Abstracts of Selected Recent NBER Working Papers

WP 15041

Seema Jayachandran, Ilyana Kuziemko

Why Do Mothers Breastfeed Girls Less Than Boys? Evidence and Implications for Child Health in India

Medical research indicates that breastfeeding suppresses post-natal fertility. We model the implications for breastfeeding decisions and test the model's predictions using survey data from India. First, we find that breastfeeding increases with birth order, since mothers near or beyond their desired total fertility are more likely to make use of the contraceptive properties of nursing. Second, given a preference for having sons, mothers with no or few sons want to conceive again and thus limit their breastfeeding. We indeed find that daughters are weaned sooner than sons, and, moreover, for both sons and daughters, having few or no older brothers results in earlier weaning. Third, these gender effects peak as mothers approach their target family size, when their decision about future childbearing (and therefore breastfeeding) is highly marginal and most sensitive to considerations such as ideal sex composition. Because breastfeeding protects against water- and food-borne disease, our model also makes predictions regarding health outcomes. We find that child-mortality patterns mirror those of breastfeeding with respect to gender and its interactions with birth order and ideal family size. Our results suggest that the gender gap in breastfeeding explains 14 percent of excess female child mortality in India, or about 22,000 "missing girls" each year.

WP 15096

Dana Goldman, Darius Lakdawalla, Yuhui Zheng

Food Prices and the Dynamics of Body Weight

A popular policy option for addressing the growth in weight has has been the imposition of a "fat tax" on selected foods that are deemed to promote obesity. Understanding the public economics of "fat taxes" requires an understanding of how or even whether individuals respond to changes in food prices over the long-term. We study the short- and long-run body weight consequences of changing food prices, in the Health and Retirement Study (HRS). We found very modest short-term effects of price per calorie on body weight, and the magnitudes align with the previous literature. The long-term effect is much bigger, but it takes a long time for the effect to reach the full scale. Within 30 years, a 10% permanent reduction in price per calorie would lead to a BMI increase of 1.5 units (or 3.6%). The long term effect is an increase of 1.9 units of BMI (or 4.2%). From a policy perspective, these results suggest that policies raising the price of calories will have little effect on weight in the short term, but might curb the rate of weight growth and achieve weight reduction over a very long period of time.

WP 15106

Anthony Lo Sasso, Lorens Helmchen, Robert Kaestner

The Effects of Consumer-Directed Health Plans on Health Care Spending

We use unique data from an insurer that exclusively offers high-deductible, "consumer-directed" health plans to identify the effect of plan fea-tures, notably the spending account, on health care spending. Our results show that the marginal dollar in the spending account is entirely spent on outpatient and pharmacy services. In contrast, inpatient and out-of-pocket spending were not responsive to the amount in the spending account. Our results represent the first plausibly causal estimates of the components of consumer-driven health plans on health spending. The magnitudes of the effects suggest important moral hazard consequences to higher spending account levels.

WP 15114

Phillip Levine, Robin McKnight, Samantha Heep

Public Policy, Health Insurance, and the Transition to Adulthood

This paper assesses the impact of two recent policies designed to increase insurance coverage for older teens and young adults. The introduction of SCHIP in 1997 enabled low and moderate income teens up to age 19 to gain access to public health insurance. More recent policies adopted by a number of states have enabled young adults between the ages of 19 and (typically) 24 to remain covered under their parents' health insurance. We take advantage of the discrete break in coverage at age 19 to evaluate the impact of SCHIP. We also use quasi-experimental variation across states and years along with the targeted nature of eligibility to evaluate the impact of these "extended parental coverage" laws. Our results suggest that both types of policies were effective at increasing health insurance coverage, especially among their respective target populations. Overall, SCHIP increases insurance coverage by 3 percentage points; those with incomes under 150 percent of poverty are found to experience a 7 percentage point increase. We find little evidence of crowd-out associated with the introduction of SCHIP. Extended parental coverage laws have minimal aggregate effects on coverage, but they increase coverage by up to 5 percentage points for select groups. These laws may generate reverse crowd-out, as individuals leave public insurance coverage to take advantage of the private coverage now available to them.

WP 15149

Mariacristina De Nardi, Eric French, John Bailey Jones

Why Do the Elderly Save? The Role of Medical Expenses

This paper constructs a rich model of saving for retired single people. Our framework allows for bequest motives and heterogeneity in medical ex-penses and life expectancies. We estimate the model using AHEAD data and the method of simulated moments. The data show that out-of-pocket medical expenses rise quickly with both age and permanent income. For many elderly people the risk of living long and requiring expensive medical care is a more important driver of old age saving than the desire to leave bequests. Social insurance programs such as Medicaid rationalize the low asset holdings of the poorest. These government programs, however, also benefit the rich because they insure them against their worst nightmares about their very old age: either not being able to afford the medical care that they need, or being left destitute by huge medical bills.

WP 15213

Samuel Preston, Jessica Ho

Low Life Expectancy in the United States: Is the Health Care System at Fault?

Life expectancy in the United States fares poorly in international comparisons, primarily because of high mortality rates above age 50. Its low ranking is often blamed on a poor performance by the health care system rather than on behavioral or social factors. This paper presents evidence on the relative performance of the US health care system using death avoidance as the sole criterion. We find that, by standards of OECD countries, the US does well in terms of screening for cancer, survival rates from cancer, survival rates after heart attacks and strokes, and medication of individuals with high levels of blood pressure or cholesterol. We consider in greater depth mortality from prostate cancer and breast cancer, diseases for which effective methods of identification and treatment have been developed and where behavioral factors do not play a dominant role. We show that the US has had significantly faster declines in mortality from these two diseases than comparison countries. We conclude that the low longevity ranking of the United States is not likely to be a result of a poorly functioning health care system.

