Care to choose
Do Individuals Make Sensible Health Insurance Decisions? Evidence from a Menu with Dominated Options
Saurabh Bhargava, George Loewenstein & Justin Sydnor
NBER Working Paper, May 2015
Abstract:
The recent expansion of health-plan choice has been touted as increasing competition and enabling people to choose plans that fit their needs. This study provides new evidence challenging these proposed benefits of expanded health-insurance choice. We examine health-insurance decisions of employees at a large U.S. firm where a new plan menu included a large share of financially dominated options. This menu offers a unique litmus test for evaluating choice quality since standard risk preferences and beliefs about one's health cannot rationalize enrollment into the dominated plans. We find that a majority of employees – and in particular, older workers, women, and low earners – chose dominated options, resulting in substantial excess spending. Most employees would have fared better had they instead been enrolled in the single actuarially-best plan. In follow-up hypothetical-choice experiments, we observe similar choices despite far simpler menus. We find these choices reflect a severe deficit in health insurance literacy and naïve considerations of health risk and price, rather than a sensible comparison of plan value. Our results challenge the standard practice of inferring risk attitudes and assessing welfare from insurance choices, and raise doubts whether recent health reforms will deliver their promised benefits.
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Astha Singhal et al.
Health Affairs, May 2015, Pages 749-756
Abstract:
Dental coverage for adults is an elective benefit under Medicaid. As a result of budget constraints, California Medicaid eliminated its comprehensive adult dental coverage in July 2009. We examined the impact of this policy change on emergency department (ED) visits by Medicaid-enrolled adults for dental problems in the period 2006–11. We found that the policy change led to a significant and immediate increase in dental ED use, amounting to more than 1,800 additional dental ED visits per year. Young adults, members of racial/ethnic minority groups, and urban residents were disproportionately affected by the policy change. Average yearly costs associated with dental ED visits increased by 68 percent. The California experience provides evidence that eliminating Medicaid adult dental benefits shifts dental care to costly EDs that do not provide definitive dental care. The population affected by the Medicaid adult dental coverage policy is increasing as many states expand their Medicaid programs under the ACA. Hence, such evidence is critical to inform decisions regarding adult dental coverage for existing Medicaid enrollees and expansion populations.
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Leverage and Bargaining Benefits: Evidence from U.S. Hospitals
Mitch Towner
University of Texas Working Paper, April 2015
Abstract:
I use the health care industry as a novel laboratory in which to study a firm's strategic use of debt to enhance their bargaining power during negotiations with non-financial stakeholders. I show that reimbursement rates negotiated between a hospital and insurers for a specific procedure are higher when the hospital has more debt. I also show that this effect is stronger when hospitals have less bargaining power relative to insurers ex ante, and that hospitals take on more debt when they have less bargaining power. I exploit differences in state laws generating plausibly exogenous variation in hospital bargaining power to further strengthen identification. This is the first paper to provide direct evidence that debt improves a firm's bargaining outcomes.
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Trends In Health Insurance Enrollment, 2013–15
Katherine Carman, Christine Eibner & Susan Paddock
Health Affairs, June 2015, Pages 1044-1048
Abstract:
We examined insurance transitions between September 2013 and February 2015, before and after the Affordable Care Act's coverage-related provisions took effect in 2014. We found that 22.8 million people gained coverage and that 5.9 million people lost coverage, for a net increase of 16.9 million people with insurance.
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Karen Joynt et al.
Health Affairs, May 2015, Pages 765-772
Abstract:
The Affordable Care Act (ACA) set in motion payment changes that could put pressure on hospital finances and lead some hospitals to close. Understanding the impact of closures on patient care and outcomes is critically important. We identified 195 hospital closures in the United States between 2003 and 2011. We found no significant difference between the change in annual mortality rates for patients living in hospital service areas (HSAs) that experienced one or more closures and the change in rates in matched HSAs without a closure (5.5 percent to 5.2 percent versus 5.4 percent to 5.4 percent, respectively). Nor was there a significant difference in the change in all-cause mortality rates following hospitalization (9.1 percent to 8.2 percent in HSAs with a closure versus 9.0 percent to 8.4 percent in those without a closure). HSAs with a closure had a drop in readmission rates compared to controls (19.4 percent to 18.2 percent versus 18.8 percent to 18.3 percent). Overall, we found no evidence that hospital closures were associated with worse outcomes for patients living in those communities. These findings may offer reassurance to policy makers and clinical leaders concerned about the potential acceleration of hospital closures as a result of health care reform.
