HEALTH, THE MEDICAL PROCESSION, AND REGULATION DevelopmentsinHealthEconomicsandPublicPolicy VOLUME6 SeriesEditors PeterZweifel, Universitya/Zurich, Switzerland H.E. FrechIII, Universitya/California, SantaBarbara, U.S.A. The titlespublishedinthisseriesarelistedattheend0/thisvolume. HEALTH, THE MEDICAL PROFESSION, AND REGULATION Edited by Peter Zweifel Socioeconomic Institute University of Zürich ..... " SPRINGER SCIENCE+BUSINESS MEDIA, LLC Library of Congress Cataloging-in-Publieation Data Health, the medieal profession, and regulation I edited by Peter Zweifel. p. em. --(DevelopmenlS in health eeonomics and public poliey; v.6) Includes bibliographical referenees. ISBN 978-1-4613-7601-9 ISBN 978-1-4615-5681-7 (eBook) DOI 10.1007/978-1-4615-5681-7 1. Medieal eeonomies. 2. Medical poliey. 3. Medicallaws and legislation. I. Zweifel, Peter. 11. Series. RA410.5.H43 1998 338.4'33621--dc21 97-43550 CIP Copyright © 1998 Springer Scienee+Business Media New York Original1y published by Kluwer Academic Publishers in 1998 Sofleover reprint of the hardcover 1 si edition 1998 retrieval system or transmitted in any fonn or by any means, meehanieal. photo eopying, reeording, or otherwise, without the prior written permission of the publisher, Springer Science+Busincss Media, LLC Printed on acid-free paper CONTENTS CONTRIBUTORS' LIST vii INTRODUCTION ix PeterZweifel PART 1 HEALTH 1 TheImpactoftheEnvironmentonthe Demands for HealthandHealthCare: AnEmpiricalAnalysis for Gennany 3 ManfredErbsland, WalterRied, andVolker Ulrich 2 TheDemandforHealth: AnEmpirical Testofthe GrossmanModelUsingPanelData 35 SandraNocera andPeterZweifel 3 CountingandDiscountingGainedLife-years 51 JesSegaardandDorteGyrd-Hansen 4 InequalityinInfantMortalityinPortugal, 1971- 1991 75 JOCIOA. Pereira 5 Health,Work-Hours, andWagesinSweden 95 GunSundberg 6 TheDeterminantsofHealthExpenditureinthe OECDCountries: APooledDataAnalysis 113 Ulf-GGerdtham, BengtJonsson, MaitlandMacFarlan, andHowardOxley PART2 THEMEDICALPROFESSION 135 7 ClinicalResponseofSalariedConsultantsto EconomicIncentives 137 TorIversen vi HEALTH,THEMEDICALPROFESSION,ANDREGULATION 8 TheUseofMultilevelAnalysisinHealthEconomics: AnApplicationto ExaminingtheEffectof CompetitiononGeneralPractitioners' Behavior 159 AnthonyScottandAlanShiell 9 AComparativeApplicationofEconometricFrontier andDEAMethodsforAssessingCostEfficiencyof FinnishHospitals 169 MiikaLinnaandUntoHtikkinen PART3 REGULATION 189 10 FinancialIncentivesandPrimaryCareProvisionin Britain: DoGeneralPractitionersMaximisetheir Income? 191 MauriceaLynch 11 Cream-SkimminginDeregulatedSocialHealth Insurance: Evidencefrom Switzerland 211 KonstantinBeckandPeterZweifel 12 ModelingCross-BorderCareintheEUUsinga Principal-AgentFramework 229 LucaCrivelliandPeterZweifel INDEX 259 CONTRIBUTORS'LIST Dr. Konstantin Beck Maitland MacFarlan CSS OECD Switzerland Paris LucaCrivelli Dr. Sandra Nocera UniversityofZurich UniversityofZurich Switzerland Switzerland Manfred Erbsland Howard Oxley Zentrumfur Europaische OECD Ulir~chajisforschung France Germany Dr.Joao Pereira Ulf-G. Gerdtham UniversidadeNovadeLisboa StockholmSchoolofEconomics Portugal Sweden Walter Ried Dorte Gyrd-Hansen UniverisityofMannheim Odense University Germany Denmark Anthony Scott Unto Hakkinen UniversityofAberdeen NationalResearchand Scotland, UK DevelopmentCentrefor Ulelfare andHealth Alan Shiell Finland The UniversityofSydney Australia Prof. Dr. Tor Iversen UniversityofOslo Dr.Jes S0gaard Norway Odense University Denmark BengtJonsson StockholmSchoolofEconomics Gun Sundberg Sweden Uppsala University Sweden Miika Linna NationalResearchand Prof. Dr. Volker Ulrich DevelopmentCentrefor UIelfare Ernst-Moritz-Arndt-Universittit andHealth Greifswald Finland Germany Dr. Mauricea Lynch PeterZweifel UniversityofStirling UniversityofZurich Scotland, UK Switzerland INTRODUCTION Health and its determinants, the behavior ofphysicians, and regulation ofthe health care sector-these are the timely themes ofthis book. A dozen contributions to the ThirdEuropeanConferenceonHealthEconomicsheld inStockholm(Sweden),20to 22August 1995wereselectedto illuminatethese issues. Part 1, comprising six papers, is devoted to people's health. Manfred