Transcript Lecture 1: Overview

A Guided Tour on research in
Health Economics and its
relevance for the Health Policy
Agenda
Prof. Guillem López-Casasnovas
Depart. of Economics Univ. Pompeu Fabra.
intro

HEALTH ECONOMICS AS A A
DISCIPLINE: ECONOMICS!!!!

HEALTH ECONOMICS AS A RESEARCH
AREA: WIDE SCOPE WITH THE ADDED
VALUE OF INTERDISCIPLINARITY…
2
A
B
WHAT INFLUENCES HEALTH? (OTHER
THAN HEALTH CARE) Occupational
hazards; consumption patterns; Education;
Income etc
WHAT IS HEALTH? WHAT IS ITS
VALUE? Perceived attributes of health;
health status indexes; value of
life; utility scaling of health
E
F
C
MICRO-ECONOMIC
EVALUATION AT TREATMENT
LEVEL Cost effectiveness & cost
benefit analysis of alternative
ways of delivering care (e.g.
choice of mode, place, timing or
amount) at all phases (detection,
diagnosis,treatment, after care
etc.)
DEMAND FOR HEALTH CARE Influences of A
+ B on health care seeking behaviour; barriers
to access (price, time, psychological,
formal); agency relationship; need
MARKET
EQUILIBRIUM Money
prices, time prices,
waiting lists & nonprice rationing systems
as equilibrating
mechanisms and their
differential effects
D
SUPPLY OF HEALTH CARE Costs of
production; alternative production
techniques; input substitution; markets
for inputs (workforce, equipment, drugs
etc.); remuneration methods and incentives
H
PLANNING, BUDGETING &
MONITORING MECHANISMS Evaluation
of effectiveness of instruments available
for optimising the system; including the
interplay of budgeting, workforce
allocations; norms; regulation etc. and the
incentive structures they generate.
G
EVALUATION AT WHOLE SYSTEM LEVEL Equity &
allocative efficiency criteria brought to bear on E + F; interregional & international comparisons of performance
3
in the research-frontier agenda under the
Williams’ frame of the discipline areas…

‘A’ area: Grossman’s demand for health in the
HK tradition, expanded at the macro level by
reframing the neoclassical production function

‘B’ area: QALY common ground analysis
– Psychometrics at the micro
– Time series analysis for the value of health at the
macro level (controlling for exogenous factors other
than health care!!)
4
... in the research-frontier agenda

‘C’ area: demand for health care, under
uncertainty (ie. Insurance). Premia (actuarilly
fair), prices, copayments, deductibles. The Rand
experiment (70s!). Models of principal-agent
relationship, moral hazard (HSAs in the policy
arena), explaining waiting lists...

‘D’ area: supply -induces demand: how many
doctors, professional incentives, team production
(and free riding), productivity, pay per
performance, variation in clinical practice,
‘moonlighting’...
5
... in the research-frontier agenda

‘E’ area: public intervention in health care:
‘welfarists’ against ‘non-welfarists’. Eliciting
preferences (eg. Conjoint analysis) vs. willingness to
pay models. Plus cost analysis, bayesian approach to
economic evaluation, prioritisation...

‘F’ area: markets in health care (information theory,
uncertainty), third party payment systems, optimal
rate setting (semi-parametric cost frontier analysis)
and optimal risk pooling, efficient prices (‘blending’
prospective and retrospective), risk adjustment
techniques for risk selection avoidance....
6
... in the research-frontier agenda

‘G’ area: Global system evaluation in the public health
tradition + WB + WHO + EQUTY project + global
burden of disease impacts + analysis on how to combine
public and private (insurance) systems... Under policy
evaluation techniques ‘matching samples’, double and
triple difference in difference models...

