Health Production Functions

Outline

Measures of Health Concepts:

Health Production Function Marginal Product of Health

Historical Health Production Functions Modern Health Production Functions

Contributions of health care Lifestyle & Environment (Pollution) Education

Measures of Health Status

What do we want:

A measure of the population’s health status, that captures those aspects of health that are meaningful, and can be measured with accuracy (i.e., quantifiable).

Two main types mortality and morbidity.

Measures of Health Status:Mortality Measures Popular measures because is

easy to quantify know when someone dies and is

regularly recorded information Crude death rate

number of deaths per 100,000 population

for some time period—usually a year

Measures of Health Status:Mortality Measures Infant mortality rate:

Number of death of children < age 1 per 1000 live births

Adjust for age, sex, and race to make more meaningful

Not necessary accurate in low-income and war-torn places

Under-five mortality rate Mortality rate for elderly

Measures of Health Status:Mortality Measures Life expectancy at birth (male and female) Cause of death

In more developed countries, can use the cause of death to make analysis more meaningful

i.e., if studying pollution, may want to look at deaths due to asthma, or respiratory infections for infants (< age 1) or small children (< age 5)

Measures of HealthMortality Measures: Problems

Problems with mortality measures Give information on acute problems that lead to

death but don’t provide information on quality of life (do you live in pain and can you perform the tasks you want)

Tend to be used in aggregate data analysis not individual analysis

Measures of HealthMorbidity Morbidity: A statement about the extent of

disability a person suffers as a consequence of a disease over time.

Difficult to quantify because no clear end point and need to asses: duration, severity, and consequences of a disease.

Measures of HealthMorbidity Need to measure the disability which could be

physical, mental, functional, or social. Some sources of these types of data are:

Hospital inpatient discharge records. Hospital outpatient discharge records / outpatient

records. Survey data: self health assessments, days lost

from work.

Measures of HealthMorbidity

Typical morbidity measures includes: Restricted-activity days due to illness

e.g. number of working days lost – Table 5.2.

Incidence rate of certain chronic conditions. Self-assessment of health status. Measures of mobility or activity (ADLs–activities

of daily living). Biomarkers: a characteristic that is objectively

measured and evaluated as an indicator or normal biologic process. For example: blood pressure, cortisol (stress measure).

Measures of HealthMorbidity Chronic conditions with the highest overall

prevalence in US are: Chronic sinusitis Arthritis Asthma Chronic bronchitis Diabetes.

Health Production Functions(Determinants of Health: US Pop.)Health Production Function: describes the

relationship or flows of inputs and flows of outputs over a specified period.

Where output is usual some measure of health status (HS).

HS=F(inputs to health) What could the inputs be? HS=F(health care, environment, education,

lifestyle, genetic factors, income)

Health Production Functions

Health Care Inputs (HI)

Health Status (HS)

1 2 43 5 6

A

B

A>B : as you increase the number of health care inputs, the effects on total health status decrease.

Does it make sense the curve flattens out, should it bend downwards again?

Marginal Product of Health Care

Health Care Inputs

Marginal Product of Health Care

21 3 4 5

A

B

Marginal Product: Is the increment in health status caused by one extra unit of Health Care, holding all other inputs constant?

MP is diminishing in size, demonstrating the law of diminishing marginal returns.

HS HS

HI HI

Marginal Product of Health Care Marginal product that is relevant for policy

makers: They want to know if I add one billion dollars to

health care, how much will the health status of the population improve.

The marginal product might be different for different types of groups, such as young, elderly, or poor.

Determinants of Health Historical View

To know what factors go into the health production function (inputs) need to understand the determinants of health.

Historical Question: what led to the population explosion and increase in life expectancy?

Why has mortality declined? Big medicine theory

Antibiotics for infectious diseases High-tech treatments for cardiovascular disease

Economic growth theory Nutrition allows one to withstand disease

Public health theory Better sewers, cleaner water and air

The long reach of early life factors Maternal nutrition in utero and fetal development What looks like big medicine now could be long-

term effects of better nutrition, public health in the past

Big Medicine Medicine is often a starting point

Seems logical?

Many studies show effects of medicine for specific conditions Drug trials Cardiovascular care Small pox! Some better than others

Difficult to assign an overall contribution Readings question role of Big Medicine

Big Medicine

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Influenza and Pneumonia Deaths per 100,000Big Medicine:Antiobiotics

The development of antibiotics helped, but it came very late in the process.

