The Oxford Handbook of Health Economics (Oxford Handbooks)

'the Oxford Handbook Of Health Economics' Provides A Guide To Health Economics. The Articles Stress The Direct Impact Of Health Economics Reasoning On Policy And Practice, Offering Readers An Introduction To The Potential Reach Of The Discipline. Contributions Come From Leaders In Health Economics And Reflect The Worldwide Reach Of The Discipline. The Articles Place Emphasis On The Connections Between Theory And Policy-making, And Develop The Contributions Of Health Economics To Problems Arising In A Variety Of Institutional Contexts, From Primary Care To The Operations Of Health Insurers. The Volume Addresses Policy Concerns Relevant To Health Systems In Both Developed And Developing Countries. The Book Takes A Broad Perspective, With Relevance To Systems With Single Or Multi-payer Health Insurance Arrangements, And To Those Relying Predominantly On User Charges; Contributions Are Also Included That Focus Both On Medical Care And On Non-medical Factors That Affect Health. Each Article Provides A Succinct Summary Of The Current State Of Economic Thinking In A Given Area, As Well As A Unique Perspective On Issues That Remain Open To Debate. The Volume Presents A View Of Health Economics As A Vibrant And Continually Advancing Field, Highlighting Ongoing Challenges And Pointing To New Directions For Further Progress.-- Introduction / Sherry Glied And Peter C. Smith -- Health Systems In Industrialized Countries / Bianca K. Frogner, Peter S. Hussey, And Gerard F. Anderson -- Health Systems In Low- And Middle-income Countries / Anne Mills -- The Political Economy Of Health Care / Carolyn Hughes Tuohy And Sherry Glied -- The Promise Of Health : Evidence Of The Impact Of Health On Income And Well-being / William Jack -- Health Production / Kristian Bolin -- Socioeconomic Status And Health : Dimensions And Mechanisms / David M. Cutler, Adriana Lleras-muney, And Tom Vogl -- Determinants Of Health In Childhood / Michael Baker And Mark Stabile -- Economics Of Infectious Diseases / Ramanan Laxminarayan And Anup Malani -- Economics Of Health Behaviors And Addictions : Contemporary Issues And Policy Implications / Donald S. Kenkel And Jody Sindelar -- Economics And Mental Health : An International Perspective / Richard G. Frank -- Public-sector Health Care Financing / Åke Blomqvist -- Voluntary Private Health Insurance / Peter Zweifel -- Health Care Cost Growth / Michael E. Chernew And Dustin May -- User Charges / Erik Schokkaert And Carine Van De Voorde -- Insurance And The Demand For Medical Care / Mark V. Pauly -- Guaranteed Access To Affordable Coverage In Individual Health Insurance Markets / Wynand P.m.m. Van De Ven And Frederik T. Schut -- Managed Care / Laurence Baker -- Hospitals : Teaming Up / Pedro Pita Barros And Pau Olivella -- Primary Care / Anthony Scott And Stephen Jan -- The Global Health Workforce / Till Bärnighausen And David E. Bloom -- The Economics Of The Biopharmaceutical Industry / Patricia M. Danzon -- Disease Prevention, Health Care, And Economics / Jane Hall -- Long-term Care / Jose-luis Fernandez, Julien Forder, And Martin Knapp -- Physician Agency And Payment For Primary Medical Care / Thomas G. Mcguire -- Provider Payment And Incentives / Jon B. Christianson And Douglas Conrad -- Non-price Rationing And Waiting Times / Tor Iversen And Luigi Siciliani -- Increasing Competition Between Providers In Health Care Markets : The Economic Evidence / Carol Propper And George Leckie -- Measuring Organizational Performance / James F. Burgess Jr. And Andrew Street -- Health System Productivity / Jack E. Triplett -- The Methods Of Cost-effectiveness Analysis To Inform Decisions About The Use Of Health Care Interventions And Programs / Simon Walker, Mark Sculpher, And Mike Drummond -- Analyzing Uncertainty In Cost-effectiveness For Decision-making / Susan Griffin And Karl Claxton -- Health Utility Measurement / Donna Rowen And John Brazier -- Concepts Of Equity And Fairness In Health And Health Care / Jan Abel Olsen -- Measuring Inequality And Inequity In Health And Health Care / Eddy Van Doorslaer And Tom Van Ourti -- Inter-generational Aspects Of Health Care / Louise Sheiner -- Econometric Evaluation Of Health Policies / Andrew M. Jones And Nigel Rice -- Health Economics And Policy : The Challenges Of Proselytizing / Alan Maynard And Karen Bloor. Edited By Sherry Glied And Peter C. Smith. Print Publication Date: Apr 2011. Published Online: Sep 2012. Includes Bibliographical References And Index. Cover The Oxford Handbook of Health Economics Copyright Acknowledgements Contents List of Figures List of Tables List of Boxes List of Contributors 1. Introduction 1.1 Why are Some People Healthy and Others Not? 1.2 What is the Best Way to Organize and Compensate Health Care Providers? 