Unbiased Analysis of Today's Healthcare Issues
Risk adjustment is important for many aspects of health care. Medicare uses risk adjustment to modify payments to Medicare Advantage (Part C) plans based on the health of the beneficiaries they cover. Private insurance companies can use risk adjustment to fine-tune capitation payments to physicians or determine a potential enrollee’s premium. Providers can use risk…
Oftentimes, people use the following rule of thumb: if the dependent variable is continuous, use OLS; if binary use a logit or probit. But what should you do if your dependent variable is fraction between 0 and 1. To use a logit or probit one would have to unnecessarily transform the dependent variable into binary…
What is power? Merriam Webster defines power as the “possession of control, authority, or influence over others.” The power I will talk about today, however, is statistical power. Statistical power measures the ability of a statistical test to determine whether the null hypothesis is false. For instance, in the U.S. judicial system, the null hypothesis…
The generalized linear model (GLM) is a flexible generalization of ordinary least squares regression. OLS restricts the regression coefficients to have a constant effect on the dependent variable. GLM allows for the this effect to vary along the range of the explanatory variables. The basic structure of GLM estimator is as follows: g(Y) = Xβ…
Price indices are useful for calculating inflation over time. The consumer price index (CPI) measures changes in prices for the overall economy. Researchers can also use price indices to understand the evolution of the price of health care over time. For instance, the Bureau of Labor Statistics also calculates a CPI for Medical Care and…
Are foreign-born individuals more likely to be literate (in English) than native born Americans? One would think not, but consider the following information: Robinson (1950) computed the following two pieces of information: the percent of the population who are foreign-born, and the percent who are literate. Robinson observes that states with a high percentage of foreign-born…
How does one model a demand system? In general, researchers only observe the equilibrium prices and quantities of goods over time. Changing prices or quantities could be due to shifts in either the demand or supply curve. Thus, modeling demand systems is difficult. Deaton and Muellbauer (1980) propose one method: the Almost Ideal Demand System…
The book Black Swan by Nassim Nicholas Taleb is an interesting book about probability outside of the traditional Gaussian framework and how paradigm changing often arise. The highlight of the book is its philosophy of the black swan, and its unknown unknown. The book also includes discussion of behavioral economics and tries to discredit Gaussian…
The Economist has an interesting article about the failure of macroeconomics to predict the latest downturn and what it means for the future of the profession of economics. As one who has little faith in macroeconomics, I certainly can commiserate with the opinions of the following Ph.D. students: According to David Colander, who has twice…
Many people model trend in the stock market using either Autoregressive (AR), Moving Average (MA) or Autoregressive Moving Average (ARMA). In these models, shocks to the stock price in prior periods help to determine the price in the current period. Shocks in the more distant past are generally assumed to have less influence on current…