State of care
Basic versus supplementary health insurance: Moral hazard and adverse selection
Jan Boone
Journal of Public Economics, August 2015, Pages 50-58
Abstract:
This paper introduces a tractable model of health insurance with both moral hazard and adverse selection. We show that government sponsored universal basic insurance should cover treatments with the biggest adverse selection problems. Treatments not covered by basic insurance can be covered on the private supplementary insurance market. Surprisingly, the cost effectiveness of a treatment does not affect its priority to be covered by basic insurance.
---------------------
Medical Spending of the U.S. Elderly
Mariacristina De Nardi et al.
NBER Working Paper, June 2015
Abstract:
We use data from the Medicare Current Beneficiary Survey (MCBS) to document the medical spending of Americans aged 65 and older. We find that medical expenses more than double between ages 70 and 90 and that they are very concentrated: the top 10% of all spenders are responsible for 52% of medical spending in a given year. In addition, those currently experiencing either very low or very high medical expenses are likely to find themselves in the same position in the future. We also find that the poor consume more medical goods and services than the rich and have a much larger share of their expenses covered by the government. Overall, the government pays for 65% of the elderly's medical expenses. Despite this, the expenses that remain after government transfers are even more concentrated among a small group of people. Thus, government health insurance, while potentially very valuable, is far from complete. Finally, while medical expenses before death can be large, on average they constitute only a small fraction of total spending, both in the aggregate and over the life cycle. Hence, medical expenses before death do not appear to be an important driver of the high and increasing medical spending found in the U.S.
---------------------
Becky Briesacher et al.
Annals of Internal Medicine, 16 June 2015, Pages 825-833
Objective: To examine changes in health outcomes and medical services in the Medicare population after implementation of Part D.
Design: Population-level longitudinal time-series analysis with generalized linear models.
Patients: Nationally representative sample of Medicare beneficiaries (n = 56 293 [unweighted and unique]) from 2000 to 2010.
Results: Five years after Part D implementation, no clinically or statistically significant reductions in the prevalence of fair or poor health status or limitations in ADLs or instrumental ADLs, relative to historical trends, were detected. Compared with trends before Part D, no changes in emergency department visits, hospital admissions or days, inpatient costs, or mortality after Part D were seen. Confirmatory analyses were consistent.
Conclusion: Five years after implementation, and contrary to previous reports, no evidence was found of Part D's effect on a range of population-level health indicators among Medicare enrollees. Further, there was no clear evidence of gains in medical care efficiencies.
---------------------
Sherry Glied, Stephanie Ma & Ivanna Pearlstein
Health Affairs, June 2015, Pages 929-935
Abstract:
About half of the $2.1 trillion of US health services spending constitutes compensation to employees. We examined how the wages paid to health-sector employees compared to those paid to workers with similar qualifications in other sectors. Overall, we found that health care workers are paid only slightly more than workers elsewhere in the US economy, but the patterns are starkly different for nonprofessional and professional employees. Nonprofessional health care workers earn slightly less than their counterparts elsewhere in the economy. By contrast, the average nurse earns about 40 percent more than the median comparable worker in a different sector. The average physician earns about 50 percent more than a comparable worker in another sector of the economy, and this differential has increased sharply since 1993. Cost containment is likely to lead to reductions in the earnings of health care professionals, but it will also require using fewer or less skilled employees to produce a given service.
---------------------
The Value of Medicaid: Interpreting Results from the Oregon Health Insurance Experiment
Amy Finkelstein, Nathaniel Hendren & Erzo Luttmer
NBER Working Paper, June 2015
Abstract:
We develop a set of frameworks for valuing Medicaid and apply them to welfare analysis of the Oregon Health Insurance Experiment, a Medicaid expansion for low-income, uninsured adults that occurred via random assignment. Our baseline estimates of Medicaid's welfare benefit to recipients per dollar of government spending range from about $0.2 to $0.4, depending on the framework, with at least two-fifths - and as much as four-fifths - of the value of Medicaid coming from a transfer component, as opposed to its ability to move resources across states of the world. In addition, we estimate that Medicaid generates a substantial transfer, of about $0.6 per dollar of government spending, to the providers of implicit insurance for the low-income uninsured. The economic incidence of these transfers is critical for assessing the social value of providing Medicaid to low-income adults relative to alternative redistributive policies.
