Care to afford
Bankruptcy, Medical Insurance, and a Law with Unintended Consequences
Thomas Koch
Health Economics, forthcoming
Abstract:
Congress passed the Emergency Medical Treatment and Active Labor Act (EMTALA) in 1986, guaranteeing a standard of medical care to anyone who entered an emergency room. This guarantee made default a more reliable substitute for medical insurance. I construct a tractable structural model of the medical insurance market and find that repealing EMTALA would increase the fraction of the population with insurance while decreasing its price.
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Is the Affordable Care Act Different from Romneycare? A Labor Economics Perspective
Casey Mulligan
NBER Working Paper, August 2013
Abstract:
Measured in percentage points, the Affordable Care Act will, by 2015, add about twelve times more to average marginal labor income tax rates nationwide than the Massachusetts health reform added to average rates in Massachusetts following its 2006 statewide health reform. The rate impacts are different between the two laws for several reasons, especially that: the populations subject to the two laws are different, the Affordable Care Act's employer penalty is an order of magnitude greater, before either reform Massachusetts had already been offering more means-tested and employment-tested health insurance assistance than other states had, and the subsidized health insurance plans created by the Massachusetts reform were less substitutable for employer-provided insurance than are the subsidized plans to be created nationwide next year.
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Average Marginal Labor Income Tax Rates under the Affordable Care Act
Casey Mulligan
NBER Working Paper, August 2013
Abstract:
The Affordable Care Act includes four significant, permanent, implicit unemployment assistance programs, plus various implicit subsidies for underemployment. Every sector of the economy, and about half of nonelderly adults, is directly affected by at least one of those provisions. This paper calculates the ACA's impact on the average reward to working among nonelderly household heads and spouses. The law increases marginal tax rates by an average of five percentage points (of employee compensation), on top of the marginal tax rates that were already present before the it went into effect. The ACA's addition to labor tax wedges is roughly equivalent to doubling both employer and employee payroll tax rates for half of the population.
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The Receding Tide of Medical Malpractice Litigation, Part 1: National Trends
Myungho Paik, Bernard Black & David Hyman
Journal of Empirical Legal Studies, forthcoming
Abstract:
The U.S. has experienced three medical malpractice ("med mal") crises in the past forty years. In response, thirty-one states now have caps on non-economic or total damages. Researchers have studied the impact of these caps, relative to control states without caps, but have not studied trends in no-cap states or overall national trends. We find that the per-physician rate of paid med mal claims has been dropping for 20 years and in 2012 is less than half the 1992 level. Lawsuit rates, in the states with available data, are also declining, at similar rates. "Small" paid claims (payout < $50,000 in 2011 dollars) have been dropping for the full period; "large" paid claims (payout > $50,000) have been dropping since 2001. Payout per large paid claim was roughly flat. Payout per physician have been dropping since 2003, and by 2012 were 48% below their 1992 level. The "third wave" of damage cap adoptions over 2003-2006 contributed to this trend, but there are also large declines in no-cap states.
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The Receding Tide of Medical Malpractice Litigation, Part 2: Effect of Damage Caps
Myungho Paik, Bernard Black & David Hyman
Journal of Empirical Legal Studies, forthcoming
Abstract:
We study the effect of damage caps adopted in the 1990s and 2000s on medical malpractice claim rates and payouts. Prior studies found some evidence that caps reduce payout/claim, but mixed and weak evidence on whether caps reduce paid claim rates and payout per physician. However, most prior studies do not allow for the gradual phase-in of damage caps, which usually apply only to lawsuits filed after the reform's effective date, or only to injuries after the effective date. Once we allow for phase-in, we find strong evidence that damage caps reduce both claim rates and payout per claim, with a large combined impact on payout per physician. The drop in claim rates is concentrated in claims with larger payouts - the ones that would be most affected by a damages cap. Stricter caps have larger effects. Some prior studies also find a large impact of tort reforms other than damage caps. Once we allow for phase-in, we find that these other reforms have no significant impact on either claim rates or payout per claim.
