Chad Meyerhoefer on How Disaster Shocks Affect Farmers’ Health Care

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In this episode of Lehigh University’s College of Business ilLUminate podcast, we are speaking with Chad Meyerhoefer about his recent study on whether income shocks from natural disasters reduce farmers' access to health care.
 
Meyerhoefer holds the Arthur F. Searing Professorship in Economics and is the chair of the Department of Economics in Lehigh's College of Business. His research focuses broadly on the economics of health and nutrition and involves the use of microeconometric methods to evaluate and inform public policy.

Meyerhoefer spoke with Jack Croft, host of the ilLUminate podcast. Listen to the podcast here and subscribe and download Lehigh Business on Apple Podcasts or wherever you get your podcasts.

Below is an edited excerpt from that conversation. Read the complete podcast transcript [PDF].

Jack Croft: What was it that initially piqued your interest in looking at the question of whether natural disasters reduce farmers' access to health care?

Chad Meyerhoefer: I've been interested in the welfare of farmers for many years now. And one of the reasons for that is that farming is a risky profession. So farmers have higher rates of illness and disability than the general population. Many countries have social insurance programs for farmers to compensate for that.

And I've done some research in the past with Hung-Hao Chang at National Taiwan University on this topic. One of the things that came out of our earlier discussions and papers we'd written in the past was how income shocks affect farmers' managerial decisions and how they affect their health and well-being. Taiwan has some nice features in that they have a nationalized health care program. They have a program that covers farmers specifically, and we are able to use those data to look at this question.

Croft: You mentioned that Taiwan has a nationalized health care program. And most of the farmers in Taiwan, as the paper notes, are enrolled in the Farmer's Health Insurance program, or FHI for short. So how does that program work?

Meyerhoefer: This nationalized health insurance program in Taiwan is a little bit more generous in its coverage of farmers than it is for the general population. And it includes some benefits like a pension, maternity leave, that are not components of the normal health insurance program. … But the one thing that health insurance doesn't cover is protection from income shocks. And that's kind of what this study focuses on.
 
If you think about how health insurance works, it basically reduces your out-of-pocket costs when you go to seek medical care. So that does reduce your expenditure, but how large that reduction is depends on the size of the medical care bill. It's not linked to your ability to pay.

If, for example, you lose your job, that doesn't change your out-of-pocket costs for health care. It doesn't change your co-insurance or your co-payment amount. That's true in Taiwan. It's true in the U.S. and other countries as well.

Now, in the case of farming, there are a lot of income shocks. And one of the reasons why we conducted this study in Taiwan is because they are subject to a large number of natural disasters, more than in many other countries. And that's just because of their geographic location. So they have a lot of typhoons. They have heavy wind and rain at times, and they get high temperatures.

All these things produce income shocks, and those reductions in income could affect access to health care in a way that the insurance program doesn't really account for. So even though the Farmers Health Insurance program in Taiwan is very comprehensive, like many health insurance programs, it doesn't protect against these income changes.

Croft: Without getting too deep into the weeds here, if you could talk a bit about the various data you analyzed to conduct the study.

Meyerhoefer: We compiled a lot of databases. We have data on health care use and expenditures from this Farmer's Health Insurance program. And then we obtained data on [the] disaster relief programs that we merged into data at the township level.

We also looked at this agricultural census survey to investigate [whether], after natural disasters, people compensate by working more off the farm or changing their labor supply. So we can actually use this disaster relief program data to figure out in each township how much damage there was.

What we do is we link … the amount of the damage and look at the time period before the payments receive the disaster aid. Essentially, when the disaster occurs, there's a delay before they receive that aid. And it's about 52 to 67 days, so about two months. We essentially look at what happens to their health care use in the two months following the disaster.

Because at that point, their potential income has gone down quite a bit, and they don't necessarily know if they'll receive the disaster aid. So they behave as if they've lost that income. And then we also look at what happens after they get the aid, if that reverses their behavior. That was essentially how we went about the analysis.

Croft: Looking at all of that data, what were your main findings? Do natural disasters reduce farmers' access to health care in Taiwan? And if so, how?

Meyerhoefer: We found that they do. And the extent to which they reduce use of health care services is similar to the very limited evidence we have from other countries. One of the challenges here in looking at how changes in income affect use of health care services is that there are very few instances where income changes are random, so you can't really isolate the causal effect of a change in health care use due to a change in income.

There's very limited evidence, but the general conclusion is that health care use is not very responsive to changes in income. Some studies have shown there's really no effect. So when people maybe lose their jobs or they lose money in the stock market or by some other mechanism, they don't reduce their health care that much.

But then in the higher quality studies that really look at random changes in income, they find that they do. So what we find is that farmers do reduce their use of health care services after these disasters. And it's essentially like if their income drops by … 10%, then they reduce their use of health care services between 1.1 and 3.2 percent. It's not super responsive, but it does respond to the income drop. They do use fewer health care services.

Croft: Are there implications for policymakers in Taiwan as a result of your study?

Meyerhoefer: I think there are. And one of the main policy issues here is that if you have people that are taking prescription drugs regularly or using preventive care, and they forego investing in those health care services or maintaining their compliance with their prescription drug regimen, then it will typically have negative adverse consequences in the future for their health and for health care costs.

A lot of studies have looked at what happens to hospitalization rates and hospital costs when people experience a drop or something that increases their cost of outpatient health care or their cost of prescriptions. And they generally find pretty big offsets, meaning that if they stop spending money on outpatient visits or drugs, … either they or their insurance company has to spend a lot of money on hospital costs because they end up in the hospital due to the failure to prevent some condition that is expensive to treat.

So we actually simulated if this drop in health care occurred in Taiwan after these disasters and it persisted for a little while, what effect would that have? Using our results and those of other studies, we determined that the average reduction in income after these disasters would increase downstream hospital costs by about 2.7% because of the fact that farmers have less income and go to the doctor less, fill fewer prescriptions after these disasters.

That 2.7% increase in hospital costs, that's about 10% to 20% of the amount of the disaster payments. We looked when the farmers receive those disaster payments or the farmers that do receive those disaster payments, that compensates for that income loss. What we find is that's enough to essentially restore their use of health care services.

And one way of looking at this is that if those payments are given, the full cost isn't what you see in the data. It's actually 10% to 20% less than that cost because you're saving money on future hospital costs that would occur if you didn't provide these payments.

So even though this disaster relief program is not designed to ensure access to health care or to reduce health care costs, it does do that. From a policy standpoint, it means that if you don't take this cost offset into account, this disaster program is going to look more expensive than it really is to the government.