Standard Operating Procedures
The impacts of New York's balance billing regulation on ground ambulance pricing
Wendy Xu et al.
Health Services Research, forthcoming
Study Design: We exploited a natural experiment using a difference-in-differences design with randomization inference (RI) to examine the effects of New York state regulations on the prices of emergency ground ambulances, analyzing 2012–2019 commercial claims data. In March 2015, New York implemented a law protecting patients from surprise out-of-network (OON) balance bills, including ground ambulance services. New York's policy tied OON ground ambulance reimbursements to usual, customary, and reasonable rates that typically reflect charges. The control group consisted of similar states that never enacted surprise billing laws. Although self-funded plans are exempted from state laws, we also examined for spillover effects on self-funded plans.
Principal Findings: The event study findings indicated that New York's law led to a continuous increase in prices, relative to controls. The law's implementation was associated with an overall emergency ground ambulance price increase of 13 percentage points (RI p-value: 0.07). We observed a 21-percentage-point increase in in-network prices (RI p-value: 0.07) and a 19-percentage-point increase in OON prices (RI p-value: 0.07), relative to controls, for fully insured health plans. Similar changes in overall prices and in in-network prices were observed in self-insured plans. Last, our study did not find statistically significant evidence of changes in out-of-pocket cost-sharing amounts under New York's regulation.
Adverse Selection and (un)Natural Monopoly in Insurance Markets
Edward Kong, Timothy Layton & Mark Shepard
NBER Working Paper, November 2024
Abstract:
Adverse selection is a classic market failure known to limit or “unravel”' trade in high-quality insurance and many other economic settings. While the standard theory emphasizes quality distortions, we argue that selection has another big-picture implication: it unravels competition among differentiated firms, leading to fewer surviving competitors—and in the extreme, what we call “un-natural” monopoly. Adverse selection pushes firms toward aggressive price cutting to attract price-sensitive, low-risk consumers. This creates a wedge between average and marginal costs that (like fixed costs in standard models) limits how may firms can profitably survive. We demonstrate this insight in a simple model of insurer entry and price competition, estimated using administrative data from Massachusetts' health insurance exchange. We find a large “selection wedge” of 20-30% of average costs, which (without corrective policies) unravels the market to monopoly. Our analysis suggests a surprising policy implication: interventions that limit price-cutting can improve welfare by supporting more entry, and ultimately lower prices.
Differential Legal Protections for Biologics vs Small-Molecule Drugs in the US
Olivier Wouters et al.
Journal of the American Medical Association, forthcoming
Importance: Biologics approved by the US Food and Drug Administration (FDA) receive 12 years of guaranteed protection from biosimilar competition compared with 5 years of protection from generic competition for new small-molecule drugs. Under the 2022 Inflation Reduction Act, biologics are exempt from selection for Medicare price negotiation for 11 years compared with 7 years for small-molecule drugs. Congress codified these differing legal protections on the premise that biologics require more time and resources to develop and have weaker patent protection, necessitating additional protections for manufacturers to recoup their development costs and generate adequate returns on investment.
Findings: The FDA approved 599 new therapeutic agents from 2009-2023, of which 159 (27%) were biologics and 440 (73%) were small-molecule drugs. Median development times were 12.6 years (IQR, 10.6-15.3 years) for biologics vs 12.7 years (IQR, 10.2-15.5 years) for small-molecule drugs (P = .76). Biologics had higher clinical trial success rates at every phase of development. Median development costs were estimated to be $3.0 billion (IQR, $1.3 billion-$5.5 billion) for biologics and $2.1 billion (IQR, $1.3 billion-$3.7 billion) for small-molecule drugs (P = .39). Biologics were protected by a median of 14 patents (IQR, 5-24 patents) compared with 3 patents (IQR, 2-5 patents) for small-molecule drugs (P < .001). The median time to biosimilar competition was 20.3 years (IQR, 16.9-21.7 years) compared with 12.6 years (IQR, 12.5-13.5 years) for small-molecule drugs. Biologics achieved higher median peak revenues ($1.1 billion in year 13; IQR, $0.5 billion-$2.9 billion) than small-molecule drugs ($0.5 billion in year 8; IQR, $0.1 billion-$1.2 billion; P = .01) and had higher median revenues in each year following FDA approval. The median annual cost of treatment was $92 000 (IQR, $31 000-$357 000) for biologics and $33 000 (IQR, $4000-$177 000) for small-molecule drugs (P = .005).