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Cardiovascular Deaths per 100,000

Big Medicine: Cardiovascular Disease

Medical advance appears more important for cardiovascular disease.

Economic growth & nutrition Fogel: Find direct evidence for economic

growth hypothesis Measures of nutrition:

Height (nutrition as a child, esp. up to age 3) Weight (nutrition as an adult)

Finds Taller people live longer People at the appropriate weight live longer

Collected lots of data on weights and heights over time

Economic Growth Explanation In 1800, people were

shorter and below optimal weight given height.

Both heights and weights have increased over time.

Fogel: This explains 50 to 80 percent of mortality decline.

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Economic Growth Explanation This was a time of exploration and many new

foods were introduced into people diets.

Agriculture was advancing, new crops, crop rotation, seed production ….

Standards of living were increasing as a result of trade so people had the money to buy more food.

Better nutrition results in stronger immune system

Public Health Explanation Preston and Deaton response to Fogel:

Fogel presents evidence on nutritional status not availability Economic growth not only factor in nutrition Interaction between disease and caloric intake

By 1900, U.S. well-fed improvement since then?

Relationship between income and health changing Example: China is about as rich as the US in 1900, but

has life expectancy fairly close to US today and far above US in 1900

Quality of the food matters

The Public Health Revolution Modern health practices date from the early

20th century (post germ theory) Macro public health: sanitation; clean water;

pasteurized milk Micro public health: bathing and hand washing

Epidemiological studies: specific public health interventions improve health

Gap in child mortality by class emerges after public health information is available Upper classes had more information?

The Public Health RevolutionFirst epidemiological study in public health

1854 and John Snow Cholera outbreak Sept 1854, 600 people living with a few blocks

died of cholera. (thought a low lying cloud caused cholera)

Obtain water by signing up with a water supply company. (there were a couple of companies in area)

One company moved to a less polluted part of Thames–deaths much lower for HH receiving this water.

Matter of public health to make sure water coming from clean areas or to chlorinate the water.

The Long Reach of Early Life Are recent mortality reductions due to public health

or nutrition changes long ago? Maybe there is much more to play out?

Almond and Mazumder: Effects of in utero exposure to flu Substantial long-term effects of exposure to flu in utero

during 1918 flu pandemic

Do other early life factors matter, but less dramatically?

Effects of in utero flu exposurePeak of flu pandemic

4th quarter of 1918Spike in poor health:2nd quarter of 1919

Why has health improved?

Probably all three mattered Contributions differ by time period

1. Economic development/nutrition• Most important before c. 1880

2. Public health/germ theory• Most important c. 1880-1960

3. Improved medical care (Big Medicine)• Most important since 1960

Determinants of HealthModern Day1. Contribution of Health Care to Population

Health—which part of the health production curve are we on.

Look at elasticity of health status (HS) with respect to health care expenditure (HE).

%

%

HS

HE

Determinants of HealthHealth Care – Elasticities in the USEvidence

First three use mortality as HS, last measures activity and morbidity.

Determinants of HealthHealth Care 1969 and 82 studies how health exp. has little

impact. A 10% increase in health care expenditure reduces mortality by at most 1.7%.

Marginal effect of health care on health status is small in US – might be on flat part of health production function.

Need to think about population effects: may be small improvement in health status for one person but summed over the population is a much bigger effect.

Determinants of HealthHealth Care

Do you think the elasticities will be the same in other countries developed or developing?

Determinants of HealthHealth Care

Heterogeneity: Medicare lead to greater improvements in the health of black females than white males.

Determinants of HealthHealth Care

Young blacks benefit more than whites

Determinants of HealthHealth Care

WIC: government program designed to improve nutrition of women and infant and provide prenatal care.

BCHS: Bureau of Community Health Services Projects: i.e., maternal and infant care and community heath centers

Able to explain 56.5% of black neonate mortality with these health interventions.

But program such as WIC or prenatal care, do more to reduce mortality than expensive neonatal intensive care units (but hospitals make a lot of money from intensive care units).

Determinants of HealthHealth CareMorbidity Maybe health care is better at reducing morbidity

(reduction of pain, mobility, etc.).

