Investing in health economically sound

“Health is a depreciating asset,” in the words of Sara Holland, speaking the prosaic language of corporate finance. But we can delay the inevitable by making investments in our health. Understanding how well we allocate our individual and collective resources to preserve health is at the center of the field of health economics.

UGA’s Terry College of Business has hired three new faculty engaged in health economics-Holland, Christina Marsh, and William Vogt.

Holland joined the Department of Banking and Finance after finishing her Ph.D. at the University of California-Berkeley. She is combining “health capital” with the broader measure of “human capital.”

“I am exploring why firms spend so much on the health of their employees and how it affects the value of the firm,” Holland said. “The big takeaway so far is that investing in health capital is not destroying shareholder value. This goes against the conventional wisdom that providing health benefits is burdensome to businesses because it exposes companies to higher health costs and takes resources away from production.”

Marsh completed her Ph.D. at the University of Minnesota in 2010. Her research addresses the problem of predicting price responses in health care when the formula is complicated by the presence of “nonlinear reimbursements.” The most common example of a “nonlinear” is the health insurance deductible.

Applying her method, she is able to test scenarios in which employees have higher deductibles or spend more on copayments but are given lower insurance premiums in return, and vice versa. “I find that the best scenario has the employee and the employer sharing the costs when the level of care needed is less critical,” Marsh said. “If you have patients pay small co-payments from the very beginning in exchange for that lower monthly premium, they are going to be more discriminating in how much health care they buy. Patients preferred this scenario because they get to choose where to spend those extra dollars.”

Vogt, the most senior of the new health-economics faculty, came to Terry from the RAND Corp. in Pittsburgh, where he was a senior economist. Previously, he was a health economist at Carnegie Mellon University.

At UGA, Vogt is the principal investigator on a million-dollar grant and co-investigator on a multimillion-dollar grant, both funded by the National Institute on Aging (NIA). One of his projects is a reanalysis of data from the 1990s Women’s Health Initiative, a series of mammoth randomized controlled trials (RCTs) that addressed heart disease, cancer and osteoporosis in postmenopausal women.

“Entering the field of health economics is an important step for us,” explained Daniel Feldman, Terry College’s associate dean for academic affairs. “With growing public attention to the affordability of health care, it is critical that Terry has a strong set of faculty who can address these issues in rigorous ways.”