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A comparison of the grade of membership measure with alternative health indicators in explaining costs for older people

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  • Paul McNamee

    (School of Population and Health Sciences, University of Newcastle, UK)

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    Abstract

    An important focus in empirical econometric studies of health care concerns estimation of the relationship with health. This paper describes a non-parametric technique, the grade of membership (GoM) procedure, which is used to construct summary indicators of health. Health status is also assessed using three alternative measures commonly employed in the literature: an index of problems of activities of daily living (ADL), an index of health conditions and overall self-rated health. Using data from a sample of frail older people, the relationship between costs and different measures of health are estimated using ordinary least squares (OLS) and instrumental variables (IV) methods. The results show that health influences costs more strongly than other variables, an effect which persists after controlling for potential endogeneity. It is shown that health can be usefully classified using GoM techniques. An alternative measure, based on an index of ADL, also performs well. Measures based on overall self-assessed health and the number of health conditions present were less satisfactory. Although health indicators derived from GoM techniques may be more theoretically attractive, in terms of capturing more fully the multidimensional nature of health, simpler alternatives such as those based on ADL indices may offer practical computational advantages. Copyright © 2003 John Wiley & Sons, Ltd.

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    Bibliographic Info

    Article provided by John Wiley & Sons, Ltd. in its journal Health Economics.

    Volume (Year): 13 (2004)
    Issue (Month): 4 ()
    Pages: 379-395

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    Handle: RePEc:wly:hlthec:v:13:y:2004:i:4:p:379-395

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    Web page: http://www3.interscience.wiley.com/cgi-bin/jhome/5749

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    1. Debra Sabatini Dwyer & Olivia S. Mitchell, 1998. "Health Problems as Determinants of Retirement: Are Self-Rated Measures Endogenous?," NBER Working Papers 6503, National Bureau of Economic Research, Inc.
    2. Gerdtham, Ulf-G. & Johannesson, Magnus, 1999. "New estimates of the demand for health: results based on a categorical health measure and Swedish micro data," Social Science & Medicine, Elsevier, Elsevier, vol. 49(10), pages 1325-1332, November.
    3. Portrait, France & Lindeboom, Maarten & Deeg, Dorly, 1999. "Health and mortality of the elderly : the grade of membership method, classification and determination," Serie Research Memoranda, VU University Amsterdam, Faculty of Economics, Business Administration and Econometrics 0022, VU University Amsterdam, Faculty of Economics, Business Administration and Econometrics.
    4. Hausman, Jerry A, 1978. "Specification Tests in Econometrics," Econometrica, Econometric Society, Econometric Society, vol. 46(6), pages 1251-71, November.
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    6. France Portrait & Maarten Lindeboom & Dorly Deeg, 2000. "The use of long-term care services by the Dutch elderly," Health Economics, John Wiley & Sons, Ltd., John Wiley & Sons, Ltd., vol. 9(6), pages 513-531.
    7. Manning, Willard G., 1998. "The logged dependent variable, heteroscedasticity, and the retransformation problem," Journal of Health Economics, Elsevier, Elsevier, vol. 17(3), pages 283-295, June.
    8. Lamb, Vicki L., 1996. "A cross-national study of quality of life factors associated with patterns of elderly disablement," Social Science & Medicine, Elsevier, Elsevier, vol. 42(3), pages 363-377, February.
    9. Douglas Staiger & James H. Stock, 1994. "Instrumental Variables Regression with Weak Instruments," NBER Technical Working Papers, National Bureau of Economic Research, Inc 0151, National Bureau of Economic Research, Inc.
    10. Grossman, Michael, 1972. "On the Concept of Health Capital and the Demand for Health," Journal of Political Economy, University of Chicago Press, University of Chicago Press, vol. 80(2), pages 223-55, March-Apr.
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    Cited by:
    1. Liu, Li-Fan & Tian, Wei-Hua & Yao, Hui-Ping, 2012. "Utilization of health care services by elderly people with National Health Insurance in Taiwan: The heterogeneous health profile approach," Health Policy, Elsevier, Elsevier, vol. 108(2), pages 246-255.
    2. Bartolucci, Francesco & Giorgio E., Montanari & Pandolfi, Silvia, 2012. "Item selection by an extended Latent Class model: An application to nursing homes evaluation," MPRA Paper 38757, University Library of Munich, Germany.
    3. Wouterse, Bram & Huisman, Martijn & Meijboom, Bert R. & Deeg, Dorly J.H. & Polder, Johan J., 2013. "Modeling the relationship between health and health care expenditures using a latent Markov model," Journal of Health Economics, Elsevier, Elsevier, vol. 32(2), pages 423-439.

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