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Book part
Publication date: 25 March 2010

Avi Dor, Maureen J. Lage, Marcy L. Tarrants and Jane Castelli-Haley

Purpose – The authors focus on understanding the relationship between costs and cost sharing on medication adherence for individuals who initiated a disease-modifying…

Abstract

Purpose – The authors focus on understanding the relationship between costs and cost sharing on medication adherence for individuals who initiated a disease-modifying therapy (DMT) for the treatment of multiple sclerosis (MS). DMTs reduce the risk of relapse and are an essential component of MS treatment. Furthermore, the authors compare monthly payment levels for copayments versus coinsurance and estimate the effects on adherence.

Methods – Using the MarketScan Commercial Claims and Encounters database evidence from July 1 2005 to March 31 2008, the authors employ a multivariate two-stage least-squares model (2SLS) to examine the impact of copayments or coinsurance on the medication possession ratio (MPR).

Findings – Descriptive results show that the mean out-of-pocket (OOP) costs of DMT per month were higher for patients with coinsurance than for patients with copayments. For the cohort of patients with copayment there was little difference in monthly copayments across adherence thresholds. Regression analysis shows that an increase in cost sharing reduces adherence overall, but this effect was small and insignificant in the copayment cohort. In contrast, in the coinsurance cohort increased cost sharing was significantly associated with decreased adherence to DMT medication; with a 10% increase in cost sharing leading to an 8.6% decline in adherence.

Implications – Employers increasingly rely on coinsurance, despite evidence that reliance on coinsurance results in lower adherence. Our research findings suggest that coinsurance appears to be a greater obstacle to compliance, confirming predictions found in the theoretical literature.

Originality – This research converted counts of injectable treatments into a continuous adherence measure. Previous literature on cost sharing did not examine MS.

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Pharmaceutical Markets and Insurance Worldwide
Type: Book
ISBN: 978-1-84950-716-5

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Article
Publication date: 1 December 1995

Dawn Bendall and Patrick Asubonteng

Examines the primary studies which have contributed to dental careresearch. By reviewing background information, lays a foundation for thereview of the current empirical…

Abstract

Examines the primary studies which have contributed to dental care research. By reviewing background information, lays a foundation for the review of the current empirical evidence, which examines the effect of dental insurance coverage on the oral health of the American population, as well as the utilization and demand for dental services. Raises questions and implications for future research and practice.

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Journal of Management in Medicine, vol. 9 no. 6
Type: Research Article
ISSN: 0268-9235

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Article
Publication date: 7 August 2017

Ibeawuchi Ibekwe

The purpose of this paper is to survey bank credit managers and analysts in Mozambique regarding their attitude toward firm diversification.

Abstract

Purpose

The purpose of this paper is to survey bank credit managers and analysts in Mozambique regarding their attitude toward firm diversification.

Design/methodology/approach

Forty-five credit managers and analysts from 23 banks in Mozambique were surveyed about their views on diversification and diversified firms. Questionnaires were used. Data were analyzed using chi-square test and binomial test.

Findings

Credit analysts and managers in Mozambique have a generally positive attitude toward diversification. This is mainly due to the coinsurance effects and stability of cash flows that diversification could provide. They, however, prefer moderately diversified to highly diversified firms and related to unrelated diversified firms. This is a puzzle, given the expectation that greater unrelated diversification is better able to provide coinsurance.

Practical implications

The study provides information that is useful for understanding the diversification–cost of capital relationship and could help corporate managers in making capital structure decisions.

Originality/value

Previous researchers have not studied the attitude of credit managers/analysts toward diversification in Mozambique using the survey approach. The study contributes to the literature on diversification and access to external finance, the diversification discount and cash holding behavior of firms.

Details

Qualitative Research in Financial Markets, vol. 9 no. 3
Type: Research Article
ISSN: 1755-4179

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Book part
Publication date: 25 March 2010

Adam Gailey, Darius Lakdawalla and Neeraj Sood

Purpose – To evaluate the efficiency consequences of the Medicare Part D program.Methods – We develop and empirically calibrate a simple theoretical model to examine the…

Abstract

Purpose – To evaluate the efficiency consequences of the Medicare Part D program.

Methods – We develop and empirically calibrate a simple theoretical model to examine the static and the dynamic welfare effects of Medicare Part D.