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Benjamin McMichael
Vanderbilt University Working Paper, May 2015
Abstract:
Occupational licensing laws ostensibly exist to protect consumers from harmful services supplied by unqualified healthcare providers. However, these laws may harm consumers by restricting access to and increasing the cost of healthcare. Using data on political spending in state elections and information on occupational licensing laws, this article considers the role of political contributions by healthcare industry and professional interest groups in states' decisions to enact occupational licensing laws. Increased political spending by physician interest groups increases the probability that a state maintains licensing laws restricting the practices of nurse practitioners (NPs) and physician assistants (PAs) — two professions that compete with physicians in healthcare services markets. Conversely, increased spending by hospital interest groups increases the probability that a state allows NPs and PAs to practice with more autonomy. The results are consistent with a rent-seeking battle over occupational licensing laws between physician interest groups and hospital interest groups.
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Extreme Markup: The Fifty US Hospitals With The Highest Charge-To-Cost Ratios
Ge Bai & Gerard Anderson
Health Affairs, June 2015, Pages 922-928
Abstract:
Using Medicare cost reports, we examined the fifty US hospitals with the highest charge-to-cost ratios in 2012. These hospitals have markups (ratios of charges over Medicare-allowable costs) approximately ten times their Medicare-allowable costs compared to a national average of 3.4 and a mode of 2.4. Analysis of the fifty hospitals showed that forty-nine are for profit (98 percent), forty-six are owned by for-profit hospital systems (92 percent), and twenty (40 percent) operate in Florida. One for-profit hospital system owns half of these fifty hospitals. While most public and private health insurers do not use hospital charges to set their payment rates, uninsured patients are commonly asked to pay the full charges, and out-of-network patients and casualty and workers' compensation insurers are often expected to pay a large portion of the full charges. Because it is difficult for patients to compare prices, market forces fail to constrain hospital charges. Federal and state governments may want to consider limitations on the charge-to-cost ratio, some form of all-payer rate setting, or mandated price disclosure to regulate hospital markups.
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Upcoding: Evidence from Medicare on Squishy Risk Adjustment
Michael Geruso & Timothy Layton
NBER Working Paper, May 2015
Abstract:
Diagnosis-based subsidies, also known as risk adjustment, are widely used in US health insurance markets to deal with problems of adverse selection and cream-skimming. The widespread use of these subsidies has generated broad policy, research, and popular interest in the idea of upcoding — the notion that diagnosed medical conditions may reflect behaviors of health plans and providers to game the payment system, rather than solely characteristics of patients. We introduce a model showing that coding differences across health plans have important consequences for public finances and consumer choices, whether or not such differences arise from gaming. We then develop and implement a novel strategy for identifying coding differences across insurers in equilibrium in the presence of selection. Empirically, we examine how coding intensity in Medicare differs between the traditional fee-for-service option, in which coding incentives are weak, and Medicare Advantage, in which insurers receive diagnosis-based subsidies. Our estimates imply that enrollees in private Medicare Advantage plans generate 6% to 16% higher diagnosis-based risk scores than the same enrollees would generate under fee-for-service Medicare. Consistent with a principal-agent problem faced by insurers attempting to induce their providers to upcode, we find that coding intensity increases with the level of vertical integration between insurers and the physicians with whom they contract. Absent a coding inflation correction, our findings imply excess public payments to Medicare Advantage plans of around $10 billion annually. This differential subsidy also distorts consumers' choices toward private Medicare plans and away from fee-for-service Medicare.
