A Structural Analysis of the Health Expenditures and Portfolio Choices of Retired Agents

Richer and healthier agents tend to hold riskier portfolios and spend proportionally less on health expenditures. Potential explanations include health and wealth effects on preferences, expected longevity or disposable total wealth. Using HRS data, we perform a structural estimation of a dynamic model of consumption, portfolio and health expenditure choices with recursive utility, as well as health-dependent income and mortality risk. Our estimates of the deep parameters highlight the importance of health capital, mortality risk control, convex health and mortality adjustment costs and binding liquidity constraints to rationalize the stylized facts. They also provide new perspectives on expected longevity and on the values of life and health.

The impotence of price controls: failed attempts to constrain pharmaceutical expenditures in Greece.

BACKGROUND: While the prices of pharmaceuticals are relatively low in Greece, expenditure on them is growing more rapidly than almost anywhere else in the European Union. OBJECTIVE: To describe and explain the rise in drug expenditures through decomposition of the increase into the contribution of changes in prices, in volumes and a product-mix effect. METHODS: The decomposition of the growth in pharmaceutical expenditures in Greece over the period 1991-2006 was conducted using data from the largest social insurance fund (IKA) that covers more than 50% of the population. RESULTS: Real drug spending increased by 285%, despite a 58% decrease in the relative price of pharmaceuticals. The increase in expenditure is mainly attributable to a switch to more innovative, but more expensive, pharmaceuticals, indicated by a product-mix residual of 493% in the decomposition. A rising volume of drugs also plays a role, and this is due to an increase in the number of prescriptions issued per doctor visit, rather than an increase in the number of visits or the population size. CONCLUSIONS: Rising pharmaceutical expenditures are strongly determined by physicians' prescribing behaviour, which is not subject to any monitoring and for which there are no incentives to be cost conscious.

Seasonal changes in 24-h and basal energy expenditures in rural Gambian men as measured in a respiration chamber.

Adaptation of 24-h energy expenditure (24-h EE) to seasonal variations in food availability was studied, by using a respiration chamber, in 18 rural Gambian men on three occasions: period 1--at the end of the rainy season, which is characterized by low food availability; period 2--during the nutritionally favorable dry season; and period 3--at the onset of the following rainy season. From periods 1 to 2 body weight increased by 2.8 +/- 0.4 kg, and a rise in 24-h EE was observed (from 8556 +/- 212 kJ/d to 9166 +/- 224 kJ/d), which was correlated to weight change (r = 0.73, P less than 0.001). During period 3, 24-h EE averaged 8740 +/- 194 kJ/d. Diet-induced thermogenesis increased significantly from periods 1 to 2 (5.9 +/- 0.5% to 8.2 +/- 0.8%) and subsequently decreased to 3.6 +/- 0.6% during period 3. In rural Gambian men, metabolic adaptations in response to seasonal changes in food availability are reflected by a decrease in body weight, mainly manifested by a loss of fat-free mass accompanied by a decreased 24-h EE and a lowered diet-induced thermogenesis.

Causes of health expenditure growth : the predominance of changes in medical practices over population ageing

On the basis of French individual data, this paper compares the effects of demographic change, changes in morbidity and changes in practices on the growth in health expenditures that occurred between 1992 and 2000. Micro simulations show that the rise in expenditures due to ageing is relatively small and that the impact of changes in practices is times larger. Furthermore, changes in morbidity induce savings which more than offset the increase in spending due to population ageing. [Authors]

Catastrophic medical expenditure risk

Medical expenditure risk can pose a major threat to living standards. We derive decomposable measures of catastrophic medical expenditure risk from reference-dependent utility with loss aversion. We propose a quantile regression based method of estimating risk exposure from cross-section data containing information on the means of financing health payments. We estimate medical expenditure risk in seven Asian countries and find it is highest in Laos and China, and is lowest in Malaysia. Exposure to risk is generally higher for households that have less recourse to self-insurance, lower incomes, wealth and education, and suffer from chronic illness.

Bureaucracy and the flypaper effect : Evidence from intercommunal fiscal equalisation in the canton of Vaud

Unlike classical theoretical expectations, our empirical study shows that financial transfers to decentralised governments increase local public expenditures much more than would be triggered by an equivalent rise in local income. This empirical evidence of the presence of a flypaper effect is achieved using panel data from 375 municipalities located in the Swiss canton of Vaud covering the period 1994 to 2005. During that time there was a major change in the financial equalisation scheme. Furthermore, our study confirms the analysis of the public choice theory: the effect depends partly on the degree of complexity of the municipal bureaucracy. These results show that local bureaucratic behaviour may impede the effectiveness of a financial equalisation scheme that aims to reduce disparities in local tax.