‘H’ area: in the NHS tradition, Markov’s models,
simulation techniques for changed scenarios, needs
estimation, normative standarisation of utilisation,
political devolution, the provision-production split, the
Health System Integration Study, coordination in health
care delivery, the optimal decentralisation and risk
transfer to providers, rol for private care in public health
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systems...
I.- Health Economics is ‘what
health economists do’

Some selected 2007 & 2008 papers for the
Arrow’s Award
8
9
Bleakley, QJE

Paradigmatical evaluation of a public
policy (before/after type) under rich
longitudinal pannel data regression
analysis, under Indirect Least Sqares plus
subsampling and comparison of methods.
Assessing the social externalities derived
from the hookworm eradication
programme
10
11
Chandra & Staiger, JPE

Mostly theory oriented contribution. In the
empirical part the paper argues against the
flat of the curve hypothesis in myordial
surgery. It accounts for the potential
biased selection effect (surgery for those
with a higher likelihood of recovery) that
biases OLS. It uses instrumental variable
methods after some initial logits on the
cardio illness probability
12
13
Das & Hammer, J Devel Econom

Geographical dual practice possibilities
and/or biased selection public/private
physicians’ employment choice may be a
problem. The paper follows a matching
propensity score approach, sorting by
income, patient characteristics, location,
etc. It compares non lineal probit results
with OLS.
14
15
Finkelstein, QJE

Generalized linear model, weighted and
unweighted OLS. Estimation, trend and
actual residual (before and after type)
since the introduction of Medicare on
health care insurance and on a full range
of affected variables...
16
17
Fishback et al. Rev of
Econom & Statistics

Searching for the relief costs of the lifes
saved by the program. Micro panel data
for understanding the effects of the great
depression: OLS, OLS with fixed effects
ands 2SLS with fixed effects
18
19
Glazer et al. JHE

Pure theoretical contribution (Game
Theory)
20
21
Hall & Jones QJE

Theory Model calibration Numerical
results in valuing how marginal utility of
extending life increases, and not decline,
with rising incomes
22
23
Iizuka, Rand Journal

Mc Fadden standard nested logit- share
equation, on how physicians mark up the
prescribed drugs. Nested logit models
with/without instrumental variables plus
random coefficients with instrumental
variables.
24
25
Avery et al. JPE

Dealing with the reverse causality problem
between advertising and consumption
Instrumental variables approach, OLS and
linear probability models.
26
27
Biglaiser & Ma Rand Journal

Pure theoretical contribution
28
29
Acemolglu & Finkelstein, JPE

Mostly theoretical plus time series analysis
on how hospitals react to changes.
Censored data estimation between those
who adopt and who does not technological
changes
30
31
Aldi & Viscusi, Rev of Econom
& Statistics

Adjusting the value of the statistical life
for age and cohort effects. Observing the
wage/ risk trade-offs. Age specific
regression analysis of hedonic wages,
extended to a two stage minimum distance
estimator. Data pooling in order to control
for the birth-cohort effect.
32
33
Brown & Finkelstein, AER

Estimation of the crowding-out effect
between public and private programs for
health insurance Medicaid and Long Term
Care. Model calibration and numerical
simulation of the before and after type
34
35
Card et al., AER

Time series analysis from rich micro data
on the impact of the Medicare
implementation on the utilization of health
care services. Before and after comparison
once having adjusted for hospital diversity
and several other interactions.
36
37
Fang et al., JPE

Testing advantageous selection: whether
risk averters are ‘cookies’: they insure
more and utilize less. Why and how. Rich
data set very much worked with, two
micro panel and OLS estimation.
38
39
Leonard, JHE

Random effects logit regression, since
among the observations some physicians
without changes in the patients’
satisfaction. Comparing this with fixed
effects estimation for those with variation
of patients’ satifation versus utilizing
random effects for all the sample.
Haussman test for the difference.
40
41
Martin et al., JHE

On the potential endogeneity of health
care spending on health programs (money
flows where health problems exist, and
resources tend to correct them). Tackling
the problem by Instrumental variables and
two stage least squares. Testing the
validity of several instruments.
42
43
Van Houtven & Norton, JHE