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Stacey McMorrow, Sharon Long & Ariel Fogel
Health Affairs, June 2015, Pages 1001-1009
Abstract:
As the number of beneficiaries in the Medicaid program grows under the Affordable Care Act, with over half of the states opting to expand Medicaid eligibility, it is important to understand more about the care provided to Medicaid patients. Using visit-level data for 2006–10 from the National Ambulatory Medical Care Survey, we examined the provision of recommended preventive services to women with Medicaid and those with private insurance at visits to primary care providers in private office-based practices. We found that after patient and provider characteristics were controlled for, Medicaid-insured visits were less likely than privately insured visits to include several preventive services, including clinical breast exams and Pap tests. The differences in provision of services by payer were generally driven by the differences in care at visits classified as preventive and at visits to obstetrician-gynecologists. Further investigation is required to determine what may be driving the differences in content of care across payers and their implications for quality of care.
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Measuring Consumer Valuation of Limited Provider Networks
Keith Marzilli Ericson & Amanda Starc
American Economic Review, May 2015, Pages 115-119
Abstract:
We measure the breadth of insurance networks in the Massachusetts health insurance exchange. Using our measures, we estimate consumer willingness-to-pay for broad and narrow networks. We find that consumers have a wide range of plans available with dramatically different networks. While consumers value broader networks, their willingness-to-pay is smaller than the brand premium, indicating an additional role for brand preferences. Consumers place additional value on star hospitals, which may affect upstream negotiations. Finally, we find significant geographic heterogeneity in the value of broad networks.
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Is the System Really the Solution? Operating Costs in Hospital Systems
Lawton Robert Burns et al.
Medical Care Research and Review, June 2015, Pages 247-272
Abstract:
Hospital system formation has recently accelerated. Executives emphasize scale economies that lower operating costs, a claim unsupported in academic research. Do systems achieve lower costs than freestanding facilities, and, if so, which system types? We test hypotheses about the relationship of cost with membership in systems, larger systems, and centralized and local hub-and-spoke systems. We also test whether these relationships have changed over time. Examining 4,000 U.S. hospitals during 1998 to 2010, we find no evidence that system members exhibit lower costs. However, members of smaller systems are lower cost than larger systems, and hospitals in centralized systems are lower cost than everyone else. There is no evidence that the system's spatial configuration is associated with cost, although national system hospitals exhibit higher costs. Finally, these results hold over time. We conclude that while systems in general may not be the solution to lower costs, some types of systems are.
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Medicare Managed Care Spillovers and Treatment Intensity
Kevin Callison
Health Economics, forthcoming
Abstract:
Evidence suggests that the share of Medicare managed care enrollees in a region affects the costs of treating traditional fee-for-service (FFS) Medicare beneficiaries; however, little is known about the mechanisms through which these 'spillover effects' operate. This paper examines the relationship between Medicare managed care penetration and treatment intensity for FFS enrollees hospitalized with a primary diagnosis of AMI. I find that increased Medicare managed care penetration is associated with a reduction in both the costs and the treatment intensity of FFS AMI patients. Specifically, as Medicare managed care penetration increases, FFS AMI patients are less likely to receive surgical reperfusion and mechanical ventilation and to experience an overall reduction in the number of inpatient procedures.
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Kathleen Carey & Meng-Yun Lin
Health Affairs, June 2015, Pages 978-985
Abstract:
The Medicare Hospital Readmissions Reduction Program (HRRP), an initiative of the Affordable Care Act, imposes considerable financial penalties on hospitals with excess thirty-day readmissions for patients with selected high-volume conditions. We investigated the intended impact of the program by examining changes in thirty-day readmissions among Medicare patients admitted for three conditions targeted by the program in New York State, compared to Medicare patients with other conditions and with privately insured patients, before and after the program's introduction. We also examined potential unintended strategic responses by hospitals that might allow them to continue to treat target-condition patients while avoiding the readmission penalty. We found that thirty-day readmissions fell for the three conditions targeted by the HRRP, consistent with the goals of the program. Second, there also was a substantial fall in readmissions for a comparison group although not as large as for the target group, which suggests modest spillover effects in Medicare for other conditions. We did not find strong evidence of unintended effects associated with the program. These early findings suggest that the HRRP is affecting hospitals in the direction intended by the Affordable Care Act.
