Check your policy

Kevin Lewis

November 04, 2019

Changes In The Equity Of US Health Care Financing In The Period 2005–16
Paul Jacobs & Thomas Selden
Health Affairs, forthcoming

Spending on health care in the United States amounted to 17.9 percent of gross domestic product in 2017. Households paid for this care through out-of-pocket medical spending and a complex mix of out-of-pocket premiums, employer premium contributions, taxes, and subsidies that combined to finance private employer-sponsored insurance, nongroup insurance, and multiple public insurance programs. Our analysis examined the impact of this complex system of health care financing on households in the period 2005–16, tracking how economic and policy changes affected incidence — that is, the amount paid to finance health care, either directly or indirectly, by households as a share of their pretax income. Health care financing was regressive at the start of our study period, with households in the bottom 20 percent of income paying 26.8 percent of their income compared to about half that amount for those with income in the top 1 percent. By 2016 incidence had become approximately proportional (the same percentage across all income levels). In part, these results reflect increases in coverage through Medicaid and the Affordable Care Act Marketplaces, which are progressively financed through the federal tax system.

Scientific risk reporting in medical journals can bias expert judgment: Comparing surgeons’ risk comprehension across reporting formats
Rocio Garcia-Retamero et al.
Journal of Experimental Psychology: Applied, forthcoming

A recent systematic search of orthopedic surgery literature suggests that scientific risk reporting often deviates from best practices in specific ways (Petrova, Joeris, Sanchez, Salamanca-Fernandez, & Garcia-Retamero, 2018). These deviations could cause dangerous biases in health professionals’ risk interpretations and risk communication practices. To investigate potential vulnerabilities, we conducted the first comparative study estimating the effects of common reporting formats on the judgment of experienced orthopedic surgeons during risk evaluations (i.e., interpreting medical research on the risk of suffering postsurgical side effects in patients). Results indicate that highly trained surgeons were often misled and strongly biased by the most commonly used formats identified in the systematic review. In contrast, less common formats following best practice standards (e.g., transparent visual aids) typically reduced or eliminated judgment biases by helping surgeons identify and compare essential information, streamlining deliberation and reducing subjective confusion. Discussion focuses on implications including additional analyses showing that the use of misleading formats in scientific medical literature is frequent, even in recent years, and it is independent of many other factors (e.g., journal impact, study quality). A broad three-category system for characterizing the probable impact of specific risk reporting formats is discussed.

The Friday Effect: Firm Lobbying, the Timing of Drug Safety Alerts, and Drug Side Effects
Luis Diestre, Benjamin Barber & Juan Santaló
Management Science, forthcoming

Safety alerts are announcements made by health regulators warning patients and doctors about new drug-related side effects. However, not all safety alerts are equally effective. We provide evidence that the day of the week on which the safety alerts are announced explains differences in safety alert impact. Specifically, we show that safety alerts announced on Fridays are less broadly diffused: they are shared 34% less on social media, mentioned in 23% to 66% fewer news articles, and are 12% to 51% less likely to receive any news coverage at all. As a consequence of this, we propose Friday alerts are less effective in reducing drug-related side effects. We find that moving a Friday alert to any other weekday would reduce all drug-related side effects by 9% to 12%, serious drug-related complications by 6% to 15%, and drug-related deaths by 22% to 36%. This problem is particularly important because Friday was the most frequent weekday for safety alert announcements from 1999 to 2016. We show that this greater prevalence of Friday alerts might not be random: firms that lobbied the U.S. Food and Drug Administration in the past are 49% to 56% more likely to have safety alerts announced on Fridays.

Dissecting racial bias in an algorithm used to manage the health of populations
Ziad Obermeyer et al.
Science, 25 October 2019, Pages 447-453

Health systems rely on commercial prediction algorithms to identify and help patients with complex health needs. We show that a widely used algorithm, typical of this industry-wide approach and affecting millions of patients, exhibits significant racial bias: At a given risk score, Black patients are considerably sicker than White patients, as evidenced by signs of uncontrolled illnesses. Remedying this disparity would increase the percentage of Black patients receiving additional help from 17.7 to 46.5%. The bias arises because the algorithm predicts health care costs rather than illness, but unequal access to care means that we spend less money caring for Black patients than for White patients. Thus, despite health care cost appearing to be an effective proxy for health by some measures of predictive accuracy, large racial biases arise. We suggest that the choice of convenient, seemingly effective proxies for ground truth can be an important source of algorithmic bias in many contexts.

