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Health Economics Worldwide.

This book contains 16 chapters selected from about 150 papers presented at the Second World Congress on Health Economics held at the University of Zurich in September of 1990. The contributors primarily are economists affiliated with American or European universities. As the title suggests, many of the chapters attempt to provide an international perspective on their topic by using examples or data from several developed nations. Other chapters simply focus on a single developed nation without providing an international perspective on the topic addressed. The rather disparate topics covered in the book's 16 chapters are presented in four sections broadly defined as issues in health insurance, cost-effectiveness and cost-utility analysis, market and non-market rationing, and issues of health policy. The book lacks features often found in conference volumes, such as published commentaries on chapters with replies from the authors. The editors also eschew the common (but too often perfunctory) introduction or conclusion presenting the editors' views of the commonalities, contradictions, and contributions of the papers in the volume. With each chapter essentially standing alone, the book resembles a (hardbound) academic journal devoted to health economics.

The health insurance section contains four chapters, highlighted by the contributions of Joseph Newhouse and Mark Pauly. Newhouse examines the problem of errors in setting prices in a medical care setting with heterogeneous patients. He concludes that welfare losses from price-setting errors are mitigated by the use of a mixed pricing strategy (partly fee-for-service and partly capitation). Pauly analyzes the positive and normative economics of a health system consisting of publicly-financed guaranteed minimum health benefits with individuals free to purchase upgraded benefits in the market. He finds that such a system generally improves welfare over a pure market system or a fully socialized health system (one with uniform benefits for all individuals). Pauly concludes that, in the absence of altruism, the extent of socialization in political equilibrium increases as the variance in household income increases and as the variance in "tastes" for health decreases. In the other insurance chapters, Van de Ven and Van Vliet focus on the problem of "cream-skimming" among competing insurers when government regulated premiums entail cross-subsidization across risk groups, and Khandker and Manning evaluate a utilization review program used by a major U.S. commercial insurer, concluding that it reduced costs and utilization.

Various issues in cost-effectiveness and cost-utility analysis are addressed in three chapters, highlighted J. R. G. Butler's chapter illustrating the conceptual similarities between cost-utility analysis and cost-benefit analysis. Alternative screening programs for prostatic cancer are evaluated by R. Launois in a very well done but otherwise routine example of cost-effectiveness analysis. Robert Leu and colleagues describe latent variable methods used to construct a health status index, and discuss the limitations of the health status index as a mechanism to refine outcome measures in cost-effectiveness/cost-utility analysis.

Three of the four chapters dealing with market and non-market rationing mechanisms generally attempt to uncover relationships between patients' clinical and socioeconomic characteristics and access to rationed services. They also attempt to provide an analysis of normative aspects of these implicit non-price allocation rules. Bernard Freidman and colleagues look at factors affecting patient selection for organ transplants in the U.S. in 1987. They find some evidence of "queue jumping" by high income patients over more clinically suitable low income patients for heart transplants but not for liver transplants. Iversen and Nord estimate the duration of waits for treatment for back or hip problems in Norway, also finding evidence of queue jumping by patients of higher socioeconomic status. Milne and Torsney analyze the geographic distribution of diagnostic radiology and electrocardiology services by the National Health Service in Scotland as it relates to three different distributional objectives (market efficiency, medical excellence, and equity). On a different note, Frech and Woolley look at the effects of price competition and non-price competition on U.S. hospital costs when information costs for consumers are large. They find that greater hospital market concentration reduces hospital service quality and increases (list) price-cost margins, but does not affect prices. They also find that factors reducing search costs to consumers increase both price and non-price competition. However, for reasons that are unclear, they use very old (1970) data pre-dating the rapid increases in hospital price competition in the 1980s. Their model applied to more recent data might yield different conclusions.

The final five chapters related to issues of health policy are a very mixed bag. Two chapters examine health care spending per capita using data for 19 OECD nations pooled over time. Ulf Gerdtham and colleagues primarily focus on the econometric issues involved in modelling per capita spending using pooled data, concluding (to no one's surprise) that per capita gross domestic product is the most important factor affecting per capita health spending. Zweifel and Ferrari conclude from their analysis of the OECD data that greater per capita health spending creates greater longevity but greater longevity does not lead to greater health spending. In the remaining policy chapters, Klaus-Dirk Henke argues that health policy should not focus on health care cost containment but on assuring allocative and productive efficiency, Breyer and Schneider analyze how various interest groups responded to proposed changes in financing mechanisms for German hospitals, and Edgar Lopez and colleagues argue that excess deaths from gastrointestinal cancer in specific geographic areas of Mexico should be used to target testing of water supplies for chemical contamination.

In summary, this book resembles a good academic journal covering a wide range

of issues in health economics. Most health economists would find at least one of its 16 chapters interesting and useful. However, the book obviously is priced with inelastic library demand in mind--let your library buy it.

Robert L. Ohsfeldt University of Alabama at Birmingham
COPYRIGHT 1993 Southern Economic Association
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Copyright 1993, Gale Group. All rights reserved. Gale Group is a Thomson Corporation Company.

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Author:Ohsfeldt, Robert L.
Publication:Southern Economic Journal
Article Type:Book Review
Date:Apr 1, 1993
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