1.3 How Much Should Society Spend on Health Care and Where Should Resources be Focused? 1.4 How Should Health Care Services be Financed and Distributed? 2. Health Systems in Industrialized Countries 2.1 Overview 2.2 Comparing Health Systems 2.2.1 Pooling 2.2.2 Provision of Services 2.2.3 Major Types of Health Systems 2.3 Coverage 2.4 Trends in Health Care Spending 2.4.1 Public vs. Private Spending 2.4.2 Specifi c Health Care Sectors 2.4.3 What Has Driven Health Spending Growth? 2.5 Demand Factors of Health Care Spending 2.5.1 Income 2.5.2 Aging 2.5.3 Possible Reasons for the Excess Growth 2.5.4 Spread of Insurance 2.6 Supply Factors of Health Care Spending 2.6.1 Supplier-induced Demand and Defensive Medicine 2.6.2 Factor Productivity 2.7 Technology 2.7.1 Physical Capital 2.7.2 Human Capital 2.7.3 Labor Augmenting Technology 2.7.4 Research and Development (R&D) 2.8 Other Possible Factors 2.8.1 Chronic Disease 2.8.2 Other Supply Factors 2.8.3 Waiting Lists/Rationing Care 2.8.4 Quality of Care 2.9 Summary and Conclusion References 3. Health Systems in Low- and Middle-income Countries 3.1 Introduction 3.2 Economic Dimensions of LMIC Health Systems 3.2.1 Revenue Collection 3.2.2 Revenue Pooling 3.2.3 Resource Allocation and Purchasing 3.2.4 Service Provision 3.2.5 Regulation 3.2.6 Categorization and Evolution of LMIC Health Systems 3.3 Distinctive Characteristics of LMICs 3.3.1 Economic Structure 3.3.2 Political and Social Institutions 3.3.3 Management Capacity 3.3.4 External Dependence for Health Financing 3.4 Unresolved Debates References 4. The Political Economy of Health Care 4.1 Scope of Government Involvement in Health Care 4.1.1 Health Care as a Merit Good 4.1.2 Information Gaps 4.1.3 Infrastructure as a Public Good 4.1.4 Externalities 4.2 Political Economy Theories Applied to Health Care 4.2.1 Th eories Focusing on Interest Groups 4.2.1.1 Concentrated Benefi ts and Diff use Costs 4.2.1.2 Capture 4.2.1.3 Oligarchy and Policy Networks 4.2.2 Th eories Focusing on Voting Behavior 4.2.3 Th eories Focusing on Institutions 4.2.3.1 Th e Role of Institutions in Concentrating Authority—Relations Among Branches of Government 4.2.3.2 Th e Role of Institutions in Concentrating Authority—Relations Among Levels of Government 4.2.3.3 Historical Institutionalism and Path Dependency 4.3 Concluding Comments References 5. The Promise of Health: Evidence of the Impact of Health 5.1 Introduction 5.2 Mechanisms 5.2.1 Direct Effects 5.2.2 Effects on Capital Accumulation 5.2.3 Aggregate Effects 5.3 Empirical Evidence 5.3.1 Cross-country Studies 5.3.2 Micro-level Evidence 5.4 Conclusions References 6. Health Production 6.1 Introduction 6.1.1 Utility and Household Production 6.2 Theoretical Outline of the Demand-for-Health model 6.2.1 Cost of Household Production 6.2.2 Depreciation of Health 6.2.3 The Benefits of Good Health 6.2.4 The Life-cycle Perspective and Time Preferences 6.2.5 The Equations of Motions for Health and Wealth 6.2.6 The Individual’s Optimization Problem 6.2.7 The Optimality Condition 6.2.8 Interpretation 6.3 Predictions: The Demand for Health and the Demand for Health Investments 6.3.1 Age 6.3.2 Wage (Market Productivity) 6.3.3 Education (Human Capital Other Than Health Capital) 6.4 Theoretical Extensions 6.4.1 The Relaxation of the Single-individual Household Assumption 6.4.2 Introducing Uncertainty 6.5 Empirical Estimations of Health 6.5.1 The Demand-for-Health Model 6.5.2 The Correlation and Possible Causality Between Education and Health 6.6 Policy 6.6.1 A Subsidy on Market Goods 6.6.2 Educational Capital 6.6.3 Uncertainty 6.7 Concluding Remarks References 7. Socioeconomic Status and Health: Dimensions and Mechanisms 7.1 Introduction 7.2 Socioeconomic Status and Health: Some Facts 7.3 Education 7.4 Financial Resources 7.5 Rank 7.6 Race and Ethnicity 7.7 Conclusion: Towards a Unified Theory References 8. Determinants of Health in Childhood 8.1 Introduction 8.2 Infant and Early Childhood Health 8.2.1 Health at Birth and Childhood Well-being 8.2.2 Environmental Factors and Infant Health 8.2.3 Maternal Employment 8.2.4 Socioeconomic Status 8.3 Access to Medical Care 8.4 Health and Behavior Post-Early-Years 8.4.1 Smoking 8.4.2 Obesity 8.4.3 Mental Health 8.4.4 Maternal Behavior and Child Health and Behavior 8.5 Conclusions References 9. Economics of Infectious Diseases 9.1 Economic Impact of Infectious Diseases 9.2 Individual Incentives 9.2.1 Prevalence and the Demand for Risk 9.2.2 Demand for Treatment and Prevention 9.2.3 Demand for