WP 15231

Pierre-Carl Michaud, Dana Goldman, Darius Lakdawalla, Yuhui Zheng, Adam Gailey

Understanding the Economic Consequences of Shifting Trends in Population Health

The public economic burden of shifting trends in population health remains uncertain. Sustained increases in obesity, diabetes, and other diseases could reduce life expectancy-with a concomitant decrease in the public-sector's annuity burden - but these savings may be offset by worsening functional status, which increases health care spending, reduces labor supply, and increases public assistance. Using a microsimulation approach, we quantify the competing public-finance consequences of shifting trends in population health for medical care costs, labor supply, earnings, wealth, tax revenues, and government expenditures (including Social Security and income assistance). Together, the reduction in smoking and the rise in obesity have increased net public-sector liabilities by $430bn, or approximately 4% of the current debt burden. Larger effects are observed for specific public programs: annual spending is 10% higher in the Medicaid program, and 7% higher for Medicare.

WP 15266

John McArdle, James P. Smith, Robert Willis

Cognition and Economic Outcomes in the Health and Retirement Survey

Dimensions of cognitive skills are potentially important but often neglected determinants of the central economic outcomes that shape overall well-being over the life course. There exists enormous variation among households in their rates of wealth accumulation, their holdings of financial assets, and the relative risk in their chosen asset portfolios that have proven difficult to explain by conventional demographic factors, the amount of bequests they receive or anticipating giving, and the level of economic resources of the household. These may be cognitively demanding decisions at any age but especially so at older ages. This research examines the association of cognitive skills with wealth, wealth growth, and wealth composition for people in their pre and post-retirement years.

WP 15317

Nina Tang, Olivia S. Mitchell, Gary R. Mottola, Stephen Utkus

The Efficiency of Sponsor and Participant Portfolio Choice in 401(k) Plans

Portfolio performance in 401(k) plans depends on both the investment menu made available by plan sponsors and participants portfolio decisions. We use a unique dataset of nearly 1 million participants in one thousand pension plans to identify key portfolio inefficiencies in 401(k) plans,attributing them either to the sponsor's menu design or to participants' own portfolio choices. We show that most sponsors offer efficient investment menus. However, many participants fail to construct efficient portfolios, leading to retirement wealth that could be one-fifth lower due to poor portfolio decisions. Because participants are the main source of inefficient DC portfolio choices, strategies targeting their portfolio choices, such as improved default investment strategies or advice programs, may help. Also, in sponsors' design of 401(k) menus, the number of options offered is less important than the range of funds provided.

WP 15326

Emily Oster, Ira Shoulson, Kimberly Quaid, E. Ray Dorsey

Genetic Adverse Selection: Evidence from Long-Term Care Insurance and Huntington Disease

Individual, personalized genetic information is increasingly available, leading to the possibility of greater adverse selection over time, particularly in individual-payer insurance markets; this selection could impact the viability of these markets. We use data on individuals at risk for Huntington disease (HD), a degenerative neurological disorder with significant effects on morbidity, to estimate adverse selection in long-term care insurance. We find strong evidence of adverse selection: individuals who carry the HD genetic mutation are up to 5 times as likely as the general population to own long-term care insurance. We use these estimates to make predictions about the future of this market as genetic information increases. We argue that even relatively limited increases in genetic information may threaten the viability of private long-term care insurance. ignificant savings to Medicare, along with premium reductions and enrollment increases. Finally, we find that greater enrollment leads to lower pharmacy prices negotiated by insurers for their non-Part D market-an external benefit to the commercially enrolled associated with administering Part D through private insurers.

WP 15330

Darius Lakdawalla, Wesley Yin

Insurer Bargaining and Negotiated Drug Prices in Medicare Part D.

A controversial feature of Medicare Part D is its reliance on private insurers to negotiate drug prices and rebates with retail pharmacies and drug manufacturers. Central to this controversy is whether increases in market power-an undesirable feature in most settings-confer benefits in health insurance markets, where larger buyers may obtain better prices for their members. We test whether insurers that experience larger enrollment increases due to Part D negotiate lower drug prices with pharmacies. Overall, we find that 100,000 additional insureds lead to 2.5-percent lower pharmacy prices negotiated by the insurer, and 5-percent reductions in pharmacy profits earned on prescriptions filled by enrollees of that insurer. Estimated enrollment effects are much larger for drugs with therapeutic substitutes, and virtually zero for branded drugs without therapeutic substitutes. We also present evidence that most insurer savings are, on the margin, passed on as lower premiums. Out-of-sample estimation suggests that modest insurer consolidation would generate s

WP 15383

Darius Lakdawall, Seth Seabury

The Welfare Effects of Medical Malpractice Liability

Policymakers and the public are concerned about the role of medical malpractice liability in the rising cost of medical care. We use variation in the generosity of local juries to identify the causal impact of malpractice liability on medical costs, mortality, and social welfare. The effect of malpractice on medical costs is large relative to its share of medical expenditures, but relatively modest in absolute terms - growth in malpractice payments over the last decade and a half contributed at most 5.0% to the total real growth in medical expenditures, which topped 33% over this period. On the other side of the ledger, malpractice liability leads to modest reductions in patient mortality; the value of these more than likely exceeds the cost impacts of malpractice liability. Therefore, policies that reduce expected malpractice costs are unlikely to have a major impact on health care spending for the average patient, and are also unlikely to be cost-effective over conventionally accepted ranges for the value of a statistical life.



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