Economic Policy in Health Care: Sickness Absence and Pharmaceutical Cost

This thesis consists of a summary and four papers. The first two concerns health care and sickness absence, and the last two pharmaceutical costs and prices. Paper [I] presents an economic federation model which resembles the situation in, for example, Sweden. In the model the state governments provide health care, the federal government provides a sickness benefit and both levels tax labor income. The results show that the states can have either an incentive to under- or over-provide health care. The federal government can, by introducing an intergovernmental transfer, induce the state governments to provide the socially optimal amount of health care. In Paper [II] the effect of aggregated public health care expenditure on absence from work due to sickness or disability was estimated. The analysis was based on data from a panel of the Swedish municipalities for the period 1993-2004. Public health care expenditure was found to have no statistically significant effect on absence and the standard errors were small enough to rule out all but a minimal effect. The result held when separate estimations were conducted for women and men, and for absence due to sickness and disability. The purpose of Paper [III] was to study the effects of the introduction of fixed pharmaceutical budgets for two health centers in Västerbotten, Sweden. Estimation results using propensity score matching methods show that there are no systematic differences for either price or quantity per prescription between health centers using fixed and open-ended budgets. The analysis was based on individual prescription data from the two health centers and a control group both before and after the introduction of fixed budgets. In Paper [IV] the introduction of the Swedish substitution reform in October 2002 was used as a natural experiment to examine the effects of increased consumer information on pharmaceutical prices. Using monthly data on individual pharmaceutical prices, the average reduction of prices due to the reform was estimated to four percent for both brand name and generic pharmaceuticals during the first four years after the reform. The results also show that the price adjustment was not instant.