Beyond the Market Designing Nonmarket Accounts for the United States (2005) / Chapter Skim
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6 Health
6 Health
Pages 117-140
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From page 117... ...
9) concludes that "accounting for improvements in the health status of the population would make a substantial difference to our measures of economic welfare over the twentieth century in the United States." This chapter considers the potential for measuring the population's health, and changes in health, within an accounting framework.
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From page 118... ...
The estimated coefficients are used to decompose observed changes in price into a portion attributable to changes in items' characteristics and a portion that represents true price change. See National Research Council (2002a: Ch.
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From page 119... ...
In all these ways, a more systematic monitoring of the population's health states, and the factors that have an impact on those states, can advance research and policy. Recommendation 6.1: A health satellite account should be produced by the Bureau of Economic Analysis in collaboration with the Centers for Medicare and Medicaid Services of the U.S.
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From page 120... ...
, the marginal value of health improvement may well exceed the cost of attaining it.3 The possibility of this sort of discrepancy is one of the fundamental reasons for constructing health accounts. A traditional type of measure -- such as gross domestic product (GDP)
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From page 121... ...
dIncludes dental services, other professional services, home health care, durable medical products, over-the-counter medicines and sundries, public health activities, research, and construction. SOURCE: Centers for Medicare and Medicaid Services, Office of the Actuary, National Health Statistics Group.
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From page 122... ...
While the treatment-based approach described above redefines medical sector output in a way that is appropriate for the NIPAs, it does not necessarily advance the objective of measuring inputs and outputs independently. For example, the technique for pricing heart disease treatment may simply sum up the costs of inputs, such as those associated with angioplasty, hospital time, and pharmaceuticals.
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From page 123... ...
Indeed, a primary reason for developing an experimental health account is to add rigor to research aimed at attributing improvements in health to specific types of expenditures, behavioral changes, and increases in basic medical science
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From page 124... ...
For example, in planning how to target public health expenditures, it would be extremely helpful to know with accuracy the extent to which smoking, obesity, and other factors contribute to disease burden.4 It is this concern that has led to development of measures of health status such as quality-adjusted life years (QALYs)
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From page 125... ...
MEASURING AND VALUING INPUTS There are at least six major inputs to the production of health: · medical care provided in market settings; · medical care services provided without payment; · time that individuals invest in their own health; · consumption of nonmedical goods and services, some of which may improve health and others of which are harmful, and nonmedical tech nology and safety devices; · research and development that may lead to improvements in medical technology and knowledge; and · environmental and "disease state" factors (and shocks)
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From page 126... ...
As noted, however, there are a variety of other inputs to health that also should be measured. Recommendation 6.2: Market inputs to health such as expenditures on medical care -- already measured in the NIPAs -- should be included in the health satellite account.
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From page 127... ...
Recommendation 6.4: Unpaid time spent providing health-related services should be valued based on a replacement labor cost approach, adjusted for productivity and quality differences between the services provided by the market and the unpaid provider. In other applications discussed in this report, there is reason to think of the replacement wage as an upper bound for the purpose of valuing nonmarket time, since market service providers often offer more specialized skills than those possessed by a home producer.
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From page 128... ...
In valuing these personal time investments, therefore, there is no real alternative but to price them at the individual's own time cost. Recommendation 6.5: Time spent by individuals in activities that improve or maintain their own health should be included in the account and valued at the opportunity cost, modified to net out the consumption or enjoyment value of the activity.
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From page 129... ...
Both the discounting and the probabilistic nature of any health effects associated with consumption patterns would be accounted for in measures of the stock of health -- for example, in data relating change in prevalence of smoking to changes in a population's health. Data on such dietary habits as smoking, drinking, and fat and cholesterol intake should be collated and included in the health satellite account, at least in an auxiliary way, even if valuation questions remain unsolved.
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From page 130... ...
. We thus do not take it up here, other than to say that the environment enters the health production function alongside diet, life style, and other factors that ultimately could be brought into a health satellite account.
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From page 131... ...
People enjoy being healthier just as they enjoy consuming better food or nicer clothing.5 The second output of investments in health is the additional income that a healthier population generates. A complete set of health accounts would include the present value of expected future earnings, perhaps augmented to include the value of expected future home production, that results from changed health.
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From page 132... ...
Because health is a multidimensional concept, encompassing length and quality of life and involving both mental and physical health, it is very difficult to measure. Most of the research to date has sought a method of summarizing information on diverse health states using a common metric and then valuing a common increment on that scale.
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From page 133... ...
Measuring Health Status The first step in measuring health output is to develop a scale along which different health states can be compared. The objective is to develop measures that allow changes in a population's expected quantity and quality of life to be estimated.
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From page 134... ...
With this in mind, we highlight two approaches to health status measurement. The first approach -- the disease state approach -- involves estimating the quality of life for people with different diseases and then multiplying those measures by disease prevalence in the population, making adjustments to reflect the percentage of people with multiple conditions.
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From page 135... ...
A second approach, around which a significant literature has grown, involves asking individuals to assess their current health status against counterfactual alternatives. The most theoretically appealing health state measurements involve explicit utility comparisons.
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From page 136... ...
. 9The Centers for Medicare and Medicaid Services in the Department of Health and Human Services also maintain a set of "national health accounts," but (as described above)
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From page 137... ...
At this point, the full range of methods, each of which attempts to place various disease or impairment states along a common scale, should be considered further for measuring changes in the population's health status. Comparisons of competing approaches are just beginning.
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From page 138... ...
If the skyscraper job adds a 1-in-10,000 risk of death and pays $100 more per year than the street-level job that is otherwise similar in terms of skill requirements, intensity of the work pace, scheduling flexibility, working conditions, and so on, the implied value of the remaining life span of the person taking the riskier job is $1,000,000. Self selection makes the problem more complicated when aggregating across a population, as people taking riskier jobs will tend to be at the population margin in their valuation of life and/or level of risk aversion.
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From page 139... ...
These derived values of life clearly are related to income; rich people can afford to spend more on safety devices and medical treatment than poor people. One set of health accounts thus might value health to the wealthy more highly than health to the poor.
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From page 140... ...
Health accounts also will require improved measures of the inputs to health. Better organized and more accurate data on medical care spending, aggregated by disease treatment, are part of what is needed.
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