three characteristics will be more affected when a worker becomes ill:

  • jobs with high values of team production,
  • jobs with high requirements for timely output, and
  • jobs with high difficulties of substitution for absent or impaired workers.

A firm of course, can invest in protection measures in the case of illness. For instance, it could cross-train workers, it could accumulate inventory to smooth out periods of down time, or might pay workers to work harder if an employee is missing. Nevertheless, the authors estimate the costs of absenteeism as follows:

Job Type Absence multipliers
Auto Service technician 1.05
Hotel maids 1.05
Customer Service Reps 1.10
Waiters 1.10
Automobile Sales 1.10
MD office receptionists 1.10
Medical Assistants 1.20
Team Assemblers 1.25
Hotel Desk Clerks 1.25
Legal Secretaries 1.27
Construction Workers 1.35
Cooks 1.36
Truck Drivers 1.50
RNs 1.52
Retail Sales 1.60
Paralegals 2.00
Carpenters 2.00
Engineers 2.04

The authors assume that the cost of being absent must be at least the employees wage if the labor market is competitive. We see that the cost of an illness is significantly higher than the wage. Also, jobs that were found to involve more teamwork, had times sensitive products, and for which workers were not substitutable had larger absentee multipliers.

For workers who are sick, but come to work, here is the cost to the firm as a percentage of the employees wage.

Job Type Acute % Chronic %
Auto Service technician 12.5% 12.5%
Hotel maids 12.5% 12.5%
Customer Service Reps 25.0% 15.8%
Waiters 25.0% 20.1%
Automobile Sales 16.1% 12.5%
MD office receptionists 25.0% 25.0%
Medical Assistants 25.0% 25.0%
Team Assemblers 30.0% 38.8%
Hotel Desk Clerks 25.0% 25.0%
Legal Secretaries 25.0% 35.7%
Construction Workers 25.0% 25.0%
Cooks 25.0% 25.0%
Truck Drivers 25.0% 25.0%
RNs 37.5% 37.5%
Retail Sales 37.5% 37.5%
Paralegals 56.4% 75.0%
Carpenters 50.0% 55.1%
Engineers 75.0% 75.0%

One problem with this analysis is that it assumes that this is a one-time illness. If these are long term illnesses, it may be more cost effective for the firm to fire the employee because their sickness is either 1) driving up insurance premiums or 2) causing them to miss too much work. Offering a generous health insurance benefit may help to prevent illness, but may also attract sicker people to the firm. Thus, despite the article’s demonstration that the cost of employees missing work is significantly higher than their wage and that there are large costs when workers come to work when they are sick, it still does not mean that employers will want to offer generous health plans.

  • MV Pauly, S Nicholson, D Polsky, ML Berger, C Sharda (2008). “Valuing Reductions in On-the-job Illness: ‘Presenteeism’ from Managerial and Economic Perspectives.” Health Economics, vol. 17(4): 469-485.

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Science 2.0

April 29, 2008 in Academic Articles, Blogging, Information | Permalink

The Scientific American magazine has an interesting article (“Science 2.0“) about the web, open-access, blogging and research. Should researchers post their results online? Should scientists blog about their methodology?

Pros

It seems like academic research is the perfect forum for social networking and blogging. The sharing of ideas is a key means towards scientific invention/innovation. Posting raw data is a great way for other researchers to verify results, or utilize the same data for different purposes. One cancer researcher noted:

  • “To me, opening up my lab notebook means giving people a window into what I’m doing every day,” Hooker says. “That’s an immense leap forward in clarity. In a paper, I can see what you’ve done. But I don’t know how many things you tried that didn’t work. It’s those little details that become clear with an open [online] notebook but are obscured by every other communication mechanism we have. It makes science more efficient.”

The site OpenWetWare let’s laboratories share their daily experiences online. Further, researchers who are traveling can access their lab notebooks from anywhere in the world with OpenWetWare.

Further, social networking can allow easier collaboration between colleagues working in different parts of the country or different parts of the world.

