Health care.

• Author: Garber, Alan M.
• Position: National Bureau of Economic Research

The NBER's Program on Health Care holds two program meetings annually, as well as NBER Summer Institute sessions, an annual "Frontiers in Health Policy Research Conference," and occasional theme meetings. Program members conduct research on a diverse range of issues in the economics of health, the delivery and financing of health care, and the interactions of health and health care with other areas of economic activity. Because Health Care is a large and active program, as reflected in the Working Papers issued by program members and in their presentations and publications, this report describes only a fraction of its work.

Private Health Insurance

Most Americans pay for health care with private health insurance obtained through employers. The loss of employment-based insurance frequently leads to either enrollment in government programs like Medicaid or the loss of health insurance altogether. Michael Chernew, David M. Cutler, and Patricia S. Keenan examine why the share of Americans without health insurance rose over the 1990s, despite the relative prosperity of the decade. In one paper, they relate changes in health insurance cost growth to changes in insurance coverage rates across metropolitan areas, accounting for a broad set of additional factors that may affect changes in coverage. (1) They find that rising premiums accounted for over half of the decline in health insurance coverage during the 1990s. A $1,000 increase in premiums is associated with a 2.6 percentage point decline in insurance coverage rates. They also project that rising health insurance costs will cause the number of uninsured to increase by 2 to 6 million people by 2010. In another paper, they report that the availability of uncompensated care leads to greater losses of insurance coverage when premiums rise. (2)

Many of the uninsured say that they lack health insurance because it is unaffordable. M. Kate Bundorf and Mark V. Pauly develop "normative" and "behavioral" definitions of affordability, examining whether health insurance is affordable to the currently uninsured. Analyzing data from the Medical Expenditure Panel Survey, they report that when a normative definition of affordability is used for family incomes above the poverty level, health insurance was affordable to 82 percent of the uninsured. Increasing the threshold to 2 and 3 times the poverty level, the proportions of the uninsured classified as able to afford coverage were 55 percent and 34 percent, respectively. These researchers also find that, with a "behavioral" definition of affordability, which is defined by the health insurance purchase behavior of individuals with similar economic circumstances, about half of the uninsured could purchase health insurance. Thus, these economists believe that affordability is not the sole barrier to health insurance coverage. (3)

Bundorf and Jay Bhattacharya also have examined whether there are offsetting wage decreases for workers with large expected health care costs by studying the wage patterns for obese workers. (4) Annual medical expenditures are $732 higher on average for obese individuals than for normal weight individuals. In a paper on this subject, they report that obese workers with employer-sponsored health insurance pay for their higher expected medical expenditures through lower cash wages. This conclusion is strengthened by their finding that obese workers with insurance coverage through an alternative employer (for example, a spouse) do not experience similar wage offsets. Nor are there wage offsets for other types of fringe benefits whose cost to the employer is less likely to be affected by obesity.

Medicare and Medicaid

Many Health Care Program members--including Bhattacharya, Amitabh Chandra, David M. Cutler, Mark Duggan, Amy Finkelstein, Victor Fuchs, Dana Goldman, Frank Lichtenberg, Thomas MaCurdy, Mark McClellan, Jonathan Skinner, and I--have studied aspects of the Medicare and Medicaid programs, such as the causes of growth in program expenditures and the role of disability in future expenditures.

Amy Finkelstein has looked at the introduction of Medicare to learn how the introduction of universal insurance affects health spending and technology adoption. (5) Medicare, she hypothesizes, should have had a greater effect in areas of the country in which relatively few of the elderly had health insurance than in areas in which many of the elderly were insured prior to the introduction of the program. She examines an annual hospital-level dataset from 1948-75 for six hospital outcomes: total expenditures, payroll expenditures, employment, beds, admissions, and patient-days. She finds that the effects were indeed greater in areas in which health insurance was less common; prior to 1965, hospital admissions were growing more slowly in the low-insurance areas than in the high-insurance areas, but after 1965 this pattern reversed, with admissions growing much more quickly in those areas most affected by Medicare's introduction. Similar patterns are evident in the other hospital outcome variables, including expenditures. These results suggest that the overall spread of health insurance explains at least 40 percent of the dramatic increase in health spending in the United States between 1950 and 1990.

In a series of articles, Jon Skinner and colleagues have examined variation in expenditures for the care of Medicare beneficiaries and their implications for the efficiency of Medicare. For example, the range of variation in resources used for end-of-life care for Medicare beneficiaries in the United States is striking, even among top-rated hospitals. (6) Skinner and colleagues also use geographical variations in health care spending to measure the incremental value of health care intensity among the elderly Medicare population. (7) To correct for the reverse causation problem--that residents of "sicker" areas tend to require more health care--they use a set of instruments characterizing health care intensity either among hip fracture patients or among patients in their last six months of life. Using various analytical methods, they find that a large component of Medicare expenditures--$26 billion in 1996 dollars, or nearly 20 percent of total Medicare expenditures--appears to provide no survival benefit, nor is it likely that this extra spending improves the quality of life. While secular trends in health care technology have delivered large health benefits, variation in health care intensity at a point in time suggests that more is not better.

Pharmaceutical Markets, Innovation, And Technology Diffusion

Health Care Program members have conducted a wide array of research addressing how technological innovation in medicine affects both health expenditures and health...