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Leemore Dafny, Igal Hendel & Nathan Wilson
American Economic Review, May 2015, Pages 110-114
Abstract:
The Affordable Care Act has engendered significant changes in the design of health insurance products. We examine the "narrowness" of hospital networks affiliated with plans offered in the first year of the marketplaces. Using data from Texas, we find limited evidence of a tight link between pricing and a simple measure of network breadth, or a more complex measure of network value derived from a logit model of hospital choice. The state's largest insurer priced its narrow networks at a fairly constant discount relative to its broad networks, notwithstanding significant variation in its broad-narrow gap across geographic markets in Texas.
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Survival Rates in Trauma Patients Following Health Care Reform in Massachusetts
Turner Osler et al.
JAMA Surgery, forthcoming
Objective: To examine the effect of Massachusetts HCR on survival rates of injured patients.
Design, Setting, and Participants: Retrospective cohort study of 1 520 599 patients hospitalized following traumatic injury in Massachusetts or New York during the 10 years (2002-2011) surrounding Massachusetts HCR using data from the State Inpatient Databases. We assessed the effect of HCR on mortality rates using a difference-in-differences approach to control for temporal trends in mortality.
Results: During the 10-year study period, the rates of uninsured trauma patients in Massachusetts decreased steadily from 14.9% in 2002 to 5.0.% in 2011. In New York, the rates of uninsured trauma patients fell from 14.9% in 2002 to 10.5% in 2011. The risk-adjusted difference-in-difference assessment revealed a transient increase of 604 excess deaths (95% CI, 419-790) in Massachusetts in the 3 years following implementation of HCR.
Conclusions and Relevance: Health care reform did not affect health insurance coverage for patients hospitalized following injury but was associated with a transient increase in adjusted mortality rates. Reducing mortality rates for acutely injured patients may require more comprehensive interventions than simply promoting health insurance coverage through legislation.
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Yan Kim et al.
Health Affairs, June 2015, Pages 907-915
Abstract:
Long-term care hospitals are postacute care facilities for patients requiring extended hospital-level care. These facilities are reimbursed by Medicare under a prospective payment system with a short-stay outlier policy, which results in substantially lower payments for patients discharged before a diagnosis-related group–specific short-stay threshold. Using Medicare data, we examined the impact of the short-stay policy on lengths-of-stay and Medicare reimbursement among patients in long-term care hospitals who require prolonged mechanical ventilation. After accounting for case-mix and facility-level differences, we found that discharges for reasons other than death in the period 2005–10 were most likely to occur on the day of or immediately after the short-stay threshold; this held true regardless of facility ownership. In contrast, live discharges in 2002 — the year before the prospective payment system started phasing out cost-based payment — were evenly distributed around the day that later became the short-stay threshold. Our findings confirm that the short-stay outlier payment policy created a strong financial incentive for long-term care hospitals to time patient discharges to maximize Medicare reimbursement. The results suggest that the new very-short-stay policy implemented in December 2012 could have a similar effect.
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Changes in Medicare Costs with the Growth of Hospice Care in Nursing Homes
Pedro Gozalo et al.
New England Journal of Medicine, 7 May 2015, Pages 1823-1831
Background: Nursing home residents' use of hospice has substantially increased. Whether this increase in hospice use reduces end-of-life expenditures is unknown.
Methods: The expansion of hospice between 2004 and 2009 created a natural experiment, allowing us to conduct a difference-in-differences matched analysis to examine changes in Medicare expenditures in the last year of life that were associated with this expansion. We also assessed intensive care unit (ICU) use in the last 30 days of life and, for patients with advanced dementia, feeding-tube use and hospital transfers within the last 90 days of life. We compared a subset of hospice users from 2009, whose use of hospice was attributed to hospice expansion, with a matched subset of non–hospice users from 2004, who were considered likely to have used hospice had they died in 2009.
