NCPA - National Center for Policy Analysis


August 26, 2005

The rapid relative growth in health care expenditures among low-income elderly people has not translated into relative improvement in either survival rates or rates of effective care, say Jonathan Skinner and Weiping Zhou, authors of new study for National Bureau of Economic Research.

Using U.S. data from the Medicare population over age 65, Skinner and Zhou compared the quality of care across income groups -- as measured by the use of effective treatments with proven effects on health outcomes -- to capture the degree of inequality in the health care system. Consider:

  • During 1987-2001, low-income households experienced an increase of 78 percent ($2,624) in per capita expenditures on healthcare, double the increase for the highest income group of 34 percent ($1214).
  • However, survival for the lowest income group during the 1990s grew by 0.2 years, compared to 0.8 years for the highest income group.

According to Skinner and Zhou, the fact that the two measures deliver such discordant messages may reflect their intrinsic shortcomings: expenditures depend on preferences, health status and prices, while outcomes are strongly affected by health behavior and past illness.

The advantage of focusing on equality in effective care (or quality of care) is that there are reasonable approaches to fixing the problem. The authors say monitoring claims data in real time, with the objective of raising rates to ideal levels of near 100 percent among appropriate candidates, will reduce income-based inequality in health outcomes. Inequality in outcomes may continue for many years, they say, but at least such differences would not be exacerbated by inequality in health care.

Source: Les Picker, "The Measurement and Evolution of Health Inequality," NBER Digest, June, 2005; based upon: Jonathan Skinner and Weiping Zhou, "The Measurement and Evolution of Health Inequality: Evidence from the U.S. Medicare Population," Working Paper No. 10842, National Bureau of Economic Research, August 2005.

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