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Economics 7550 – Fall 2019

Economics 7550 – Fall 2019. Lecture 2 – A Model of Health Care Production and Policy From Zweifel and Breyer. Purpose. Is there a general way to model (in an aggregate way) health policy? We would like to distinguish health services from health? How does technology factor in?. C.

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Economics 7550 – Fall 2019

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  1. Economics 7550 – Fall 2019 Lecture 2 – A Model of Health Care Production and Policy From Zweifel and Breyer

  2. Purpose • Is there a general way to model (in an aggregate way) health policy? • We would like to distinguish health services from health? • How does technology factor in?

  3. C We produce and value these! C = Home Good H = Health C = C(X) X = Non-medical Good M = Medical Good We buy these! X H M

  4. C C = Home Good H = Health C = C(X), Why? X = Non-medical Good M = Medical Good Why do these look like this? X H Y(H) = pX + qM Y3 Y2 Y1 Y0 Y = pX + qM H = H (M), Why? M

  5. Y = pX + qM Budget Constraint This leads to a relationship between goods X and M. If we differentiate the function, realizing that H = H(M), we get: This leads to:

  6. Normally: If Either equals 0, negative relationship occurs This implies that more M less X. Here, if you buy more M, you’re healthier -- it may allow you to buy more X as well. Thenmore M  more X

  7. C C = C(X) X H Y(H) = pX + qM Y = pX + qM H = H (M) M

  8. C We Value These U = U(C, H) C = C(X) X H Y(H) = pX + qM Y = pX + qM H = H (M) M

  9. C U = U(C, H) C = C(X) C* X* X H H* Y(H) = pX + qM Q* Y = pX + qM M* H = H (M) Q* = qM*/y(H*) = Optimal Health Share M

  10. Some Macro thoughts • We may not know much about H or C, but we can measure [qM] and [pX]. • Let H = person-years of good health qM = national health expenditures pX = aggregate consumption expenditures • Suppose there’s an improvement in health technology.

  11. C U = U(C, H) C = C(X) C* X* X H H* Y(H) = pX + qM Q* M* H = H (M) H+ = H+(M) M

  12. Other types of changes • Preferences between health and consumption. • C (X) is not constant. Better education, for example, may increase C. • Budget constraint is subject to changes in p and in q, as well as to increasing incomes (or wage rates). • Institutional factors (e.g. Social Security, Medicare, National Health Insurance) may make a difference.

  13. Ruhm on Macroeconomy and Health • In 1970s there was a lot of literature (Brenner, a sociologist, and others) that said • Bad economy  bad health • They did some time series analysis that purported to show that a bad economy had adverse health impacts. • The answer, not surprisingly, is “well, it depends.”

  14. Let’s look at drinking • Bad economy  stress ↑  drinking ↑ • BUT, bad economy  income  drinking . • Drinking less  drunk driving and fewer deaths from drunk driving.

  15. These should be examined at the individual level • I looked at this using a 2001 database.

  16. Income and Alcohol The relationship is complicated.

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