Statistical Life

Kevin Lewis

March 16, 2020

Patients as Consumers in the Market for Medicine: The Halo Effect of Hospitality
Cristobal Young & Xinxiang Chen
Social Forces, forthcoming

Consumer-driven health care is often heralded as a new quality paradigm in medicine. However, patients-as-consumers face difficulties in judging the quality of their medical treatment. With a sample of 3,000 U.S. hospitals, we find that neither medical quality nor patient survival rates have much impact on patient satisfaction with their hospital. In contrast, patients are very sensitive to the “room and board” aspects of care that are highly visible. Quiet rooms have a larger impact on patient satisfaction than medical quality, and communication with nurses affects satisfaction far more than the hospital-level risk of dying. Hospitality experiences create a halo effect of patient goodwill, while medical excellence and patient safety do not. Moreover, when hospitals face greater competition from other hospitals, patient satisfaction is higher but medical quality is lower. Consumer-driven health care creates pressures for hospitals to be more like hotels. These findings lend broader insight into unintended consequences of marketization.

(How) did attack advertisements increase Affordable Care Act enrollments?
Niam Yaraghi et al.
PLoS ONE, February 2020

We examine the effects of exposure to negative information in attack advertisements in the context of Affordable Care Act (ACA) and Common Core (CC) education standards and show that they lead to an increase in the ACA enrollments and support of the CC standards. To explain this effect, we rely on the knowledge-gap theory and show that individuals who were exposed to more attack advertisements were also more likely to independently seek information, become more knowledgeable, and consequently support these subjects. In addition to an observational study, to test our hypotheses on the link between exposure to negative information, curiosity, and shifts in knowledge and support levels, we design and conduct a randomized experiment using a sample of 300 unique individuals. Our multi-methods research contributes to marketing literature by documenting a rare occasion in which exposure to attack advertisements leads to increased demand and unveiling the mechanisms through which this effect takes place.

Health Care Spending in the US vs UK: The Roles of Medical Education Costs, Malpractice Risk and Defensive Medicine
Michael Keane, Barry McCormick & Gosia Popławska
European Economic Review, forthcoming

We analyze how two key factors contribute to the high cost of healthcare in the US relative to the UK: (i) the higher private cost of medical education, and (ii) the higher risk of malpractice litigation. To assess the role of these factors we formulate, calibrate and simulate an equilibrium model of physician wages and the supply of medical graduates, work hours and treatment decisions of practicing physicians, and malpractice risk and malpractice insurance pricing. Consistent with prior work, we find direct costs of malpractice fines and insurance explain little of the high cost of healthcare in the US. However, the high private cost of medical education interacts with high malpractice risk in an interesting way: It leads doctors to (i) demand high wages and (ii) use excessive diagnostics to mitigate risk (“defensive medicine”). The agency problem that arises because patients cannot judge the efficacy of tests allows them to be over-prescribed. Together, these factors increase costs far more than direct malpractice costs. Specifically, physician salaries plus diagnostic tests comprise 4.04% of GDP in the US, compared to only 2.3% in the UK. The mechanisms emphasized in our model can largely explain the difference. Our policy simulations imply that more generous medical education subsidies would lead to both improved patient welfare and reduced overall health care costs in the US system (a Pareto improvement). We also find policies to (i) reduce malpractice risk, or (ii) induce doctors to internalize a small part of diagnostic costs, would have similar efficacious effects.

Associations between Medicaid expansion and nurse staffing ratios and hospital readmissions
Wafa Tarazi
Health Services Research, forthcoming

Data sources: Secondary data from the 2011‐2016 Healthcare Cost Report Information System, the American Hospital Association Annual Survey, and the Hospital Compare data.

Study design: Difference‐in‐difference models are used to compare outcomes in hospitals located in states that expanded Medicaid with those located in nonexpansion states. The changes in nurse staffing ratios and hospital‐wide readmission rates are calculated in each one of the postexpansion years (2014, 2015, and 2016), compared to pre‐expansion.

Principal findings: Results indicate that nurse staffing ratios increased, whereas hospital‐wide readmission rates declined in expansion states relative to nonexpansion states. Nurse staffing ratios increased by 0.33, 0.42, and 0.46 registered nurses hours per adjusted patient days in 2014, 2015, and 2016 in hospitals located in expansion states, compared with hospitals in nonexpansion states after expansion. This increase was statistically significant (P < .001) in 2015 and 2016, but marginally significant (P = .016) in 2014. Hospital‐wide readmission rates statistically significantly decreased by 9, 16, and 18 per 10 000 patients (P < .001) in 2014, 2015, and 2016, respectively, in expansion vs nonexpansion states hospitals after expansion.

