Is Great Information Good Enough? Evidence from Physicians as Patients
Michael Frakes, Jonathan Gruber & Anupam Jena
NBER Working Paper, July 2019
Stemming from the belief that the key barrier to achieving high-quality and low-cost health care is the deficiency of information and medical knowledge among patients, an enormous number of health policies are focused on patient education. In this paper, we attempt to place an upper bound on the improvements to health care quality that may emanate from such information campaigns. To do so, we compare the care received by a group of patients that should have the best possible information on health care service efficacy — i.e., physicians as patients — with a comparable group of non-physician patients, taking various steps to account for unobservable differences between the two groups. Our results suggest that physicians do only slightly better in adhering to both low- and high-value care guidelines than non-physicians – but not by much and not always.
Provider Responses to Online Price Transparency
Journal of Health Economics, July 2019, Pages 241-259
Price transparency initiatives have recently emerged as a solution to the lack of health care price information available to consumers. This paper uses the staggered and nationwide diffusion of a leading internet-based price transparency platform to estimate the effects of price transparency on provider prices. I find a 1-4% reduction in provider prices for homogenous services, laboratory tests, but find no price response for differentiated services, office visits. Price responses are driven by active consumer use of price information. This paper demonstrates how reducing consumer search costs can spur limited firm price competition in health care markets.
Does Medicare Reimbursement Drive Up Drug Launch Prices?
David Ridley & Chung-Ying Lee
Review of Economics and Statistics, forthcoming
Medicare reimburses health care providers for the drugs they administer. Since 2005, Medicare has reimbursed based on the past price of the drug. Reimbursement on past prices could motivate manufacturers to set higher launch prices because providers become less sensitive to price and because provider reimbursement is higher if past prices were higher. Using data on drug launch prices between 1999 and 2010, we estimate that reimbursement based on past prices caused launch prices to rise dramatically. The evidence is consistent with the 2018 claim from Medicare's administrator that it “creates a perverse incentive for manufacturers to set higher prices.”
Air Ambulances With Sky-High Charges
Ge Bai et al.
Health Affairs, July 2019, Pages 1195-1200
Charges for air ambulance services were 4.1–9.5 times higher than what Medicare paid for the same services in 2016. The median charge ratios (the charge divided by the Medicare rate) for the services increased by 46–61 percent in 2012–16. Air ambulance charges varied substantially across the US, and some of the largest providers had among the highest charges.
The Health Impacts of Hospital Delivery Practices
David Card, Alessandra Fenizia & David Silver
NBER Working Paper, June 2019
Hospital treatment practices vary widely, often with little connection to the medical needs of patients. We assess the impact of these differences in the context of childbirth. We focus on low-risk first births, where c-section rates vary enormously across hospitals, and where policymakers have focused much of their attention in calls for reducing unnecessary c-sections. We find that proximity to hospitals with high c-section rates leads to more cesarean deliveries, fewer vaginal births after prolonged labor, and higher average Apgar scores. Infants born in these hospitals are less likely to be readmitted in the year after birth, but more likely to visit the emergency department for a respiratory-related problem. They also have lower mortality rates, driven by a reduction in the joint probability of prolonged labor and subsequent death. A stylized cost benefit analysis suggests that re-allocating births to high c-section hospitals could lead to net social benefits.
Prevalence and Characteristics of Virginia Hospitals Suing Patients and Garnishing Wages for Unpaid Medical Bills
William Bruhn et al.
Journal of the American Medical Association, forthcoming
Methods: We searched 2017 Virginia court records on completed warrant-in-debt lawsuits (defined as a party suing an individual for an unpaid debt) filed by hospitals resulting in garnishment of a patient’s wages. Data were collected from the General District Court Online Case Information System within the Virginia Judicial System website.4 We searched for civil cases categorized as “warrant in debt” and “garnishment” in each Virginia district that contained the words “hospital” or “medical center” and extracted all cases in which a medical entity was the plaintiff against an individual. Virginia was chosen because of its consolidated online court records and because the state contains a broad mix of income, political party constituents, and metropolitan and rural areas. We used the American Hospital Directory to identify hospital characteristics (Table 1) and collected employer data from court records. We used a nonparametric negative binomial model (ie, a generalized additive model with a negative binomial response) to study hospital characteristics associated with the number of wage garnishment cases per hospital per year. Statistical analyses were performed in R version 3.4.0 using the GAMLSS package.5 The statistical significance level was set at P < .05 using 2-sided tests.