Testing 9.3 Institutional and National Incentives 9.4 Optimal Allocation of Resources to Fight Infectious Diseases 9.5 Conclusions References 10. Economics of Health Behaviors and Addictions: Contemporary Issues and Policy Implications 10.1 Introduction 10.2 Economic Models of Substance Use 10.2.1 Rational Addiction 10.2.2 Time Inconsistency 10.2.3 Cue-triggered Addiction 10.2.4 Empirical Tests of Models of Addiction 10.3 Economic Approach to Substance Use Policy 10.3.1 Neoclassical-based Policies 10.3.1.1 Provision of Information 10.3.1.2 Corrective Taxation 10.3.1.3 Regulation 10.3.1.4 Prohibition 10.3.2 Behavioral Economics and Public Policy 10.3.3 Welfare Eff ects of Public Policies 10.4 Empirical Research into the Economics of Substance Use 10.4.1 Cigarette Taxes and Smoking Bans 10.4.1.1 Taxation 10.4.1.2 Smoking Bans 10.4.2 Alcohol Consumption and Adverse Health and Social Outcomes 10.4.3 Alcohol Taxes 10.4.4 Behavioral Economic Research and Substance Abuse Interventions 10.4.4.1 Present-bias and Small Incentives Change Behavior 10.4.4.2 Lack of Will-power and Pre-commitment Mechanisms 10.5 Summary References 11. Economics and Mental Health: An International Perspective 11.1 Introduction 11.2 Background 11.3 Moral Hazard, Externalities, and Rationing 11.3.1 Moral Hazard 11.3.2 Rationing and Budgets for Mental Health Care 11.3.2.1 National Approaches to Rationing of Mental Health Care 11.3.3 Incentives and Rationing of Mental Health Care 11.3.4 Rationing of Hospital Care 11.4 Concluding Observations References 12. Public-Sector Health Care Financing 12.1 Introduction 12.2 What Share of Health Expenditures Should the Public Plan Cover? 12.2.1 Consumer Cost-Sharing in Public Plans 12.2.2 Private Insurance in Countries with Public Funding of Health Care 12.2.2.1 Supplementary and Complementary Private Insurance 12.2.2.2 Duplicate vs. Substitute Private Insurance: Opting Out 12.3 How Should Revenue Be Raised to Pay for the Public Plan? 12.3.1 General Tax Revenue 12.3.1.1 Cost-sharing Between Several Levels of Government 12.3.2 Th e Social Insurance Model 12.3.2.1 Social Insurance and Horizontal Equity 12.3.2.2 Effi ciency Properties of Social Insurance Contributions 12.3.3 Social Insurance: A Single Fund vs. Multiple Funds? 12.3.4 Social Insurance and the Retired 12.3.4.1 Health Insurance for the Elderly When Opting Out is Allowed 12.4 How Should Providers Be Paid Under the Public Plan? 12.4.1 Payment Methods 12.4.2 Payment Methods: Which is the Best? 12.4.2.1 Payment Methods and Consumer Choice in Public Plans 12.5 Lessons Learned? References 13. Voluntary Private Health Insurance 13.1 Introduction 13.2 The Theory of Voluntary Private Individual Health Insurance 13.2.1 Demand for Voluntary Private Individual Health Insurance 13.2.1.1 Health Loss 13.2.1.2 Ex Ante Moral Hazard 13.2.1.3 Ex Post Moral Hazard 13.2.1.4 Asymmetric Information about Health Risks 13.2.1.5 Risk of Deterioration of Health Status 13.2.2 Supply of Voluntary Private Individual Health Insurance 13.2.2.1 Loading 13.2.2.2 Risk Selection Eff ort 13.2.2.3 Vertical Integration 13.2.2.4 Market Structure 13.3 Private Health Insurance Markets in Practice 13.3.1 Premium Regulation 13.3.1.1 Diversity of Risks 13.3.1.2 Access to Risk Information 13.3.2 Regulation Designed to Counteract Risk Selection 13.3.3 Regulation Designed to Encourage Private Primary Health Insurance: Employer-based Schemes 13.3.4 Private Insurance as Auxiliary to Public Health Insurance 13.4 Why is Social Health Insurance So Preponderant? 13.4.1 Efficiency Reasons 13.4.1.1 Adverse Selection 13.4.1.2 Altruism and Free-riding 13.4.1.3 Optimal Taxation When Health and Income are Correlated 13.4.2 Equity Reasons 13.4.3 Public Choice Reasons 13.4.3.1 Redistribution of Wealth 13.4.3.2 Redistribution of Medical Care 13.4.3.3 Redistribution of Health 13.5 Future Challenges 13.5.1 Cost of Dying 13.5.2 Multiple Risks 13.5.3 International Purchasing 13.5.4 Technological Change in Medicine References 14. Health Care Cost Growth 14.1 Introduction 14.1.1 Background 14.1.2 General Issues Relating to Cost Growth 14.1.2.1 Evidence Relating Technology to Cost Growth 14.1.2.2 Population Expenditures vs. Unit Costs or Disease-/Service-specifi c Spending 14.1.2.3 Level vs. Rate of Change in Costs 14.1.2.4 Past Experience vs. Future Potential 14.2 Cost Containment Approaches 14.2.1 Cost Sharing at the Point of Service 14.2.1.1 Background 14.2.1.2 Evidence 14.2.1.3 Potential 14.2.2 Managed Care/Managed Competition 14.2.2.1 Background 14.2.2.2 Evidence 14.2.2.3 Potential 14.2.3 Payment Reforms 14.2.3.1 Background 14.2.3.2 Evidence 14.2.3.3 Potential 14.2.4 Competition among