Testing the effects of heterogeneous informal
care treatments on Medicare expenses. Two part
expenditure model according to the type of
informal home care, once controlling for
endogeneity through instrumental variables
(since formal and informal care are mostly
interdependent but only formal care impacts on
spending). Since 2SLS standard structure is
inconsistent in controlling for endogeneity, they
adopt two stage residual inclusion and for the
discrete outcomes, a probit for instrumental
variables.
44
45
Yin, JHE
Panel data and a difference-in-difference
approach for orphan drugs and others,
since orphans are subject to a different set
of incentives. Testing the effectiveness of
these incentives in terms of actual
pharmaceutical innovation
46
GENERAL THEORETICAL TREND
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GROWING ANALYTICAL
SOPHISTICATION
USA DOMINATES
PUBLIC HEALTH EXTERNALITIES WITH
RENEWED INTEREST
MACRO: HEALTH VALUE GAINS
MICRO: CLINICAL PRACTICE AND
INCENTIVES
47
GENERAL THEORETICAL TREND



INSURANCE, MORAL HAZARD & COSTS
LESS ON CBA OR CEA
PROVIDERS SUPPLY/ DEMAND OF
HEALTH CARE VERY MUCH SENSITIVE
TO THE ESPECIFICITY OF THE HEALTH
SYSTEMS FOR EXTRAPOLATING
RESULTS
48
GENERAL EMPIRICAL TREND


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REGRESSION ANALYSIS BEFORE AND
AFTER TYPE
INSTRUMENTAL VARIABLES FOR
ENDOGENEITY
DIFFICULTY IN TESTING THE
DIRECTION OF THE REVERSE
CAUSALITY HYPOTHESIS
RICH LONGITUDINA, MICRO, PANEL
DATA.
49
GENERAL POLICY CONCERNS: IN
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INTERACTIONS PUBLIC/ PRIVATE
INSURANCE
EXTERNALITIES AND ECONOMIC
DEVELOPMENT EFFECTS FROM PUBLIC
HEALTH INTERVENTIONS
STRATEGIC ORGANISATIONAL DESIGN FOR
HEALTH: THE INCENTIVE COMPATIBILITY
FRAME
RISK SELECTION AND ADVERSE
SELECTION IN INSURANCE
50
GENERAL POLICY CONCERNS:
OUT OF THE ANALYSIS
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FINANCIAL SUSTAINABILITY
CHANGES IN SUPPLY OF HEALTH
CARE
THE CONTRIBUTION OF HEALTH
CARE TO HEALTH (QALY, HYE…)
OPTIMAL RISK POOLING
COST EFFECTIVENESSA ANALYSIS
AND PRIORITY SETTING
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52

ADDENDA: FOOD FOR THOUGHT
53
HEALTH SYSTEMS: “The Health Care Box”
SOURCE:
Employer, employees
Tax payers, users
FINANCIAL MECHANISM:
Taxes (direct/indirect), pay-roll
Savings, fees, premia
COLLECTING
ORGANISATION:
Country/regional, Social Security
Mutual Funds, Private, HMOs
PUBLICLY PROVIDED HEALTH EXPENDITURE OVER GDP
Population coverage (breadth)
Restricted / Universal
54
Modified from Busse R, et al (Feb 2007) HNP “Analyzing changes in Health Financing Arrangements in High-Income Countries
…The options
• The frameworks of health care organisation and finance

Planning/ Finance/ Insurance
Risk management/Purchasing
Production of care

Health and Finance Depart. /Health Insurance
Agencies / Purchasers of care services /Production
and Managerial Units
55
STRATEGIC MANAGEMENT DESIGN
(HAX, MAJLUF)
Planning System
Control System
Information
System
Financing
System
ORGANISATIONAL CULTURE
COST CENTERS / RESPONSIBILITY CENTERS
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THE FINANCIAL RISK TRANSFER FROM
PAYERS TO PROVIDERS: (AVERHILL, 2003)
e
vat
P ri ide r
v
pro
er
vid
o
r
P
l ic
P ub der
vi
P ro
Degree of
financial
risk
Payer
it em
Per
l
t ua
A c os t
c
Per
m
di e
cas
Per
e
e
sod
ep i
k
Ri s s t ed
n
u
a dj i t ati o
p
ca
re
Pu t i on
ta
i
cap
58
2.- Some research-frontier issues in
the specific Health Policy agenda