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Taylor Lincoln
Public Citizen Working Paper, August 2013
Abstract:
Medical malpractice payments made on behalf of doctors and the inflation-adjusted value of such payments were at their lowest level on record in 2012, according to the federal government's National Practitioner Data Bank (NPDB), which has tracked such payments since the fall of 1990. In 2012, both the number of malpractice payments on behalf of doctors and unadjusted value of such payments declined for the ninth consecutive year. In unadjusted dollars, payments were at their lowest level since 1998. Medical malpractice payments' share of the nation's health care bill also was its lowest on record in 2012, falling to about one-tenth of 1 percent (0.11 percent) of national health care costs. Medical liability insurance premiums fell to 0.36 of 1 percent of health care costs, the lowest level in the past 10 years, which represents the extent of data the researcher was able to obtain. More than four-fifths of the money allocated in medical malpractice awards in 2012 compensated for death, catastrophic harms or serious permanent injuries. The facts surrounding the prevalence of medical malpractice litigation are important because medical malpractice has been singled out by many in Congress as the culprit for rising health care costs. In reality, this report shows, there is no evidence that the prevalence of medical malpractice litigation significantly influences health care costs. Cumulative malpractice payments were 28.8 percent lower in 2012 than in 2003, yet overall health care costs were 58.3 percent higher.
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Insurer Competition and Negotiated Hospital Prices
Kate Ho & Robin Lee
NBER Working Paper, September 2013
Abstract:
We examine the impact of increased health insurer competition on negotiated hospital prices. Insurer competition can lead to lower premiums and reduced industry surplus, thereby depressing hospital prices; however, hospitals may also leverage fiercer insurer competition when bargaining in order to negotiate higher prices. We rely on a theoretical bargaining model to derive a regression equation relating negotiated prices to the degree of insurer competition, and use the presence of Kaiser Permanente in a hospital's market as a measure of insurer competition. We estimate a model of consumer demand for hospitals and use it to derive many of the other independent variables specified in the regression equation. Leveraging a unique dataset on negotiated prices between hospitals and commercial insurers in California in 2004, we find that increased insurer competition reduces hospital prices on average, but has a positive and empirically meaningful effect on the prices of attractive and high utility generating hospitals. This heterogeneous effect across hospitals - which has not been emphasized in the recent literature on hospital-insurer bargaining - provides incentives for hospital investment and consolidation, and implies that hospital market power can lead to high input prices even in markets where many insurers are present.
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Has Medicare Part D Reduced Racial/Ethnic Disparities in Prescription Drug Use and Spending?
Elham Mahmoudi & Gail Jensen
Health Services Research, forthcoming
Objective: To evaluate whether Medicare Part D has reduced racial/ethnic disparities in prescription drug utilization and spending.
Data: Nationally representative data on white, African American, and Hispanic Medicare seniors from the 2002-2009 Medical Expenditure Panel Survey are analyzed. Five measures are examined: filling any prescriptions during the year, the number of prescriptions filled, total annual prescription spending, annual out-of-pocket prescription spending, and average copay level.
Study Design: We apply the Institute of Medicine's definition of a racial/ethnic disparity and adopt a difference-in-difference-in-differences (DDD) estimator using a multivariate regression framework. The treatment group consists of Medicare seniors, the comparison group, adults without Medicare aged 55-63 years.
Principal Findings: Difference-in-difference-in-differences estimates suggest that for African Americans Part D increased the disparity in annual spending on prescription drugs by $258 (p = .011), yet had no effect on other measures of prescription drug disparities. For Hispanics, DDD estimates suggest that the program reduced the disparities in annual number of prescriptions filled, annual total and out-of-pocket spending on prescription drugs by 2.9 (p = .077), $282 (p = .019) and $143 (p < .001), respectively.
Conclusion: Medicare Part D had mixed effects. Although it reduced Hispanic/white disparities related to prescription drugs among seniors, it increased the African American/white disparity in total annual spending on prescription drugs.