---------------------
Jeffrey Silber et al.
Medical Care, July 2015, Pages 619-629
Objectives: To determine if black-white disparities in general surgery mortality for Medicare patients are attributable to poorer health status among blacks on admission or differences in the quality of care provided by the admitting hospitals.
Subjects: All black elderly Medicare general surgical patients (N=18,861) and white-matched controls within the same 6 states or within the same 838 hospitals.
Results: Matching on age, sex, year, state, and the exact same procedure, blacks had higher 30-day mortality (4.0% vs. 3.5%, P<0.01), in-hospital mortality (3.9% vs. 2.9%, P<0.0001), in-hospital complications (64.3% vs. 56.8% P<0.0001), and failure-to-rescue rates (6.1% vs. 5.1%, P<0.001), longer length of stay (7.2 vs. 5.8 d, P<0.0001), and more 30-day readmissions (15.0% vs. 12.5%, P<0.0001). Adding preoperative risk factors to the above match, there was no significant difference in mortality or failure-to-rescue, and all other outcome differences were small. Blacks matched to whites in the same hospital displayed no significant differences in mortality, failure-to-rescue, or readmissions.
Conclusions: Black and white Medicare patients undergoing the same procedures with closely matched risk factors displayed similar mortality, suggesting that racial disparities in general surgical mortality are not because of differences in hospital quality. To reduce the observed disparities in surgical outcomes, the poorer health of blacks on presentation for surgery must be addressed.
---------------------
Informational Shocks and the Effects of Physician Detailing
Bradley Shapiro
University of Chicago Working Paper, June 2015
Abstract:
The effects of pharmaceutical firm advertising directly to physicians using sales reps, or detailing, has been a major area of interest for both regulators and firms. As firms spend vast amounts of money on detailing activities, understanding the response of such inputs is crucial to profit maximization. Regulators, on the other hand, worry that detailing might be illegally focused on off-label prescribing. In addition there is a regulatory worry that promotion will lead to prescriptions to those who do not need the drugs. Finally, regulators worry whether detailing provides socially useful information or socially harmful quid pro quo relationships. In this paper, I estimate the effect of detailing in the anti-psychotic category, a roughly $9 billion per year category which has been hit with over $6.5 billion in regulatory fines due to promotional practices in the past fifteen years. I estimate these effects using two studies that disseminated new information that drastically changed the nature of competition. Detailing effects are significant, but modest, with the average effect of a visit being to increase prescriptions by 0.15 over the short term and 0.3 over the long term. While detailing raises both on-label and off-label prescriptions, I find evidence that it disproportionately raises on-label prescriptions. I find evidence that the effect of detailing is primarily informational: those visits that included the presentation of a clinical study were 70% more effective than those that did not and visits that included a meal were no more effective than those visits that did not. Additionally, visits do not increase the proportion of low severity patients taking anti-psychotics.
---------------------
Hospitals as Insurers of Last Resort
Craig Garthwaite, Tal Gross & Matthew Notowidigdo
NBER Working Paper, June 2015
Abstract:
American hospitals are required to provide emergency medical care to the uninsured. We use previously confidential hospital financial data to study the resulting uncompensated care, medical care for which no payment is received. We use both panel-data methods and case studies from state-wide Medicaid disenrollments and find that the uncompensated care costs of hospitals increase in response to the size of the uninsured population. The results suggest that each additional uninsured person costs local hospitals $900 each year in uncompensated care. Similarly, the closure of a nearby hospital increases the uncompensated care costs of remaining hospitals. Increases in the uninsured population also lower hospital profit margins, which suggests that hospitals cannot simply pass along all increased costs onto privately insured patients. For-profit hospitals are less affected by these factors, suggesting that non-profit hospitals serve a unique role as part of the social insurance system.