It seems like researchers would be some of the first people to utilize Web 2.0, but…

Cons

  • “It’s so antithetical to the way scientists are trained,” Duke University geneticist Huntington F. Willard said at the January 2007 North Carolina Science Blogging Conference, one of the first big gatherings devoted to this topic. The whole point of blogging is getting ideas out there quickly, even at the risk of being wrong or incomplete. “But to a scientist, that’s a tough jump to make,” Willard says. “When we publish things, by and large, we’ve gone through a very long process of drafting a paper and getting it peer-reviewed. Every word is carefully chosen, because it’s going to stay there for all time. No one wants to read, ‘Contrary to the result of Willard and his colleagues….’”

Beside the fact that writing about unfinished results is not the way scientists are usually trained, most individuals worry about having their ideas stolen. Having your idea “stolen” by another individual means you will not get the recognition you deserve for coming up with an idea, and your career path can be adversely affected. Doling out credit for work accomplished is an important component of the “old school” journal system.

Other worries include the fact that when junior faculty post critical comments of the work of senior faculty, they may fear some sort of reprisal. This has lead some individuals to use pseudonyms.

Summing up

There are some serious drawback to Science 2.0, but as Timo Hannay, head of Web publishing at the Nature Publishing Group, states, “Our real mission isn’t to publish journals but to facilitate scientific communication.”

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Doctors, Patients, and the Racial Mortality Gap

February 28, 2008 in Academic Articles, Medical Studies | Permalink

Differences in the health outcomes between white and minority patients has been well documented in the medical and economics literature. Reasons for this difference could be:

  • Unequal access to treatment. Minorities are poorer and less likely to be covered by insurance than whites.
  • Unequal treatment – Minorities are less likely to have a regular doc, which leads to discontinuities in care.
  • Unequal quality of care available to minorities – For instance, doctors who treat blacks are less likely to be board certified.

A recent paper by Emilia Simeonova tries to dig deeper into what is causing the racial mortality gap for chronic heart failure (CHF). CHF is one of the leading causes of death for the elderly and one of the major components of the racial mortality gap.

Methods

Ms. Simeonova uses a six-year panel data set from Veterans Affairs [i.e.: the VHA Medical SAS inpatient and outpatient datasets,the Beneficiary Identification Records Locator Subsystem (BIRLS) death files, the VHA Enrollment files, and the Veterans Service Support Administration (VSSA) clinic performance measures database]. The data allow the author to compare treatment within facilities rather than just between them. This is important because it is possible that blacks go to bad doctors and whites go to good doctors and this may constitute the entire mortality gap. By comparing outcomes within a clinic or within the same doctor, the author can better analyze what is causing the mortality differences.

The author calculates 3 year survival probabilities conditional on surviving two years. This should help to eliminate different CHF severity levels. In her regression, Simeonova uses patient and clinic characteristics, as well as clinic fixed effects, and time and cohort dummies. Simeonova measures doctor quality as the probability the doctor prescribes beta blockers and ACE inhibitors to patients with chronic heart failure (CHF). However, another aspect of the quality of medical care is patient compliance. Patient compliance is calculated as the number of prescriptions filled on time divided by the total number of prescriptions filled.

Results

Simeonova finds that doctor quality accounts for 5% of the CHF mortality gap and socio-economic factors account for 20% of the differences in CHF mortality. However, the vast majority of the mortality differences are due to the fact that blacks are less likely to take their medication than whites.

“I show that doctor quality significantly influences patient outcomes. While minority patients visit slightly less competent doctors, this does not explain the large gap in survival. Individual doctors are found to treat their patients similarly regardless of race. On the patient side, I demonstrate that variation in compliance triggers a racial mortality gap. Differences in patient response to treatment significantly alter survival probabilities. Considerable reductions in medical costs could be achieved by convincing patients of the importance of strictly following the therapy regimen. I estimate that targeting compliance patterns could reduce the black-white mortality gap by at least two-thirds.”

Also interesting is that the paper found that when blacks have a regular doctor, they end up seeing a lower quality doctor. Nevertheless, compliance rates and mortality decrease for blacks when they have a regular doctor despite the fact that this doctor may be of a somewhat lower quality.

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