Care About Spending
Productivity Variation and Input Misallocation: Evidence from Hospitals
Amitabh Chandra, Carrie Colla & Jonathan Skinner
NBER Working Paper, August 2023
Abstract:
There are widespread differences in total factor productivity across producers in the U.S. and around the world. To help explain these variations, we devise a general test for misallocation in input choices -- the underuse of effective inputs and overuse of ineffective ones. Misallocation implies that conditional on total input use, the return to using a particular input is not zero (a positive return implies underuse, and a negative return implies overuse). We measure misallocation across hospitals, where inputs and outputs are better measured than in other industries. Applying our test to a sample of 1.6 million Medicare beneficiaries with heart attacks (of which 436 thousand were admitted by ambulance), we reject the hypothesis of productive efficiency; moving a patient from a 10th percentile to a 90th percentile hospital with respect to misallocation, holding spending constant, is predicted to increase survival by 3.1 percentage points. With misallocation accounting for as much as 25 percent of the variation in hospital productivity, our results suggest that how the money is spent, rather than how much money is spent, is central to understanding productivity differences both in health care, and in the rest of the economy.
Does the ACA Medicaid Expansion Encourage Labor Market Exits of Older Workers?
Sezen Onal
Journal of Labor Research, June 2023, Pages 56–93
Abstract:
In this study, I examine the effects of the Affordable Care Act Medicaid expansion on the labor supply decisions of non-disabled, low-educated, childless adults ages 50-64. I employ a triple-differences (DDD) methodology, exploiting variation in individuals’ health insurance status and the expansion decisions of states. I find that with Medicaid expansion, insured workers without retirement health insurance (RHI) decreased full-time work by 7.06 percentage points relative to those with RHI and those without any employer-sponsored coverage at all. Among those no longer working full-time, 82 percent transitioned to complete retirement.
Did the Dependent Coverage Mandate Reduce Crime?
Zachary Fone et al.
Journal of Law and Economics, February 2023, Pages 143–182
Abstract:
The Affordable Care Act’s dependent coverage mandate (DCM) induced approximately 2 million young adults to join parental employer-sponsored health insurance plans. This study is the first to explore the impact of the DCM on crime, a potentially important externality. Using data from the National Incident-Based Reporting System, we find that the DCM induced a 2–5 percent reduction in property crime incidents involving young adult arrestees ages 22–25 relative to those ages 27–29. This finding is supported by supplemental analysis using data from the Uniform Crime Reports. An examination of the underlying mechanisms suggests that declines in large out-of-pocket expenditures for health care, increased educational attainment, and increases in cohabitation of parents and adult children may explain these declines in crime. Back-of-the-envelope calculations suggest that the DCM generated approximately $371–$512 million in annual social benefits from crime reduction among young adults.
Hospital Prices For Commercial Plans Are Twice Those For Medicare Advantage Plans When Negotiated By The Same Insurer
Mark Katz Meiselbach et al.
Health Affairs, August 2023, Pages 1110-1118
Abstract:
Most major insurers operate in both the commercial health insurance and Medicare Advantage (MA) markets. We investigated the ratio of commercial-to-MA prices negotiated by the same insurer, in the same hospital and for the same services, using 2022 price information disclosed by hospitals in compliance with the hospital price transparency rule. Insurers negotiated median hospital prices for commercial plans that were two to three times higher than their MA prices in the same hospital for the same service. The median commercial-to-MA price ratio in the same hospital varied, from 1.8 for surgery and medicine services to 2.2 for laboratory tests and emergency department visits and 2.4 for imaging services. In multivariable Poisson regression analysis, higher ratios were associated with system-affiliated, nonprofit, and teaching hospitals, as well as with large national insurers. These findings reflect the differences in financial incentives and regulatory policies in the commercial and MA markets. Because insurers respond to differing incentives by obtaining different negotiated prices across markets, policy and practice efforts that alter incentives for insurers may have the potential to lower commercial prices.
Evaluation of safety and care outcomes after the introduction of a virtual registered nurse model
Samuel Savitz et al.
Health Services Research, forthcoming
Objective: To evaluate the impact of a virtual registered nurse (ViRN) model on safety and care outcomes. ViRN is a telemedicine intervention that enables an experienced virtual nurse to assist the in-person care team in providing care to patients.
Data Sources and Study Setting: Electronic health records data were utilized from the Mayo Clinic during the intervention (December 2020–November 2021) and historical periods (December 2018–November 2019). ViRN was implemented on general medical units at the Mayo Clinic Rochester. We used general medical units at the Mayo Clinic Arizona as the comparison group.