Results: We identified 20 054 warrant-in-debt lawsuits and 9232 garnishment cases in 2017. Garnishing was conducted by 48 of 135 Virginia hospitals (36%), of which 71% were nonprofit and 75% urban, compared with 53% nonprofit and 91% urban among hospitals that did not garnish (Table 1). The mean annual gross revenue of garnishing hospitals was $806 million and the mean amount garnished per hospital was $722 342 (0.1% of gross revenue). The mean amount garnished per patient was $2783.15 (range, $24.80-$25 000). The mean number of garnishments per hospital was 82, and 8399 patients had wages garnished. Garnishments were more likely among nonprofit vs for-profit hospitals (incidence rate ratio [IRR], 11.52; 95% CI, 2.05-64.64) and hospitals with a higher markup ratio relative to the Medicare allowable amount (IRR, 2.81 per 100% increase; 95% CI, 1.69-4.69) (Table 2). Garnishments decreased with annual gross revenue (IRR, 0.76 per $100 million; 95% CI, 0.65-0.89). Five hospitals (4 nonprofit and 1 for-profit) accounted for 51% (4690/9232) of all garnishment cases in the state. The most common employers of those having wages garnished were Walmart, Wells Fargo, Amazon, and Lowes, accounting for 8% of patients whose wages were garnished.
Private vs. Public Provision of Social Insurance: Evidence from Medicaid
Timothy Layton et al.
NBER Working Paper, July 2019
Public health insurance benefits in the U.S. are increasingly provided by private firms, despite mixed evidence on welfare effects. We investigate the impact of privatization in Medicaid by exploiting the staggered introduction of county-level mandates in Texas that required disabled beneficiaries to switch from public to private plans. Compared to the public program, which used blunt rationing to control costs, we find privatization led to improvements in healthcare — including increased consumption of high-value drug treatments and fewer avoidable hospitalizations — but also higher Medicaid spending. We conclude that private provision can be beneficial when constraints in the public setting limit efficiency.
Sending The Wrong Price Signal: Why Do Some Brand-Name Drugs Cost Medicare Beneficiaries Less Than Generics?
Stacie Dusetzina et al.
Health Affairs, July 2019, Pages 1188-1194
The current Medicare Part D benefit may require greater out-of-pocket spending for beneficiaries filling prescriptions for higher-price generic drugs, compared to those filling brand-name counterparts. This can occur among patients who reach the catastrophic coverage phase under the Part D benefit, when differences between the prices for generic and brand-name drugs are not large. This scenario may be common with specialty drugs (typically high-price products used to treat rare or complex conditions), when the number of generic manufacturers or clinical alternatives are limited. In this study we demonstrated that patients would pay more out of pocket for generic medications than for brand-name drugs in these cases, driven by manufacturer discounts provided in the Medicare Part D coverage gap. Overpayments for specialty generic drugs relative to brand-name drugs ranged from $869 to $1,072 in 2019, despite lower point-of-sale prices for these drugs. Policy makers should consider modifying the Part D benefit to increase incentives for generic drug use.
How do Humans Interact with Algorithms? Experimental Evidence from Health Insurance
Kate Bundorf, Maria Polyakova & Ming Tai-Seale
NBER Working Paper, June 2019
Algorithms increasingly assist consumers in making their purchase decisions across a variety of markets; yet little is known about how humans interact with algorithmic advice. We examine how algorithmic, personalized information affects consumer choice among complex financial products using data from a randomized, controlled trial of decision support software for choosing health insurance plans. The intervention significantly increased plan switching, cost savings, time spent choosing a plan, and choice process satisfaction, particularly when individuals were exposed to an algorithmic expert recommendation. We document systematic selection - individuals who would have responded to treatment the most were the least likely to participate. A model of consumer decision-making suggests that our intervention affected consumers’ signals about both product features (learning) and utility weights (interpretation).
Physician activism in American politics: The opposition to the Price nomination
Adam Bonica, Howard Rosenthal & David Rothman
PLoS ONE, June 2019
Although a substantial literature considers physician advocacy fundamental to medical professionalism, only a minority of physicians actually pursue it. We analyze the characteristics of 6,402 physicians who engaged in political advocacy by signing the Clinician Action Network's 2016 petition objecting to the American Medical Association's endorsement of the nomination of Tom Price as Secretary of Health and Human Services. These physicians were matched to the NPI (all physicians) and PECOS (largely Medicare payment recipients) directories. Physicians in the directories were matched to publicly disclosed campaign contributions. Contributions are used to measure political preferences expressed on a liberal-conservative scale. We document a pronounced generational realignment in the politics of the medical profession, with recent graduates trending sharply Democratic. Petition signing vs. non-signing is responsive to gender, specialty, geographic location, personal liberal-conservative preferences and year of graduation from medical school. Petition signers were more likely to be women (62% of signers versus 34% of non-signers), recent medical school graduates (58% of signers versus 42% of non-signers), and in lower-paying specialties (27% of signers versus 12% of non-signers). The changing face of physician advocacy has important implications for understanding how the medical profession is likely to influence health care policy in coming decades.