Providers/Supply Restrictions 14.2.4.1 Background 14.2.4.2 Evidence 14.2.4.3 Potential 14.2.5 Disease Management/“Pay for Performance” Initiatives/Wellness Programs 14.2.5.1 Background 14.2.5.2 Evidence 14.2.5.3 Potential 14.2.6 Information interventions 14.2.6.1 Background 14.2.6.2 Evidence 14.2.6.3 Potential 14.3 Conclusions References 15. User Charges 15.1 Introduction 15.2 The Importance of Out-of-pocket Payments in the World 15.3 User Charges and Efficiency: The Price Effect 15.4 User Charges as a Revenue-raising Mechanism 15.5 User Charges and Equity 15.5.1 User Charges and Equity in Finance 15.5.2 User Charges and Equality of Access 15.5.3 Exemption Mechanisms 15.6 Towards a Theory of Optimal User Charges? 15.7 Official and Unofficial User Charges 15.7.1 Informal Payments 15.7.2 Extra Billing 15.8 Conclusion References 16. Insurance and the Demand for Medical Care 16.1 Introduction 16.2 Introduction to Moral Hazard in Insurance Economics 16.3 The (Probably Infeasible) Benchmark Indemnity Model 16.4 Necessary Conditions for Indemnity Insurance to be Feasible and Optimal 16.5 Income Effects with Moral Hazard 16.6 Moral Hazard and Optimal Health Insurance with Single-period Independent Demand 16.7 Interrelated Demands 16.8 Insurance Coverage with Imperfect Supply-side Competition 16.9 Moral Hazard and Patterns of Voluntary Insurance Coverage: Theory and Practice 16.10 Empirical Evidence on the Effect of Insurance on the Demand for Medical Care 16.11 Insurance Deductibles and the Use of Medical Care 16.12 Moral Hazard and Value-based Cost Sharing: Theory and Evidence 16.13 Moral Hazard and New Technology 16.14 Beneficent Moral Hazard in Social Insurance 16.15 Conclusion References 17. Guaranteed Access to Affordable Coverage in Individual Health Insurance Markets 17.1 Introduction 17.2 Equivalence of Premiums and Risks 17.3 Cross-subsidies 17.3.1 Explicit Subsidies 17.3.1.1 Risk-adjusted vs. Premium-based Subsidies 17.3.1.2 Excess-loss Compensations 17.3.2 Implicit Subsidies 17.3.2.1 Guaranteed Renewability 17.3.2.2 Universal Premium-rate Restrictions 17.3.3 Conclusion 17.4 Community Rating: Does One Premium Fit All? 17.4.1 Drawbacks of Community Rating 17.4.2 Why is Community Rating so Popular? 17.5 How to Organize the Subsidy Payments? 17.6 Conclusion and Discussion References 18. Managed Care 18.1 Introduction 18.2 Managed Care Practices and Managed Care Plans 18.2.1 Characteristics of Managed Care Plans 18.2.1.1 Selective Contracting and Provider Organization 18.2.1.2 Overseeing and Infl uencing Utilization 18.2.1.3 Financial Incentives 18.2.1.4 Covered Services 18.2.1.5 Patient Cost Sharing 18.2.2 Th e Development of Managed Care and Types of Managed Care Plans 18.3 Managed Care and Selection 18.4 Effects of Managed Care on Health Care for Enrollees 18.5 Area-level Effects of Managed Care 18.5.1 Studies of Health Expenditures 18.5.2 Studies of Infrastructure and Capabilities 18.5.3 Studies of Treatments, Quality, and Health Outcomes 18.6 Aggregate Spending Patterns Since the Rise of Managed Care 18.7 Conclusion References 19. Hospitals: Teaming Up 19.1 Introduction 19.2 Technology: What Does a Hospital Do? 19.3 Preferences: What Does a Hospital Want? 19.3.1 Models of Hospital Behavior 19.3.2 Th e Separation of Governance and Control 19.4 Incentives Within the Hospital 19.4.1 General Elements 19.4.2 Group Incentives 19.4.2.1 Doctors and Nurses 19.4.2.2 Centralization vs. Decentralization and the Provision of Incentives 19.5 The Hospital and the Outside World 19.5.1 Contracting with Payers 19.5.2 Referrals 19.6 Some Empirical Evidence 19.6.1 Technology 19.6.2 Does Ownership Matter? 19.7 Discussion and Challenges for Future Research References 20. Primary Care 20.1 Introduction 20.2 Defining Primary Care and its Role in the Health Care System 20.2.1 Gatekeeping 20.2.2 Strong Agency Relationships 20.2.3 Comprehensiveness and Integration 20.3 Performance 20.4 Financing Primary Care 20.4.1 Financing and Access 20.4.2 Remuneration of Primary Care Providers 20.5 Primary Care Workforce 20.6 Conclusions References 21. The Global Health Workforce 21.1 Introduction 21.2 First Phase: Health Workforce Planning 21.2.1 Background 21.2.2 Literature 21.2.2.1 First Approach: Need 21.2.2.2 Second Approach: Demand 21.2.2.3 Th ird Approach: Service Targets 21.2.2.4 Fourth Approach: Population Ratio 21.3 Second Phase: The Health Worker as Economic Actor 21.3.1 Background 21.3.2 Health Worker Licensure 21.3.2.1 Th eories of Licensure 21.3.2.2 Literature on Health Worker Licensure 21.4 Third Phase: The Health Worker as Necessary Resource 21.4.1 Background 21.4.2 Developed Countries: Interventions to Increase