Date of Award

Summer 8-21-2020

Level of Access

Open-Access Thesis

Degree Name

Master of Science in Economics (MSECO)

Department

Economics

Advisor

Angela Daley

Second Committee Member

Keith Evans

Third Committee Member

Caroline Noblet

Abstract

Each year, Americans spend more money on health care than any other industrialized nation, despite comparable mortality rates for people with risk factors for heart disease. The reasons for this lack of health care value in the US are numerous and complex – including market distortions like supplier-inflated pricing and regulatory structures that enable consumers to utilize ubiquitous, high-cost medical technologies that yield uncertain benefits. Health insurance, once thought to be an insignificant contributor to rising health spending, has changed considerably in the past few decades in ways that make it more accessible and more generous in coverage. Health insurance design thus continues to be of considerable interest in health policy research.

This work seeks to further explore the relationship between medical care and drugs that treat risk factors for heart disease. Previous research, which has largely focused on the consequences to medical care utilization following the change in the price of drugs, has generally concluded that medical care and drugs are substitutes. Does this substitution relationship still hold when the price of medical care changes? Using three years of health insurance claims from a single large employer in the United States, we conclude that it does not. We find that a small absolute increase in cost-sharing for a broad range of medical services is associated with a reduction in the rate of spending on drugs that treat heart disease risk factors. However, for consumers with high blood pressure or high cholesterol, this comes without any change to rates of drug utilization. Consumers with type-II diabetes lower rates of both spending and utilization, suggesting a complementary relationship. These results may have important implications for value in health insurance design.

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