Study Design: This study used a difference-in-differences design to evaluate the impact of ViRN compared to usual care on transfer to the intensive care unit (ICU), inpatient mortality, and length of stay (LOS). We used logistic regression for transfer to the ICU and inpatient mortality and negative binomial regression for LOS. We controlled for demographics, patient interaction with the health system, clinical characteristics, and admission characteristics. We clustered standard errors to account for patients who have multiple admissions during the study period.
Principal Findings: There were no significant differences for transfer to the ICU (average marginal effect (AME) −0.08 percentage point [95% confidence interval (CI): −1.34, 1.18]), inpatient mortality (AME 0.43 percentage point [95% CI: −0.33, 1.18]), or LOS (AME −0.20 days [95% CI: −0.57, 0.17]). The findings were mostly consistent across the sensitivity analyses.
Burden of serious harms from diagnostic error in the USA
David Newman-Toker et al.
BMJ Quality & Safety, forthcoming
Methods: Cross-sectional analysis of US-based nationally representative observational data. We estimated annual incident vascular events and infections from 21.5 million (M) sampled US hospital discharges (2012–2014). Annual new cancers were taken from US-based registries (2014). Years were selected for coding consistency with prior literature. Disease-specific incidences for 15 major vascular events, infections and cancers (‘Big Three’ categories) were multiplied by literature-based rates to derive diagnostic errors and serious harms. We calculated uncertainty estimates using Monte Carlo simulations. Validity checks included sensitivity analyses and comparison with prior published estimates.
Results: Annual US incidence was 6.0 M vascular events, 6.2 M infections and 1.5 M cancers. Per ‘Big Three’ dangerous disease case, weighted mean error and serious harm rates were 11.1% and 4.4%, respectively. Extrapolating to all diseases (including non-‘Big Three’ dangerous disease categories), we estimated total serious harms annually in the USA to be 795,000 (plausible range 598,000–1,023,000). Sensitivity analyses using more conservative assumptions estimated 549,000 serious harms. Results were compatible with setting-specific serious harm estimates from inpatient, emergency department and ambulatory care. The 15 dangerous diseases accounted for 50.7% of total serious harms and the top 5 (stroke, sepsis, pneumonia, venous thromboembolism and lung cancer) accounted for 38.7%.
Home Visits With A Registered Nurse Did Not Affect Prenatal Care In A Low-Income Pregnant Population
Rebecca Gourevitch et al.
Health Affairs, August 2023, Pages 1152-1161
Abstract:
There is an urgent need to improve maternal and neonatal health outcomes and decrease their racial disparities in the US. Prenatal nurse home visiting programs could help achieve this by increasing the use and quality of prenatal care and facilitating healthy behaviors during pregnancy. We conducted a randomized controlled trial of 5,670 Medicaid-eligible pregnant people in South Carolina to evaluate how a nurse home visiting program affected prenatal health care and health outcomes. We compared outcomes between the treatment and control groups and found little evidence of statistically significant differences in the intensity of prenatal care use, receipt of guideline-based prenatal care services, other health care use, or gestational weight gain. Nor did we find treatment effects in subgroup analyses of socially vulnerable participants (46.9 percent of the sample) or non-Hispanic Black participants (52.0 percent of the sample). Compared with the broader Medicaid population, our trial participants had more health and social risk factors, more engagement with prenatal care, and similar pregnancy outcomes. Delivering intensive nurse home visiting programs to the general Medicaid population might not be an efficient method to improve prenatal care for those who need the most support during pregnancy.
Risk Preferences Over Health: Empirical Estimates and Implications for Healthcare Decision-Making
Karen Mulligan et al.
NBER Working Paper, August 2023
Abstract:
Recent research has documented a link between consumer risk preferences over health and the willingness to pay (WTP) for medical technologies. However, the absence of empirical health risk preference estimates so far limits the implementation of this generalized risk-adjusted cost-effectiveness (GRACE) theory, which addresses several limitations of traditional cost-effectiveness analysis (CEA). To address this gap, we elicit from a nationally representative U.S. sample individual risk preference parameters over health-related quality of life (HRQoL) that shed light on health risk attitudes and enable GRACE valuation of medical technology. We find individuals exhibit risk-seeking preferences at low levels of health, switch to risk-averse preferences at health equal to 0.485 (measured on a zero to one scale), and become most risk-averse when their health is perfect (coefficient of relative risk aversion = 4.36). The risk preference estimates imply an empirical premium for disease severity: each unit of health is worth three times more to patients with serious health conditions (health equals 0.5) than those who are perfectly healthy. They also imply that traditional CEA overvalues treatments for the mildest diseases by more than a factor of two. Use of traditional CEA both overstimulates mild disease treatment innovation and underprovides severe disease treatment innovation.