Health Worker Supply to Underserved Areas 21.4.3 Developing Countries: Health Worker Emigration 21.5 Conclusions References 22. The Economics of the Biopharmaceutical Industry 22.1 Introduction: Key Characteristics of Biopharmaceuticals 22.2 R&D: Technology, Regulation, and Costs 22.2.1 Technology 22.2.2 Regulation of R&D and Market Access 22.2.3 R&D Costs 22.2.4 Empirical Evidence on Costs and Benefi ts of Regulation 22.2.5 Regulation vs. Markets vs. Tort Liability 22.3 Industry Structure, Competition, Pricing, and Price Regulation 22.3.1 Industry Structure and Competition 22.3.2 Pricing and Reimbursement in the US 22.3.3 Price Regulation and Competition Ex-US 22.3.4 Cost-Eff ectiveness Requirements for Reimbursement 22.3.5 Evidence of Eff ects of Price Regulation 22.3.6 Generics 22.3.7 Profi tability and Rates of Return 22.3.8 Industry Structure and Productivity: Regulation or Technology? 22.3.9 Alternatives to Patents 22.4 Promotion 22.4.1 Regulation 22.4.2 Trends in Promotion 22.4.3 Evidence on Eff ects of Pharmaceutical Promotion 22.5 Drugs for Developing Countries 22.6 Conclusions References 23. Disease Prevention, Health Care, and Economics 23.1 Introduction 23.2 What is Prevention? 23.2.1 Summary 23.3 Is There an Under-investment in Prevention? 23.3.1 Is Health All There Is? 23.3.2 Screening and the Value of Information 23.3.3 Preferences over lifestyles 23.3.4 Summary 23.4 Assessing Preventive Strategies 23.4.1 Considerations for the Economic Evaluation of Prevention Programs 23.4.2 Taxes and Subsidies 23.4.3 Direct Financial Incentives 23.4.4 Incentives Linked to Health Insurance and Employment 23.4.5 Problems in Rewarding Complex Behaviors 23.4.6 Changing the Health System to Focus on Prevention 23.4.7 Summary 23.5 Conclusion References 24. Long-term Care 24.1 Introduction 24.1.1 What is Long-term Care? 24.1.2 Challenges of Economic Analysis in Long-term Care 24.2 Population Aging: Implications for Long-term Care 24.2.1 Demography and Need 24.2.2 Informal Care Supply 24.2.3 Unit Costs of Services 24.2.4 Availability of Financial Resources 24.3 Provision 24.3.1 Health vs. Social Care Services 24.3.2 Provider Sector 24.3.3 Community vs. Institutions 24.4 Financing 24.4.1 The Rationale for Collective Funding Arrangements 24.4.2 Equity and Efficiency in Funding Arrangements 24.4.2.1 Equity 24.4.2.2 Efficiency 24.4.2.3 Sustainability/Acceptability of Funding Arrangements 24.4.3 Policy Options for Funding Long-term Care 24.4.3.1 Minimum Safety-net Systems 24.4.3.2 One System for All 24.4.3.3 Progressive Universalism 24.4.4 Implementation Factors 24.4.4.1 Revenue-raising Mechanism 24.4.4.2 Defi ning Eligibility 24.4.4.3 Carer-blind or Carer-sighted 24.4.4.4 Interactions with Other Systems 24.5 Governance 24.5.1 Market Reforms 24.5.2 Integration 24.6 Conclusions References 25. Physician Agency and Payment for Primary Medical Care 25.1 Introduction 25.2 A Policy Application: Paying for the Medical Home 25.3 Agency and Physician Induced Demand 25.3.1 Target Income and Physician Utility 25.3.2 Physician-Induced Demand 25.4 Paying for Primary Care by a Mixed System 25.4.1 Physician Fees and Incentives 25.4.2 Argument I: Physician Agency Implies Fees Should be Lower than Marginal Cost and Th ere Should be a Prospective Component of Payment 25.4.3 Argument II: Physician Ability to Induce Demand Implies Fees Should be Set at Less than Marginal Cost 25.4.4 Argument III: Demand Side Moral Hazard Implies Fees Should be Less than Marginal Cost 25.4.5 Argument IV: Physician Marginal Cost is Less than Average Cost Implying Fees Should be Less than Average Cost 25.4.6 Argument V: Fees Do Not Pay for Everything Physicians Should do, and a Prospective Component of Payment Encourages Supply of the Otherwise Unreimbursed Activities 25.4.7 Argument VI: Practical Considerations 25.5 Discussion: Movements in the Right Direction Bibliography 26. Provider Payment and Incentives 26.1 Introduction 26.2 Background: Provider Payment Incentives 26.2.1 Capitation 26.2.2 Fee-for-Service 26.2.3 Prospective Payment per Admission or Episode of Care 26.2.4 Salary 26.2.5 Budgets 26.3 Conceptual Model for Predicting Effects of Specific Incentive Programs 26.3.1 Choice of Quantity and Quality of Output 26.3.2 Hypothesis 1 (Quality Effects of Quality-Based Financial Incentives) 26.3.3 Hypothesis 2 (Quantity Effects of Quality-based Financial Incentives) 26.3.4 Hypothesis 3 (Effects of Exogenous PriceLevel Changes) 26.3.4.1 Quality Effects 26.3.4.2 Quantity Effects 26.4 Assessing the Impact of Financial Incentives on Provider Behavior 26.4.1 Evidence on Effects of Provider Payment Incentives on Type and Amount of Care 26.4.2 