Administrative Discretion in Scientific Funding: Evidence from a Prestigious Postdoctoral Training Program
Donna Ginther & Misty Heggeness
NBER Working Paper, March 2020

The scientific community is engaged in an active debate on the value of its peer-review system. Does peer review actually serve the role we envision for it — that of helping government agencies predict what ideas have the best chance of contributing to scientific advancement? Many federal agencies use a two-step review process that includes programmatic discretion in selecting awards. This process allows us to determine whether success in a future independent scientific-research career is more accurately predicted by peer-review recommendations or discretion by program staff and institute leaders. Using data from a prestigious training program at the National Institute of Health (NIH), the Ruth L. Kirschstein National Research Service Award (NRSA), we provide evidence on the efficacy of peer review. We find that, despite all current claims to the contrary, the existing peer-review system works as intended. It more closely predicts high-quality science and future research independence than discretion. We discover also that regression discontinuity, the econometric method typically used to examine the effect of scientific funding, does not fit many scientific-funding models and should only be used with caution when studying federal awards for science.

Do payor‐based outreach programs reduce medical cost and utilization?
Benjamin Ukert et al.
Health Economics, forthcoming

There is growing interest in using predictive analytics to drive interventions that reduce avoidable healthcare utilization. This study evaluates the impact of such an intervention utilizing claims from 2013 to 2017 for high‐risk Medicare Advantage patients with congestive heart failure. A predictive algorithm using clinical and nonclinical information produced a risk score ranking for health plan members in 10 separate waves between July 2013 and May 2015. Each wave was followed by an outreach intervention. The varying capacity for outreach across waves created a set of arbitrary intervention treatment cutoff points, separating treated and untreated members with very similar predicted risk scores. We estimate a difference‐in‐differences model to identify the effects of the intervention program among patients with a high score on care utilization. We find that enrollment in the intervention decreased the probability and number of hospitalizations (by 43% and 50%, respectively) and emergency room visits (10% and 14%, respectively), reduced the time until a primary care visit (8.2 days), and reduced total medical cost by $716 per month in the first 6 months following outreach.

Selection in Employer Sponsored Health Insurance
Elena Capatina
Journal of Health Economics, forthcoming

This paper examines the extensive margin of selection into employer-sponsored health insurance (ESHI) using data from the Medical Expenditures Panel Survey 2001-2010 and 2014-2016 and the National Longitudinal Survey of Youth ’97 in 2010. Controlling for a large set of firm and job characteristics, I find that before the implementation of the Affordable Care Act (ACA) in 2014, workers aged 25-40 who declined ESHI and remained privately uninsured had significantly higher health risk than those who enrolled. No correlation between health and insurance take-up is found in the 41-64 age group. These results are partly explained by differences in income and Medicaid crowding out ESHI for high risk workers. The paper sheds light on the characteristics of uninsured workers, their incentives for declining insurance and the interaction between private and public health insurance. The allocation of ESHI remained unchanged after the ACA was introduced due to the provisions’ counteracting effects.

Worth the Weight? Recent Trends in Obstetric Practices, Gestational Age, and Birth Weight in the United States
Andrea Tilstra & Ryan Masters
Demography, February 2020, Pages 99–121

Birth weight in the United States declined substantially during the 1990s and 2000s. We suggest that the declines were likely due to shifts in gestational age resulting from changes in obstetric practices. Using restricted National Vital Statistics System data linked birth/infant death data for 1990–2013, we analyze trends in obstetric practices, gestational age distributions, and birth weights among first-birth singletons born to U.S. non-Hispanic White, non-Hispanic Black, and Latina women. We use life table techniques to analyze the joint probabilities of gestational age-specific birth and gestational age-specific obstetric intervention (i.e., induced cesarean delivery, induced vaginal delivery, not-induced cesarean delivery, and not-induced vaginal delivery) to fully document trends in obstetric practices by gestational age. We use simulation techniques to estimate counterfactual changes in birth weight distributions if obstetric practices did not change between 1990 and 2013. Results show that between 1990 and 2013, the likelihood of induced labors and cesarean deliveries increased at all gestational ages, and the gestational age distribution of U.S. births significantly shifted. Births became much less likely to occur beyond gestational week 40 and much more likely to occur during weeks 37–39. Overall, nearly 18% of births from not-induced labor and vaginal delivery at later gestational ages were replaced with births occurring at earlier gestational ages from obstetric interventions. Results suggest that if rates of obstetric practices had not changed between 1990 and 2013, then the average U.S. birth weight would have increased over this time. Findings strongly indicate that recent declines in U.S. birth weight were due to increases in induced labor and cesarean delivery at select gestational ages.

Defensive Medicine and Obstetric Practices: Evidence from the Military Health System
Michael Frakes & Jonathan Gruber
Journal of Empirical Legal Studies, March 2020, Pages 4-37

We estimate the extent of defensive medicine by physicians during labor and delivery, drawing on a novel and significant source of variation in liability pressure. In particular, we embrace the no‐liability counterfactual made possible by the structure of liability rules in the Military Heath System. Active‐duty patients seeking treatment from military facilities cannot sue for harms resulting from negligent care, while protections are provided to dependents treated at military facilities and to all patients — active‐duty or not — who receive care from civilian facilities. Drawing on this variation and addressing endogeneity in the choice of treatment location by estimating mother fixed effects specifications and by exploiting exogenous shocks to care location choices stemming from base‐hospital closures, we find suggestive evidence that liability immunity increases cesarean utilization and treatment intensity during childbirth, with no measurable negative effect on patient outcomes.

