Two Papers of Interest

Two papers in the current issue of Health Economics look interesting to me. I may not have time to read them but others might wish to. They’re listed below with links and abstracts.

The first addresses the question of whether the fact that individuals switch health plans results in lower use of preventative services. Since provision of preventative services is a current investment for a future return, high turnover offers an opportunity for an insurer to benefit from the investments of others and to dodge the consequences of its own under-investment.

The second paper below documents the variation in value of a quality adjusted life year (QALY) across countries. Since figures are not reported in the same currency they are hard to compare. But the authors also estimated the discount rate of QALY value across countries. The QALY discount rate in Japan is almost twice that in the U.S., for example.

Many preventive healthcare procedures are widely recognized as cost-effective but have relatively low utilization rates in the US. Because preventive care is a present-period investment with a future-period expected financial return, enrollee turnover among private insurers lowers the expected return of this investment. In this paper, I present a simple theoretical model to illustrate the suboptimal provision of preventive healthcare that results from insurers ‘free riding’ off of the provision from others. I also provide an empirical test of this hypothesis using data from the Community Tracking Study’s Household Survey. I use lagged market-level measures of employment-induced insurer turnover to identify variation in insurers’ expectations and test for the effect of turnover on several different measures of medical utilization. As expected, I find that turnover has a significantly negative effect on the utilization of preventive services and has no effect on the utilization of acute services used as a control.

Takeru Shiroiwa, et al., International survey on willingness-to-pay (WTP) for one additional QALY gained: what is the threshold of cost effectiveness?

Although the threshold of cost effectiveness of medical interventions is thought to be £20 000-£30 000 in the UK, and $50 000-$100 000 in the US, it is well known that these values are unjustified, due to lack of explicit scientific evidence. We measured willingness-to-pay (WTP) for one additional quality-adjusted life-year gained to determine the threshold of the incremental cost-effectiveness ratio. Our study used the Internet to compare WTP for the additional year of survival in a perfect status of health in Japan, the Republic of Korea (ROK), Taiwan, Australia, the UK, and the US. The research utilized a double-bound dichotomous choice, and analysis by the nonparametric Turnbull method. WTP values were JPY 5 million (Japan), KWN 68 million (ROK), NT$ 2.1 million (Taiwan), £23 000 (UK), AU$ 64 000 (Australia), and US$ 62 000 (US). The discount rates of outcome were estimated at 6.8% (Japan), 3.7% (ROK), 1.6% (Taiwan), 2.8% (UK), 1.9% (Australia), and 3.2% (US). Based on the current study, we suggest new classification of cost-effectiveness plane and methodology for decision making.

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