Hostname: page-component-78c5997874-fbnjt Total loading time: 0 Render date: 2024-11-15T13:49:47.509Z Has data issue: false hasContentIssue false
  • English
  • Français

Heterogeneity in the smoking response to health shocks by out-of-pocket spending risk

Published online by Cambridge University Press:  06 May 2014

Michael R. Richards  and
Joachim Marti
Michael R. Richards*
Affiliation:
Postdoctoral Research Associate, Wharton School, Colonial Penn Center, Leonard Davis Institute of Health Economics, University of Pennsylvania, USA
Joachim Marti
Affiliation:
Lecturer in Health Economics, Leeds Institute of Health Sciences, University of Leeds, Academic Unit of Health Economics, UK
*
*Correspondence to: Michael R. Richards, Postdoctoral Research Associate, University of Pennsylvania, Wharton School, Leonard Davis Institute of Health Economics Colonial Penn Center, 3641 Locust Walk, Philadelphia, PA 19104 USA. Email: mirich@wharton.upenn.edu
Get access Rights & Permissions [Opens in a new window]

Abstract

An existing literature demonstrates that adverse changes to health can lead to improvements in health behaviors. Although the exact explanations for these empirical findings are debated, some posit that individuals learn about their true health risks through health shocks. Updated health risk information can then induce changes in health behaviors. While we follow a learning framework, we argue that past work has neglected the role of health insurance and medically related financial risk within this decision making context. Using longitudinal data from 11 European countries, we investigate the impact of a new cardiovascular (CV) health shock on smoking decisions among older adults and examine whether personal exposure to medical spending risk influences the smoking response. We then explore two potential mechanisms for this link: larger updates to health risk beliefs and higher medical expenditures to incentivize behavior change. We find that CV shocks impact the propensity to smoke, with relatively more impact among individuals with high financial risk exposure to medical spending. We also see larger increases in out-of-pocket expenditures following a shock for this group – consistent with the latter mechanism for behavior change.

Type
Articles
Information
Health Economics, Policy and Law , Volume 9 , Issue 4 , October 2014 , pp. 343 - 357
Copyright
© Cambridge University Press 2014 

Access options

Get access to the full version of this content by using one of the access options below. (Log in options will check for institutional or personal access. Content may require purchase if you do not have access.)

