Living markets
Misrepresented Interests: Business, Medicare, and the Making of the American Health Care State
Peter Swenson
Studies in American Political Development, April 2018, Pages 1-23
Abstract:
A belief that there is a pervasive and enduring adversarial relationship between business and the welfare state is shared widely across scholarly disciplines engaged in historical and comparative analysis of social politics. According to that view, each stage in the expansion of the American welfare state was a defeat for capitalists. Detailed evidence on the politics of health care, with special focus on the passage of Medicare in 1965, casts serious doubt on this dominant view about class politics, the welfare state, and the power of business. It shows that much of the literature takes a hazardous inferential leap from national business organizations’ official positions against reform to overconfident conclusions about actual business opinions. The literature also mistakenly discounts evidence of business support for moderate reforms as strategic camouflage of actual opposition designed to head off more radical ones. Extensive evidence reveals enormous division within business rather than unity about the health care state, and a great deal of support from large and powerful corporations for its creation and expansion. Evidence about the economic implications of health insurance for businesses, including before and after Medicare, and all the way to the Affordable Care Act of 2010, indicates that the support was genuine, not strategic, and that sometimes it was critical for passage. That support calls for new thinking about how to answer the perennial question about class power in America: “Who actually governs?”
The Consequences of a Public Health Insurance Option: Evidence From Medicare Part D
Daniel Miller & Jungwon Yeo
American Journal of Health Economics, forthcoming
Abstract:
This paper structurally estimates a demand and supply model of Medicare Part D and evaluates counterfactual scenarios that introduce a public option competing alongside private insurers. The results show that a public option with cost advantage expands coverage, crowds out private insurer enrollment, but has little effect on market premiums. Additional subsidy payments covering the expanded base of enrollees offset welfare gains regardless of the public option's cost position. In scenarios where private insurers cream skim the public option, risk adjustment payments create a pricing wedge that acts as a de facto subsidy for private insurers and tax on the public option, limiting the public option's penetration but improving welfare through lower private insurer premiums. Risk corridors can be used as a lever to regulate the pricing wedge and redistribute surplus.
The Effect of Hospital Acquisitions of Physician Practices on Prices and Spending
Cory Capps, David Dranove & Christopher Ody
Journal of Health Economics, May 2018, Pages 139-152
Abstract:
During the past decade, U.S. hospitals have acquired a large number of physician practices. For example, from 2007 to 2013, hospitals acquired nearly 10 percent of the practices in our sample. We find that the prices for the services provided by acquired physicians increase by an average of 14.1 percent post-acquisition. Nearly half of this increase is attributable to the exploitation of payment rules. Price increases are larger when the acquiring hospital has a larger share of its inpatient market. We find that integration of primary care physicians increases enrollee spending by 4.9%.
Early-life Medicaid Coverage and Intergenerational Economic Mobility
Rourke O’Brien & Cassandra Robertson
Journal of Health and Social Behavior, forthcoming
Abstract:
New data reveal significant variation in economic mobility outcomes across U.S. localities. This suggests that social structures, institutions, and public policies - particularly those that influence critical early-life environments - play an important role in shaping mobility processes. Using new county-level estimates of intergenerational economic mobility for children born between 1980 and 1986, we exploit the uneven expansions of Medicaid eligibility across states to isolate the causal effect of this specific policy change on mobility outcomes. Instrumental-variable regression models reveal that increasing the proportion of low-income pregnant women eligible for Medicaid improved the mobility outcomes of their children in adulthood. We find no evidence that Medicaid coverage in later childhood years influences mobility outcomes. This study has implications for the normative evaluation of this policy intervention as well as our understanding of mobility processes in an era of rising inequality.
Does Managed Care Widen Infant Health Disparities? Evidence from Texas Medicaid
Ilyana Kuziemko, Katherine Meckel & Maya Rossin-Slater
American Economic Journal: Economic Policy, forthcoming
Abstract:
Medicaid programs increasingly finance competing, capitated managed care plans rather than administering fee-for-service (FFS) programs. We study how the transition from FFS to managed care affects high- and low-cost infants (blacks and Hispanics, respectively). We find that black-Hispanic disparities widen - e.g., black mortality and pre-term birth rates increase by 15% and 7%, respectively, while Hispanic mortality and pre-term birth rates decrease by 22% and 7%, respectively. Our results are consistent with a risk-selection model whereby capitation incentivizes competing plans to offer better (worse) care to low-(high-)cost clients to retain (avoid) them in the future.
