A Latent Variable Model of Quality Determination

Despite substantial interest in the determination of quality, there has been little empirical work in the area. The problem, of course, is the general lack of data on quality. This paper overcomes the data problem by constructing a Multiple Indicator Multiple Cause (MIMIC) model of quality determination. We present a one-factor MIMIC model of quality which derives natural indicators out of the relationship between input demand and output determination. The indicators turn out to be input demands which have been filtered to remove variation due to all factors, except quality ana random disturbances. These indicators are measures of input investment in each unit of output or the volume (intensity) of service. The model is identified by defining input demand to be a function of quantity and "total effective output" (quantity times average quality), instead of quantity and average quality. The model is then applied to the determination of nursing home quality. The model appears to perform quite well, as the results generally conform with economic theory and restrictions implied by the MIMIC structure are accepted in hypothesis tests.

A Decomposition of the Elasticity of Medicaid Nursing Home Expenditures Into Price, Quality, and Quantity Effects

Nursing home expenditures have become a public policy concern primarily because the Medicaid program payes for approximately 50 percent. Medicaid makes health care available to individuals who otherwise could not afford it, by directly reimbursing nursing homes for Medicaid patient care. Typically, Medicaid reimbursement rates are set by a cost plus method, where the reimbursement per patient is equal to average cost plus some return referred to as the Medicaid "plus" factor. This paper estimates the elasticity of Medicaid expenditures with respect to a change in the Medicaid "plus" factor,and decomposes that elasticity into price, quality, and quantity components. The decomposition is derived from a model of nursing home behavior, which shows that an increase in the Medicaid "plus" factor causes nursing homes to admit more Medicaid patients and reduce quality.Total expenditures are the Medicaid reimbursement rate times the number of Medicaid patients receiving care. An increase in the Medicaid "plus" factor affects the Medicaid reimbursement by directly raising the Medicaid "plus" factor, and by indirectly decreasing average cost through a reduction in quality. These are the price and quality effects, respectively. The quantity effect is change in the number of Medicaid patients. The elasticities are estimated separately for proprietary and "not for profit" nursing homes using a 1980 sample of New York nursing homes. Uniformly, the proprietary elasticities are approximately twice as large as the "not for profit" elasticities. As expected the price and quantity effects are positive, and the quality effects are negative. In the decomposition, the quality effect is quite important. In fact, ignoring it would lead to a fifty-three percent overestimate of the Medicaid expenditure elasticity.

Subsidies, Quality, and Regulation in the Nursing Home Industry

This paper analyzes the impact of the Medicaid patient subsidy and Certificate of Need (CON) cost containment programs on nursing home behavior.The analysis is complicated by the fact the both proprietary and "not for profit" nursing homes exist, and by the problem that qualityis not directly observed. Medicaid pays the for the care of the financially indigent by directly reimbursing nursing homes at a predetermined rate. As a result, nursing homes can price discriminate between patients who finance their care privately and patients whose care is financed by Medicaid. Nevertheless, nursing homes are required to provide the same quality to both types of patients. Typically, Medicaid reimbursement rates are set by a cost plus method, where the reimbursement per patient is equal to average cost plus some return referred to as the Medicaid "plus" factor. Our results show that Medicaid policymakers face a trade-off between quality and the access of poor to nursing home care. Specifically, we find that increases in the Medicaid "plus" factor cause nursing homes to reduce quality and substitute Medicaid patients for "private pay" patients. These quality differences can be quite large. In fact, in our sample, we find that homes who receive high Medicaid "plus" factors provide hundreds of thousands of dollars less in goods and services than homes who receive average Medicaid "plus" factors, certris paribus. CON attempts to control nursing home expenditures by limiting the supply of beds with capacity constraints and entry barriers. Our analysis shows that CON policy makers are forced to trade off containing the size of the industry (and therefore total Medicaid payments) against quality and access of the poor to nursing home care. Specifically, we find that the capacity constraints and the reduced competition from the entry barriers lead to lower quality and fewer Medicaid patients receiving care.

Insuring Consumption Against Illness

One of the most sizable and least predictable shocks to economic opportunities in developing countries is major illness, both in terms of medical care expenditures and lost income from reduced labor supply and productivity. As a result, families may not be able to smooth their consumption over periods of illness. In this paper, we investigate the extent to which families are able to insure consumption against major illness using a unique panel data set from Indonesia that combines excellent measures of health status with consumption information. We focus on the effect of large exogenous changes in physical functioning. We find that there are significant economic costs associated with these illnesses, albeit more from income loss than from medical expenditures. We also find a robust and striking rejection of full consumption insurance. Indeed, the deviation from full consumption smoothing is significant, particularly for illnesses that severely limit physical function; families are able to smooth less than 30 percent of the income loss from these illnesses. These estimates suggest large welfare gains from the introduction of formal disability insurance, and that the large public subsidies for medical care typical of most developing countries may improve welfare by providing consumption insurance.