Evidence on Indirect Effects of Provider Payment Incentives on Quality of Care 26.4.3 Evidence on Effects of Specific Payment Incentive Programs on Quality of Care 26.5 Conclusions Appendix: Physician Practice Equilibrium Quantity Effects Quality Effects References 27. Non-price Rationing and Waiting Times 27.1 Introduction 27.1.1 Waiting Time Measurements 27.1.2 Overview of Waiting Times Across Countries 27.1.3 Willingness to Pay (WTP) for Wait Reductions and Contingent Evaluation 27.2 Types and Role of Non-price Rationing in Economic Theory 27.2.1 Rationing by Waiting Time 27.2.2 Threshold Rationing 27.2.3 Rationing by Price vs. Non-price Rationing 27.2.4 Waiting-time Prioritization 27.2.5 Waiting Times and the Private Sector 27.3 Why Does Waiting Time Occur? 27.3.1 Waiting Time as a Dynamic Phenomenon: Long-run Equilibrium and Steady State 27.3.2 Empirical Evidence on Demand and Supply Elasticity 27.4 Are There Effective Instruments for Reducing Waiting Times? 27.4.1 Temporary Increase in Activity 27.4.2 Increase Allocative Efficiency: Activity-based Funding 27.4.3 Demand Containment 27.4.4 Choice and Competition 27.4.5 Targets and Waiting-time Guarantees 27.4.6 Primary Care and Waiting Times 27.5 The Major Gaps in Knowledge and Challenges for Future Research 27.5.1 Studies of Demand and Supply Elasticities 27.5.2 Demand Containment: Rationing and Prioritization 27.5.3 Hospital Financing 27.5.4 The Role of Choice and Competition in Reducing Waiting Time 27.5.5 The Waiting Time and the Private Sector 27.5.6 The Role of Waiting-time Targets 27.5.7 The Role of the General Practitioner References 28. Increasing Competition Between Providers in Health 28.1 Introduction 28.2 Competition between Hospitals 28.2.1 The Impact of Competition on Health Care Markets: What Economic Theory Predicts 28.2.2 The US Evidence on Competition and Health System Outcomes 28.2.2.1 The Effects on Prices and Quality of Competition 28.2.2.2 Evidence on Hospital Mergers 28.2.2.3 Differential Treatment of Patients and Differential Responses by Hospitals 28.2.3 Evidence on Competition and Health Outcome from Outside the United States 28.2.3.1 Evidence from the UK 28.2.3.2 Other Evidence 28.3 The Use of Information in Health Care Markets 28.3.1 The Use of Information 28.3.2 The Impact of Information on Health Outcomes 28.4 The Impact of Centrally Set Prices 28.5 Discussion References 29. Measuring Organizational Performance 29.1 Conceptual Framework 29.1.1 Introduction 29.1.2 Th e Evaluative Context 29.2 Modeling the Production Process for Organizational Performance or “Efficiency” 29.2.1 Unit of Analysis 29.2.2 Outputs 29.2.3 Inputs 29.2.4 Political and Environmental Constraints 29.3 Analytical Techniques 29.4 Discussion 29.4.1 Policy Conclusions 29.4.2 Back to the Principal 29.4.3 Incentives 29.4.4 Concluding Comments References 30. Health System Productivity 30.1 Introduction 30.2 Concepts of Productivity Change 30.3 Estimating Medical Care Productivity 30.3.1 Estimating Productivity of the Medical Care Sector: Output 30.3.1.1 Treatment for an Illness 30.3.2 Medical Outcomes as the Output Measure: A Treatment Index or an Outcomes Index? 30.3.3 From Expenditures on Treatments to Quantities of Treatments 30.3.3.1 Deflation 30.3.3.2 Direct Quantity Index 30.3.3.3 When Treatment Characteristics Change 30.3.4 Estimating Productivity: Inputs to Medical Care 30.3.5 A Conceptual Error 30.4 Health, Its Determinants, and the Productivity of Producing It 30.5 Conclusion References 31. The Methods of Cost-effectiveness Analysis to Inform Decisions about the Use of Health Care Interventions and Programs 31.1 Introduction 31.2 Principles of Choice in Health Care 31.2.1 Welfarism 31.2.2 Non-welfarist approaches 31.3 Making Choices 31.4 Defining the Decision Problem 31.4.1 Who is the Choice Directed At? 31.4.2 What is the Choice Between? 31.5 A Clinical Scenario 31.6 Measuring Outcomes 31.7 Costs 31.7.1 Which Costs Should Be Included? 31.7.2 Measuring and Valuing Costs 31.8 How Do We Make Decisions Based on Costs and Outcomes? 31.8.1 Decision Rules for CEA 31.8.2 Decision Rules for CBA 31.9 Vehicles for Economic Evaluation 31.10 Summary References 32. Analyzing Uncertainty in Cost-effectiveness for Decision-making 32.1 Introduction 32.2 Why Uncertainty Matters 32.2.1 Which Intervention is Most Cost-eff ective Given Current Evidence? 32.2.2 Is the Current Evidence Suffi cient? 32.2.3 What are the Consequences of Decision-making Under Uncertainty? 32.3 How Can We Evaluate Decision Uncertainty? 