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THE VALUE OF HEALTH : Wagner (health
spending and GDP)-Engel (public/private mix) –
Preston (flat part of the curve and public taxation)
THE CONTRIBUTION OF HEALTH CARE TO
HEALTH: priority setting; incremental CEA,
shadow Qaly value; non-optimal substitute
(opportunity) costs; ‘appraising’ and ‘assessing’
health care; budget rigidities in health care
management
HEALTH SYSTEMS ORGANISATION AND
HEALTH CARE MANAGEMENT: NHS vs SHIS
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Gains in Health by Income Levels
1900, 30s, 60s, 2000s (A. Preker, WB., 2004)
Life Expectancy in Years
80
About 1960
70
About 1930
60
About 1900
50
Reverse Development Process in the
future?
40
30
0
5,000
10,000
15,000
20,000
Income per capita (at 1991 Dollars)
and postulated health related expenditure
25,000
60
THE CONTROVERSIAL CONTRIBUTION OF
HEALTH CARE TO HEALTH
Uncertainty of health care treatments: to whom (cohort, age,
gender) and under which conditions (comorbidities..)
Some ‘hot’ issues in Health Policy

On health valuation:
– to what extent are getting aggregate good value for money
in health care; different patterns for Develop. vs. LDCs
– differences in sub-group valuations and its effects on
implementing (delivering and financing) routine health
care

On prioritisation:
– where to fix the cut off (in & out of the public coverage)?
– E.g. £15000 or £30000 per Quality Adjusted Life Year?

Distributional issues:
– equal weighting of benefits or equity weighting?
62
The Health Care ‘Industry’

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1. Catastrophic coverage (insurance)
2. Incentives for preventive services (public
health)
3. Efficient pricing- rate setting (purchasing)
4. Welfare maximand (allocation and
redistribution policies)
63
Too much work to be bored…
THANKS FOR YOUR
ATTENTION!!!

Addenda…
64
THE HEALTH CARE DELIVERY
SYSTEMS
 National
Health Service- Social
Health Care Systems
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…HOW HEALTH CARE BOXES, MAINLY
THOSE IN PUBLIC SYSTEMS, GET
ADJUSTED

FOR GREATER MANAGEABILITY,
PORTABILITY (INNOVATION AND
ADJUSTMENT TO NEW SOCIAL NEEDS) AND
ASSURING THEIR FINANCIAL
SUSTAINABILITY…