Health Insurance and the Supply of Entrepreneurs: Evidence from the ACA Medicaid Expansion
Kyung Min Lee
George Mason University Working Paper, October 2019

I examine whether the expansion of Medicaid eligibility under the Affordable Care Act increases the supply of entrepreneurs as measured by self-employment. Using the 2003–2017 Current Population Survey and focusing on childless adults in low-income households, I apply difference-in-differences, propensity score weighting, and instrumental variable (IV) methods. I find that expanding Medicaid eligibility raises the self-employment rate by 0.8 to 1.6 percentage points, without increasing self-employment exit. IV estimates imply that covered individuals have 8 to 11 percentage points higher probability to become self-employed. In the analysis of policy heterogeneity, I find evidence that the underlying mechanism of the effect was through the reduction of entrepreneurship lock. The results suggest that limited access to health insurance may be a barrier to entrepreneurship.

How Acquisitions Affect Firm Behavior and Performance: Evidence from the Dialysis Industry
Paul Eliason et al.
Quarterly Journal of Economics, forthcoming

Many industries have become increasingly concentrated through mergers and acquisitions, which in health care may have important consequences for spending and outcomes. Using a rich panel of Medicare claims data for nearly one million dialysis patients, we advance the literature on the effects of mergers and acquisitions by studying the precise ways in which providers change their behavior following an acquisition. We base our empirical analysis on more than 1,200 acquisitions of independent dialysis facilities by large chains over a twelve-year period and find that chains transfer several prominent strategies to the facilities they acquire. Most notably, acquired facilities converge to the behavior of their new parent companies by increasing patients’ doses of highly reimbursed drugs, replacing high-skill nurses with less-skilled technicians, and waitlisting fewer patients for kidney transplants. We then show that patients fare worse as a result of these changes: outcomes such as hospitalizations and mortality deteriorate, with our long panel allowing us to identify these effects from within-facility or within-patient variation around the acquisitions. Because overall Medicare spending increases at acquired facilities, mostly as a result of higher drug reimbursements, this decline in quality corresponds to a decline in value for payers. We conclude the paper by considering the channels through which acquisitions produce such large changes in provider behavior and outcomes, finding that increased market power cannot explain the decline in quality. Rather, the adoption of the acquiring firm’s strategies and practices drives our main results, with greater economies of scale for drug purchasing responsible for more than half of the change in profits following an acquisition.

Should Hospitals Keep Their Patients Longer? The Role of Inpatient Care in Reducing Postdischarge Mortality
Ann Bartel, Carri Chan & Song-Hee Kim
Management Science, forthcoming

The Centers for Medicare & Medicaid Services (CMS) and the National Quality Forum have endorsed the 30-day mortality rate as an important indicator of hospital quality. Concerns have been raised, however, as to whether postdischarge mortality rates are reasonable measures of hospital quality as they consider the frequency of an event that occurs after a patient is discharged and is no longer under the watch and care of hospital staff. Estimating the causal effect of length of stay (LOS) on postdischarge mortality from retrospective data introduces a number of econometric challenges. We describe three potential sources of (endogeneity and censoring) biases and propose an approach that provides conservative estimates of the true treatment effect. Using a large data set comprising all hospital encounters of every Medicare fee-for-service patient with acute myocardial infarction from 2000 to 2011, we find evidence that an increase in LOS is associated with a decrease in 30-day mortality rates. An additional day in the hospital could decrease 30-day mortality rates by over 6%. Moreover, we find that, from a social planner’s perspective, the gains achieved in reducing mortality rates likely exceed the cost of keeping the patients in the hospital for an additional day.

