Essay about Health Economics

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MEMORANDUM To: Professor Sherry Glied From: Shraddha Kothari Re: Using Grossman’s model to evaluate how NYC’s new sick leave law will affect emergency room use Date: February 10, 2015 This memorandum will use Grossman’s model of production of health to evaluate how New York City’s new sick leave law will affect emergency room use. Grossman’s model states that a person utility is based on health (H) and other non-health related goods (Z) that the person consumes. The production possibility frontier for Grossman model shows the tradeoff between home good production (Z) and health (H). Unlike usual production possibility frontiers, an individual needs an optimal level of H to maximize consumption of Z goods. New York City’s new sick…show more content…
The individual’s health is a stock variable which changes over time. Hence, health decisions in one period not only impact that period but also impact subsequent periods. With paid sick leave, it is easier for an individual can take time off work to recuperate. This has multiple benefits. Firstly, it allows the individual to recuperate before health levels become extremely low. Extremely low levels of health will result in more ER visits and a longer recovery period. Secondly, if the individual has an infectious disease then paid sick leave allows the individual to recover and it prevents the infection from spreading to other people in the organization. Lastly, the improved health (due to recuperation) will increase employee productivity in subsequent periods at work. Hence paid sick leave will reduce ER visits over the course of the individual’s life. 3) A study shows that availability of after-hours care by primary physicians reduces emergency room visits. Based on this study we can infer that it is likely that some of these individuals are forced to visit emergency rooms due the unavailability of after-hours care by primary physicians and lack of paid sick leave to reach the primary care physician during regular work hours. Paid sick leave will reduce the emergency room visits as employees can now contact their primary care physicians during work hours. 4) With the new paid sick leave law, an

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