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Tracking Labor Demand with Online Job Postings: The Case of Health IT Workers and the HITECH Act
Aaron Schwartz, Roger Magoulas & Melinda Buntin
Industrial Relations, October 2013, Pages 941-968
Abstract:
Growth in the health information technology (health IT) workforce will be necessary for the widespread adoption of electronic health records called for by the Health Information Technology for Economic and Clinical Health (HITECH) provisions of the American Recovery and Reinvestment Act. However, the health IT workforce is difficult to track using existing sources of data. We introduce a novel method for measuring labor demand in markets not defined by standard industrial or occupational codes. Drawing from 84 million online help wanted postings, we create a dataset of 434,000 health IT-related job listings from 2007 to 2011 whose descriptions contain key phrases such as "electronic health record" or "clinical informatics." We find that health IT-related job postings have grown substantially over time, tripling as a share of healthcare job postings since 2007. Trend-break and difference-in-difference analyses suggest that health IT-related job postings accelerated following HITECH. According to our preferred specification, the legislation was associated with an 86 percent increase in monthly postings, or 162,000 additional postings overall.
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Benjamin Jarvis et al.
Academic Medicine, October 2013, Pages 1471-1477
Purpose: To assess the impact of using an advanced electronic health record (EHR) on hospital quality and patient satisfaction.
Method: This retrospective, cross-sectional analysis was conducted in 2012 to evaluate the association between advanced EHR use (Healthcare Information Management Systems Society [HIMSS] Stage 6 or 7 as of December 2012) and estimated process and experience of care scores for hospitals under the Medicare Hospital Value-Based Purchasing Program, using data from the American Hospital Association for 2008 to 2010. Generalized linear regression models were fit to test the association between advanced EHR use with process of care and experience of care, controlling for hospital characteristics. In a second analysis, the models included variables to account for HIMSS stage of advanced EHR use.
Results: The study included 2,988 hospitals, with 248 (8.3%) classified as advanced EHR users (HIMSS Stage 6 or 7). After controlling for hospital characteristics, advanced EHR use was associated with a 4.2-point-higher process of care score (P < .001). Hospitals with Stage 7 EHRs had 11.7 points higher process of care scores, but Stage 6 users had scores that were not substantially different from those of nonadvanced users. There was no significant difference in estimated experience of care scores by level of advanced EHR use.
Conclusions: This study evaluated the effectiveness of the U.S. federal government's investment in hospital information technology infrastructure. Results suggest that the most advanced EHRs have the greatest payoff in improving clinical process of care scores, without detrimentally impacting the patient experience.
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The Impact of Insurance and HIV Treatment Technology on HIV Testing
Neeraj Sood & Yanyu Wu
NBER Working Paper, September 2013
Abstract:
This paper investigates the effects of health insurance and new antiviral treatments on HIV testing rates among the U.S. general population using nationally representative data from the Behavioral Risk Factor Surveillance Survey (BRFSS) for the years 1993 to 2002. We estimate recursive bivariate probit models with insurance coverage and HIV testing as the dependent variables. We use changes in Medicaid eligibility and distribution of firm size over time within a state as instruments for insurance coverage. The results suggest that (a) insurance coverage increases HIV testing rates, (b) insurance coverage increases HIV testing rates more among the high risk population, and (c) the advent of Highly Active Antiretroviral Therapy (HAART) increases the effects of insurance coverage on HIV testing for high risk populations.
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The effect of medical malpractice liability on rate of referrals received by specialist physicians
Xiao Xu et al.
Health Economics, Policy and Law, October 2013, Pages 453-475
Abstract:
Using nationally representative data from the United States, this paper analyzed the effect of a state's medical malpractice environment on referral visits received by specialist physicians. The analytic sample included 12,839 ambulatory visits to specialist care doctors in office-based settings in the United States during 2003-2007. Whether the patient was referred for the visit was examined for its association with the state's malpractice environment, assessed by the frequency and severity of paid medical malpractice claims, medical malpractice insurance premiums and an indicator for whether the state had a cap on non-economic damages. After accounting for potential confounders such as economic or professional incentives within practices, the analysis showed that statutory caps on non-economic damages of $250,000 were significantly associated with lower likelihood of a specialist receiving referrals, suggesting a potential impact of a state's medical malpractice environment on physicians' referral behavior.