References

Allin, S., Bankauskaite, V., Dubois, H., Figueras, J., Golna, C., Grosse-Tebbe, S., Jemiai, N., McDaid, D., Riesberg, A., Schreyoegg, J. and Thomson, S. (2005), Snapshots of Health Systems, London, UK: EU Observatory WHO.Google Scholar
Anderson, G. (2007), ‘From ‘Soak the Rich’ to ‘Soak the Poor’: recent trends in hospital pricing’, Health Affairs, 26(3): 780–789.Google Scholar
Anderson, G. F., Frogner, B. K. and Reinhardt, U. E. (2007), ‘Health spending in OECD countries in 2004: an update’, Health Affairs, 26(5): 1481–1489.CrossRefGoogle ScholarPubMed
Atella, V., Brunetti, M. and Maestas, N. (2012), ‘Household portfolio choices, health status and health care systems: a cross-country analysis based on SHARE’, Journal of Banking & Finance, 36: 1320–1335.Google Scholar
Babiarz, P., Widdows, R. and Yilmazer, T. (2013), ‘Borrowing to cope with adverse health events: liquidity constraints, insurance coverage, and unsecured debt’, Health Economics, 22(10): 1177–1198.Google Scholar
Brawley, L. R., Rejeski, W. J. and King, A. C. (2003), ‘Promoting physical activity for older adults: the challenges for changing behavior’, American Journal of Preventive Medicine, 25(3, Supplement 2): 172–183.Google Scholar
Breyer, F. and Felder, S. (2006), ‘Life expectancy and health care expenditures: a new calculation for Germany using the costs of dying’, Health Policy, 75(2): 178–186.CrossRefGoogle ScholarPubMed
Börsch-Supan, A. and Jürges, H. (eds) (2005), The Survey of Health, Ageing and Retirement in Europe – Methodology, Mannheim: MEA.Google Scholar
Cawley, J. and Meyerhoefer, C. (2012), ‘The medical care costs of obesity: an instrumental variables approach’, Journal of Health Economics, 31: 219–230.Google Scholar
Chernew, M. E., Rosen, A. B. and Fendrick, A. M. (2007), ‘Value-based insurance design’, Health Affairs, 2: 195–203.Google Scholar
Clark, A. and Etilé, F. (2002), ‘Do health changes affect smoking? Evidence from British panel data’, Journal of Health Economics, 21: 533–562.CrossRefGoogle ScholarPubMed
Dave, D. and Kaestner, R. (2009), ‘Health insurance and ex ante moral hazard: evidence from Medicare’, International Journal of Health Care Finance and Economics, 9: 367–390.Google Scholar
De Nardi, M., French, E. and Jones, J. B. (2010), ‘Why do the elderly save? The role of medical expenses’, Journal of Political Economy, 118(1): 39–75.Google Scholar
Demark-Wahnefried, W., Aziz, N. M., Rowland, J. H. and Pinto, B. M. (2005), ‘Riding the crest of the teachablem: promoting long-term health after the diagnosis of cancer’, Journal of Clinical Oncology, 23(24): 5814–5830.Google Scholar
Docteur, E. and Oxley, H. (2003), ‘Health-cares: lessons from the reform experience’, OECD Health Working Papers, 9: 1–97.Google Scholar
Ehrlich, I. and Becker, G. S. (1972), ‘Market insurance, self-insurance, and self-protection’, Journal of Political Economy, 80(4): 623–648.Google Scholar
Falba, T. (2005), ‘Health events and the smoking cessation of middle aged americans’, Journal of Behavioral Medicine, 28(1): 21–33.CrossRefGoogle ScholarPubMed
Finkelstein, E. A., Cohen, J. and Dietz, W. (2009), ‘Annual Medical Spending Attributable to Obesity: Payer- and Service-Specific Estimates’, Health Affairs (web exclusive), 28(5): w822–w831.Google Scholar
Fuchs, V. R. (1999), ‘Health care for the elderly? How much? Who will pay for it?’, Health Affairs, 18(1): 11–21.Google Scholar
Grembowski, D., Patrick, D., Diehr, P., Durham, M., Beresford, S., Kay, E. and Hecht, J. (1993), ‘Self-efficacy and health behavior among older adults’, Journal of Health and Social Behavior, 34: 89–104.Google Scholar
Jappelli, T., Pistaferri, L. and Weber, G. (2007), ‘Health care quality, economic inequality, and precautionary saving’, Health Economics, 16: 327–346.Google Scholar
Jha, P., Ramasundarahettige, C., Landsman, V., Rostron, B., Thun, M., Anderson, R. N., McAfee, T. and Peto, R. (2013), ‘21st-century hazards of smoking and benefits of cessation in the United States’, New England Journal of Medicine, 368(4): 341–350.Google Scholar
Keeler, E. B., Sloss, E. M., Brook, R. H., Operskalski, B. H., Goldberg, G. A. and Newhouse, J. P. (1987), ‘Effects of cost sharing on physiological health, health practices, and worry’, Health Services Research, 22(3): 281–306.Google ScholarPubMed
Keenan, P. (2009), ‘Smoking and weight change after new health diagnoses in older adults’, Archives of Internal Medicine, 169(3): 237–242.Google Scholar
Khwaja, A., Sloan, F. and Chung, S. (2006a) ‘The effects of spousal health on the decision to smoke: evidence on consumption externalities, altruism, and learning within the household’, Journal of Risk and Uncertainty, 32: 17–35.Google Scholar
Khwaja, A., Sloan, F. and Chung, S. (2006b) ‘Learning about individual risk and the decision to smoke’, International Journal of Industrial Organization, 24: 683–699.Google Scholar