Growth Of Public Coverage Among Working Families In The Private Sector
Douglas Strane et al.
Health Affairs, July 2019, Pages 1132-1139
Working families have increasingly enrolled their children in Medicaid or the Children’s Health Insurance Program in recent years. Parents’ place of employment affects the availability and cost of family health insurance, making it a determinant of pediatric public insurance enrollment. We examined that enrollment in the period 2008–16 in families working full time and earning more than 100 percent of the federal poverty level at three types of employers. Among low-income families (100–199 percent of poverty), children’s public health insurance coverage was highest for those with parents employed at small private firms, increasing from 53 percent to 79 percent, while the public insurance coverage rate also increased among children with parents working for large private firms (from 45 percent to 69 percent). Among moderate-income families (200–299 percent of poverty) working at small private firms, public coverage increased from 21 percent to 64 percent. Increases in the number of working families with pediatric public insurance were driven by employees of large private firms. Maintaining high pediatric insurance coverage rates will require policies that recognize the changing role of public insurance for working families as the cost of employer-based coverage grows.
So Many Hospitals, So Little Information: How Hospital Value‐Based Purchasing Is a Game of Chance
Andrew Friedson, William Horrace & Allison Marier
Southern Economic Journal, forthcoming
As part of the Patient Protection and Affordable Care Act, participating hospitals have part of their Medicare reimbursements withheld and then redistributed based on quality performance. The Hospital Value‐Based Purchasing reimbursement plan relies partly on ordinal rankings of hospitals to determine how money is distributed. We analyze the quality metric score distributions that underlie payment redistribution and show that there is not enough information to reliably differentiate hospitals from one another near the program point cutoffs, and conclude that a large part of the payment formula is driven by sampling variability rather than true quality information. An alternative plan for rewarding hospitals is developed.
Are Quality-Adjusted Medical Prices Declining for Chronic Disease? Evidence from Diabetes Care in Four Health Systems
Karen Eggleston et al.
NBER Working Paper, June 2019
Improvements in medical treatment have contributed to rising health spending. Yet there is relatively little evidence on whether the spending increase is “worth it” in the sense of producing better health outcomes of commensurate value — a critical question for understanding productivity in the health sector and, as that sector grows, for deriving an accurate quality-adjusted price index for an entire economy. We analyze individual-level panel data on medical spending and health outcomes for 123,548 patients with type 2 diabetes in four health systems. Using a “cost-of-living” method that measures value based on improved survival, we find a positive net value of diabetes care: the value of improved survival outweighs the added costs of care in each of the four health systems. This finding is robust to accounting for selective survival, end-of-life spending, and a range of values for a life-year or, equivalently, to attributing only a fraction of survival improvements to medical care.
Accuracy Of The Relative Value Scale Update Committee’s Time Estimates And Physician Fee Schedule For Joint Replacement
John Urwin et al.
Health Affairs, July 2019, Pages 1079-1086
Even though relative value units guide 70 percent of physician payment, little research has assessed their accuracy. We analyzed actual service time for total hip and knee replacements at two academic hospitals in the period January 1, 2013–October 1, 2016, using electronic health record time-stamp data, and we compared that time with the Medicare Physician Fee Schedule and most recent Relative Value Scale Update Committee recommendations. We found that the committee and fee schedule overestimated the operating time of original hip replacements by 18 percent and original knee replacements by 23 percent. Revision hip replacements were overestimated by 61 percent and knee replacements by 48 percent. In a multivariate analysis we found that faster operating time was not associated with more complications or admissions to the intensive care unit. Complication rates varied tenfold across physicians and twofold across hospitals. The fee schedule and the committee significantly overestimated operating times for original and revision hip and knee replacements. Policy makers should use empirical time-stamp data instead of self-reported estimates to determine physician payment.
Occupational Licensing of Social Services and Nursing Home Quality: A Regression Discontinuity Approach
John Bowblis & Austin Smith
ILR Review, forthcoming
Occupational licensing has grown dramatically in recent years, with more than 25% of the US workforce having a license as of 2008, up from 5% in 1950. Has licensing improved quality or is it simply rent-seeking behavior by incumbent workers? To estimate the impact of increased licensure of social workers in skilled nursing facilities (SNFs) on service quality, the authors exploit a federal staffing provision that requires SNFs of a certain size to employ licensed social workers. Using a regression discontinuity design, the authors find that qualified social worker staffing increases by approximately 10%. However, the overall increase in social services staffing is negligible because SNFs primarily meet this requirement in the lowest cost way — substituting qualified social workers for unlicensed social services staff. The authors find no evidence that the increase in licensure improves patient care quality, patient quality of life, or quality of social services provided.
