Production of Health

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Production of Health

• FGS - Chapter 5

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General Formulation
What are these?

• HS f (Health Care, Environment, Human Biology,
  Life Style)
• HS f (HC, Env, HB, LS)
• If were concentrating on health care,
• Total Product HS f (HC, Env, HB, LS)
• Marginal Product MP ?HS/?HC
• Average Product AP HS/HC
• (Excel Spreadsheet - Ch 5.xls)

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Measures of Health Status

• Death rates (easiest to measure)
• Healthy days
• Morbidity rates
• It may be critical to distinguish between total
  and marginal contributions, since low marginals
  may accompany high totals.

Think about longevity.
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Total v. Marginal

• It is critical to distinguish between total and
  marginal contributions. It may turn out that
  although the total contribution may be
  substantial, the marginal contribution may be
  very small. Why do we care?
• Because many decisions are made at the margin.
  Additions to the amount spent, may not be worth
  it.

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Marginal Products

• Under most conditions, marginal products are
  always going to be non-negative. Why?
• Can ?H/?x (where x health care) be negative?
• ltAgt Yes! 2 Possibilities

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Iatrogenic (physician caused) disease

• Iatrogenic (physician caused) disease. All
  procedures have their risks. For example, in
  anesthesia, you kill someone a little bit -- You
  may do it too much.
• Suppose, that the more we do, the higher the
  risk.
• More care gives lower marginal product, higher
  risk.

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Iatrogenic Picture

• Impacts of care
• mgl product ()
• mgl risk (-)
• Net impact
• mgl product - mgl risk.

Marginal impacts
Net impact MP - MR
Mgl. Prod.

• Here, its positive.

Mgl. Risk
Health care, x
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Iatrogenic Picture

• Here, its negative.

Marginal impacts
Net impact.

• Why?

Mgl. Prod.
Mgl. Risk
Health care, x
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Examples of Iatrogenic (physician caused) disease

• Examples
• smallpox vaccine is a prime example
• Medical malpractice may be a another (i.e. the
  more done, the more possible mistakes).

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Medicalization of Health Care

• Ivan Illich has argued that the medicalization
  (substituting medical for home care) of health
  care could effectively lead to less personal
  consumer effort to produce health.
• How would this work?
• Can you think of an example?

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On the Historical Role of Medicine and Health
Care

• McKeown focused on dramatic rise in population in
  England and Wales since 1750.
• It seems that world population rose and fell
  without any upward trend, up until that time.
• How does population increase? (Discuss)
• ltAgt Increased births
• Decreased deaths
• Increased in-migration

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Population Growth
http//www.ciese.org/curriculum/popgrowthproj/worl
dpop.html
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KEY !!!

• Decreased deaths due to
• 1. airborne causes -- tuberculosis, bronchitis,
  pneumonia, and influenza
• 2. waterborne causes
• Table 5.1.

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Public Health

• If not medical care, than what?
• McKeown argues that its public health
• Immunization of populations
• Quarantines
• Sanitary standards for water and sewage
• Sanitary standards for food handling and
  treatment

Key point, though is increased nutrition
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Fogel - Increased Nutrition

• Infectious disease creates a relationship
  between host and parasite. While control of the
  parasite is directly helpful in reducing disease
  incidence, the condition of the host helps to
  determine its resistance to disease. A person
  who is better housed, better rested, and ...
  better fed, will be more resistant and less
  likely to die subsequent to exposure. FGS/4,
  Ch. 5

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Fuchs -- Utah/Nevada
How do we explain?
Excess Death Rates (Nevada - Utah)

• Age Group Males Females
• lt1 42 35
• 1-19 16 26
• 20-39 44 42
• 40-49 54 69
• 50-59 38 28
• 60-69 26 17
• 70-79 20 6

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Neonate Mortality

• Table 5.3 looks at neonate mortality. Rate is
  the ratio of infant deaths aged 1 month or less
  per thousand live births. It fell 1964-1982 from
  17.9 to 7.7. Corman, Joyce, and Grossman were
  able to estimate the contributions of specific
  types of medical care and specific types of
  neonate-related programs.
• WIC - Women, Infants and Children (improved
  nutrition program) is means tested, directed
  toward the poor.
• For whites - 25 of the reduction can be
  explained
• For blacks - 56 can be explained.

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Bureau of Community Health Services Projects
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Morbidity

• Mortality is useful because it is easy to
  measure. Morbidity refers to illness.
• What might we expect? If most diseases are
  either self-limiting, or irreversible, the
  possibilities for additional medical services to
  reverse morbidity are small. May work for some
  services (hypertension, periodontal disease), and
  not for others. That's about what is found.

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Schooling - Two Different Theories

• Grossman - Educated people produce health more
  efficiently. Why? If so, it makes sense to
  transfer resources from medical care to
  education.
• Fuchs - Education is an investment with a long
  time horizon. So is health! Since individuals
  with low time discount rates, or long time
  horizons will tend to invest both in education
  and health, the two (health and education) will
  be correlated. No explicit link.
• This debate has been around for a while, and
  theyre still arguing about it.

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Cutler

TB
Decreasing MB ?s

• Starts with a simple model
• U V(q) C(q), where q health output
• To maximize total utility
• Mgl. Value Mgl. Cost
• Nothing profound here.
• What weve done thus far in all of our analyses
  today is Mgl cost. What about Mgl value?

TC
Increasing MC ?s
MB
MC
q
q
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Example

• Studies have shown that were willing to pay 300
  (MC) for an air bag. What are MB?
• Air bag will save life of 1 in 10,000. So
• MC for airbags MB for airbags
• 300 probability of dying Value of life
• .0001 Value of life
• Value of life 300/0.0001 3,000,000
• Depending on how we discount it, this is worth
  about 100,000 per year.

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Look at Cardiovascular Care

• Cutler asserts that average 45 year old will
  spend 30,000 in present value on CV care.
• Average person will live 3 years longer because
  of the medical advance? Is it worth it? Who is
  average?
• Turns out that average discounted benefit is
  120,000.
• Yes, it is worth it!

B/C120/30 4!
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But
Mgl. Valuation
Mgl. Costs

• We want to look not only at marginal product ?
  marginal costs, but at marginal valuation
  relative to marginal costs!
• Low marginal product, may mean increasing
  marginal costs, but it doesnt mean that care is
  not valuable.

Source David M. Cutler Are the Benefits of
Medicine Worth What We Pay for It? FIFTEENTH
ANNUAL HERBERT LOURIE MEMORIAL LECTURE ON HEALTH
POLICY, Syracuse University, 2004
Quantity of Care