The Relationship Between Health Literacy and Costs
David H Howard
Julie Gazmararian
Ruth M Parker
Emory University
Funding provided by Pfizer Inc.
1
Health literacy
“The degree to which individuals have the
capacity to obtain, process, and understand basic
health information” (Ratzan and Parker 2000)
About one half of the adult U.S. population has
“low functional reading literacy”
Math literacy is probably low as well
2
More information on health literacy
IOM Report: Health Literacy, A Prescription to End
Confusion, 2004
New Research on Health Literacy
Monday 2:00 p.m. – 3:30 p.m.
Royal Palm Four
Health Literacy, Cultural Competence & Perceived
Racism
Tuesday 9:15 a.m. – 10:45 a.m.
Royal Palm Four
3
Standard story: why might health literacy affect
costs?
Low health literacy leads to underuse and inefficient
use of outpatient care and prescription drugs
 complications, progression of chronic
diseases
 Greater use of inpatient, emergency room care
 Higher costs
4
Also important to consider physician behavior
For low health literacy patients, physicians may
substitute intensive care for patient self-care
(↑ costs)
Physicians may withhold care from low health
literacy patients if they think that such patients are
non-compliant (↓ costs)
Are patient medical knowledge and medical care
substitutes or complements?
5
Data: the Prudential Survey
Elderly Medicare beneficiaries newly enrolled in
Prudential Medicare managed care plans
Locations: Cleveland, Ohio; Houston, Texas; South
Florida, and Tampa, Florida.
Time span: December 1996 and August 1997.
Refusal rate: 44%.
N = 3,260
6
Large samples are needed to compare costs
Fraction
.464657
0
12.38
330868
total net pay of hosp adm. for m
7
Large samples are needed to compare costs
.464657
Fraction
$0 values
0
12.38
330868
total net pay of hosp adm. for m
8
Large samples are needed to compare costs
Fraction
.464657
“outliers”
0
12.38
330868
total net pay of hosp adm. for m
9
Large samples are needed to compare costs
.464657
Fraction
Mean of inpatient costs = $5,321
0
12.38
330868
total net pay of hosp adm. for m
10
Large samples are needed to compare costs
.464657
Mean of inpatient costs = $5,321
Fraction
Mean of inpatient costs with four highest
values (> $240,000) excluded = $4,984
0
12.38
330868
total net pay of hosp adm. for m
11
Analysis: modified 2 part model (Mullahy 1998)
First stage
Model: logit
Dep var: Probability of positive expenditures
Sample: entire sample
Second stage
Model: non-linear least squares, y = exp(xB)
Dep var: Expenditures
Sample: those with positive expenditures
Prediction:
Sample average treatment effect
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Characteristic
Age
Female
Race is white
Income > $25K
Education >12 years
Never smoked
Doesn't drink
Chronic conditions
Angina
Arthritis
Cancer
Depression
Diabetes
N
Health literacy
Low
Adequate
P-value
75
57%
21%
9%
14%
44%
72%
72
58%
7%
24%
40%
38%
58%
<0.01
0.44
<0.01
<0.01
<0.01
<0.01
<0.01
9%
58%
5%
18%
18%
8%
50%
6%
12%
13%
0.30
<0.01
0.26
<0.01
<0.01
1,166
2,094
13
Adjusted cost differences: low versus
adequate health literacy
Site of care
Difference
P-value
Inpatient
Outpatient
Emergency room
Pharmacy
$1,042
-$228
$69
$53
0.150
0.047
<0.001
0.126
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Adjusted use differences: low versus adequate
health literacy
Site of care
Difference
Inpatient
Outpatient
Emergency room
Pharmacy
0.043
-0.020
0.049
-0.035
P-value
0.017
0.108
0.006
0.010
15
Bottom line
Consistent with hypothesis that low health literacy is
associated with higher costs
Policy implications: interventions have the scope to
reduce costs, but skepticism is in order
16
Caveats/future directions
Reverse causation: to what degree does poor
health result in deterioration in literacy
Need large surveys
What is the mechanism?
17
APPENDIX: statistical analysis
1. First stage (logit):
Pr($  0)  f HL, X |  
2. Second stage (non-linear least squares):
$  exp HL, X |  
3. Prediction:


PRED ($ | HL , X )  f HL , X | ˆ exp HL , X | ˆ 
For more information, see Mullahy, Journal of Health Economics, 1998)
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APPENDIX: statistical analysis
Write cost prediction as a function of health literacy
PRED$ | HL  X 
Sample average treatment effect
 PRED$ | HL  1  PRED$ | HL  0
N
Standard error computed via Monte Carlo simulation
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Sample mean costs
Site of care
Health literacy
Low
Adequate
Inpatient
Outpatient
Emergency room
Pharmacy
$6,516
$1,894
$564
$663
$4,656
$1,805
$360
$684
P-value
<0.01
0.45
<0.01
0.57
20