---------------------
Josh Pasek, Gaurav Sood & Jon Krosnick
Journal of Communication, forthcoming
Abstract:
According to some recent research, Americans hold a great deal of misinformation about important political issues. However, such investigations treat incorrect answers to quiz questions measuring knowledge as evidence of misinformation. This study instead defines misperceptions as incorrect answers that respondents are confident are correct. Two surveys of representative samples of American adults on the Affordable Care Act reveal that most people were uncertain about the provisions in the law. Confidently held incorrect beliefs were far less common than incorrect answers. Misperceptions were most prevalent on aspects of the law on which elites prominently and persistently made incorrect claims. Furthermore, although Americans appear to have learned about the law between 2010 and 2012, misperceptions on many provisions of the law persisted.
---------------------
Heterogeneity and the Effect of Mental Health Parity Mandates on the Labor Market
Martin Andersen
Journal of Health Economics, forthcoming
Abstract:
Health insurance benefit mandates are believed to have adverse effects on the labor market, but efforts to document such effects for mental health parity mandates have had limited success. I show that one reason for this failure is that the association between parity mandates and labor market outcomes vary with mental distress. Accounting for this heterogeneity, I find adverse labor market effects for non-distressed individuals, but favorable effects for moderately distressed individuals and individuals with a moderately distressed family member. On net, I conclude that the mandates are welfare increasing for moderately distressed workers and their families, but may be welfare decreasing for non-distressed individuals.
---------------------
The Impact of Medicaid Payer Status on Hospitalizations in Nursing Homes
Shubing Cai et al.
Medical Care, July 2015, Pages 574-581
Objectives: To examine the association between payer status (Medicaid vs. private-pay) and the risk of hospitalizations among long-term stay nursing home (NH) residents who reside in the same facility.
Data and Study Population: The 2007-2010 National Medicare Claims and the Minimum Data Set were linked. We identified newly admitted NH residents who became long-stayers and then followed them for 180 days.
Results: The prevalence of all-cause hospitalization during a 180-day follow-up period was 23.3% among Medicaid residents compared with 21.6% among private-pay residents. After accounting for individual characteristics and facility effects, the probability of any all-cause hospitalization was 1.8-percentage point (P<0.01) higher for Medicaid residents than for private-pay residents within the same facility. We also found that Medicaid residents were more likely to be hospitalized for discretionary conditions (5% increase in the likelihood of discretionary hospitalizations), but not for nondiscretionary conditions. The findings from the sensitivity analyses were consistent with the main analyses.
Conclusions: We observed a higher hospitalization rate among Medicaid NH residents than private-pay residents. The difference is in part driven by the financial incentives NHs have to hospitalize Medicaid residents.
---------------------
Deficiencies In Care At Nursing Homes And Racial/Ethnic Disparities Across Homes Fell, 2006-11
Yue Li et al.
Health Affairs, July 2015, Pages 1139-1146
Abstract:
Despite the increased use of nursing homes by minority residents, nursing home care remains highly segregated. Compared to whites, racial/ethnic minorities tend to be cared for in facilities with limited clinical and financial resources, low nurse staffing levels, and a relatively high number of care deficiency citations. We assessed the trends from 2006 to 2011 in those citations and in disparities across facilities with four different concentrations of racial/ethnic minority residents. We found that the number of health care-related deficiencies and the percentage of facilities with serious deficiencies decreased over time for all four facility groups. From 2006 to 2011 the average annual number of health care-related deficiencies declined from 7.4 to 6.8 for facilities with low minority concentrations (<5 percent) and from 10.6 to 9.4 for facilities with high minority concentrations (?35 percent). In multivariable analyses, across-site disparities in health care-related deficiencies and in life-safety deficiencies narrowed over time. We also found that increasing the Medicaid payment rate might help improve both overall quality and disparities, but state case-mix payment approaches might worsen both. These results suggest the need to reevaluate quality improvement and cost containment efforts to better foster the quality and equity of nursing home care.
