Health Care.

• Position: Bureau News

The NBER's Program on Health Care, directed by Alan M. Garber, NBER and Stanford University, met in Cambridge on October 26. They discussed these papers:

Michael Baker and Mark Stabile, NBER and University of Toronto, and Catherine Den, University of Toronto, "What Do Self-Reported, Objective, Measures of Health Measure?" (NBER Working Paper No. 8419)

Mark Duggan, NBER and University of Chicago, "Can the Private Sector Improve the Efficiency of Government Programs? Evidence from Medicaid Managed Care"

Ernst R. Berndt, NBER and MIT; Julie M. Donohue, Arnold M. Epstein, and Meredith B. Rosenthal, Harvard University; and Richard G. Frank, NBER and Harvard University, "Some Economics of Direct-to-Consumer Advertising of Prescription Drugs"

Karen Eggleston, Tufts University; Nolan Miller, Harvard University; and Richard J. Zeckhauser, NBER and Harvard University, "Ownership Structure and Provider Behavior"

Jason R. Barro, NBER and Harvard University, and Robert Huckman, Harvard University, "Returns to Hospital Advertising"

Baker, Stabile, and Den explore measurement error in objective, self-reported measures of health. They use a unique dataset that matches a variety of self-reports of health with respondents' medical records. The findings are striking. For example, the ratio of the error variance to the total variance ranges from just over 30 percent for the incidence of diabetes to over 80 percent for the incidence of arthritis. Furthermore, for many conditions the error is significantly related to individuals' labor market activity; as hypothesized in the literature. In the final section of the paper, the authors compare estimates of the effect of these different measures of health on labor market activity.

Currently more than 20 million Medicaid recipients are covered by a managed care plan; the remaining 15 million are enrolled in the Medicaid fee-for-service system. Identifying the causal effect of HMO enrollment on government spending is difficult if, as is often the case, recipients have the option to enroll in a plan. Those who choose to enroll in a plan may differ unobservably from those who do not. Duggan exploits 21 county-level mandates introduced during the last decade in the state of California that required Medicaid recipients to enroll in an HMO. His results suggest that the move from fee-for-service to managed care was associated with a 15 percent increase in government spending. The effect was smaller in counties with...