Do financial incentives matter? Effects of Medicare price shocks on skilled nursing facility care
Daifeng He, Peter McHenry & Jennifer Mellor
Health Economics, forthcoming

Skilled nursing facility (SNF) spending has been one of the fastest growing categories of Medicare spending over the past few decades, and reductions in SNF payments are often recommended as part of Medicare cost containment efforts. Using a quasi‐experiment resulting from a policy‐driven and facility‐specific Medicare payment change, we provide new evidence on how Medicare payment changes affect the amount of SNF care provided to Medicare patients. Specifically, we examine a one‐time, plausibly exogenous change in the hospital wage index, an area‐level adjustment to SNF payments that affected the majority of SNFs nationwide. Using a panel dataset of SNFs, we model the effects of these payment changes on more than 12,000 SNFs across the United States. We find that increases in Medicare payment rates to SNFs increased the total number of Medicare resident days at SNFs. Specifically, a 5% payment increase raised Medicare resident days by 2.33% at facilities with a 10% Medicare share relative to 0%. Further, the effects were asymmetric: Although Medicare payment increases affected Medicare days, payment decreases did not. Our results have important implications for policies that alter the Medicare base payment rates to SNFs and other health care providers.

Drug Firms' Payments and Physicians' Prescribing Behavior in Medicare Part D
Colleen Carey, Ethan Lieber & Sarah Miller
NBER Working Paper, February 2020

In a pervasive but controversial practice, drug firms frequently make monetary or in-kind payments to physicians in the course of promoting prescription drugs. We use a federal database on the universe of such interactions between 2013 and 2015 linked to prescribing behavior in Medicare Part D. We account for the targeting of payments with fixed effects for each physician-drug combination. In an event study, we show that physicians increase prescribing of drugs for which they receive payments in the months just after payment receipt, with no evidence of differential trends between paid and unpaid physicians prior to the payment. Using hand-collected efficacy data on three major therapeutic classes, we show that those receiving payments prescribe lower-quality drugs following payment receipt, although the magnitude is small and unlikely to be clinically significant. In addition, we examine five case studies of major drugs going off patent. Physicians receiving payments from the firms experiencing the patent expiry transition their patients just as quickly to generics as physicians who do not receive such payments.

How protected classes in Medicare Part D influence U.S. drug sales, utilization, and price
Courtney Yarbrough
Health Economics, forthcoming

When the Medicare Part D prescription drug benefit was implemented in 2006, six drug classes were designated “protected classes.” Because responsibility for obtaining favorable drug prices depends on private insurers' abilities to negotiate with pharmaceutical manufacturers using the threat of formulary exclusion, the protected class designation could undermine the insurers' ability to control spending and utilization of drugs in these six classes. I estimate the effect of the protected class policy on U.S. national drug sales, utilization, and price using 2001–2010 IMS Health National Sales Perspectives data and Verispan Vector One: National data and controlling for drug and year fixed effects. I find that protected status beginning in 2006 led to $112–121 million per drug per year higher U.S. sales for drugs in protected classes relative to unprotected drugs. Greater sales were driven by the antidepressant, antipsychotic, anticonvulsant, and antineoplastic classes. Subsequent analyses on a subset of drugs reveal that increases in both price and quantity are responsible for the growth of sales in protected class drugs. These results are important for informing the recent and ongoing deliberation by the Medicare program over whether to remove several classes from protection.

Trading Spaces: Medicare’s Regulatory Spillovers on Treatment Setting for Non-Medicare Patients
Michael Geruso & Michael Richards
University of Texas Working Paper, February 2020

Medicare pricing is known to indirectly influence provider prices and care provision for non-Medicare patients; however, Medicare’s regulatory externalities are less well-understood. We study such implications by examining how physicians’ outpatient surgery setting preferences respond to the removal of a Medicare ban on ambulatory surgery center (ASC) use for a specific procedure. Following the policy change, surgeons sharply reallocate targeted Medicare cases to ASCs and are up to 70% more likely to use ASCs for equivalent non-Medicare cases. Affected surgeons also shift other procedures outside of the regulation’s scope to ASCs — suggesting diffuse distortionary effects from Medicare rulemaking.

Priority access to health care: Evidence from an exogenous policy shock
Christine Yee et al.
Health Economics, March 2020, Pages 306-323

Access to care is an important issue in public health care systems. Unlike private systems, in which price equilibrates supply and demand, public systems often ration medical services through wait times. Access that is given on a first come, first served basis might not yield an allocation of resources that maximizes the health of a population, potentially creating suboptimal heterogeneity in wait times. In this study, we examine an access disparity between two groups of patients — established patients and new patients. We exploit an exogenous policy change — implemented by the U.S. Veterans Health Administration — that removed the disparity and homogenized the wait time. We find strong evidence that without such a policy, established patients have priority access over new patients. We discuss whether this is a suboptimal allocation of resources. We additionally find that established patient priority access is an important determinant of access for new patients; accounting for it increased the explanatory power of our statistical model of new patient wait times by a factor of five. The findings imply that policy and management decisions may be more effective in achieving the optimal distribution of access if access heterogeneity is recognized and accounted for explicitly.

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