Results: Of 786,328 nursing home decedents, 27.6% in 2004 and 39.8% in 2009 elected to use hospice. The 2004 and 2009 matched hospice and nonhospice cohorts were similar (mean age, 85 years; 35% male; 25% with cancer). The increase in hospice use was associated with significant decreases in the rates of hospital transfers (2.4 percentage-point reduction), feeding-tube use (1.2 percentage-point reduction), and ICU use (7.1 percentage-point reduction). The mean length of stay in hospice increased from 72.1 days in 2004 to 92.6 days in 2009. Between 2004 and 2009, the expansion of hospice was associated with a mean net increase in Medicare expenditures of $6,761 (95% confidence interval, 6,335 to 7,186), reflecting greater additional spending on hospice care ($10,191) than reduced spending on hospital and other care ($3,430).
Conclusions: The growth in hospice care for nursing home residents was associated with less aggressive care near death but at an overall increase in Medicare expenditures.
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Nursing Home 5-Star Rating System Exacerbates Disparities In Quality, By Payer Source
Tamara Konetzka et al.
Health Affairs, May 2015, Pages 819-827
Abstract:
Market-based reforms in health care, such as public reporting of quality, may inadvertently exacerbate disparities. We examined how the Centers for Medicare and Medicare Services' five-star rating system for nursing homes has affected residents who are dually enrolled in Medicare and Medicaid ("dual eligibles"), a particularly vulnerable and disadvantaged population. Specifically, we assessed the extent to which dual eligibles and non–dual eligibles avoided the lowest-rated nursing homes and chose the highest-rated homes once the five-star rating system began, in late 2008. We found that both populations resided in better-quality homes over time but that by 2010 the increased likelihood of choosing the highest-rated homes was substantially smaller for dual eligibles than for non–dual eligibles. Thus, the gap in quality, as measured by a nursing home's star rating, grew over time. Furthermore, we found that the benefit of the five-star system to dual eligibles was largely due to providers' improving their ratings, not to consumers' choosing different providers. We present evidence suggesting that supply constraints play a role in limiting dual eligibles' responses to quality ratings, since high-quality providers tend to be located close to relatively affluent areas. Increases in Medicaid payment rates for nursing home services may be the only long-term solution.
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Health Information Technology Adoption in the Emergency Department
Frederic Selck & Sandra Decker
Health Services Research, forthcoming
Objective: To describe the trend in health information technology (IT) systems adoption in hospital emergency departments (EDs) and its effect on ED efficiency and resource use.
Data Sources: 2007–2010 National Hospital Ambulatory Medical Care Survey – ED Component.
Principal Findings: The percent of ED visits that took place in an ED with at least a basic health IT or an advanced IT system increased from 25.2 and 3.1 percent in 2007 to 69.1 and 30.6 percent in 2010, respectively (p < .05). Controlling for ED fixed effects, waiting times were reduced by 6.0 minutes in advanced IT-equipped EDs (p < .05), and the number of tests ordered increased by 9 percent (p < .01). In models using a 1-year lag, advanced systems also showed an increase in the number of medications and images ordered per visit.
Conclusions: Almost a third of visits now occur in EDs with advanced IT capability. While advanced IT adoption may decrease wait times, resource use during ED visits may also increase depending on how long the system has been in place. We were not able to determine if these changes indicated more appropriate care.
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The Impact of Tort Reform and Quality Improvements on Medical Liability Claims: A Tale of 2 States
Kenneth Illingworth et al.