Halloween, ADHD, and Subjectivity in Medical Diagnosis
Christopher Worsham, Charles Bray & Anupam Jena
NBER Working Paper, December 2024
Abstract:
The practice of medicine relies on accurate diagnosis. However, the diagnosis of many medical conditions involves assessments that invite varying degrees of subjectivity. External and arbitrary factors can influence physicians’ diagnostic assessments in conditions ranging from heart attacks to neurodevelopmental conditions like attention deficit hyperactivity disorder (ADHD). Quantifying this subjectivity is challenging, however, particularly for neurodevelopmental and psychiatric conditions where subjective assessments of behavior are common and important. Halloween, a holiday characterized by excitement among children, could present a natural experiment to study subjectivity in diagnosis, if any ensuing behavioral changes influence diagnosis rates of ADHD. Using data on over 100 million physician office visits, we compared ADHD diagnosis rates, by day, among children seen by physicians in the 10 weekdays surrounding seven Halloween holidays. The rate of new ADHD diagnosis was 62.7 per 10,000 child-visits on Halloween, compared with 55.1 during surrounding weekdays, a 14% increase. There were no increases in diagnoses of several neuropsychiatric disorders with diagnostic criteria that are less focused on hyperactive behavior. Our findings highlight subjectivity in ADHD diagnosis and support the need to consider external factors that may influence diagnosis.
The Impact of Children's Access to Public Health Insurance on Their Cognitive Development and Behavior
Marie Hull & Ji Yan
Journal of Health Economics, December 2024
Abstract:
While a large literature examines the immediate and long-run effects of public health insurance, much less is known about the impacts of total program exposure on child developmental outcomes. This paper uses an instrumental variable strategy to estimate the effect of cumulative eligibility gain on cognitive and behavioral outcomes measured at three points during childhood. Our analysis leverages substantial variation in cumulative eligibility due to the dramatic public insurance expansions between the 1980s and 2000s. We find that increased eligibility improves child cognitive skills and present suggestive evidence on better behavioral outcomes. There are notable heterogeneous effects across the subgroups of interest. Both prenatal eligibility and childhood eligibility are important for driving gains in the test scores at older ages. Improved child health is found to be a mediator of the impact of increased eligibility.
Investing in Health and Public Safety: Childhood Medicaid Eligibility and Later Life Criminal Behavior
Logan Hendrix & Wendy Stock
Journal of Human Resources, November 2024, Pages 1741-1768
Abstract:
A growing body of research documents positive long-term impacts of public health insurance that go far beyond improving recipients’ health. In this study, we expand the analysis to assess whether expanding Medicaid coverage generates reductions in crime. We find that increased Medicaid eligibility during childhood generates significant reductions in crime in early adulthood. Cohorts who experienced expanded Medicaid eligibility during childhood had significantly fewer arrests for property crime, drug-related crime, and driving under the influence in early adulthood. The effects are concentrated among males, are larger for Blacks than whites, and larger for eligibility experienced later in childhood.
Strengths and Weaknesses of Introducing an Inflation Factor into the Medicare Physician Fee Schedule
Michael Chernew, Ateev Mehrotra & Riya Doshi
Health Affairs, December 2024, Pages 1689-1697
Abstract:
Unlike most other Medicare fee schedules, the Medicare Physician Fee Schedule does not include an automatic inflation update. We describe the history of Physician Fee Schedule update systems and present paradigms for evaluating the merits of adding an inflation-based adjustment factor to the schedule’s updating formulas. We adopt an incentive paradigm, which emphasizes how access to care and the consolidation of health care facilities are affected by fees. Although evidence suggests that the impact of fee changes on access has been small, it might not remain so. Moreover, the disparity in fees, and fee updates, between care delivered in an outpatient facility as opposed to a physician office may induce consolidation. Because existing evidence does not support the idea that there is a current access crisis in Medicare, we believe that a partial, inflation-based, across-the-board update (for example, inflation minus 1) would help sustain access into the future and potentially slow consolidation. This approach would be reasonably easy to implement and have better distributional properties than some alternatives, such as differential updates for the work and practice expense components of the Medicare Physician Fee Schedule.
First, Do No Harm: Do Staffing Shortages Drive Abuse and Malfeasance in U.S. Nursing Homes?
Jong Myeong Lim, Ken Moon & Minje Park
University of Miami Working Paper, November 2024
Abstract:
The U.S. nursing home industry has suffered decades-long understaffing and high worker turnover, with 99% of nursing homes surveyed in 2021 reporting being short-staffed. Although it is known that understaffing can reduce the quality of nursing home services and care, we examine the under-recognized possibility that understaffing may harm patients by incentivizing unethical behavior. We empirically study the causal relationship between nursing home staffing and "chemical restraints," i.e., the use of antipsychotic medications to improperly sedate difficult patients with dementia. Using nationwide data obtained from the U.S. Centers for Medicare & Medicaid Services through Freedom of Information Act requests, our causal analyses exploit local market wages for nurses and changes in states' minimum-staffing regulations as sources of exogenous variation in nursing homes' staffing levels. We find that, on average, every 15 minutes of increased daily nurse staffing hour per resident reduces a nursing home's usage of antipsychotic drugs by 1.51 residents or approximately 1.54% of its resident population. Interestingly, we find evidence that this robust causal relationship is driven by urban and for-profit nursing homes in particular. Our estimates predict that the new federal minimum staffing standards for nursing homes introduced in April 2024 will reduce the nationwide usage of antipsychotic drugs by 24,148 nursing home residents, or 9.6%. Our findings demonstrate a robust causal relationship between staffing and the widespread use of potentially abusive and harmful practices in healthcare operations.