When Private Equity Comes to Town: The Local Economic Consequences of Rising Healthcare Costs
Cyrus Aghamolla, Jash Jain & Richard Thakor
University of Minnesota Working Paper, June 2023
Abstract:
We examine the effect of increased healthcare costs on local economic conditions. We use private equity (PE) buyouts of U.S. hospital systems as a shock to the healthcare costs faced by firms in affected areas. Our primary identification strategy consists of the PE acquisition of a large-scale hospital chain, with hospitals dispersed across various communities in the U.S. We supplement this strategy with broader evidence including all PE buyouts of hospitals over a longer sample period. We provide evidence that PE buyouts of hospital chains result in higher healthcare insurance premiums paid by firms, and such rises in premiums lead to higher business bankruptcies, an increase in business loan volume, slower employment and establishment growth, and lower wages. We additionally provide evidence that increases in healthcare costs result in firms being more vulnerable to the financial crisis, suggesting that the negative economic consequences of rising healthcare costs are due to weakened firm balance sheets which cause firms to be more susceptible to negative economic shocks.
Price Increases Versus Upcoding As Drivers Of Emergency Department Spending Increases, 2012–19
Vivian Ho, Sasathorn Tapaneeyakul & Heidi Voelker Russell
Health Affairs, August 2023, Pages 1119-1127
Abstract:
Recent studies document a substantial increase in emergency department (ED) spending in the past decade, even though the number of ED visits per capita has remained relatively stable. Price increases and upcoding are sometimes cited as possible explanations, but their relative impacts are not known. We analyzed Blue Cross Blue Shield claims for patients of all ages who received care in EDs in five states in 2012 and 2019. We used estimates from spending regressions and regressions explaining coding intensity to decompose changes in spending between 2012 and 2019 into components attributable to price increases, changes in patient characteristics or treatment intensity, and upcoding. Prices accounted for at least half of the increase in ED spending per visit for four of the five states we examined. Increases in spending attributable to upcoding were notable but generally not as large. Future research should explore the associations between local market conditions, such as consolidation and ownership type, and both price increases and upcoding.
The Effect of Medicaid Expansion on the Take-up of Disability Benefits by Race and Ethnicity
Becky Staiger, Madeline Helfer & Jessica Van Parys
NBER Working Paper, August 2023
Abstract:
Public disability programs provide financial support to 12 million working-age individuals per year, though not all eligible individuals take up these programs. Mixed evidence exists regarding the impact of Medicaid eligibility expansion on program take-up, and even less is known about the relationship between Medicaid expansion and racial and ethnic disparities in take-up. Using 2009-2020 Current Population Survey (CPS) data, we compare changes in Supplemental Security Income (SSI) and Social Security Disability Insurance (SSDI) take-up among people with disabilities living in Medicaid expansion states, compared to people with disabilities living in non-expansion states, before and after Medicaid expansion. We further explore heterogeneity by race/ethnicity. We find that Medicaid expansion reduced SSI take-up among White and Hispanic respondents by 10% and 21%, respectively, and increased SSDI take-up among White and Black respondents by 9% and 11%, respectively. We further find that Medicaid expansion reduced the probability that disabled respondents had employer-sponsored health insurance by approximately 8%, an effect primarily observed among Black and other-race respondents, suggesting that expansion reduced job-lock among the SSDI-eligible, contributing to the observed increase in SSDI take-up.
Changes In Net Prices And Spending For Pharmaceuticals After The Introduction Of New Therapeutic Competition, 2011–19
Sean Dickson, Nico Gabriel & Inmaculada Hernandez
Health Affairs, August 2023, Pages 1062-1070
Abstract:
Previous research has demonstrated that the introduction of a new brand-name pharmaceutical competitor does not lower list prices for existing competitive therapies. However, no study has systematically evaluated the impact of new therapeutic competition on net prices of pharmaceutical products. We identified new therapies approved during the period 2013–17 that were competitors for existing treatments. We used a novel peer-reviewed algorithm to estimate the net prices of existing therapies. We implemented regression models to estimate changes in these net prices after the approval of the new therapeutic competition during the period 2011–19. Across twelve therapeutic classes with new drug entrants in 2013–17, the introduction of new therapeutic competition was associated with a 4.2 percent decrease in annual net price growth. The introduction of new brand-name therapies in twelve therapeutic classes reduced net commercial spending on existing therapies by $10.4 billion -- an 18.5 percent reduction in projected spending absent therapeutic competition. Our findings demonstrate that new therapeutic competition allows pharmacy benefit managers to use formulary management to decrease net prices and reduce drug spending, contrary to observed trends in list price increases.