The Value of Health Insurance during a Crisis: Effects of Medicaid Implementation on Pandemic Influenza Mortality
Karen Clay et al.
NBER Working Paper, May 2020
This paper studies how better access to public health insurance affects infant mortality during pandemics. Our analysis combines cross-state variation in mandated eligibility for Medicaid with two influenza pandemics - the 1957-58 "Asian Flu" pandemic and the 1968-69 "Hong Kong Flu" - that arrived shortly before and after the program's introduction. Exploiting heterogeneity in the underlying severity of these two shocks across counties, we find no relationship between Medicaid eligibility and pandemic infant mortality during the 1957-58 outbreak. After Medicaid implementation, we find that better access to insurance in high-eligibility states substantially reduced infant mortality during the 1968-69 pandemic. The reductions in pandemic infant mortality are too large to be attributable solely to new Medicaid recipients, suggesting that the expansion in health insurance coverage mitigated disease transmission among the broader population.
Distributional Effects of Recent Health Insurance Expansions on Weight-Related Outcomes
Melissa McInerney & Mark Meiselbach
Economics & Human Biology, forthcoming
We provide new evidence that weight-related outcomes improved for the severely obese following three recent health insurance expansions. Using Behavioral Risk Factor Surveillance System (BRFSS) data from 2001 through 2016, we examine the effects of Massachusetts health care reform, the Affordable Care Act (ACA) dependent coverage mandate, and the ACA Medicaid expansions on Body Mass Index (BMI) and the likelihood of obesity or severe obesity. Estimates from unconditional quantile regression show that Body Mass Index (BMI) fell among the severely obese who are at the top of the distribution of BMI following all three of these insurance expansions. We also observe a robust reduction in the likelihood of severe obesity following the ACA dependent coverage mandate, and suggestive evidence of a reduction in severe obesity following Massachusetts health care reform. Together, these results identify an important benefit arising from recent health insurance expansions: improved weight-related outcomes for those with severe obesity.
Most Patients Undergoing Ground And Air Ambulance Transportation Receive Sizable Out-Of-Network Bills
Karan Chhabra et al.
Health Affairs, May 2020, Pages 777-782
"Surprise" out-of-network bills have come under close scrutiny, and while ambulance transportation is known to be a large component of the problem, its impact is poorly understood. We measured the prevalence and financial impact of out-of-network billing in ground and air ambulance transportation. For members of a large national insurance plan in 2013-17, 71 percent of all ambulance rides involved potential surprise bills. For both ground and air ambulances, out-of-network charges were substantially greater than in-network prices, resulting in median potential surprise bills of $450 for ground transportation and $21,698 for air transportation. Though out-of-network air ambulance bills were larger, out-of-network ground ambulance bills were more common, with an aggregate impact of $129 million per year. Out-of-network air ambulance bills averaged $91 million per year, rising from $41 million in 2013 to $143 million in 2017. Federal proposals to limit surprise out-of-network billing should incorporate protections for patients undergoing ground or air ambulance transportation.
Wide State-Level Variation In Commercial Health Care Prices Suggests Uneven Impact Of Price Regulation
Michael Chernew, Andrew Hicks & Shivani Shah
Health Affairs, May 2020, Pages 791-799
Prices charged for health care services in the commercial insurance market are high and vary widely within and between market areas. As a result, prices have been the focus of much policy debate. We extended the literature on commercial prices by examining state-level price variation in the commercial market, relative to Medicare, for a broader set of states and a wider set of services than had been examined. We assessed the potential impact on provider revenue of setting commercial prices at Medicare rates. Consistent with the existing literature, we found that average commercial prices for inpatient and outpatient facility services were about double Medicare fees, while commercial prices for professional services were about 60 percent higher. Finally, average hospital revenue would fall about 35 percent if commercial prices were limited to Medicare rates, but this would vary widely by state. If Medicaid rates were also increased to match Medicare rates, hospital revenue would likely fall by about 30 percent. Given the potentially large impact, policies to address the market failures that lead to high and variable prices in the commercial insurance sector are needed, but they should be structured to avoid the large disruptions that could occur if there were a very rapid transition to Medicare rates in the commercial market.
Physician Prices And The Cost And Quality Of Care For Commercially Insured Patients
Mark Unruh et al.
Health Affairs, May 2020, Pages 800-808
We analyzed the relationship between prices paid to 30,549 general internal medicine physicians and the cost and quality of care for 769,281 commercially insured adults. The highest-price physicians were paid more than twice as much per service, on average, as the lowest-price physicians were. Total annual costs for patients of the highest-price physicians were $996 (20 percent) higher than costs for patients of the lowest-price physicians were, and this variation was not explained by differences in use. Physician prices were not associated with quality: Among physicians in the same hospital referral region, we did not find significant differences between patients of the highest-price physicians and patients of lowest-price physicians in the likelihood of experiencing an ambulatory care-sensitive hospitalization or being readmitted within thirty days of hospital discharge. There were also no differences between the highest- and lowest-price physicians for these quality outcomes for high-need patients. Policy makers need more information on the causes and consequences of the large disparities in prices paid to physicians.