Findings – We show that Medicare Part D can simultaneously reduce static deadweight loss from monopoly pricing of drugs and improve incentives for innovation. We estimate that even after excluding the insurance value of the program, the welfare gain of Medicare Part D roughly equals its social costs. The program generates $5.11 billion of annual static deadweight loss reduction and at least $3.0 billion of annual value from extra innovation.

Implications – Medicare Part D and other public prescription drug programs can be welfare-improving, even for risk-neutral and purely self-interested consumers. Furthermore, negotiation for lower branded drug prices may further increase the social return to the program.

Originality – This study demonstrates that pure efficiency motives, which do not even surface in the policy debate over Medicare Part D, can nearly justify the program on their own merits.

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Pharmaceutical Markets and Insurance Worldwide
Type: Book
ISBN: 978-1-84950-716-5

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Book part
Publication date: 25 March 2010

William E. Encinosa, Didem Bernard and Avi Dor

Purpose – To estimate the impact of diabetic drug adherence on hospitalizations, emergency room (ER) visits, and hospital costs.Methods – It is often difficult to measure…

Abstract

Purpose – To estimate the impact of diabetic drug adherence on hospitalizations, emergency room (ER) visits, and hospital costs.

Methods – It is often difficult to measure the impact of drug adherence on hospitalizations since both adherence and hospitalizations may be correlated with unobservable patient severity. We control for such unobservables using propensity score methods and instrumental variables for adherence such as drug coinsurance levels and direct-to-consumer advertising.

Findings – We find a significant bias due to unobservable severity in that patients with more severe health are more apt to comply with medications. Thus, the relationship between adherence and hospitalization will be underestimated if one does not control for unobservable severity. Overall, we find that increasing diabetic drug adherence from 50% to 100% reduces the hospitalization rate by 23.3% from 15% to 11.5%. ER visits reduce by 46.2% from 17.3% to 9.3%. Although such an increase in adherence increases diabetic drug spending by $776 a year per diabetic, the cost savings for averted hospitalizations and ER visits are $886 per diabetic, a cost offset of $1.14 per $1.00 spent on diabetic drugs.

Originality – Most of the drug cost-offset literature focuses only on the impact of cost-sharing and drug spending on cost-offsets, making it impossible to back-out the empirical impact of actual drug adherence on cost-offsets. In this chapter, we estimate the direct impact of adherence on hospitalizations and costs.

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Pharmaceutical Markets and Insurance Worldwide
Type: Book
ISBN: 978-1-84950-716-5

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Book part
Publication date: 1 January 2006

Jay Bhattacharya and Neeraj Sood

If rational individuals pay the full costs of their decisions about food intake and exercise, economists, policy makers, and public health officials should treat the…

Abstract

If rational individuals pay the full costs of their decisions about food intake and exercise, economists, policy makers, and public health officials should treat the obesity epidemic as a matter of indifference. In this paper, we show that, as long as insurance premiums are not risk rated for obesity, health insurance coverage systematically shields those covered from the full costs of physical inactivity and overeating. Since the obese consume significantly more medical resources than the non-obese, but pay the same health insurance premiums, they impose a negative externality on normal weight individuals in their insurance pool.

To estimate the size of this externality, we develop a model of weight loss and health insurance under two regimes – (1) underwriting on weight is allowed and (2) underwriting on weight is not allowed. We show that under regime (1), there is no obesity externality. Under regime (2), where there is an obesity externality, all plan participants face inefficient incentives to undertake unpleasant dieting and exercise. These reduced incentives lead to inefficient increases in bodyweight, and reduced social welfare.

Using data on medical expenditures and bodyweight from the National Health and Interview Survey and the Medical Expenditure Panel Survey, we estimate that, in a health plan with a coinsurance rate of 17.5%, the obesity externality imposes a welfare cost of about $150 per capita. Our results also indicate that the welfare loss can be reduced by technological change that lowers the pecuniary and non-pecuniary costs of losing weight, and also by increasing the coinsurance rate.

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The Economics of Obesity
Type: Book
ISBN: 978-1-84950-482-9

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Article
Publication date: 9 March 2010

Larry D. Su

The purpose of this paper is to investigate whether, and to what extent, corporate diversification into related and unrelated businesses affects capital structure choices…

Abstract

Purpose

The purpose of this paper is to investigate whether, and to what extent, corporate diversification into related and unrelated businesses affects capital structure choices, and whether ownership structure is germane to the understanding of corporate diversification strategies and debt‐equity financing choices.