32.3.1 Characterizing the Current Evidence and Uncertainty 32.3.2 Evaluating Parameter Uncertainty 32.3.3 Evaluating Other Sources of Uncertainty 32.3.4 Presenting Uncertainty 32.3.5 Value of Information 32.4 Evaluating the Need for Evidence and the Consequences of Uncertain Decisions 32.4.1 Is the Evidence Suffi cient? 32.4.2 What Type of Evidence is Needed? 32.4.3 How Should Research be Designed? 32.4.4 Th e Consequences of Approving an Intervention 32.5 Summary References 33. Health Utility Measurement 33.1 Introduction 33.2 Overview of issues 33.2.1 Describing Health and Quality of Life 33.2.2 Valuing Health and Quality of Life 33.2.3 Modeling Health State Valuation Data to Obtain Preference Weights 33.2.4 Comparing the Generic Measures 33.2.5 Whose Values? 33.2.6 Policy Implications 33.3 Methodological Developments 33.3.1 Mapping 33.3.1.1 Mapping Using Preferences Rather Than Statistical Association 33.3.2 Using the Most Appropriate Descriptive System: The Role of Condition Specific Measures 33.3.3 States Worse Th an Dead 33.3.3.1 Solution (1): Developments in Modeling Existing TTO Preference Data 33.3.3.2 Solution (2): Th e Lead Time TTO 33.3.4 Ordinal Measures 33.3.4 Experience vs. Preferences 33.3.4.1 Why Patient Values? 33.3.4.2 A Middle Way 33.4 Summary References 34. Concepts of Equity and Fairness in Health and Health Care 34.1 Introduction 34.2 Inequalities in Health and Health Care: A Background Framework 34.3 Concepts of Equity in Health and Three Distributive Principles 34.3.1 Equality = Equal Shares 34.3.2 Equity = Not Necessarily Equal Shares 34.3.3 Fairness—Some Diverse Interpretations 34.3.4 Justice = Just Procedures + Just Distributions 34.3.4.1 Utilitarianism as Health Maximization 34.3.4.2 Egalitarianism 34.3.4.3 Maximin: Rawls’ Diff erence Principle 34.4 The Health Frontier: Equity–efficiency Trade-off 34.4.1 Th e Paradigm of the Health Frontier 34.4.2 Th e Social Welfare Function for Health 34.5 Equality of What I: Health Gains, Prospective Health, Total Health,or What? 34.6 Equality of What II: Outcomes vs. Opportunities 34.7 Conclusion References 35. Measuring Inequality and Inequity in Health and Health Care 35.1 Introduction 35.2 Measurement and Decomposition of Socioeconomic Inequality in Health and Health Care 35.2.1 Measurement 35.2.1.1 Th e Concentration Index 35.2.1.2 Factor Decomposition of the Concentration Index 35.2.1.3 Decomposition of the Concentration Index: Extensions 35.2.2 Properties of Health Variables 35.2.2.1 Mirror, Bounds, and Measurement Scale 35.2.2.2 Alternatives to the Concentration Index for Bounded Variables 35.2.2.3 Implications for Health Inequality Measurement 35.3 Empirical Applications and Policy Implications 35.3.1 Horizontal Inequity in Health Care Use 35.3.2 Income-related Inequalities in Health Outcomes 35.4 Conclusion References 36. Inter-generational Aspects of Health Care 36.1 Health Spending by Age 36.1.1 Cross-country Comparisons of the Age Distribution of Health Spending 36.1.2 Changes in the Age Profiles of Health Spending over Time 36.1.2.1 Effects of Technological Growth 36.1.2.2 Effects of Improving Health 36.2 Implications of Demographic Change for Aggregate Health Spending 36.3 Implications of Demographic Change for Government Budgets 36.3.1 Government Financing by Age 36.3.2 Endogenous Changes in Public Financing 36.4 Inter-generational Transfers in Public Health Spending 36.4.1 Measures of Inter-generational Transfers 36.5 Conclusions References 37. Econometric Evaluation of Health Policies 37.1 The Evaluation Problem 37.1.1 Counterfactuals and Treatment Effects 37.1.2 Average Treatment Effects 37.1.3 Selection Bias 37.2 Selection on Observables 37.2.1 Regression Analysis 37.2.2 Matching 37.2.3 Propensity Scores 37.3 Selection on Unobservables 37.3.1 Structural Models and Control Functions 37.3.2 Instrumental Variables 37.3.3 Regression Discontinuity 37.3.4 Diff erence-in-differences 37.3.5 Panel Data Models 37.4 Ex Ante Evaluation and Micro-simulation 37.5 Further Reading References 38. Health Economics and Policy: The Challenges of Proselytizing 38.1 Global Health Policy Goals 38.1.1 The Pursuit of Efficiency 38.1.2 The Pursuit of Equity 38.1.3 The Pursuit of Macro-economic Expenditure Control 38.2 The Response of Health Economists 38.3 Health Economics and its Impact on Policy: Successes and Issues Remaining to be Addressed 38.3.1 Health Technology Assessment 38.3.2 Pricing Hospital Care 38.3.3 Improving Incentive Structures in Health Care Provision 38.3.4 Development of Patient Reported Outcome Measures (PROMs) 38.4 Conclusions References Index This Handbook Provides An Engaging, Comprehensive Review Of Health Economics, With A Focus On Policy Implications In The Developed And Developing World. Authoritative, But Non-technical, It Stresses