Cream skimming and hospital transfers in a mixed public-private system.

The increasing prominence of the private sector in health care provision has generated considerable interest in understanding its implications on quality and cost. This paper investigates the phenomenon of cream skimming in a mixed public-private hospital setting using the novel approach of analysing hospital transfers. We analyse hospital administrative data of patients with ischemic heart disease from the state of Victoria, Australia. The data set contains approximately 1.77 million admission episodes in 309 hospitals, of which 132 are public hospitals, and 177 private hospitals. We ask if patients transferred between public and private hospitals differ systematically in the severity and complexity of their medical conditions; and if so, whether utilisation also differs. We find that patients with higher disease severity are more likely to be transferred from private to public hospitals whereas the opposite is true for patients transferred to private hospitals. We also find that patients transferred from private to public hospitals stayed longer and cost more than private-to-private transfer patients, after controlling for patients' observed health conditions and personal characteristics. Overall, the evidence is suggestive of the presence of cream skimming in the Victorian hospital system, although we cannot conclusively rule out other mechanisms that might influence hospital transfers.

The causal effect of income on health: evidence from German reunification.

We investigate whether there was a causal effect of income changes on the health satisfaction of East and West Germans in the years following reunification. Our data source is the German Socio-Economic Panel (GSOEP) between 1984 and 2002, and we fit a recently proposed fixed-effects ordinal estimator to our health measures and use a causal decomposition technique to account for panel attrition. We find evidence of a significant positive effect of income changes on health satisfaction, but the quantitative size of this effect is small. This is the case with respect to current income and a measure of 'permanent' income.