Do cancer treatments have option value? Real‐world evidence from metastatic melanoma
Meng Li et al.
Health Economics, July 2019, Pages 855-867
A change in the expectations about future treatments may change the option value of a current treatment, thereby affecting its utilization. We conducted an interrupted time series analysis using a large administrative claims database to test whether the utilization of existing cancer treatments changed after the disclosures of the then‐investigational drug ipilimumab's Phase II and Phase III results among metastatic melanoma patients from 2008 to 2011. We used a multinomial logistic regression to analyze the temporal probability of receiving antineoplastic systemic therapy, surgical resection of metastasis, or both, relative to no treatment, in the first 3 months following the first metastasis diagnosis. One thousand eight hundred forty‐six metastatic melanoma patients were included. After adjusting for clinical and sociodemographic variables and the underlying time trend, the disclosure of ipilimumab's Phase II result was associated with a nearly twofold immediate increase in the probability of receiving surgical resection of metastasis relative to no treatment, which was significant at 5% level. No significant effect was observed for the time trend. No significant effects were found for the announcement of the Phase III result. Our findings in metastatic melanoma provide the first empirical evidence of the impact of option value in cancer treatment decision making.
Impact Of Medicare Readmissions Penalties On Targeted Surgical Conditions
Karan Chhabra et al.
Health Affairs, July 2019, Pages 1207-1215
The Hospital Readmissions Reduction Program, announced in 2010 to penalize excess readmissions for patients with selected medical diagnoses, was expanded in 2013 to include targeted surgical diagnoses, beginning with hip and knee replacements. Whether these surgical penalties reduced procedure-specific readmissions is not well understood. Using Medicare claims, we evaluated the penalty announcements’ effects on risk-adjusted readmission rates, episode payments, lengths-of-stay, and observation status use. Risk-adjusted readmission rates declined for both procedures from 7.6 percent in 2008 to 5.5 percent in 2016. These rates were decreasing before the program was announced, but the rate of reductions doubled after the announcement of medical penalties in March 2010 (from −0.05 percentage points to −0.10 percentage points per quarter). After targeted surgical penalties were announced in August 2013, readmission reductions returned to near the baseline trend. During the same time period, mean episode payments and lengths-of-stay decreased substantially, and trends in observation status were unchanged. This suggests that medical readmission penalties led to readmission reductions for surgical patients as well, that targeted surgical penalties did not have an additional effect, and that readmission reductions are approaching a “floor” below which further reductions may be unlikely.
On the value of Medicaid in providing access to long‐term care
Journal of Public Economic Theory, forthcoming
The crowding‐out by Medicaid has been identified as a possible reason for the low demand for private long‐term care (LTC) insurance in the USA. I extend the previous analysis to the case in which budget constraints inhibit access to care. This reduces the role of the implicit tax and fundamentally changes the nature, scope, and welfare implications of crowding‐out. It suggests a large value of Medicaid that a private insurance market is unable to offer due to a dilemma prevalent in — but not exclusive to — the market for LTC insurance: a dilemma between access and affordability.
Physicians’ Well-Being Linked To In-Basket Messages Generated By Algorithms In Electronic Health Records
Ming Tai-Seale et al.
Health Affairs, July 2019, Pages 1073-1078
Despite concerns about physicians’ workload associated with electronic health records (EHRs), little attention has been paid to the relationship between physicians’ well-being and the in-basket messages physicians receive — specifically, their volume and sources. Analyses of EHR work performed by physicians in a multispecialty practice found that in-basket messages generated by the EHR system accounted for almost half (114) of the 243 weekly in-basket messages received per physician, on average — far exceeding the numbers received from their colleagues (53) and patients (30). In a survey, 36 percent of the physicians reported burnout symptoms, and 29 percent intended to reduce their clinical work time in the upcoming year. Receiving more than the average number of system-generated in-basket messages was associated with 40 percent higher probability of burnout and 38 percent higher probability of intending to reduce clinical work time. Physicians’ perceptions of a positive work environment were associated with lower odds of burnout and intention to reduce clinical work time and with greater satisfaction with life. Female physicians had a higher risk of burnout and lower satisfaction with life, compared to males. Meaningful redesign of EHR in-basket workflow and a wellness-enhancing work environment are necessary to effectively improve physicians’ well-being.