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Health Insurance for "Humans": Information Frictions, Plan Choice, and Consumer Welfare
Benjamin Handel & Jonathan Kolstad
NBER Working Paper, August 2013
Abstract:
Traditional models of insurance choice are predicated on fully informed and rational consumers protecting themselves from exposure to financial risk. In practice, choosing an insurance plan from a set of complex non-linear contracts is a complicated decision often made without full information on several potentially important dimensions. In this paper we combine new administrative data on health plan choices and claims with unique survey data on consumer information and other typically unobserved preference factors in order to separately identify risk preferences, information frictions, and perceived plan hassle costs. The administrative and survey data are linked at the individual level, allowing in-depth investigations of the links between these micro- foundations in both descriptive and choice-model based analyses. We find that consumers lack information on many important dimensions that they are typically assumed to understand, perceive high plan hassle costs, and make choices that depend on these frictions. Moreover, in the context of an expected utility model, including the additional frictions that we measure has direct implications for risk preference estimates, which are typically assumed to be the only source of persistent unobserved preference heterogeneity in such models. In our setting, we show that incorporating measures of these frictions leads to meaningful reductions in estimated consumer risk aversion. This result has both positive and normative implications since risk aversion generally has different welfare implications than information frictions. We assess the welfare impact of a counterfactual menu design and find that the welfare loss from risk exposure when additional frictions are not taken into account is more than double that when they are, illustrating the potential importance of our analysis for policy decisions.
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The Response of Drug Expenditures to Non-Linear Contract Design: Evidence from Medicare Part D
Liran Einav, Amy Finkelstein & Paul Schrimpf
NBER Working Paper, August 2013
Abstract:
We study the demand response to non-linear price schedules using data on insurance contracts and prescription drug purchases in Medicare Part D. Consistent with a static response of drug use to price, we document bunching of annual drug spending as individuals enter the famous "donut hole," where insurance becomes discontinuously much less generous on the margin. Consistent with a dynamic response to price, we document a response of drug use to the future out-of-pocket price by using variation in beneficiary birth month which generates variation in contract duration during the first year of eligibility. Motivated by these two facts, we develop and estimate a dynamic model of drug use during the coverage year that allows us to quantify and explore the effects of alternative contract designs on drug expenditures. For example, our estimates suggest that "filling" the donut hole, as required under the Affordable Care Act, will increase annual drug spending by $180 per beneficiary, or about 10%. Moreover, almost half of this increase is "anticipatory," coming from beneficiaries whose spending prior to the policy change would leave them short of reaching the donut hole. We also describe the nature of the utilization response and its heterogeneity across individuals and types of drugs.
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Perverse Reverse Price Competition: Average Wholesale Prices and Medicaid Pharmaceutical Spending
Abby Alpert, Mark Duggan & Judith Hellerstein
NBER Working Paper, August 2013
Abstract:
Generic drugs comprise an increasing share of total prescriptions dispensed in the U.S., rising from nearly 50 percent in 1999 to 75 percent in 2009. The generic drug market has typically been viewed at the wholesale level as a competitive market with price approaching marginal costs. However, the large presence of third party payers as final purchasers may distort prices at the retail level relative to what a standard model of price competition would predict. In this paper, we investigate how generic drug producers compete in the presence of the procurement rules of the Medicaid program. Medicaid reimbursement to pharmacies, like that of other payers, is based on a benchmark price called the average wholesale price (AWP). The AWP is reported by generic producers themselves, and until recently has been subject to essentially no independent verification. As a result, generic producers have had an incentive to compete for pharmacy market share by reporting AWPs that exceed actual average wholesale prices, as this "spread" leads to larger pharmacy profits. In 2000, after a federal government audit of actual wholesale prices of generic products, states were advised to reduce Medicaid reimbursement by as much as 95% for about 400 generic and off-patent drug products. We use variation induced by the timing of this policy along with its differential impact on drug products' Medicaid reimbursement to estimate the impact of this exogenous price change on the market share of targeted products. Our findings indicate that pharmacies did respond to the perverse incentives of the Medicaid program by dispensing products with the highest AWPs. Overall, the Medicaid market share fell by about 45% for targeted drug products as a result of the policy.