The Wide Reach Of The Discipline - Across Nations, Health Systems And Areas Within Health And Medical Care. Introduction / Sherry Glied, Peter C. Smith -- Health Systems In Industrialized Countries / Bianca K. Frogner, Peter S. Hussey, Gerard F. Anderson -- Health Systems In Low- And Middle-income Countries / Anne Mills -- Dt Political Economy Of Health Care / Carolyn Hughes Tuohy, Sherry Glied -- Promise Of Health : Evidence Of The Impact Of Health On Income And Well-being / William Jack -- Health Production / Kristian Bolin -- Socioeconomic Status And Health : Dimensions And Mechanisms / David M. Cutler, Adriana Lleras-muney, Tom Vogl -- Determinants Of Health In Childhood / Michael Baker, Mark Stabile -- Economics Of Infectious Diseases / Ramanan Laxminarayan, Anup Malani -- Economics Of Health Behaviors And Addictions : Contemporary Issues And Policy Implications / Donald S. Kenkel, Jody Sindelar -- Economics And Mental Health : An International Perspective / Richard G. Frank -- Public-sector Health Care Financing / Åke Blomqvist -- Voluntary Private Health Insurance / Peter Zweifel -- Health Care Cost Growth / Michael E. Chernew, Dustin May -- User Charges / Erik Schokkaert, Carine Van De Voorde -- Insurance And The Demand For Medical Care / Mark V. Pauly -- Guaranteed Access To Affordable Coverage In Individual Health Insurance Markets / Wynand P.m.m. Van De Ven, Frederik T. Schut -- Managed Care / Laurence Baker -- Hospitals : Teaming Up / Pedro Pita Barros, Pau Olivella -- Primary Care / Anthony Scott, Stephan Jan -- Global Health Workforce / Till Bärnighausen, David E. Bloom -- Economics Of The Biopharmaceutical Industry / Patricia M. Danzon -- Disease Prevention, Health Care, And Economics / Jane Hall -- Long-term Care / Jose-luis Fernandez, Julien Forder, Martin Knapp -- Physician Agency And Payment For Primary Medical Care / Thomas G. Mcguire -- Provider Payment And Incentives / Jon B. Christianson, Douglas Conrad -- Non-price Rationing And Waiting Times / Tor Iversen, Luigi Siciliani -- Increasing Competition Between Providers In Health Care Markets : The Economic Evidence / Carol Propper And George Leckie -- Measuring Organizational Performance / James F. Burgess Jr., Andrew Street -- Health System Productivity / Jack E. Triplett -- Methods Of Cost Effectiveness Analysis To Inform Decisions About The Use Of Health Care Interventions And Programs / Simon Walker, Mark Sculpher, Mike Drummond -- Analyzing Uncertainty In Cost-effectiveness For Decision-making / Susan Griffin, Karl Claxton -- Health Utility Measurement / Donna Rowen, John Brazier -- Concepts Of Equity And Fairness In Health And Health Care / Jan Abel Olsen -- Measuring Inequality And Inequity In Health And Health Care / Eddy Van Doorslaer, Tom Van Ourti -- Inter-generational Aspects Of Health Care / Louise Sheiner -- Econometric Evaluation Of Health Policies / Andrew M. Jones, Nigel Rice -- Health Economics And Policy : The Challenges Of Proselytizing / Alan Maynard, Karen Bloor. Edited By Sherry Glied And Peter C. Smith. Includes Bibliographical References And Index. The Oxford Handbook of Health Economics provides an accessible and authoritative guide to health economics, intended for scholars and students in the field, as well as those in adjacent disciplines including health policy and clinical medicine. The chapters stress the direct impact of health economics reasoning on policy and practice, offering readers an introduction to the potential reach of the discipline. Contributions come from internationally-recognized leaders in health economics and reflect the worldwide reach of the discipline. Authoritative, but non-technical, the chapters place great emphasis on the connections between theory and policy-making, and develop the contributions of health economics to problems arising in a variety of institutional contexts, from primary care to the operations of health insurers. The volume addresses policy concerns relevant to health systems in both developed and developing countries. It takes a broad perspective, with relevance to systems with single or multi-payer health insurance arrangements, and to those relying predominantly on user charges; contributions are also included that focus both on medical care and on non-medical factors that affect health. Each chapter provides a succinct summary of the current state of economic thinking in a given area, as well as the author's unique perspective on issues that remain open to debate. The volume presents a view of health economics as a vibrant and continually advancing field, highlighting ongoing challenges and pointing to new directions for further progress.