Health Economics
14th Edition
ISBN: 9781137029966
Author: Jay Bhattacharya
Publisher: SPRINGER NATURE CUSTOMER SERVICE
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Question
Chapter 3, Problem 2E
To determine
Check whether the statement is true or false.
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Indicate whether the statement is true or false, and justify your answer.In real life, investments in health can generate long-lasting benefits, but the Grossman model neglects this aspect of health.
Suppose that in the fictional country ASU in 2012, a mandate was passed where everyone between the ages of 23-25
will receive health insurance at a discounted rate, while individuals aged 27-29 were not impacted by this policy.
You, a researcher, want to study the effect of offering discounted health insurance coverage on the use of mental
health services. You have data on the average number of visits for these two age groups over time. Using the
information in the table below, a quick difference-in-difference calculation suggests that the mandate led to
Time Periods
Age
group
Avg.
Avg.
Number of Number of
visits
visits
Pre-2012.
Post-2012
23 to 25 2.3
27 to 29 2.5
approximately 0.3 more visits.
approximately 0.7 more visits.
approximately 0.4 fewer visits.
approximately 0.7 fewer visits.
approximately
0.3 fewer
visits.
020202
337
SUCHARY
3.0
2.9
P
1302
126 70 5572
25
20120822
2012
C
Consider that you want to apply the difference-in-differences approach to evaluate the
Health Insurance Subsidy Program (HISP). In this scenario, you have two rounds of data
on two groups of households: one group that enrolled in the program, and another that
did not. You know that you cannot compare the average health expenditures of the two
groups because of selection bias, thus you decide to compare change in health
expenditures as follows:
Table 7.2 Evaluating HISP: Difference-in-Differences Comparison of Means
After
Before
(baseline)
(follow-up)
Difference
Enrolled
7.84
14.49
-6.65
Nonenrolled
22.30
20.79
1.51
Difference
DD = -6.65 – 1.51 = -8.16
Note: The table presents mean household health expenditures (in dollars) for enrolled and
nonenrolled households, before and after the introduction of HISP.
How should you interpret this difference ($USD -8.16)? What are the basic assumptions
required to accept this result from difference-in-differences?
Knowledge Booster
Similar questions
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- Indicate whether the statement is true or false, and justify your answer. In the Grossman model, optimal health status declines with age.arrow_forwardWhile it may seem intuitively obvious that health expenditures will increase as a population ages – older people after all are less healthy on average than younger people in fact, several prominent health economists have argued that it is not aging per se, but rather some of the correlates of an aging population that cause health expenditures to rise as a population ages. For instance, Getzen (1992) argues that, at least in part, rising health expenditures with an aging population are due to the higher incomes and resources of the older population; health care is a normal good, so higher incomes lead to higher expenditures. In a similar manner, Zweifel et al. (1999) argue that the real problem with an aging population, at least as far as health care costs are concerned, is that there will be more people who are within a couple of years of dying. Since health care expenditures rise sharply close to the end of life, it is this, rather than population aging by itself, that leads to higher…arrow_forwardWhile it may seem intuitively obvious that health expenditures will increase as a population age – older people, after all, are less healthy on average than younger people – in fact, several prominent health economists have argued that it is not ageing per se, but rather some of the correlates of an ageing population that cause health expenditures to rise as population ages. For instance, Getzen (1992) argues that, at least in part, rising health expenditures with an ageing population are due to the higher incomes and resources of the older population; health care is a normal good, so higher incomes lead to higher expenditures. In a similar manner, Zweifel et al. (1999) argue that the real problem with an ageing population, at least as far as health care costs are concerned, is that there will be more people who are within a couple of years of dying. Since health care expenditures rise sharply close to the end of life, it is this, rather than population ageing by itself, that leads to…arrow_forward
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