---------------------
Eric Roberts & Darrell Gaskin
Medical Care Research and Review, forthcoming
Abstract:
Millions of low-income adults are beginning to gain Medicaid coverage under the Affordable Care Act. To forecast the resulting need for primary care providers, we estimate the effect of Medicaid take-up on visits to office-based primary care providers, including clinics. We estimate that adults with Medicaid coverage at any point in the year have an average of 1.32 visits per year to primary care providers, 0.48 more visits than low-income adults without Medicaid. Consequently, we project a need for 2,113 additional primary care providers (range: 1,130-3,138) if all states expand Medicaid. Our estimates are somewhat lower than several recent forecasts, which may not have controlled adequately for selection bias, and which used non-representative samples for forecasting. Our findings shed light on disparities in access to care, particularly in counties with relatively few primary care providers per capita. Efforts to expand access to primary care should focus on where providers practice, rather than simply training more providers.
---------------------
Sorting Out the Health Risk in California's State-Based Marketplace
Andrew Bindman et al.
Health Services Research, forthcoming
Objective: To characterize the health risk of enrollees in California's state-based insurance marketplace (Covered California) by metal tier, region, month of enrollment, and plan.
Data Collection/Extraction Methods: Chronic Illness and Disability Payment System (CDPS) health risk scores derived from an individual's age and sex from the enrollment file and the diagnoses captured in the hospitalization and ED records. CDPS scores were standardized by setting the average to 1.00.
Principal Findings: Among the 1,286,089 enrollees, 120,573 (9.4 percent) had at least one ED visit and/or a hospitalization in 2012. Higher risk enrollees chose plans with greater actuarial value. The standardized CDPS health risk score was 11 percent higher in the first month of enrollment (1.08; 99 percent CI: 1.07-1.09) than the last month (0.97; 99 percent CI: 0.97-0.97). Four of the 12 plans enrolled 91 percent of individuals; their average health risk scores were each within 3 percent of the marketplace's statewide average.
Conclusions: Providing health plans with a means to assess the health risk of their year 1 enrollees allowed them to anticipate whether they would receive or contribute payments to a risk-adjustment pool. After receiving these findings as a part of their negotiations with Covered California, health plans covering the majority of enrollees decreased their initially proposed 2015 rates, saving consumers tens of millions of dollars in potential premiums.
---------------------
Does Defensive Medicine Reduce Health Care Spending?
Scott Barkowski
Clemson University Working Paper, February 2015
Abstract:
The medical community often argues that physician fear of legal liability increases health care spending. Theoretically, though, the effect could be positive or negative, and empirical evidence has supported both cases. Previous empirical work, however, has ignored the fact that physicians face risk from industry oversight groups like state-level medical licensing boards in addition to civil litigation risk. This paper addresses this omission by incorporating previously unused data on punishments by oversight groups against physicians, known as adverse actions, along with malpractice payments data to study state-level health care spending. My analysis suggests that health care spending does not rise in response to higher levels of risk. An increase in adverse actions equal to 16 (the mean, absolute value of year-to-year changes within a state) is found to be associated with statistically significant average annual spending decreases in hospital care and prescription drugs of as much as 0.25% (nearly $29 million) and 0.29% (almost $9.3 million). Malpractice payments were generally estimated to have smaller, statistically insignificant effects.
---------------------
Randall Cebul et al.
Health Affairs, July 2015, Pages 1121-1130
Abstract:
Studies of Medicaid expansion have produced conflicting results about whether the expansion is having a positive impact on health and the cost and efficiency of care delivery. To explore the issue further, we examined MetroHealth Care Plus, a Centers for Medicare and Medicaid Services (CMS) waiver program in Ohio composed of three safety-net organizations that enrolled 28,295 uninsured poor patients in closed-panel care during 2013. All participating organizations used electronic health records and patient-centered medical homes, publicly reported performance in a regional health improvement collaborative, and accepted a budget-neutral cap approved by CMS. We compared changes between 2012 and 2013 in achieving quality standards for diabetes and hypertension among 3,437 MetroHealth Care Plus enrollees to changes among 1,150 patients with the same conditions who remained uninsured in both years. Compared to continuously uninsured patients with diabetes, MetroHealth Care Plus enrollees with diabetes improved significantly more on composite standards of care and intermediate outcomes. Among enrollees with hypertension, blood pressure control improvements were insignificantly larger than those in the continuously uninsured group with hypertension. Across all 28,295 enrollees, 2013 total costs of care were 28.7 percent below the budget cap, providing cause for optimism that a prepared safety net can meet the challenges of Medicaid expansion.