Evidence:1. Newhouse and Friedlander (1980) looked at

biomarkers such as blood pressure, cholesterol, abnormal chest Xrays …

Found availability of health care was rarely significantly related to these measures. But better educated individuals had better health.

They did not control for the quality of health care, did these organizations do an adequate job.

Determinants of HealthHealth Care2. Rand Health Experiment

Controlled experiment in health insurance 1974-1982, 7,000 individuals Randomized into 14 different insurance plans but

one health maintenance organization. (different price, same quality)

Co-payments ranged from 0-95% with a maximum outlay of $1000 dollars per participant.

Wanted to test the effects of alternative health insurance policies on the demand for health care and on the health status.

Fully insured purchased roughly 40% more health care.

Rand Health Experiment Little difference in health status

Determinants of HealthHealth CareRand Health Experiment (continued)

Folland, et al. use this as evidence that health care has little effect on health status.

How would you criticize the study.1. Is 40% meaningful (reduce from 2 visits to the

doctor to 1 visit?) might not have been going enough to the doctor in the first place.

Determinants of HealthHealth Care

2. We showed earlier that subgroups mattered. So what is the effect of greater costs on the poor, on newborns, infants or on blacks—other studies show that the poor’s health declined as the amount of insurance they had to pay increased.

3. Time period of the study, duration of experiment and length of time till poor health are also important factors.

Determinants of HealthHealth Care

Folland summarizes that health care is not a major determinant of health status.

So what else might be?

Determinants of HealthEnvironment and Life Style Factors Evidence shows that countries whose

citizens have better life-styles (lower smoking, more exercise, not excessive drinking…) have better health status. (difference between US and Europe?)

Determinants of HealthEnvironment and Life Style Factors Fuchs compares average death rates in

Nevada and Utah for 1959-1961 and 1966-1988. Compares these two states because feels they

are similar, same level of income and medical care, but Utah has Mormons so smoke and drink less.

To do this better need to control for as many observables as you can (income, pollution levels, % urban population ….)

Determinants of HealthEnvironment and Life Style Factors

Concludes the lifestyle is an important part of health.

Determinants of HealthEnvironment and Life Style Factors What is a major health problem today and

what type of life-style factors lead to this? What is being done about it?

There is a lot of work going on studying the effects of air pollution (especially particulate matter) on asthma and other respiratory disease.

If you want to look at recent economic studies look at Chay and Greenstone.

Drug use/smoking/excessive drinking: especially crucial for newborn health.

Determinants of HealthIncome Talked about this for developing countries. But just looking in the developed (already

rich world) there is less of a correlation between health and income. This is partly because there is just not enough variation in income.

Pritchett and Summers (1996) do show that people with very low incomes in developed countries have worse health.

Determinants of HealthEducationTwo Theories:

1. Education central to health

2. Education not important

Determinants of HealthEducation1. Health important Better educated people know how to use

medical and other market inputs and their own time to produce health care.

More efficient producer of health status. Medicaid, all the confusing paper work, when

are you eligible and when not. Hard for an uneducated person to figure this out.

Better educated probably demand more answers.

Able to read and understand how to take care of themselves better.

Determinants of HealthEducation

2. Education not important Omitted Variable Bias

Some third factor that is missing that effects both education and health status (e.g. mother’s education).

Determinants of HealthEducationEvidence: Tends to show that theory 1 is correct. Education

does lead to better health outcomes. Miguel article-Health and Development Section

Lleras-Muney (2002): used timing of compulsory education laws. Birth cohorts from before and after compulsory education

would have had similar experiences but differed in education.

Compulsory education led to 1.7 more years of life per person.

Health Production FunctionsDeveloping Countries

Van der Gaag and Gertler (1990) Interpret as elasticities (log-log relationship).

Van der Gaag and Gertler

Literacy is a very important factor. (not showing causation like Miguel is trying to show).

Health Production FunctionsDeveloping Countries Link between education and health weakens

when family background variables are controlled for.

Correlation between health care expenditures and health. A 10% increase in health exp. is associated with

an increase of 0.6 years of life expectancy, 4.1% reduction in IMR, 8.7% reduction in child mortality rate.

Discussion Questions

1. Do you think how health care is practiced might affect the impact of health care on health status? What might you change in the US system?

2. Do you think public and private dollars at substitutable, i.e., will you buy the same kind of health care and will it have the same effect on your health status?