Health and (other) Asset Holdings

The empirical literature on the asset allocation and medical expenditures of U.S. households consistently shows that risky portfolio shares are increasing in both wealth and health whereas health investment shares are decreasing in these same variables. Despite this evidence, most of the existing models treat financial and health-related choices separately. This paper bridges this gap by proposing a tractable framework for the joint determination of optimal consumption, portfolio and health investments. We solve for the optimal rules in closed form and show that the model can theoretically reproduce the empirical facts. Capitalizing on this closed-form solution, we perform a structural estimation of the model on HRS data. Our parameter estimates are reasonable and confirm the relevance of all the main characteristics of the model.

Life expectancy with and without disability

Average life expectancy reached 78.8 years in Europe in 2002 (WHO 2003); most Europeans can, therefore, now anticipate living well past 75 years of age. Projections in industrialized nations suggest a continuing mortality decline in the next decades 1 while birth rates will probably continue to decline, resulting in further ageing of these nations. As those aged 80 years and over are the fastest expanding segment of the older population, concerns are growing about a potential dramatic increase in the number of disabled persons. The ageing of the population and the related increase in chronic disease burden have already had major impacts on most Western health-care systems, and will probably further affect these systems in the future as the baby-boom generation becomes older. For instance, in Switzerland, it is estimated that costs due to long-term care could more than double by 2030, from 6.5 to 15.3 billion SFr.2 Similar trends are expected in most European countries. As a consequence, postponement of the onset of disability, with a compression of functional dependency into a shorter period towards the end of life, is becoming a major goal. To successfully achieve this goal and improve the control of growing health and social care expenditures, various strategies of health promotion and disease prevention are developed and tested. Although several of these experiences had some effects on functional decline and institutional placement, they have not been shown to be cost-effective. Additional strategies are, therefore, needed to prevent or delay the onset of disability in older persons, reduce functional impairment, and face the challenge of an increasing disabled elderly population.

Health and (Other) Asset Holdings

Despite clear evidence of correlations between financial and medical statuses and decisions, most models treat financial and health-related choices separately. This article bridges this gap by proposing a tractable dynamic framework for the joint determination of optimal consumption, portfolio holdings, health investment, and health insurance. We solve for the optimal rules in closed form and capitalize on this tractability to gain a better understanding of the conditions under which separation between financial and health-related decisions is sensible, and of the pathways through which wealth and health determine allocations, welfare and other variables of interest such as expected longevity or the value of health. Furthermore we show that the model is consistent with the observed patterns of individual allocations and provide realistic estimates of the parameters that confirm the relevance of all the main characteristics of the model.

Self-selection and risk selection on the Swiss health insurance market

Abstract This thesis presents three empirical studies in the field of health insurance in Switzerland. First we investigate the link between health insurance coverage and health care expenditures. We use claims data for over 60 000 adult individuals covered by a major Swiss Health Insurance Fund, followed for four years; the data show a strong positive correlation between coverage and expenditures. Two methods are developed and estimated in order to separate selection effects (due to individual choice of coverage) and incentive effects ("ex post moral hazard"). The first method uses the comparison between inpatient and outpatient expenditures to identify both effects and we conclude that both selection and incentive effects are significantly present in our data. The second method is based on a structural model of joint demand of health care and health insurance and makes the most of the change in the marginal cost of health care to identify selection and incentive effects. We conclude that the correlation between insurance coverage and health care expenditures may be decomposed into the two effects: 75% may be attributed to selection, and 25 % to incentive effects. Moreover, we estimate that a decrease in the coinsurance rate from 100% to 10% increases the marginal demand for health care by about 90% and from 100% to 0% by about 150%. Secondly, having shown that selection and incentive effects exist in the Swiss health insurance market, we present the consequence of this result in the context of risk adjustment. We show that if individuals choose their insurance coverage in function of their health status (selection effect), the optimal compensations should be function of the se- lection and incentive effects. Therefore, a risk adjustment mechanism which ignores these effects, as it is the case presently in Switzerland, will miss his main goal to eliminate incentives for sickness funds to select risks. Using a simplified model, we show that the optimal compensations have to take into account the distribution of risks through the insurance plans in case of self-selection in order to avoid incentives to select risks.Then, we apply our propositions to Swiss data and propose a simple econometric procedure to control for self-selection in the estimation of the risk adjustment formula in order to compute the optimal compensations.