Public Health Insurance and Household Portfolio Choices: Unravelling Financial “Side Effects” of Medicare
Marco Angrisani, Vincenzo Atella & Marianna Brunetti
Journal of Banking & Finance, forthcoming
Abstract:
Large, unpredictable and not fully insurable health-care costs represent a source of background risk that might deter households’ financial risk taking. Using panel data from the Health and Retirement Study, we test whether universal health insurance, like Medicare for over-65 Americans, shields against this risk promoting stockholding. We adopt a fixed-effects estimation strategy, thereby taking into account household-level heterogeneity in health status and private insurance coverage. We find that, before Medicare eligibility, households in poor health, who face a higher risk of medical expenses, are less likely to hold stocks than their healthier counterparts. Yet, this gap is mostly eliminated by Medicare. Notably, the offsetting is primarily experienced by households in poor health and without private health insurance over the observation period.
The Effects of Home Health Visit Length on Hospital Readmission
Elena Andreyeva, Guy David & Hummy Song
NBER Working Paper, April 2018
Abstract:
Home health care has experienced significant growth as an industry and is viewed as one of the avenues for achieving reductions in the cost and utilization of expensive downstream health care services. Using a novel dataset on home health care visits, this study quantifies the effects of reduced time spent with patients during a post-acute home health visit on hospital readmissions. We focus in particular on the subset of patients with conditions that are subject to penalty under the Hospital Readmission Reduction Program. Since both visit length and readmission risk are likely to be correlated with unobserved illness severity, we use the daily sequence of provider visits and deviation from the provider’s average daily workload as instruments for visit length. We find that patients who are visited later in the provider’s day as well as those who are visited by a provider who has a higher than usual workload experience home health visits that are shorter than usual. Using our instruments and controlling for patient, visit, and provider characteristics, we find that home health visits that are longer than usual by one minute reduce the risk of hospital readmission by approximately 8 percent. These effects seem to be driven by providers with higher levels of discretion in their time management and care provision. We suggest several approaches that managers could take to attain reductions in readmissions without incurring significant additional costs.
Medicare Secondary Payer and Settlement Delay
Eric Helland & Jonathan Klick
Journal of Empirical Legal Studies, June 2018, Pages 356-377
Abstract:
The Medicare Secondary Payer Act of 1980 and its subsequent amendments require that insurers and self‐insured companies report settlements, awards, and judgments that involve a Medicare beneficiary to the Centers for Medicare and Medicaid Services. The parties then may be required to compensate CMS for its conditional payments. In a simple settlement model, this makes settlement less likely. Also, the reporting delays and uncertainty regarding the size of these conditional payments are likely to further frustrate the settlement process. We provide results, using data from a large insurer, showing that, on average, implementation of the MSP reporting amendments led to a delay in the resolution of disputes involving auto accidents of about six months.
Elasticity of Medicaid Access with Respect to State Financial Distress
Victoria Perez, Joseph Benitez & Eric Seiber
American Economic Review, May 2018, Pages 384-387
Abstract:
In 2016, total Medicaid spending, $574.2 billion, represented one-third of state budgets. Descriptive studies indicate that state policymakers adjust social welfare programs during times of financial distress, particularly Medicaid. The challenge of formally estimating this effect is that macroeconomic shocks increase Medicaid enrollment and state-level financial stress. We use an exogenous measure of Medicaid generosity to estimate the elasticity of Medicaid generosity with respect to financial conditions. We find Medicaid generosity is not adjusted during periods of fiscal distress, whether anticipated or not. Instead, we find a counter-cyclical Medicaid effect with generosity increasing with increases in the unemployment rate.
Growing Reinsurance Payments Weaken Competitive Bidding in Medicare Part D
Jeah Jung & Roger Feldman
Health Services Research, forthcoming
Data/Study Design: 2007-2015 Part D Plan Payment and Premium data; 2010-2013 Part D Prescription Drug Event data; and 2013 Part D Plan Formulary Files.
Principal Findings: Risk‐adjusted reinsurance payments varied widely across plans at a given out‐of‐pocket (OOP) premium. The variance in risk‐adjusted reinsurance in common OOP premium ranges increased between 2010 and 2015. High risk‐adjusted reinsurance payments were negatively correlated with use of utilization management tools for high‐cost drugs.
Conclusions: Growing reinsurance payments shrink plans’ liability for managing drug spending for high‐cost enrollees, creating plan moral hazard, and making OOP premiums a noisy signal of plans’ total costs.
The Affordable Care Act and College Enrollment Decisions
Juergen Jung & Vinish Shrestha
Economic Inquiry, forthcoming
Abstract:
We investigate the effect of the expansion of the federal dependent coverage mandate for young adults under the Affordable Care Act (ACA) on college enrollment decisions of young Americans. The expansion removes the requirement that young individuals need to be enrolled as full‐time students in order to remain on their parents' health insurance past the age of 18 and expands the coverage mandate to age 26 irrespective of student status. This changes the incentives for the full‐time college enrollment decisions of young individuals. We use panel data from the Survey of Income and Program Participation (SIPP) for the years 2003-2013 and estimate that the dependent coverage expansion under the ACA decreases the probability to enroll as full‐time student by 3 percentage points using a difference‐in‐differences framework. Furthermore, we find that part‐time college enrollment is unaffected by the new policy. The results are robust to changes in the model specification and become stronger when we increase the sample overlap between treatment and control groups using trimming based on propensity scores.