---------------------
Do Hospital Mergers Reduce Costs?
Matt Schmitt
Northwestern University Working Paper, January 2015
Abstract:
Proponents of hospital consolidation claim that mergers lead to significant cost savings, but there is little systematic evidence backing these claims. For a large sample of hospital mergers between 2000 and 2010, I estimate differences-in-differences models that compare cost trends for acquired hospitals (treatments) to a set of hospitals whose ownership did not change during the period (controls). Pre-merger, the two groups of hospitals appear to share common cost trends. Post-merger, hospitals that were acquired experience slower cost growth than controls. The results indicate that hospitals being acquired realize cost savings between 3 and 5 percent as a result of merger, on average. These results are robust to several different control strategies, such as matching treatments and controls (on the basis of observable hospital characteristics) using optimal matching methods from the statistics literature. I also find suggestive - but not conclusive - evidence that (1) hospitals of acquiring hospitals/systems experience no changes in cost and (2) cost reductions primarily occur with mergers involving multi-hospital systems.
---------------------
Beyond Statistics: The Economic Content of Risk Scores
Liran Einav et al.
NBER Working Paper, June 2015
Abstract:
In recent years, the increased use of "big data" and statistical techniques to score potential transactions has transformed the operation of insurance and credit markets. In this paper, we observe that these widely-used scores are statistical objects that constitute a one-dimensional summary of a potentially much richer heterogeneity, some of which may be endogenous to the specific context in which they are applied. We demonstrate this point empirically using rich data from the Medicare Part D prescription drug insurance program. We show that the "risk scores," which are designed to predict an individual's drug spending and are used by Medicare to customize reimbursement rates to private insurers, do not distinguish between two different sources of spending: underlying health, and responsiveness of drug spending to the insurance contract. Naturally, however, these two determinants of spending have very different implications when trying to predict counterfactual spending under alternative contracts. As a result, we illustrate that once we enrich the theoretical framework to allow individuals to have heterogeneous behavioral responses to the contract, strategic incentives for cream skimming still exist, even in the presence of "perfect" risk scoring under a given contract.
---------------------
Eric Sun & Laurence Baker
Health Affairs, June 2015, Pages 916-921
Abstract:
Physician groups are growing larger in size and fewer in number. Although this consolidation could result in improved patient care, the resulting increase in market concentration also could allow larger groups to negotiate higher physician fees from private insurers. We examined the association between market concentration and physician fees in the case of total knee arthroplasty by calculating market concentration for orthopedic groups practicing in a given market and by analyzing administrative claims data from Marketscan. In the period 2001-10 the average professional fee for total knee arthroplasty was $2,537. During this time, in markets that moved from the bottom quartile of concentration to the top quartile, physician fees paid by private payers increased by $168 per procedure. The increase nearly offset the $261 decline in fees that we observed, absent changes in market concentration. These findings suggest that caution should be used in implementing policies designed to encourage further group concentration, which could produce similar effects.
---------------------
Judith Hibbard et al.
Medical Care Research and Review, August 2015, Pages 481-495
Abstract:
Both payment reform and patient engagement are key elements of health care reform. Yet the question of how incentivizing primary care providers (PCPs) on quality outcomes affects the degree to which PCPs are supportive of patient activation and patient self-management has received little attention. In this mixed-methods study, we use in-depth interviews and survey data from PCPs working in a Pioneer Accountable Care Organization that implemented a compensation model in which a large percentage of PCP salary is based on quality performance. We assess how much PCPs report focusing their efforts on supporting patient activation and self-management, and whether or not they become frustrated with patients who do not change their behaviors. The findings suggest that most PCPs do not see the value in investing their own efforts in supporting patient self-management and activation. Most PCPs saw patient behavior as a major obstacle to improving quality and many were frustrated that patient behaviors affected their compensation.