Moral Hazard in Partnerships

In this paper, we investigate incentive structures within partnerships. Partnerships provide a classic example of the tradeoff between risk spreading and moral hazard. The degree to which firms choose to spread risk and sacrifice efficiency incentives depends upon risk preferences, for which data are typically unavailable. We are able to overcome this difficulty due to the existence of a unique data set on a prominent form of professional partnership; medical group practice. We consider a two-stage model in which agents choose effort in response to incentives and in which the firm can choose two different instruments to affect incentives and to spread risk: the compensation method and the number of members. There are two new theoretical results. First, relative to the compensation method or group size which would be chosen in the absence of risk or risk aversion, the best compensation method will be one which sacrifices efficiency incentives in order to spread risk, and the best membership size will exceed the first best size for the same reasons. Second, a further increase in risk or risk aversion leads the firm to sacrifice more efficiency incentives in order to spread more risk. Hence, firms who are more risk averse or face greater uncertainty pay larger risk premiums in terms of sacrificed output due to shirking. The empirical results are striking and consistent with the theory. Firms which report more risk aversion have greater departures from first-best organizational incentive structures. Specifically, increased risk aversion leads to compensation arrangements which spread more risk through greater sharing of output and to decreased group size in order to counteract diminished incentives. We also find that compensation arrangements that have greater degrees of sharing of output across physicians significantly reduce each physician's productivity, whereas reductions in group size significantly increase productivity. The estimated premium associated with risk aversion accounts for almost eleven percent of gross income, comparing the most risk averse to the least risk averse physicians in the sample.

The Effect of Pre-Primary Education on Primary School Performance

Although the theoretical case for universal pre-primary education is strong, the empirical foundation is weak. In this paper, we contribute to the empirical case by investigating the effect of a large expansion of universal pre-primary education on subsequent primary school performance in Argentina. We estimate that one year of preprimary school increases average third grade test scores by 8 percent of a mean or by 23 percent of the standard deviation of the distribution of test scores. We also find that preprimary school attendance positively affects student’s self-control in the third grade as measured by behaviors such as attention, effort, class participation, and discipline.http://deepblue.lib.umich.edu/bitstream/2027.42/57218/1/wp838 .pd

An Experiment in Incentive-Based Welfare: The Impact of PROGRESA on Health in Mexico

We investigate the impact of a unique anti-poverty program in Mexico on health outcomes. The program, PROGRESA, combines a traditional cash transfer program with financial incentives for families to invest in human capital of children. Our analysis takes advantage of a controlled randomized study design with household panel data. We find that the program significantly increased utilization of public health clinics for preventive care. The program also lowered the number of inpatient hospitalizations and visits to private providers, which is consistent with the hypothesis that PROGESA lowered the incidence of severe illness. We found a significant improvement in the health of both children and adults.anti-pverty program, child health, Mexico

Regulation and the Provision of Quality to Heterogenous Consumers: The Case of Prospective Pricing of Medical Services

This gaper analyzes the welfare implications of fixed price regulation in a model in which consumers are heterogeneous and a firm can endogenously quality discriminate. The motivation for this analysis is the current move of third party payors (governmental and private insurors) toward prospective pricing of medical services. Our major result is that prospective pricing causes a distributional welfare loss. Specifically, in our model, prospective pricing induces a profit maximizing medical care provider to simultaneously provide a smaller than socially optimal level of quality to more severely ill patients and, surprisingly, a greater than socially optimal amount of quality to less severely ill patients. Further, the distributional welfare loss does not disappear when ethically motivated deviation from profit maximization is allowed. The inefficient distribution of quality occurs because prospective payment regulation fixes the price across patients with different severities of illness but allows providers to quality discriminate. More complicated DRG pricing rules do not appear to be able to completely avoid this problem. Alternatively, vertical integration of third party payors into the direct provision of medical care is shown to be able to bypass the problem completely. This implies that the recent proliferation of vertically integrated health care organizations such health maintenance organizations, preferred provider organizations, and managed care plans by self-insuring employers are welfare improving.

Psychological treatments for depression following brain injury

Traumatic brain injury (TBI) increases risk of depression which is distressing and can be a barrier to recovery. This program of research examined non-pharmacological interventions for people with depression following TBI. A Cochrane systematic review was conducted in order to identify studies of interventions (Gertler, Tate, & Cameron, 2015; Chapter 2, section 1). Cochrane reviews are the most stringent form of systematic review of evidence relating to treatment outcomes. The review identified six studies, three studies relating to cognitive-behavioural therapy (CBT) which were combined in a meta-analysis that showed a very small effect in favour of treatment versus control, with a wide confidence interval. Other treatment studies were evaluated but either did not favour any treatment or were low quality studies. Recent studies have reported positive findings for CBT extended by booster sessions or for acceptance and commitment therapy (Chapter 2, section 2). Chapter 3 (Gertler & Cameron, 2018) is a published journal article explaining data analytic techniques used in a Cochrane review. Chapter 4 describes a psychometric evaluation of single-item mood scales (SIMS; Gertler & Tate, 2020) that can be used to demonstrate progress in treatment. SIMS are frequently used in clinical practice but had not yet been shown to be valid when used with people with brain impairment. SIMS were demonstrated to have construct and criterion validity when applied to TBI. Chapter 5 (Gertler and Tate, 2019) is a published journal article describing a single case experimental design (SCED) trial of behavioural activation (BA) to improve participation and mood. BA was chosen because it had not been evaluated for people with TBI and was thought to be more suitable than treatments such as CBT that require abstract thinking. The authors did not find evidence in favour of BA and this was discussed in the context of recent research findings that suggested that new technologies could improve the quality of measurement and interventions. In conclusion, there is more research to do in order to improve the effectiveness of interventions for depression after TBI however, using SIMS as a measure and SCED methodology, the thesis demonstrates a model for investigating untested interventions and their active components

The Effect of Pre-Primary Education on Primary School Performance

Although the theoretical case for universal pre-primary education is strong, the empirical foundation is weak. In this paper, we contribute to the empirical case by investigating the effect of a large expansion of universal pre-primary education on subsequent primary school performance in Argentina. We estimate that one year of preprimary school increases average third grade test scores by 8 percent of a mean or by 23 percent of the standard deviation of the distribution of test scores. We also find that preprimary school attendance positively affects student’s self-control in the third grade as measured by behaviors such as attention, effort, class participation, and discipline.Preschool, Pre-primary education, Primary school performance