HOW -BY CHANGING THE HEALTH CARE
BOXES-, THE NATIONAL HEALTH SERVICES
AND THE SOCIAL HEALTH INSURANCE
SYSTEMS ANSWER TO THE NEW
CHALLENGES: DEMOGRAPHICS,
TECHNOLOGY CHANGES AND CONCERNS
FOR EQUITABLE ACCESS TO CARE
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THE ANALYSIS: ...the departing
point: the nature of the systems
•
The ‘NHS’: ‘NATIONAL’ (aiming to
geographical-universal uniform access
conditions) ‘HEALTH’ (through an
intersectional coordinated action) ‘SERVICE’
(by state administered care).
• However: diversity at the point of access is
unavoidable (not much contribution to reduce
health inequalities in the English NHS–Le Grand);
corporative interests of health care providers,
rather than health targets, usually prevail; and
some care services prove unmanageable in
political hands (difficulty to say ‘no’, lack of
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commitment)
•
To minorate these problems NHS
have moved to the provision/
production split, with
DECENTRALISATION in order to
improve efficiency (by transferring
responsibilities to providers) and assure
that, if inequalities, they are ‘acceptable’
(by choice or being local communities
financially accountable after the central
levelling of resources)
68
NHS’ SYSTEM INCENTIVES for
improvement:
For coordination in delivering care (fund-holding on
a capitation risk- adjusted basis), mostly centred in
primary care management of illnesses (LTCs, Chronic
care conditions…) and paying for health outcomes
performed.
New roles for the private sector: Public-private
partnerships, internal markets in providing public
services, opening complementary private finance for
less cost effective care, once excluded from the public
packages
69
...the departing point: the nature of the systems.
THE SOCIAL HEALTH CARE INSURANCE
SYSTEMS:
‘Social’ (community –solidarity- premia);
‘Health Care’ (life cycle utilization of
affiliates); ‘Insurance’ (risk pooling,
entitlements of coverage); ‘System’ (networks
of multiple independent providers).
However: Sustainability implies to restrain open
access, favoring primary care gate keeping for
the delivery of care and a more accurate
screening of the basic package granted for
collective compulsory finance.
70
To minorate these problems SHIS have
moved towards
RISK TRANSFER from insurers to affiliates
(copayments, deductibles..) and providers (riskrating, prospective case-mix payments, global
budgeting…)
INCENTIVES FOR COORDINATION by inserting into
the system new ‘brokers’ of the individuals’ care and
lower co-payments to users if they access the system
through primary care
NEW STRATEGIES IN MANAGING ILLNESS
EPISODES, being more selective in what services are
‘in’ and ‘out’ in the former comprehensive package of
services
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BASIC NHS- SHIS: DIFFERENCES:
1-Degree of choice between cash transfers versus
in-kind delivery of care
2-Political involvement still in the public
provision/private production split
NHS- SHIS: DIFFERENCES:
3- Scope and actual mix of health care coverage:
On basic (tax financed), complementary (taxfavoured, under regulated community premia) and
additional (private) package of services. With
limited opting-out
4-On the way they allocate the health care
management roles and its finance: The flow of
Funds
“NHS type” Flow of funds
District
Health
Authorities
Public Funder
(Capitation risk adjusted)
Hospital
Care
Citizens /
tax payers
Primary
Care
Services
FundHolders
or Integrated
Providers
(Trusts)
Inpatient
care
“SHIS type” Flow of funds
Health
Insurer
Public Funder
Citizens /
premia
Providers
ARGUMENTS FOR ASSESSING THE
SUPERIORITY OF EACH MODEL:
INCENTIVES TO PROVIDERS FOR AN EFFICIENT
AND EQUITABLE DELIVERY COMPATIBLE WITH
CONSUMERS’ CHOICE
STRATEGIES FOR REDUCING MORAL HAZARD IN
HEALTH CARE CONSUMPTION, HOLDING
EQUITABLE OUTCOMES
THE EFFECTIVENESS OF IN-KIND VERSUS CASH
TRANSFERS IN ACHIEVING POPULATION HEALTH
TARGETS
COMMON GROUNDS IN BOTH
SYSTEMS
•
Which part of the coverage should be under
public regulation and collective finance: less
predictable, more financially catastrophic…
•
How to decentralise responsibilities:
minimum risk-pooling for a credible
financial transfer and competition by
improving providers’ autonomy: the options
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PRIVATE- PUBLIC RELATIONSHIPS IN
HEALTH CARE
ON THE INSURANCE SIDE:
• ALTERNATIVE
• COEXISTING (THE COMPATIBILITY OF PRACTICES
ISSUE),
•COMPLEMENTARITY RELATIONS (TAKING MUTUAL
ADVANTAGE)
•SUPPLEMENTARY (ON THE TOP, WHERE IT DOES NOT
REACH..)
ON THE PROVIDER SIDE: PRIVATE HEALTH CARE ‘IN’ AND
‘OUT’ OF PUBLIC FACILITIES
ON THE FINANCING SIDE: PUBLIC PRIVATE
PARTNERSHIPS