WEALTH INCENTIVES: Temptation and Incentives

A WORKING WHITE PAPER

Orazio Attanasio

Agnes Kovacs

Patrick Moran

We propose a rich model of household behavior to study the effect of two important policies: mortgage interest tax deduction and mandatory mortgage amortization. These policies have attracted some controversy, first because they are conceived to increase overall saving, an objective that the literature does not agree they can achieve, and second because they incentivize illiquid savings and may thus increase the share of ‘wealthy hand-to-mouth’ households.

We build a life-cycle model where housing may act as a commitment device to counteract present biases arising from temptation. We show that the model matches several empirical facts, including the large share of wealthy hand-to-mouth households. We evaluate the effect of the two policies and find that they increase wealth accumulation by 7 and 10% respectively.

Our results demonstrate that these policies not only induce portfolio re-balancing, as emphasized by the previous literature, but also increase savings by making commitment more accessible.

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WHITE PAPER: https://www.nber.org/system/files/working_papers/w28938/w28938.pdf

ASSESSMENT: Your thoughts and comments are appreciated.

THANK YOU

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Organizational Economics and Physician Practices

N.B.E.R.

By James B. Rebitzer & Mark E. Votruba

Economists seeking to improve the efficiency of health care delivery frequently emphasize two issues: the fragmented structure of physician practices and poorly designed physician incentives. This decade old paper analyzes these issues from the perspective of organizational economics.

We begin with a brief overview of the structure of physician practices and observe that the long anticipated triumph of integrated care delivery has largely gone unrealized. We then analyze the special problems that fragmentation poses for the design of physician incentives. Organizational economics suggests some promising incentive strategies for this setting, but implementing these strategies is complicated by norms of autonomy in the medical profession and by other factors that inhibit effective integration between hospitals and physicians. Compounding these problems are patterns of medical specialization that complicate coordination among physicians.

We conclude by considering the policy implications of our analysis – paying particular attention to proposed Accountable Care Organizations.

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READ HERE: https://www.nber.org/papers/w17535

ASSESSMENT: What has changed this past decade; if anything? Your thoughts are appreciated.

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On Higher Prescription Drug Cost-Sharing and Mortality?

Raises Mortality among Medicare PART D Beneficiaries

QUERY: What are the health consequences when patients reduce their use of prescribed medications in response to higher out-of-pocket costs?

w28439.jpg

In The Health Costs of Cost-Sharing (NBER Working Paper 28439), researchers Amitabh Chandra, Evan Flack and Ziad Obermeyer use the distinctive out-of-pocket cost-sharing features of Medicare Part D to demonstrate that such reductions can increase mortality.

ASSESSMENT: Your thoughts are appreciated.

THANK YOU

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The Economic Value and Pricing of “Personalized and Precision” Medicine

PRECISION MEDICINE

By Tomas J. Philipson

DEFINITION: Personalized medicine, also referred to as precision medicine, is a medical model that separates people into different groups—with medical decisions, practices, interventions and/or products being tailored to the individual patient based on their predicted response or risk of disease

CITE: https://www.amazon.com/Dictionary-Health-Insurance-Managed-Care/dp/0826149944/ref=sr_1_4?ie=UTF8&s=books&qid=1275315485&sr=1-4

We discuss the economic value of personalized medicine and the optimal pricing of the combination products involved. We build on previous work of Egan and Philipson (2015) who stress a link between rational adherence in health care and the value of personalized medicine. Personalized medicine converts experience goods to search goods by speeding up the learning process relative to trial and error. This explains the emergence of personalized medicine in cancer care as well as the timing of this emergence. It also predicts greater innovation-and merger incentives from Disneyland style two-part pricing of the combination products.

Personalized Medicine - Personal Medicine - Medicine ...

READ: https://www.nber.org/system/files/chapters/c13997/c13997.pdf

Your thoughts are appreciated.

