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International Journal of Health Economics and Management

Erschienen in:

04.05.2021 | Research article

The incidence of the healthcare costs of chronic conditions

verfasst von: Kyung Min Lee, Chanup Jeung

Erschienen in: International Journal of Health Economics and Management | Ausgabe 4/2021

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Abstract

Who pays for the costs of chronic conditions? In this paper, we examine whether 50–64-year old workers covered by employer-sponsored insurance bear healthcare costs of chronic conditions in the form of lower wages. Using a difference-in-differences approach with data from the Health and Retirement Study, we find that workers with chronic diseases receive significantly lower wages than healthy workers when they are covered by employer-sponsored insurance. Our findings suggest that higher healthcare costs of chronic conditions can explain the substantial part of the wage gap between workers with and without chronic diseases.

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In this study, we use the terms “chronic disease” and “chronic condition” interchangeably.

Fixed effects were used in both previous studies. Although Cowan and Schwab (2011) found evidence of wage adjustment for smoking in the fixed-effects models, Bhattacharya and Bundorf (2009) did not find evidence of wage offsets for obesity in their fixed-effects models.

Most of the alternative datasets do not have information on either chronic conditions (e.g., NLS or PSID) or hourly wage information (e.g., NHIS). The MEPS could be an alternative dataset, but it has some limitations for the analysis of wages. First of all, because the hourly wage in MEPS is right censored (e.g., 80 dollars in the 2015 MEPS), it is impossible to capture changes in wages among workers with high wages (probably in good jobs that offer ESI). This may lead to underestimation bias in the estimates for wage adjustments. In addition, the MEPS is a quasi-panel (2 years), which does not permit checking a long-term wage adjustments with fixed effects estimates. This could be a problematic especially if wages are not adjusted quickly to address the onset of a chronic condition.

In Appendix Table 10, we provide the number of individuals in the specified transition of (1) having their first chronic conditions, (2) increasing the number of conditions, and (3) changing jobs by the changes in the ESI status between two consecutive waves.

Similarly, Bhattacharya and Bundorf (2009) did not find statistically significant wage offsets from the fixed-effects models due to fewer switchers and less statistical power.

We also compared the difference in the expected medical expenditure between workers with and without chronic conditions using the 2002 MEPS. Because the MEPS does not provide information on cancer, we defined the status of having any chronic condition as a worker having high blood pressure, diabetes, lung disease, heart problems, stroke, or arthritis. The gap in the average medical expenditure between workers with and without chronic conditions was $2,340 (= $3,794—$1,454). Although the gap in medical expenditure was lower than our estimate of $3,100, the difference was not large, and the lower estimate may result from no information on cancer in MEPS.

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Titel: The incidence of the healthcare costs of chronic conditions
verfasst von: Kyung Min Lee
Chanup Jeung
Publikationsdatum: 04.05.2021
Verlag: Springer US
Erschienen in: International Journal of Health Economics and Management / Ausgabe 4/2021
Print ISSN: 2199-9023
Elektronische ISSN: 2199-9031
DOI: https://doi.org/10.1007/s10754-021-09305-6

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The incidence of the healthcare costs of chronic conditions

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