Iowa's Medicaid Healthy Behaviors Program Associated With Reduced Hospital-Based Care But Higher Spending, 2012-17
Brad Wright et al.
Health Affairs, May 2020, Pages 876-883
Health behavior incentive programs are increasingly common in Medicaid programs nationwide. Iowa's Healthy Behaviors Program (HBP) requires Medicaid expansion enrollees to complete an annual wellness exam and health risk assessment or pay monthly premiums to avoid disenrollment. The extent to which the program reduces the use of hospital-based care and lowers health care spending is unknown. Using data for 2012-17 from Medicaid and for 2014-17 from HBP, we evaluated changes in use and spending associated with HBP participation. Compared to nonparticipants, HBP participants were less likely to have an emergency department visit or be hospitalized (by 9.6 percentage points and 2.8 percentage points, respectively) but had higher total health care spending ($1,594). Meanwhile, Iowa's Medicaid expansion was associated with increased use and spending independent of HBP participation - that is, applying to both participants and nonparticipants. Overall, our findings suggest that the HBP was associated with substantial reductions in hospital-based care but increased health care spending.
Office Visits Preventing Emergency Room Visits: Evidence From the Flint Water Switch
Shooshan Danagoulian, Daniel Grossman & David Slusky
NBER Working Paper, May 2020
Emergency department visits are costly to providers and to patients. We use the Flint water crisis to test if an increase in office visits reduced avoidable emergency room visits. In September 2015, the city of Flint issued a lead advisory to its residents, alerting them of increased lead levels in their drinking water, resulting from the switch in water source from Lake Huron to the Flint River. Using Medicaid claims for 2013-2016, we find that this information shock increased the share of enrollees who had lead tests performed by 1.7 percentage points. Additionally, it increased office visits immediately following the information shock and led to a reduction of 4.9 preventable, non-emergent, and primary-care-treatable emergency room visits per 1000 eligible children (8.2%). This decrease is present in shifts from emergency room visits to office visits across several common conditions. Our analysis suggest that children were more likely to receive care from the same clinic following lead tests and that establishing care reduced the likelihood parents would take their children to emergency rooms for conditions treatable in an office setting. Our results are potentially applicable to any situation in which individuals are induced to seek more care in an office visit setting.
Privilege in the Delivery Room? Race, Class, and the Realization of Natural Birth Preferences, 2002-2013
Katherine Johnson & Richard Simon
Social Problems, forthcoming
We expand prior research on the sociology of birth by testing race and class effects on women's capacity to realize their childbirth preferences in hospital settings. Drawing on data from the U.S. Listening to Mothers survey, we use Poisson regression and logistic regression to examine the extent to which women's preferences are associated with actual experiences of medical intervention during perinatal care. We find that 1) less privileged women were significantly less likely to have certain interventions and had fewer interventions overall; but 2) less privileged women with natural birth preferences were significantly more likely to have certain medical interventions, compared to their race/class privileged counterparts. Thus, less privileged women simultaneously receive less and more childbirth interventions - both of which appear to be out of sync with their birthing preferences. Our results support previous research which has found race and social class inequities in medical treatment, which we interpret here as "privilege in the delivery room."
Countervailing Market Power and Hospital Competition
Eric Barrette, Gautam Gowrisankaran & Robert Town
NBER Working Paper, April 2020
While economic theories indicate that monopsony power by downstream firms can potentially counteract market power upstream, antitrust policy is opaque about whether to incorporate countervailing market power in merger analyses. We use detailed national claims data from the healthcare sector to evaluate whether insurer monopsony power does indeed limit hospitals' exercise of market power. We estimate willingness-to-pay models to evaluate hospital market power across analysis areas. We find that countervailing market power is important: a typical hospital merger would raise hospital prices 4.3% at the 25th percentile of insurer concentration but only 0.97% at the 75th percentile of insurer concentration.
