Very low birthweight babies (less than 1,500 grams) only account for a small fraction of births, but they account for nearly 40 percent of infant deaths. In addition to their poor survival prospects these babies incur disproportionate health care costs. Many of these babies are covered by public programs such as Medicaid and hence their hospital care contributes significantly to public welfare costs. Beyond the overall rates of low survival for very low birthweight babies, there are well known, but largely unexplained ethnic and racial differentials in mortality. Using the California Birth Cohort data in conjunction with Medicaid data for the years 1980 through 1987, we propose to combine economic, demographic and clinical models to study the survivorship and cost of caring for very low birthweight babies. Our research agenda has the following objectives. (1) Analyze racial and ethnic differences in mortality with the goal of evaluating the relative importance of four explanations of these differences, including differences in maturity at a given birthweight, in pregnancy and delivery complications, in health at birth, and differences in cause of death. (2) Analyze the extent to which race and ethnic differences are reflected in health care costs. (3) Within race and ethnic groups, examine the extent to which the factors that influence mortality also influence differences in cost. (4) Disaggregate health costs in the first year of life into those associated with the initial hospitalization following birth and those incurred in the remainder of the first year of life. (5) Evaluate the extent to which babies who are hospitalized for long durations following birth are drawn from a pool of increasingly sick children with poor survival prospects and high costs. This study will contribute to our understanding of racial and ethnic differences in morbidity and mortality, the relationship of these differences to health care costs, and the consequences on long term initial hospitalization for the survival prospects and health care costs in the remainder of the first year of life.