American Journal of Medical Quality, May/June 2015, Pages 263-270
Abstract:
The purpose of this study was to determine the effect of tort reform and quality improvement measures on medical liability claims in 2 groups of hospitals within the same multihospital organization: one in Texas, which implemented medical liability tort reform caps on noneconomic damages in 2003, and one in Louisiana, which did not undergo significant tort reform during the same time period. Significant reduction in medical liability claims per quarter in Texas was found after tort reform implementation (7.27 to 1.4; P < .05). A significant correlation was found between the increase in mean Centers for Medicare & Medicaid Services performance score and the decrease in the frequency of claims observed in Louisiana (P < .05). Although tort reform caps on noneconomic damages in Texas caused the largest initial decrease, increasing quality improvement measures without increasing financial burden also decreased liability claims in Louisiana. Uniquely, this study showed that increasing patient quality resulted in decreased medical liability claims.
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Nurse Practitioners and Their Effects on Visits to Primary Care Physicians
Yuriy Pylypchuk & Eric Sarpong
B.E. Journal of Economic Analysis & Policy, April 2015, Pages 837–864
Abstract:
The demand for primary care services is expected to increase at a time of persistent shortages of primary care physicians (PCPs) in the United States. A proposed solution is to expand the role of other allied health professions. This study examines the causal effects of visits to nurse practitioners (NPs) on the demand for services from PCPs. We employ a system of simultaneous equations and dynamic panel estimators to control for endogeneity of visits to NPs. Results indicate that patients who visited an NP are significantly less likely to visit PCPs and to receive prescribed medication, medical check-up, and diagnosis from PCPs. Findings were robust to other specification and passed a falsification test. The results suggest that the use of NPs could serve as a potential option to address shortages in supply of primary care services.
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Use of provider-level dashboards and pay-for-performance in venous thromboembolism prophylaxis
Henry Michtalik et al.
Journal of Hospital Medicine, March 2015, Pages 172–178
Background: Despite safe and cost-effective venous thromboembolism (VTE) prevention measures, VTE prophylaxis rates are often suboptimal. Healthcare reform efforts emphasize transparency through programs to report performance and payment incentives through pay-for-performance programs.
Interventions: A Web-based hospitalist dashboard provided VTE prophylaxis feedback. After 6 months of feedback only, a pay-for-performance program was incorporated, with graduated payouts for compliance rates of 80% to 100%.
Results: Monthly VTE prophylaxis compliance rates were 86% (95% confidence interval [CI]: 85–88), 90% (95% CI: 88–93), and 94% (95% CI: 93–96) during the baseline, dashboard, and combined dashboard/pay-for-performance periods, respectively. Compliance significantly improved with the use of the dashboard (P = 0.01) and addition of the pay-for-performance program (P = 0.01). The highest rate of improvement occurred with the dashboard (1.58%/month; P = 0.01). Annual individual physician performance payments ranged from $53 to $1244 (mean $633; standard deviation ±$350).
Conclusions: Direct feedback using dashboards was associated with significantly improved compliance, with further improvement after incorporating an individual physician pay-for-performance program. Real-time dashboards and physician-level incentives may assist hospitals in achieving higher safety and quality benchmarks.
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Marc Elliott et al.
Health Services Research, forthcoming
Data: Surveys from 4,822,960 adult inpatients discharged July 2007–June 2008 or July 2010–June 2011 from 3,541 U.S. hospitals.
Study Design: Linear mixed-effect regression models with fixed effects for time, patient mix, and hospital characteristics (bedsize, ownership, Census division, teaching status, Critical Access status); random effects for hospitals and hospital-time interactions; fixed-effect interactions of hospital characteristics and patient characteristics (gender, health, education) with time predicted HCAHPS measures correcting for regression-to-the-mean biases.
Principal Findings: HCAHPS scores increased by 2.8 percentage points from 2008 to 2011 in the most positive response category. Among the middle 95 percent of hospitals, changes ranged from a 5.1 percent decrease to a 10.2 percent gain overall. The greatest improvement was in for-profit and larger (200 or more beds) hospitals.
Conclusions: Five years after HCAHPS public reporting began, meaningful improvement of patients' hospital care experiences continues, especially among initially low-scoring hospitals, reducing some gaps among hospitals.