---------------------
Hospital Alignment with Physicians as a Bargaining Response to Commercial Insurance Markets
Sean Sheng-Hsiu Huang & Ian McCarthy
Georgetown University Working Paper, May 2015
Abstract:
The relationship between physicians and hospitals has dramatically changed over the last decade, with the employer-employee model supplanting the traditional model of private physicians with hospital admitting privileges. We examine the motivations for this increase in physician-hospital alignment, focusing on alignment as a tool to increase bargaining power with private insurers. We then investigate the subsequent effects of such alignment on efficiency and prices, as well as the extent to which a hospital's bargaining motives may influence these effects. Our results suggest that increased concentration in the private insurance market significantly increases hospital-physician alignment, with a 1% increase in health insurance concentration leading to a 0.47% increase in hospital employment of physicians and a 1.08% increase in equity arrangements between hospitals and physicians. We also find significant price increases among some (but not all) forms of physician-hospital alignment, with heterogeneous effects across hospital ownership type. Finally, we find that alignment as a bargaining response to insurance market pressures can lead to significant increases in average Medicare costs per beneficiary of between $900 and $1,350, particularly with certain forms of alignment such as equity agreements. Our results highlight the heterogeneities in the effects of alignment on prices and efficiency, with differential effects across hospital ownership type and competitiveness in the local hospital market. Broadly, we find evidence that physician-hospital alignment in the form of an employee model may improve population-level efficiency with no apparent increase in hospital prices, while some of the more loosely defined arrangements such as physician-hospital organizations are more likely to increase prices and potentially reduce efficiency.
---------------------
Eunjung Lim et al.
Health Services Research, forthcoming
Objective: To examine the impact of key laboratory and race/ethnicity data on the prediction of in-hospital mortality for congestive heart failure (CHF) and acute myocardial infarction (AMI).
Data Sources: Hawaii adult hospitalizations database between 2009 and 2011, linked to laboratory database.
Principal Findings: Adding a simple three-level summary measure based on the number of abnormal laboratory data observed to hospital administrative claims data significantly improved the model prediction for inpatient mortality compared with a baseline risk model using administrative data that adjusted only for age, gender, and risk of mortality (determined using 3M's All Patient Refined Diagnosis Related Groups classification). The addition of race/ethnicity also improved the model.
Conclusions: The results of this study support the incorporation of a simple summary measure of laboratory data and race/ethnicity information to improve predictions of in-hospital mortality from CHF and AMI. Laboratory data provide objective evidence of a patient's condition and therefore are accurate determinants of a patient's risk of mortality. Adding race/ethnicity information helps further explain the differences in in-hospital mortality.
---------------------
Geographic variation in the demand for emergency care: A local population-level analysis
David Lee et al.
Healthcare, forthcoming
Background: Geographic variation in healthcare has been traditionally studied in large areas such as hospital referral regions or service areas. These analyses are limited by variation that exists within local communities.
Materials and methods: Using a New York claims database, we analyzed variation in emergency department use using 35 million visits from 2008 to 2012 among 4797 Census tracts, a smaller unit than usually studied. Using multivariate analysis, we studied associations between population characteristics and proximity to healthcare with rates of emergency department use. We analyzed how factors associated with emergency department utilization differed among urban, suburban, and rural regions.
Results: We found significant geographic variation in emergency department use among Census tracts. Public insurance and uninsurance were correlated with high emergency department utilization across all types of regions. We found that race, ethnicity, and poverty were only associated with high emergency department use in urban regions. In suburban and rural regions, a lower proportion of elderly residents and shorter distances to the nearest ED were correlated with high emergency department use.
Conclusions: Significant variation in emergency department use exists locally when studied within small geographic areas. Insurance type is significantly associated with variation in emergency department use across urban, suburban, and rural regions, whereas the significance of other factors depended on urbanicity.