Design/methodology/approach

Univariate approaches include the parametric two‐sample t‐test, non‐parametric Kolmogorov‐Smirnov test and Kruskal‐Wallis rank test, and cluster analysis. Multivariate approaches include panel data regressions to identify the sign and magnitude of the effect of diversification on capital structure, after controlling for a number of industry and firm characteristics as suggested in the literature.

Findings

Corporate diversification into related or unrelated industries has opposite effects on capital structure, after controlling for ownership structure and corporate governance mechanisms. Consistent with the prediction of organizational economics, an increase in the degree of business relatedness is associated with a reduction in debt while an increase in business unrelatedness is associated with an increase in debt. In addition, there is strong evidence that government‐controlled firms use less debt financing and that government ownership weakens the positive relationship between unrelated diversification and leverage. The results are robust to different measures of capital structure.

Originality/value

Traditional finance literature has not been able to provide conclusive evidence on what affects corporate capital structure decisions. This paper shows that a corporate strategy perspective, with its emphasis on a managerial decision‐making process, can provide a behavioral basis for understanding capital structure choices.

Details

Management Decision, vol. 48 no. 2
Type: Research Article
ISSN: 0025-1747

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Book part
Publication date: 15 December 2010

Ian McCarthy

With expenditures totaling $227 billion in 2007, prescription drug purchases are a growing portion of the total medical expenditure, and as this industry continues to…

Abstract

With expenditures totaling $227 billion in 2007, prescription drug purchases are a growing portion of the total medical expenditure, and as this industry continues to grow, prescription drugs will continue to be a critical part of the larger health care industry. This chapter presents a survey on the economics of the US pharmaceutical industry, with a focus on the role of R&D and marketing, the determinants (and complications) of prescription drug pricing, and various aspects of consumer behavior specific to this industry, such as prescription drug regulation, the patient's interaction with the physician, and insurance coverage. This chapter also provides background in areas not often considered in the economics literature, such as the role of pharmacy benefit managers in prescription drug prices and the differentiation between alternative measures of prescription drug prices.

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Book part
Publication date: 25 March 2010

Avi Dor

Pedro Pita Barros reviews pharmaceutical policies adopted by health care systems in European (OECD) countries. He notes that cost-sharing for pharmaceuticals is higher…

Abstract

Pedro Pita Barros reviews pharmaceutical policies adopted by health care systems in European (OECD) countries. He notes that cost-sharing for pharmaceuticals is higher than cost-sharing for other services. However, although pharmaceutical cost-sharing is pervasive across the European Union, concerns over equity have led most countries to adopt sliding fee schedules and even outright exemptions from copayments for vulnerable populations such as the elderly and low income households. The most common form of price regulation in these countries is reference pricing, either “external” (pegging pharmaceutical payments to lowest prices in a group of countries) or “internal” (pegging pharmaceutical prices to the lowest price within a therapeutic class), as well as outright administrative price controls. In his theoretical results, Barros shows that reference pricing lowers cost to consumers the most, followed by administrative price lists, while the pure coinsurance system yields the higher total cost. To foster innovation, Barros proposes adoption of innovative payment schemes based on supply-side risk sharing whereby payments to drug manufacturers are tied to treatment results and patient outcomes. Such schemes are akin to pay-for performance methods used to reimburse physicians in certain managed care settings in the United States.

Details

Pharmaceutical Markets and Insurance Worldwide
Type: Book
ISBN: 978-1-84950-716-5

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Book part
Publication date: 4 March 2008

C.W. Sealey

A major theme in the literature on bank regulation is that greater reliance on market forces can mitigate the moral hazard problem inherent in government sponsored deposit…

Abstract

A major theme in the literature on bank regulation is that greater reliance on market forces can mitigate the moral hazard problem inherent in government sponsored deposit insurance. Specific proposals to impose greater market discipline on banks include minimum requirements on (1) uninsured subordinated debt financing (either fixed-term or with option-type features), and (2) private coinsurance on deposits. Both proposals amount to delegating the responsibility for bank regulation to various private sector claimholders. The results suggest that such delegation (with or without claims that include option-type features) may be ineffective in lowering bank risk, at least within the present regulatory and institutional framework. Alternative mechanisms exist that can mitigate the moral hazard problem; however, it may be necessary for the regulator/deposit insurer to be an integral part of the solution.

Details

Research in Finance
Type: Book
ISBN: 978-1-84950-549-9

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