The Affordable Care Act and the Market for Higher Education
Rajashri Chakrabarti & Maxim Pinkovskiy
Federal Reserve Working Paper, July 2019

Through changing the connection between insurance and employment, the Affordable Care Act (ACA) has affected people's incentives to obtain education. We employ a triple-difference strategy comparing counties with different levels of uninsurance pre-ACA and in states with different Medicaid expansion decisions across time to investigate changes in enrollment in different types of higher education institutions. We find that enrollment in less than 2-year for-profit colleges increased more between high- and low-uninsurance counties in states that expanded Medicaid relative to states that didn't, with nearly all the increase taking place after the 2012 Supreme Court decision that gave states the right to choose not to expand Medicaid. Differential enrollment is absent for all other comparable college types. We find this differential increase in less than 2-year for-profit college enrollment to be remarkably general across various demographic groups, although the effect is statistically and economically more significant for Hispanics. Studying effects on certificates awarded, we find strong evidence that the increase in enrollment led to an increase in certificates awarded, most prominently in vocational fields. This pattern is consistent with the notion that by relaxing job-lock, the ACA encouraged individuals to seek training in vocational fields that would facilitate employment in low-insurance industries. Our results are robust to controlling for confounders such as the differential impact of the Great Recession, changes in state appropriations for higher education, differences in age composition across counties, thus ruling out the role of the young adult provision of the ACA in contributing to our results, and survive a plethora of sensitivity checks.

Medicaid and Household Savings Behavior: New Evidence from Tax Refunds
Emily Gallagher et al.
Journal of Financial Economics, forthcoming

Using data on over 57,000 low-income tax filers, we estimate the effect of Medicaid access on the propensity of households to save or repay debt from their tax refunds. We instrument for Medicaid access using variation in state eligibility rules. We find substantial heterogeneity across households in the savings response to Medicaid. Households that are not experiencing financial hardship behave in a manner consistent with a precautionary savings model, meaning they save less under Medicaid. In contrast, among households experiencing financial hardship, Medicaid eligibility increases refund savings rates by roughly 5 percentage points or $102. For both sets of households, effects are stronger in states with lower bankruptcy exemption limits — consistent with uninsured, financially constrained households using bankruptcy to manage health expenditure risk. Our results imply that expansions to the social safety net may affect the magnitude of the consumption response to tax rebates.

Health Insurance and Early Retirement Plans: Evidence from the Affordable Care Act
Padmaja Ayyagari
American Journal of Health Economics, Fall 2019, Pages 533-560

Understanding how individuals make retirement plans is key to designing effective policy. In particular, access to affordable insurance during retirement can play an important role in the labor supply decisions of older adults. In this study, I examine the impact of the 2010 Affordable Care Act (ACA) on the retirement plans of older adults. The ACA includes several provisions that significantly increase access to affordable insurance not tied to employment. I find that the ACA decreased the subjective probability of working past age 62 by 5.6 percentage points, representing a 9.9 percent decline, among persons without employer sponsored retiree coverage relative to persons with employer sponsored benefits. On average, individuals expect to retire about 3.6 to 7.2 months earlier due to the ACA.

Good for your Fiscal Health? The Effect of the Affordable Care Act on Healthcare Borrowing Costs
Pengjie Gao, Chang Lee & Dermot Murphy
University of Illinois Working Paper, September 2019

We study the impact of the Affordable Care Act (ACA) on municipal healthcare borrowing costs. The ACA expanded the insured customer base for hospitals, although exposed them to greater regulatory risk. Following a favorable 2012 ACA Supreme Court ruling, healthcare yields decreased by 39 basis points, for per-issue and economy-wide interest savings of $3.0 million and $1.74 billion. The effect was larger for urban and private hospitals. Yields decreased by another 17 basis points in states that voted to expand Medicaid. However, the ACA effect on long-term yields was weak, suggesting that repeal risk remains an obstacle to long-run financing.

All Medicaid Expansions Are Not Created Equal: The Geography and Targeting of the Affordable Care Act
Craig Garthwaite et al.
NBER Working Paper, September 2019

We use comprehensive patient-level discharge data to study the effect of Medicaid on the use of hospital services. Our analysis relies on cross-state variation in the Affordable Care Act’s Medicaid expansion, along with within-state variation across ZIP Codes in exposure to the expansion. We find that the Medicaid expansion increased Medicaid visits and decreased uninsured visits. The net effect is positive for all visits, suggesting that those who gain coverage through Medicaid consume more hospital services than they would if they remained uninsured. The increase in emergency department visits is largely accounted for by “deferrable” medical conditions. Those who gained coverage under the Medicaid expansion appear to be those who had relatively high need for hospital services, suggesting that the expansion was well targeted. Lastly, we find significant heterogeneity across Medicaid-expansion states in the effects of the expansion, with some states experiencing a large increase in total utilization and other states experiencing little change. Increases in hospital utilization were larger in Medicaid-expansion states that had more residents gaining coverage and lower pre-expansion levels of hospital uncompensated care costs.

