The Relationship Between Health Literacy and Costs

1. The Relationship Between Health Literacy and Costs David H Howard Julie Gazmararian Ruth M Parker Emory University Funding provided by Pfizer Inc.

2. Health literacy “The degree to which individuals have the capacity to obtain, process, and understand basic health information” (Ratzan and Parker 2000) About one half of the adult U.S. population has “low functional reading literacy” Math literacy is probably low as well

3. More information on health literacy IOM Report: Health Literacy, A Prescription to End Confusion, 2004 New Research on Health LiteracyMonday 2:00 p.m. – 3:30 p.m.Royal Palm Four Health Literacy, Cultural Competence & Perceived Racism Tuesday 9:15 a.m. – 10:45 a.m.Royal Palm Four

4. Standard story: why might health literacy affect costs? • Low health literacy leads to underuse and inefficient use of outpatient care and prescription drugs • complications, progression of chronic diseases • Greater use of inpatient, emergency room care •  Higher costs

5. Also important to consider physician behavior For low health literacy patients, physicians may substitute intensive care for patient self-care (↑ costs) Physicians may withhold care from low health literacy patients if they think that such patients are non-compliant (↓ costs) Are patient medical knowledge and medical care substitutes or complements?

6. Data: the Prudential Survey Elderly Medicare beneficiaries newly enrolled in Prudential Medicare managed care plans Locations: Cleveland, Ohio; Houston, Texas; South Florida, and Tampa, Florida. Time span: December 1996 and August 1997. Refusal rate: 44%. N = 3,260

7. .464657 Fraction 0 12.38 330868 total net pay of hosp adm. for m Large samples are needed to compare costs

8. .464657 Fraction 0 12.38 330868 total net pay of hosp adm. for m Large samples are needed to compare costs $0 values

9. .464657 Fraction 0 12.38 330868 total net pay of hosp adm. for m Large samples are needed to compare costs “outliers”

10. .464657 Fraction 0 12.38 330868 total net pay of hosp adm. for m Large samples are needed to compare costs Mean of inpatient costs = $5,321

11. .464657 Fraction 0 12.38 330868 total net pay of hosp adm. for m Large samples are needed to compare costs Mean of inpatient costs = $5,321 Mean of inpatient costs with four highest values (> $240,000) excluded = $4,984

12. Analysis: modified 2 part model (Mullahy 1998) First stage Model: logit Dep var: Probability of positive expenditures Sample: entire sample Second stage Model: non-linear least squares, y = exp(xB) Dep var: Expenditures Sample: those with positive expenditures Prediction: Sample average treatment effect

14. Adjusted cost differences: low versus adequate health literacy

15. Adjusted use differences: low versus adequate health literacy

16. Bottom line • Consistent with hypothesis that low health literacy is associated with higher costs • Policy implications: interventions have the scope to reduce costs, but skepticism is in order

17. Caveats/future directions Reverse causation: to what degree does poor health result in deterioration in literacy Need large surveys What is the mechanism?

18. APPENDIX: statistical analysis 1. First stage (logit): 2. Second stage (non-linear least squares): 3. Prediction: For more information, see Mullahy, Journal of Health Economics, 1998)

19. APPENDIX: statistical analysis Write cost prediction as a function of health literacy Sample average treatment effect Standard error computed via Monte Carlo simulation

20. Sample mean costs