Risk adjustment in Switzerland

In Switzerland the new law on Health Insurance, effective since 1996, introduced pro competitive changes in the market of sickness funds. The legislator expected high mobility between sickness funds of both healthy and sick insured as open enrolment was introduced with the new law. That is why the risk adjustment scheme, that was already introduced 1993, was limited until 2005. However, consumer mobility remained low and risk selection strategies are still profitable, since risk-adjustment is based only on demographic variables. This paper describes risk adjustment, consumer mobility, risk selection activities of sickness funds and the impact of imperfect risk adjustment on the development of HMO and PPO models. The paper concludes with a description of the current political and scientific discussion in Switzerland.

Health care renunciation for economic reasons in Switzerland.

BACKGROUND: Most societies elaborate ways to contain increasing health care expenditures. In Switzerland out of pocket payments and cuts in the catalogue of reimbursed services are used as cost-containment measures. The aims of the study were to estimate the extent of health care renunciation for economic reasons and to identify associated factors. METHODS: A population-based cross-sectional survey (2008-2009) of a representative sample in the Canton of Geneva, Switzerland. Health care underuse, income level categories (<CHF 3000/month, 3000-4999, 5000-6999, 7000-9499, 9500-13 000, >13 000), education, occupation, insurance status and cardiovascular comorbidities were collected using self-rated questionnaires. RESULTS: 765 men and 814 women aged 35-74 years participated. 14.5% (229/1579) (95%CI 12.7-16.2) renounced health care for economic reasons. Among those who renounced (N = 229), 74% renounced dental care, 37% physician consultation (22% specialist, 15% general practitioner), 26% health devices, 13% medication, and 5% surgery. Income was negatively correlated with renouncement (r = -0.18, p <.0001). Each decrease in income level category provided a 48% increased risk of renouncing health care for economic reasons (OR 1.48, 1.31-1.65). This association remained when dental care was excluded from the definition of health care renunciation. CONCLUSIONS: In a region of Switzerland with a high cost of living, such as Geneva, socioeconomic status may influence the use of the health care system, and renunciation for economic reasons was not uncommon. More than 30% of the lowest income group renounced health care for economical reasons in the previous year. Health care underuse and renunciation may worsen the health status of a substantial part of society.

Energy expenditure and postprandial thermogenesis in obese women before and after weight loss.

In six young obese women (mean weight 85 +/- 3 kg) with a childhood history of obesity, and in six young nonobese women (mean weight 55 +/- 2 kg), the energy expenditure was measured during 24 h in a respiratory chamber with a maintenance energy intake. The next day, the thermogenic response to a mixed meal was investigated by using an open circuit indirect calorimetry hood system. In addition, five of the same obese women were similarly studied after a mean weight loss of 12.1 kg (14% of initial body weight) consecutive to an 11-wk hypocaloric diet (protein-supplemented modified fast). Expressed in absolute terms, the total 24 h and basal energy expenditures were found to be significantly greater in the obese (2208 +/- 105 and 1661 +/- 56 kcal/24 h, respectively) than in the controls (1746 +/- 61 and 1230 +/- 40 kcal/24 h, respectively). After weight loss, both the total 24-h and the basal energy expenditures were significantly reduced (2009 +/- 99 kcal/24 h and 1423 +/- 43 kcal/24 h respectively), but both values were still greater than that of the control subjects. The thermogenic response to the mixed meal (a liquid diet containing 17, 54, and 29% as protein, carbohydrate, and lipid calories, respectively, and an energy level determined to cover 60% of the basal energy expenditure computed for 24 h) was found to be significantly reduced in the obese as compared to controls (ie, 7.6 +/- 0.4% versus 9.5 +/- 0.4% of the energy content of the load, respectively, p less than 0.025). After weight loss, the postprandial thermogenesis of the obese was still markedly reduced (ie, 6.2 +/- 0.8%). Both before and after weight loss, the relative increase in diurnal urinary norepinephrine excretion was found to be lower in the obese than in controls, when compared to the nocturnal values. These results show that the greater 24 h energy expenditure of obese women is entirely due to their higher basal metabolic rate. The lower thermogenic response to the meal in the obese supports the concept of a thermogenic defect which can favor energy gain; furthermore, the unchanged response after weight loss in the obese suggests that the thermogenic defect may be a cause rather than a consequence of obesity.