Effects of the Affordable Care Act on Health Behaviors after Three Years
Charles Courtemanche et al.
NBER Working Paper, April 2018
Abstract:
This paper examines the impacts of the Affordable Care Act (ACA) - which substantially increased insurance coverage through regulations, mandates, subsidies, and Medicaid expansions - on behaviors related to future health risks after three years. Using data from the Behavioral Risk Factor Surveillance System and an identification strategy that leverages variation in pre-ACA uninsured rates and state Medicaid expansion decisions, we show that the ACA increased preventive care utilization along several dimensions, but also increased risky drinking. These results are driven by the private portions of the law, as opposed to the Medicaid expansion. We also conduct subsample analyses by income and age.
Impact of the excise tax on firm R&D and performance in the medical device industry: Evidence from the Affordable Care Act
Daeyong Lee
Research Policy, June 2018, Pages 854-871
Abstract:
This article examines how the excise tax affects firms’ R&D investment, performance, and market strategy in the US medical device industry. The Affordable Care Act imposed a 2.3% excise tax on medical devices beginning in January 2013, and thus this study compares the medical device firms with other high-tech firms before and after the tax incidence. Using COMPUSTAT data from 2006 to 2015, the author finds that the excise tax reduced R&D investment, sales revenue, gross margins, and earnings for medical device firms. In addition, the excise tax increased their global market sales intensity, global market diversification, and customer diversification in the US domestic market.
The Impact of New Drug Launches on Life-Years Lost in 2015 from 19 Types of Cancer in 36 Countries
Frank Lichtenberg
NBER Working Paper, April 2018
Abstract:
This study employs a two-way fixed effects research design to measure the mortality impact and cost-effectiveness of cancer drugs: it analyzes the correlation across 36 countries between relative mortality from 19 types of cancer in 2015 and the relative number of drugs previously launched in that country to treat that type of cancer, controlling for relative incidence. One additional drug for a cancer site launched during 2006-2010 is estimated to have reduced the number of 2015 disability-adjusted life years (DALYs) lost due to cancer at that site by 5.8%. The estimated cost per life-year gained at all ages in 2015 from cancer drugs launched during 2006-2010 is $1635. We estimate that drugs launched during the entire 1982-2010 period reduced the number of cancer DALYs lost in 2015 by about 23%. In the absence of new drug launches during 1982-2010, there would have been 26.3 million additional DALYs lost in 2015.
Precision Medicine In Action: The Impact Of Ivacaftor On Cystic Fibrosis-Related Hospitalizations
Lisa Feng et al.
Health Affairs, May 2018, Pages 773-779
Abstract:
Cystic fibrosis is a life-threatening genetic disease that causes severe damage to the lungs. Ivacaftor, the first drug that targeted the underlying defect of the disease caused by specific mutations, is a sterling example of the potential of precision medicine. Clinical trial and registry studies showed that ivacaftor improved outcomes and reduced hospitalizations. Our study used US administrative claims data to assess the real-world effectiveness of ivacaftor. Comparing twelve-month rates before and after starting the use of ivacaftor among people who initiated therapy during 2012-2015, we found that overall and cystic fibrosis-related inpatient admissions fell by 55 percent and 81 percent, respectively. There was a comparable reduction in inpatient spending. Ivacaftor appears to be effective for multiple mutations that cause the disease, as suggested by the fact that during the study period, ivacaftor’s use was extended to nine additional mutations in 2014. Examination of evidence from clinical trial, clinical care, and administrative data sources is important for understanding the real-world effectiveness of precision medicines such as ivacaftor.
Captive to the Clinic: Phase I Clinical Trials as Temporal Total Institutions
Quintin Williams & Jill Fisher
Sociological Inquiry, forthcoming
Abstract:
This article develops the concept of temporal total institutions to describe how and why individuals voluntarily submit to highly controlled and often dehumanizing environments. We focus empirically on Phase I clinical trials, which offer compensation to healthy people in exchange for testing investigational pharmaceuticals. Analyzing the experiences of 67 U.S. healthy volunteers, we illustrate how comparisons between Phase I trials and prison are salient to participants as they reflect on their confinement in research facilities and their interactions with other participants and research staff. We argue that conditions of contemporary economic insecurity and/or poverty facilitate the existence of coercive temporal total institutions by undermining voluntariness. Phase I clinics take advantage of the steady supply of individuals who will submit to the organization's demands out of hope that the income gained will be transformative for their lives.