Health Economics

May 8, 2009
Michael Grossman and Theodore J. Joyce, Organizers

Robert Kaestner, University of Illinois and NBER; and Jeffrey H. Silber, University of Pennsylvania
New Evidence on the Efficacy of Medicare Spending

Kaestner and Silber examine the effect of inpatient spending on the mortality and failure-to-rescue of Medicare patients admitted to the hospital between 2001 and 2005. They consider a broad range of patients including those admitted for surgery and medical conditions. They address the potential reverse causality that likely characterizes the relationship between spending and health outcomes using an unusually large set of patient level risk adjusters and instrumental variables. Results from their analysis indicate that spending is significantly and negatively associated with mortality and failure-to-rescue. A 10 percent increase in inpatient spending is associated with a 1 to 2 percent increase in survival. However, measured against conventional estimates of the value of life, such improvements are costly. The rough estimates here suggest a cost of life-year saved of between $177,000 and $4 million depending on the illness.

Kanaka Shetty; Thomas DeLeire, University of Wisconsin, Madison and NBER; Chapin White, Congressional Budget Office; and Jay Bhattacharya, Stanford University and NBER
Changes in U.S. Hospitalization and Mortality Rates Following Smoking Bans

U.S. state and local governments are increasingly restricting smoking in public places. Bhattacharya and his coauthors analyze nationally representative databases, including the Nationwide Inpatient Sample, to compare short-term changes in mortality and hospitalization rates in smoking-restricted regions with control regions. In contrast with smaller regional studies, they find that workplace bans are not associated with statistically significant short-term declines in mortality or hospital admissions for myocardial infarction or other diseases. An analysis simulating smaller studies using subsamples reveals that large short-term increases in myocardial infarction incidence following a workplace ban are as common as the large decreases reported in the published literature.

Partha Deb, Hunter College and NBER; William T. Gallo, Yale University; Padmaja Ayyagari, Yale University School of Public Health; Jason Fletcher, Yale University; and Jody L. Sindelar, Yale University and NBER
Job Loss: Eat, drink and try to be merry?

Deb and coauthors examine the impact of job loss attributable to business closings on body mass index (BMI) and alcohol consumption. They suggest that the ambiguous findings in the extant literature may be caused in part by unobserved heterogeneity in response and in part by an overly broad measure of job loss that is partially endogenous (for example, layoffs). They improve upon this literature by using: exogenously determined business closings, a sophisticated estimation approach (finite mixture models) to deal with complex heterogeneity, and national, longitudinal data from the Health and Retirement Study. For both alcohol consumption and BMI, they find evidence that individuals who are more likely to respond to job loss by increasing unhealthy behaviors are already in the problematic range for these behaviors before losing their jobs. These results suggest the health effects of job loss could be concentrated among “at risk” individuals and could lead to negative outcomes for the individuals, their families, and society at large.

SAMANTHA HEEP, Wellesley College,PHILLIP LEVINE and ROBIN MCKNIGHT, Wellesley College and NBER
Public Policy, Health Insurance, and the Transition to Adulthood

Levine, McKnight, and Heep assess the impact of two recent policies designed to increase insurance coverage for older teens and young adults. The introduction of SCHIP in 1997 enabled low and moderate income teens up to age 19 to gain access to public health insurance. More recent policies adopted by a number of states have enabled young adults between the ages of 19 and (typically) 24 to remain covered under their parents' health insurance. The researchers take advantage of the discrete break in coverage at age 19 to evaluate the impact of SCHIP. They also use quasi-experimental variation across states and years along with the targeted nature of eligibility to evaluate the impact of these "extended parental coverage" laws. Their results suggest that both types of policies were effective at increasing health insurance coverage, especially among the respective target populations. They find little evidence of crowd-out associated with the introduction of SCHIP. Extended parental coverage laws generated reverse crowd-out, as individuals left public insurance coverage to take advantage of the private coverage now available to them.

Joshua Angrist, MIT and NBER; Stacey Chen, Royal Holloway University of London; and Brigham Frandsen, MIT
Did vietnam veterans get sicker in the 1990s?

The veterans disability compensation (VDC) program, which provides a monthly stipend to disabled veterans, is the third largest American disability insurance program. Since the late 1990s, VDC growth has been driven primarily by an increase in claims from Vietnam veterans, raising concerns about costs as well as health. Angrist and his coauthors use the draft lottery to study the long-term effects of Vietnam-era military service on health and work in the 2000 Census. Their estimates show no significant overall effects on employment or work-related disability status, with a small effect on non-work-related disability for whites. On the other hand, the estimates for white men with low earnings potential show a large negative impact on employment and a marked increase in non-work-related disability rates. The differential impact of Vietnam-era service on low-skill men cannot be explained by more combat or war-theatre exposure for the least educated, leaving the relative attractiveness of VDC for less skilled men and the work disincentives embedded in the VDC system as a likely explanation.

Gabriella Conti, University of Chicago; James J. Heckman, University of Chicago and NBER; and Sergio S. Urzua, Northwestern University
Early Endowments, Education, and Health

Conti and her coauthors revisit the relationship between education and health. They disentangle the causal effect of education from the role played by cognitive and socio-emotional abilities, and early-life health in determining adult outcomes. They show that early endowments are important determinants of adult health and success. Using models with unobservable components generated by factor structures, they compute distributions of treatment effects and allow responses to education to vary among observationally equivalent agents. They show that heterogeneity matters and that the individuals with the poorest endowment of capabilities are the ones who benefit the most from education. Their results also indicate that, in general, the average marginal effects of education on health (AMTE) are larger than the estimated average effects (ATE).

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