THANK YOU

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Selected NBER Papers of Note for MDs and FAs

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National Bureau of Economic Research

www.NBER.org

The 2012 No. 3 Bulletin includes the articles below:

1)  The Value of Planning Prompts
by Katherine Milkman, John Beshears, James Choi, David Laibson, and Brigitte Madrian
http://www.nber.org/aginghealth/2012no3/w17994.html

2)  The Effect of the Earned Income Tax Credit on Infant Health
by Hilary Hoynes, Douglas Miller, and David Simon
http://www.nber.org/aginghealth/2012no3/w18206.html

3)  Can Health Explain Differences in Employment of Older Men Across Countries?
by Kevin Milligan and David Wise
http://www.nber.org/aginghealth/2012no3/w18229.html

Assessment

Abstracts of Selected Recent NBER Working Papers:
http://www.nber.org/aginghealth/2012no3/WorkingPaperSummaries.html

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The NBER Bulletin on Aging and Health

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The National Bureau of Economic Research — 2012 No. 2

The 2012 No. 2 Bulletin includes the articles below:

1)  Can Low-Cost Interventions Affect Retirement Saving Behavior?

by Gopi Shah Goda, Colleen Flaherty Manchester, and Aaron Sojourner –  #17927
by James Choi, Emily Haisley, Jennifer Kurkoski, and Cade Massey – #17843

http://www.nber.org/aginghealth/2012no2/w17927.html

2)  Labor Market Effects of the Massachusetts Health Insurance Reform

by Jonathan Kolstad and Amanda Kowalski

http://www.nber.org/aginghealth/2012no2/w17933.html

3)  Can Germany’s Riester Pensions Fill the Pension Gap?

by Axel Boersch-Supan, Michela Coppola, and Anette Reil-Held

http://www.nber.org/aginghealth/2012no2/w18014.html

4)  Retirement Before the Social Security Entitlement Age

by Kevin Milligan

http://www.nber.org/aginghealth/2012no2/w18051.html

5)  Are Consumers Forward-Looking in Responding to Health Care Prices?

by Aviva Aron-Dine, Liran Einav, Amy Finklestein, and Mark Cullen

http://www.nber.org/aginghealth/2012no2/w17802.html

NBER Profile:  Patricia Danzon

http://www.nber.org/aginghealth/2012no2/danzon.html

NBER Profile:  Doug Staiger

http://www.nber.org/aginghealth/2012no2/staiger.html

Conclusion

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Spillovers, Complementarities and Specialization in the Hospital Industry

Broadening Focus

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NBER Working Paper No. 16937
Issued in April 2011

The long-standing argument that focused operations out-perform others stands in stark contrast to claims about the benefits of broader operational scope and is addressed by Jonathan R. Clark, Robert Huckman in this working paper

Specialize Expertise

The performance benefits of focus are typically attributed to reduced complexity, lower uncertainty, and the development of specialized expertise, while the benefits of greater breadth are linked to the economies of scope achieved by sharing common resources, such as advertising or production capacity, across activities. Within the literature on corporate strategy, this tension between focus and breadth is reconciled by the concept of related diversification (i.e., a firm with multiple operating units, each specializing in distinct but related activities). They consider whether there are similar benefits to related diversification within an operating unit and examine the mechanism that generates these benefits.

Cardio-Vascular Care Context

Using the empirical context of cardiovascular care within hospitals, the authors first examine the relationship between a hospital’s level of specialization in cardiovascular care and the quality of its clinical performance on cardiovascular patients. They find that, on average, focus has a positive effect on quality performance. They then distinguish between positive spillovers and complementarities to examine: (1) the extent to which a hospital’s specialization in areas related to cardiovascular care directly impacts performance on cardiovascular patients (positive spillovers) and (2) whether the marginal benefit of a hospital’s focus in cardiovascular care depends on the degree to which the hospital “co-specializes” in related areas (complementarities).

Assessment

In this setting, they find evidence of such complementarities in hospital specialization.

Link: https://hq.ssrn.com/login/pubSignInJoin.cfm?nber_id=w16937

Conclusion

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Health Dictionary Series: http://www.springerpub.com/Search/marcinko

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