Bayesian analysis of the two-part model with endogeneity: application to health care expenditure

This paper studies the effect of managed care on medical expenditure using a model in which the insurance status is assumed to be endogenous. Insurance plan choice is modeled through the multinomial probit model. The medical expenditure variable, the outcome of interest, has a significant proportion of zeros that are handled using the two-part model, extended to handle endogenous insurance. The estimation approach is Bayesian, based on the Gibbs Sampler. The model is applied to a sample of 20 460 individuals obtained from the Medical Expenditure Panel Survey. The results provide substantial evidence of selectivity. Copyright © 2006 John Wiley & Sons, Ltd.

[1]  Bertrand Melenberg,et al.  Parametric and semi-parametric modelling of vacation expenditures , 1996 .

[2]  W. Wong,et al.  The calculation of posterior distributions by data augmentation , 1987 .

[3]  S. Crystal,et al.  Uninsured status and out-of-pocket costs at midlife. , 2000, Health services research.

[4]  G. Maddala.  A survey of the literature on selectivity bias as it pertains to health care markets. , 1985, Advances in health economics and health services research.

[5]  Pravin K. Trivedi,et al.  Bayesian analysis of a self-selection model with multiple outcomes using simulation-based estimation: an application to the demand for healthcare , 2003 .

[6]  S. Chib,et al.  Bayesian analysis of binary and polychotomous response data , 1993 .

[7]  D. Poirier,et al.  On the Predictive Distributions of Outcome Gains in the Presence of an Unidentified Parameter , 2003 .

[8]  K. Wells,et al.  Health Care Utilization in Employer Plans with Preferred Provider Organization Options , 1990 .

[9]  John Geweke,et al.  Efficient Simulation from the Multivariate Normal and Student-t Distributions Subject to Linear Constraints and the Evaluation of Constraint Probabilities , 1991 .

[10]  W. Manning,et al.  Estimating Log Models: To Transform or Not to Transform? , 1999, Journal of health economics.

[11]  Peter E. Rossi,et al.  A Bayesian analysis of the multinomial probit model with fully identified parameters , 2000 .

[12]  Siddhartha Chib,et al.  Semiparametric Bayes analysis of longitudinal data treatment models , 2002 .

[13]  S. Glied.  Chapter 13 Managed care , 2000 .

[14]  Sarah J. Reber,et al.  Paying for Health Insurance: The Tradeoff between Competition and Adverse Selection , 1996 .

[15]  Michael Keane,et al.  A Note on Identification in the Multinomial Probit Model , 1992 .

[16]  L. Wasserman,et al.  Computing Bayes Factors Using a Generalization of the Savage-Dickey Density Ratio , 1995 .

[17]  J J Toland,et al.  Managed care. , 1995, Orthopedics.

[18]  D. Goldman,et al.  Managed care as a public cost-containment mechanism. , 1995, The Rand journal of economics.

[19]  C. Morris,et al.  A Comparison of Alternative Models for the Demand for Medical Care , 1983 .

[20]  M C Hornbrook,et al.  Modeling risk using generalized linear models. , 1999, Journal of health economics.

[21]  J. Mullahy.  Much Ado About Two: Reconsidering Retransformation and the Two-Part Model in Health Economics , 1998, Journal of health economics.

[22]  Sally C Stearns,et al.  Do Medicare HMOs still reduce health services use after controlling for selection bias? , 2002, Health economics.

[23]  Han Bleichrodt,et al.  Handbook of Health Economics , 2001 .