Macroeconomic Perspectives on the Value of Health

An NBER conference on Macroeconomic Perspectives on the Value of Health took place November 8 in Cambridge. Research Associate Chad Syverson of University of Chicago organized the meeting, sponsored by the Robert Wood Johnson Foundation. These researchers' papers were presented and discussed:

David M. Cutler, Harvard University and NBER

A Satellite Account for Health in the United States

Adriana Lleras-Muney, University of California, Los Angeles and NBER, and Flavien E. Moreau, University of California, Los Angeles

A Unified Law of Mortality for Economic Analysis

Lleras-Muney and Moreau propose a dynamic production function of health and use it to understand the dynamics of population mortality and health from birth to death, across time, and across species. The parsimonious model provides an excellent fit for the mortality and survival curves for both primate and human populations. The model sheds light on the dynamics behind many phenoma documented in the literature, including (i) the existence and evolution of mortality gradients across socio-economic statuses, (ii) non-monotomic dynamic effects of in-utero shocks, (iii) persistent or "scarring" effects of wars and (iv) mortality displacement after large temporary shocks such as extreme weather.

Seidu Dauda, World Bank Group; Abe Dunn, Bureau of Economic Analysis; and Anne E. Hall, Department of the Treasury

Are Medical Prices Still Declining?: A Systematic Examination of Quality-adjusted Price Index Alternatives for Medical Care

More than two decades ago a well-known study provided evidence from heart attack treatments suggesting that prices in medical care were actually declining, when appropriately adjusted for quality. Dauda, Dunn, and Hall revisit this subject looking at a large number of conditions and more recent and more comprehensive data sources to compare alternative methods of quality adjustment. A method based on utility theory produces the most robust and accurate results, while the alternative methods used in recent work overstate inflation. Based on claims data for three medical conditions as well as data on medical innovations from over 7,000 cost-effectiveness studies spanning all major condition categories and types of treatment, the researchers find that, when properly adjusted for quality, declining prices from innovation are a prevalent feature of this sector. These findings have important implications for the measurement of medical care output and productivity.

Mary O'Mahony and Lea Samek, King's College London

Health and Human Capital

O'Mahony and Samek examine the impact of morbidity on human capital stocks (HCS) with an application to the UK from 1996 to 2018. The researchers incorporate health status into the standard Jorgenson-Fraumeni lifetime income measure of HCS through its effect on absenteeism and presenteeism (lost productivity) by taking account of inactivity due to illness and modelling the impact of health on earnings and retirement behaviour. The researchers employ the approach of estimating individual health indices, which reduce concerns for reporting and errors-invariable bias, and takes account of individuals' and spouses' health as well as caring responsibilities due to adverse health of third parties. The results show that overall poor health leads to a reduction in HCS by about 12 per cent in 2018, but shows a slight tendency to decrease over time. This is mostly driven by inactivity due to long-term illness, and retirements for those aged over 50. There are significant impacts of poor health on earnings, especially for males, but the results show only a small impact on HCS from earnings as most people in poor health are not economically active. The results vary by qualification level, gender and age, with productive HCS reduced by about 45 per cent for individuals aged 50 years or older with low qualifications.

Anne E. Hall, Department of the Treasury

Declines in Health and Widening Socioeconomic Inequalities Among the Working-Age Population and Their Implications for Work-related Disability: Evidence from the National Health Interview Survey 1997-2018

Hall documents both an overall decline in health and a widening gap in health between the more and less educated among the US population aged 25-64 between 1997 and 2018 in the National Health Interview Survey (NHIS). Hall then considers the implications of these trends for trends in work-related disability in this population. Some of the largest contributors by medical condition to the decline were increases in the prevalences of diabetes and hypertension and their complications, mental and emotional disorders, musculoskeletal problems, and asthma. All but the last are also implicated in widening inequality between education groups. Trends in work-related disability closely track trends in health and appear to be driven by the same factors. The shares of employed and nonemployed men with serious health problems is unchanged over the past twenty years, implying a tight connection between men’s health and employment. Meanwhile, the share of non-employed women with serious health problems has trended up over the same time period.

Colleen Carey, Cornell University and NBER, and David Molitor and Nolan H. Miller, University of Illinois at Urbana-Champaign and NBER

Why Does Disability Insurance Enrollment Increase During Recessions? Evidence from Medicare

Charles I. Jones and Peter J. Klenow, Stanford University and NBER

The Economic Well-Being of the U.S. Population, 1970 - Present (Slides)

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