Volume 8, Issue 2 - “Health Care Economics and Policy” edited by Ching-to Albert Ma

The State Children's Health Insurance Program (SCHIP) significantly expanded public insurance eligibility and coverage for children in ``working poor" families. Despite this success, it is estimated that over 6 million children who are eligible for public insurance remain uninsured. An important first step for designing strategies to increase enrollment of eligible but uninsured children is to determine how the take-up of public coverage varies within the population. Because of their low rates of insurance coverage and unique enrollment barriers, children of immigrants are an especially important group to consider. We compare the effect of SCHIP eligibility on the insurance coverage of children of foreign-born and native-born parents. In contrast to research on the earlier Medicaid expansions, we find similar take-up rates for the two groups. This suggests that state outreach strategies were not only effective at increasing take-up overall, but were successful in reducing disparities in access to coverage.

Much of the debate surrounding Direct-to-Consumer Advertising (DTCA) of pharmaceuticals centers on whether DTCA conveys useful information to consumers or indiscriminately increases requests for the advertised medication. By identifying how DTCA changes the shape of the demand curve for antidepressants, we seek to infer the promotional objectives of manufacturers. Using data from the 1996-2003 Medical Expenditure Panel Survey (MEPS), we find that advertising shifts the demand curve for antidepressants outward and rotates it counter-clockwise. DTCA increases the probability that an individual will initiate use of antidepressants, particularly when out-of-pocket medication costs are low, but does not necessarily increase utilization levels among those already taking antidepressants. This is consistent with a promotional campaign that seeks to alert consumers to the product's existence, but conveys no real information that would allow them to learn their true match with the product.

Despite considerable research, there is little consensus about the impact of Medicaid eligibility expansions for low-income children. In this paper, I reexamine the expansions’ impact on Medicaid take-up and private insurance “crowd-out” by investigating a number of critiques leveled at the seminal work of Cutler and Gruber (1996) and extending the analysis to include further expansions of Medicaid. I find that accounting for most critiques of Cutler and Gruber does not substantively affect their estimates of sizable take-up and crowd-out. However, controlling for age-specific time trends does substantially reduce the estimated take-up and crowd-out and recovers results close to those found elsewhere in the literature. I also find that later expansions generated much lower rates of take-up and crowding out.

The gateway, or stepping stone, hypothesis is important as it has had considerable influence on drug policy and legislation in many countries. The gateway hypothesis offers one possible explanation for young people's development of serious drug problems. It simply states that the use of one drug increases the risk of starting to consume another, possibly more harmful, drug later on and that the risk increases with frequency of use (dose-response). The empirical basis for the hypothesis is the common finding that most heavy drug users have started with less dangerous drugs first and that there seems to be a "staircase" from alcohol and solvents via cannabis and tablets to amphetamine, cocaine and heroin. The core question is whether the sequential initiation pattern of drug use is best explained by the gateway hypothesis or whether the phenomenon is better understood by employing the concepts of accessibility and/or transition proneness? Based on unique data from a representative sample of 21-30 year olds in Oslo we have examined the gateway effect of both legal (alcohol) and illegal drugs (cannabis) on subsequent use of cannabis and hard drugs (amphetamine and cocaine). We are the first to use multivariate probit models to examine the hypothesis. The models take into account unobservable individual-specific effects to reduce the possibility of a spurious effect of soft drug use on the onset of hard drug use. The gateway effects are greater when we do not take account of unobserved heterogeneity, but, although substantially reduced, they remain considerable when unobserved factors are accounted for.

This paper uses data from the Medical Expenditure Panel Survey to estimate the effect of COBRA on health care utilization among a sample of individuals who experience employment separation. The empirical specification employs a structural simultaneous equations model of insurance choice and utilization that is estimated by Maximum Simulated Likelihood. Results indicate that employment separators who elect COBRA appear to consume more health care compared to individuals who become temporarily uninsured. In addition, results do not indicate adverse selection into COBRA. Although COBRA enrollees consume more health care than temporary insurance losers, election appears to exhibit favorable selection with respect to physician utilization.

Waiting times have been a central concern in the English NHS, where care is provided free at the point of delivery and is rationed by waiting time. Pro-market reforms introduced in the NHS in the 1990s were not accompanied by large drops in waiting times. As a result, the English government in 2000 adopted the use of an aggressive policy of targets coupled with the publication of waiting times data at the hospital level and strong sanctions for poor performing hospital managers. This regime has been dubbed ‘targets and terror’. We estimate the effect of the English target regime for waiting times for hospital care after 2001 by a comparative analysis with Scotland, a neighbouring country with the same healthcare system that did not adopt the target regime. We estimate difference-in-differences models of the proportion of people on the waiting list who waited over 6, 9 and 12 months. Comparisons between England and Scotland are sensitive to whether published or unpublished data are used but, regardless of the data source, the ‘targets and terror’ regime in England lowered the proportion of people waiting for elective treatment relative to Scotland.

Quality reports or profiles of health care providers are inevitably based on only a measurable subset of the ``outputs" of the organization. Hospitals, for example, are being profiled on their mortality in the cardiac area but not in some other areas where mortality does not seem to be the appropriate measure of quality. If inputs used for outputs included in the profile also affect outputs outside the scope of the profile, it can be taken into account in constructing a profile of the measured outputs. This paper presents a theory for how such a commonality in production should be taken into account in designing a profile for a hospital or other health care provider. We distinguish between ``conventional" weights in a quality profile, and ``optimal" weights that take into account a commonality in the production process. The basic idea is to increase the weights on discharges for which output is measured that use inputs that are important to other discharges whose outputs are not included in the profile.

This article studies the pricing and advertising of prescription drugs in a duopoly market. If advertising is banned, decisions of the prescribing physician are price-sensitive. The emerging market equilibrium is characterized by marginal-cost pricing and normal profits. The introduction of advertising, and physician-oriented advertising (detailing) in particular, creates market power and asymmetric pricing and advertising behavior. In an equilibrium, one firm chooses maximum detailing and the rival firm invests less in physician-oriented advertising. The asymmetric detailing strategies explain the observed price differences in the market for prescription drugs. The model also predicts free-riding in DTC advertising. According to the predictions of the model, the free-rider is the firm with a low level of physician-oriented advertising. The firm with maximum detailing invests money in DTC advertising, expanding the market for prescription drugs.

Presuming that the standard of care reflected in the physician reimbursement scheme harms patients, German and US courts enforce their traditional legal standard of care in malpractice lawsuits. This paper summarizes the literature, evaluates the legal standard in microeconomic terms and determines the insurers' and courts' impact on patient welfare. The legal standard proves to be inefficiently high. By contrast, patient welfare is maximized when insurers apply a two-part reimbursement scheme that induces physicians not to comply with the legal standard. If this is infeasible, another reimbursement scheme is suggested.