Koszegi, B. and Szeidl, A. (2013), ‘A model of focusing in economic choice’, Quarterly Journal of Economics, 128(1): 53–104 (ahead of print).Google Scholar
Liaropoulos, L., Siskou, O., Kaitelindou, D., Theodorou, M. and Katostaras, T. (2008), ‘Informal payments in public hospitals in Greece’, Health Policy, 87(1): 72–81.CrossRefGoogle ScholarPubMed
Lim, S. S., Vos, T., Flaxman, A. D., Danaei, G., Shibuya, K. and Adair-Rohani, H., et al. (2012), ‘A comparative risk assessment of burden of disease and injury attributable to 67 risk factors and risk factor clusters in 21 regions, 1990–2010: a systematic analysis for the Global Burden of Disease Study 2010’, Lancet, 380(9859): 2224–2260.CrossRefGoogle ScholarPubMed
Lorig, K. R., Sobel, D. S., Stewart, A. L., Brown, B. W. J., Bandura, A., Ritter, P., Gonzalez, V. M., Laurent, D. D. and Holman, H. R. (1999), ‘Evidence suggesting that a chronic disease self-management program can improve health status while reducing hospitalizations: a randomized trial’, Medical Care, 37(1): 5–14.Google Scholar
Meara, E., White, C. and Cutler, D. M. (2004), ‘Trends in medical spending by age, 1963–2000’, Health Affairs, 23(4): 176–183.Google Scholar
Paccagnella, O., Rebba, V. and Weber, G. (2013), ‘Voluntary private health insurance among the over 50s in Europe’, Health Economics, 22(3): 289–315.Google Scholar
Paez, K. A., Zhao, L. and Hwang, W. (2009), ‘Rising out-of-pocket spending for chronic conditions: a ten-year trend’, Health Affairs, 28(1): 15–25.Google Scholar
Palumbo, M. G. (1999), ‘Uncertain medical expenses and precautionary saving near the end of the life cycle’, Review of Economic Studies, 66(2): 395–421.CrossRefGoogle Scholar
Rashad, I. and Markowitz, S. (2007), ‘Incentives in obesity and health insurance’, NBER Working Paper Series, 1–31.Google Scholar
Rice, D. P. and Fineman, N. (2004), ‘Economic implications of increased longevity in the United States’, Annual Review of Public Health, 25: 457–473.CrossRefGoogle ScholarPubMed
Richards, M. R. and Helmchen, L. A. (2013), ‘Adverse selection and moral hazard in the provision of clinical trial ancillary care’, Health Economics, Policy & Law, 8: 225–234.CrossRefGoogle ScholarPubMed
Schoen, C., Osborn, R., Squires, D., Doty, M. M., Pierson, R. and Applebaum, S. (2010), ‘How health insurance design affects access to care and costs, by income, in eleven countries’, Health Affairs, 29(12): 2323–2334.Google Scholar
Schoenbaum, M. (1997), ‘Do smokers understand the mortality effects of smoking? Evidence from the Health and Retirement Survey’, American Journal of Public Health, 87(5): 755–759.CrossRefGoogle ScholarPubMed
Schroeder, S. A. (2007), ‘We can do better – improving the health of the american people’, New England Journal of Medicine, 357: 1221–1228.Google Scholar
Siciliani, L. and Verzulli, R. (2009), ‘Waiting times and socioeconomic status among elderly Europeans: evidence from SHARE’, Health Economics, 18: 1295–1306.Google Scholar
Siskou, O., Kaitelindou, D., Papakonstantinou, V. and Liaropoulos, L. (2008), ‘Private health expenditure in the Greek health care system: where truth ends and the myth begins’, Health Policy, 88(2–3): 282–293.Google Scholar
Smith, J. P. (1999), ‘Health bodies and thick wallets: the dual relation between health economic status’, Journal of Economic Perspectives, 13(2): 145–166.Google Scholar
Smith, V. K., Taylor, D. H. J., Sloan, F. A., Johnson, F. R. and Desvousges, W. H. (2001), ‘Do smokers respond to health shocks?’, Review of Economics and Statistics, 83(4): 675–687.Google Scholar
Sturm, R. (2002), ‘The effects of obesity, smoking, and drinking on medical problems and costs’, Health Affairs, 21(2): 245–253.Google Scholar
Sundmacher, L. (2012), ‘The effect of health shocks on smoking and obesity’, European Journal of Health Economics, 13: 451–460.Google Scholar
Thomson, S., Osborn, R., Squires, D. and Jun, M. (2013), ‘International profiles of health care systems, 2013’, C. Fund: Commonwealth Fund. Available at http://www.commonwealthfund.org/Publications/Fund-Reports/2013/Nov/International-Profiles-of-Health-Care-Systems.aspxGoogle Scholar
Thorpe, K. E. (2005), ‘The rise in health care spending and what to do about it’, Health Affairs, 24(6): 1436–1445.Google Scholar
Viscusi, W. (1990), ‘Do smokers underestimate risks?’, Journal of Political Economy, 98(6): 1253–1269.Google Scholar
Weinstein, N. D. (1987), ‘Unrealistic optimism about susceptibility to health problems: conclusions from a community-wide sample’, Journal of Behavioral Medicine, 10(5): 481–500.Google Scholar
Yach, D., Hawkes, C., Gould, L. and Hofman, K. J. (2004), ‘The global burden of chronic diseases: overcoming impediments to prevention and control’, Journal of the American Medical Association, 291(21): 2616–2622.Google Scholar