Drug Diffusion Through Peer Networks: The Influence of Industry Payments
Leila Agha & Dan Zeltzer
NBER Working Paper, October 2019

Pharmaceutical companies' marketing efforts primarily target physicians, often through individual detailing that entails monetary or in-kind transfers. We study how peer influence broadens these payments' reach beyond the directly paid physicians. Combining Medicare prescriptions and Open Payments data for anticoagulant drugs, we document that pharmaceutical payments target highly connected physicians. We exploit within-physician variation in payment exposure over time to estimate the payments' influence. Unlike the paid doctor, peer physicians are not directly selected by the pharmaceutical company on the basis of their expertise or enthusiasm for the target drug. Yet, following a large payment, prescriptions for the target drug increase both by the paid physician and the paid physician's peers. These peer effects influence doctors who share patients with the paid physician, even when the two doctors are not affiliated with the same group practice. We find no evidence that payments reduce prescriptions among high-risk patients. Over the period 2014-2016, physician payments associated with anticoagulant marketing increased the drugs' prescription volume by 23 percent, with peer spillovers contributing a quarter of the increase.

What Difference Does a Diagnosis Make? Evidence from Marginal Patients
Mattan Alalouf, Sarah Miller & Laura Wherry
NBER Working Paper, October 2019

Over the past 30 years, the criteria used to diagnose many illnesses have been relaxed, resulting in millions more relatively healthy individuals receiving treatment. This paper explores the impact of receiving a diagnosis of a common disease among such “marginally ill” patients. We apply a regression discontinuity design to the cutoff in blood sugar levels used to classify patients as having diabetes. We find that a marginally diagnosed patient with diabetes spends $1,097 more on drugs and diabetes-related care annually after diagnosis, but find no corresponding changes in self-reported health or healthy behaviors. These increases in spending persist over the 6-year period we observe the patients. These marginally diagnosed patients experience improved blood sugar after the first year of diagnosis, but this improvement does not persist in subsequent years. Other clinical measures of health, such as BMI, blood pressure, cholesterol, and mortality show no improvement. The diagnosis rates for preventable disease-related conditions such as diabetic retinopathy, neuropathy, and kidney disease increase following a diagnosis, likely due to more intensive screening. Our results imply that a small relaxation in the diagnosis cutoff would increase total spending on diabetes-related care by about $2.4 billion annually and minimally impact patient health.

Healthcare Costs for Abortions Performed in Ambulatory Surgery Centers vs. Office-based Settings
Douglas Leslie et al.
American Journal of Obstetrics and Gynecology, forthcoming

Study Design: A retrospective cohort study compared expenditures for abortions performed in ambulatory surgery centers versus office-based settings. Data on women who had abortions in an ambulatory surgery center or office-based setting between January 1, 2011 and December 31, 2014 were obtained from the MarketScan® Commercial Claims and Encounters database. The sample was limited to women who were continuously enrolled in their insurance plans for at least one year prior to and at least six weeks after the abortion. Healthcare expenditures were assessed separately for the index abortion and the 6-week period after the abortion. Costs were measured from the perspective of the healthcare system and included all payments to the provider, including insurance company payments and any patient out-of-pocket payments.

Results: Overall, 49,287 beneficiaries who had 50,311 abortions met inclusion criteria. Of included abortions, 47% were first-trimester aspiration, 27% first-trimester medication, and 26% second-trimester or later abortions. Most abortions (89%) were provided in office-based settings, with 11% provided in ambulatory surgery centers. Unadjusted mean index abortion costs were higher in ambulatory surgery centers than office-based settings ($1,704 vs. $810; p<0.001). After adjusting for patient clinical and demographic characteristics, costs of index abortions were $772 higher (95% CI $746 – $797), total follow-up costs for abortions that had any follow-up care were $1,099 higher (95% CI $1004 – $1,195), and total follow-up costs for abortions that had an abortion-related morbidity or adverse event were not significantly different in ambulatory surgery centers compared to office-based settings. There were also no significant differences in the likelihood of having any follow-up care or abortion-related event follow-up care.

to your National Affairs subscriber account.

Already a subscriber? Activate your account.


Unlimited access to intelligent essays on the nation’s affairs.

Subscribe to National Affairs.