Drug Insurance and the Strategic Behavior of Drug Manufacturers: Evergreening and Generic Entry After Medicare Part D
Geoffrey Sanzenbacher & Gal Wettstein
Journal of Health Economics, forthcoming
For branded drug manufacturers, maintaining market power by managing product lifecycle - evergreening - is an important tool to navigate pharmaceutical markets. For generic manufacturers, the key decision is to enter the market at all. Expansion of drug insurance may lead firms to change their behavior because of increased demand-side market power - due to consolidation of buyers into a small number of insurers - and because of increased drug utilization. We analyze manufacturer responses to such changes through the introduction of Medicare Part D, which expanded drug coverage among seniors, in a difference-in-differences design comparing drugs used frequently by those over age 65 to those used infrequently by this population. The results show that Part D reduced generic entry, and suggest that it increased evergreening. Furthermore, while these effects are associated with higher drug prices, they are more than offset by the consolidation of demand, reducing prices overall.
Alleviating Drug Shortages: The Role of Mandated Reporting-Induced Operational Transparency
Junghee Lee et al.
Tulane University Working Paper, March 2020
The ongoing shortage of pharmaceutical drugs critically threatens public health. With increasing industry consolidation, operational disruptions at a firm can lead to a nationwide shortage for life-saving drugs. In 2012, the U.S. Food and Drug Administration (FDA) mandated all manufacturers to report any manufacturing interruption that can potentially cause shortages. Its goal was to mitigate drug shortages by enhancing operational transparency in the pharmaceutical industry and inducing a faster recovery. Resolving drug shortages crucially depends on the disrupted firm's recovery, which forms the focus of this paper. We leverage the FDA intervention to understand the impact of mandated reporting-induced operational transparency on drug shortage recovery. We find that the new policy expedites recovery, but its effectiveness is contingent upon the competition level. While the intervention is not effective under a monopoly, the mandate is most effective for a duopoly and its effect decreases as competition intensifies. In the absence of the mandate-induced transparency, competition does not necessarily alleviate shortage recovery times, but with the regulation, competition can accelerate drug shortage recovery. Our results produce actionable insights for healthcare providers and policymakers about alleviating drug shortages.
Managing Intelligence: Skilled Experts and AI in Markets for Complex Products
Jonathan Gruber et al.
NBER Working Paper, April 2020
In numerous high stakes markets skilled experts play a key role in facilitating consumer choice of complex products. New artificial intelligence (AI) technologies are increasingly being used to augment expert decisions. We study the role of technology and expertise in the market for health insurance, where consumer choices are widely known to be sub-optimal. Our analysis leverages the large-scale implementation of an AI-based decision support tool in a private Medicare exchange where consumers are randomized to skilled agents over time. We find that, prior to AI-based technology, skilled experts in this market exhibit the same type of inconsistent behavior found in previous studies of individual choices, costing consumers $1260 on average. The addition of AI-based decision support improves outcomes by $278 on average and substantially reduces heterogeneity in broker performance. Experts efficiently synthesize private information, incorporating AI-based recommendations along dimensions that are well suited to AI (e.g. total expected patient costs), but overruling AI-based recommendations along dimensions for which humans are better suited (e.g. specifics of doctor networks). As a result, switching plans, an ex-post measure of plan satisfaction, is meaningfully lower for agents making AI-based recommendations. While AI is a complement to skill on average, we find that it is a substitute across the skill distribution; lower quality agents provide better recommendations with AI than the top agents did without it. Overall productivity rises, with the introduction of decision support associated with a 21% reduction in call time for enrollment.
Any Willing Provider and Negotiated Retail Pharmaceutical Prices
Daniel Hosken, David Schmidt & Matthew Weinberg
Journal of Industrial Economics, March 2020, Pages 1-39
Any Willing Provider (AWP) regulations require insurers to allow health care providers network membership, eliminating an insurer's ability to commit to a limited network of providers. We study the effect of AWP on prices negotiated between insurers and providers by exploiting the introduction of a regulation targeting retail pharmacies in the state of Maine. Using insurance claim level data and across state variation in exposure to the regulation, we estimate increases in negotiated pharmaceutical prices. Our results are consistent with AWP regulations' reducing competition by inhibiting the ability of insurers to move demand across competing pharmacies.
Rushed Innovation: Evidence from Drug Licensing
Management Science, forthcoming
We study the drug licensing behavior (acquisition of rights for developing drugs) of large pharmaceutical firms in the aftermath of large negative shocks to their pipelines, phase 3 failures (P3Fs). We find that P3Fs lead to increased licensing within a year of the event. This result is significant, because one year is a short window given the usual timelines - licensing is a lengthy process that requires extensive planning and careful execution. Supported by a series of additional results, we interpret this finding as a reflection of rushed firm behavior. Correspondingly, our main finding is that drugs licensed in these circumstances (within a year of a P3F event) underperform in subsequent development: they are significantly less likely to reach the market compared with others licensed in normal conditions. Further analysis suggests that this underperformance may stem from the influence of rush on activities taking place in the "last mile" of the licensing process and could hinge on the quality of the agreements that firms converge to during contract negotiations.