Erbsland, Ulrich Ried, and Volker Ulrich provide long-awaited econometric evidence on the influenceoftheenvironmentonhealth, usingGerman microdata. Indeed, theyfmd a nonneglegible negative effect on environmental pollution on health. The novelty of the contribution by Sandra Nocera and Peter Zweifel lies in their ability to trace a sample of Swiss individuals over a period of twelve years. The well-known Grossman model predicts a long-run positive relationship between medical care and health, but even these data strongly suggest a negative one: people seek care when they are in bad health. Jes Sogaard and Dorte Gyrd-Hansen examine the issue of discounting utility, which is crucial for the application ofcapital theory in the same Grossman model. They distinguish between deterministic and probabilistic approaches to life expectancy and show that depending on the choice, the present value ofyears gained may differ by a factor ofno less than 150. Economists have alwaysconsidered incometo beoneofthe majordeterminantsofhealth; however, its importancemay diminish as income levelsrise generally. This is preciselywhat Joao Pereirafmds inthe caseofperinatalmortality inPortugal. However, overaperiodof twenty years, inequality in postnatal mortality shows a rebound after a drop in the 1970s. Inequality in health likely is related to inequality in income; specifically, a higher wage permits people to work less, which should enhance health. Gun Sundberg presents evidence of such a relationship. Finally, Ulf Gerdtham, Bengt J5nsson, Maitland MacFarlan, and Howard Oxley provide an international comparison ofhealthcare expenditure. They showthat incomegrowthexplains most ofthe development ofhealth care expenditure, pretty much regardless ofthe policy orientationofgovernments. Part 2 consists ofthree papers that deal with the supply side ofthe market for health care services. In particular, financial incentives may well influence clinical decisions. TorIverseninvestigatesthe settingofprioritiesbyNorwegainclinicians in response to achange in relative fees. He finds economic incentivesto matter when it comes to the choice between inpatient and outpatient treatment of patients of the same diagnostic group but not when it comes to the treatment choices for patients belonging to different diagnostic groups. Anthony Scott and Alan Shiell present evidence suggesting that Australian GPs also change their style of practice in response to changed economic incentives. In particular, increased competition is shown to have a crucial effect. But above all, increased competition holds the x HEALTH,THEMEDICALPROFESSION,ANDREGULATION promise ofweeding out inefficiencies in the supply ofhealth care services, not least in hospitals. Miika Linna and Unto Hlikkinen measure the average level of inefficiencyinFinnishhospital intwoways,obtainingresultsthatbroadlyagree. Part3containsthreecontributionsdevotedtohealth regulation. Regulatoryeffects very much depend on whether physicians are ethical or income maximizers. Usinga linearprogrammingmodel for incomemaximization, MauriceaLynchconcludesthat only some 5 percent of British GPs unambiguously fall in the latter category. Regulation and deregulation are crucial issues also in insurance-based health care systems, where the problem ofcream skimming ofgood risks has been at the center ofdebate. Konstantin Beck and PeterZweifel showthat Swiss sick funds, regardless oftheir status ofsocial health insurers, engaged heavily in cream skimming. They propose an improvement of the risk adjustment formula that should substantially mitigatethe incentive to cream skim. Finally Luca Crivelli and PeterZweifel add an internationaltouchbylookingintoso-calledcross-bordercare intheEuropeanUnion (EU). This is becoming an issue because citizens ofEU member countries have the rightto obtaintreatment in anothermembercountry providedtheirclaim isendorsed byanumberofauthorities. This editor for one found each ofthese topics fascinating. May this fascination spring over to the reader when he or she delves into some ofthese contributions, discovering parallels and differences that provide answers but also raise interesting questionsfor future research! Part 1 Health