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Why Has Medicine Expanded? The Role of Consumers
Hui Zheng
Social Science Research, July 2015, Pages 34–46
Abstract:
In the past 50 years, the field of medicine has expanded dramatically in many Western societies. Despite substantial improvements in objective health measures, there has not been a commensurate increase in assessments of subjective health. We hypothesize that medical expansion may lower people’s subjective health perceptions, leading to an increase in health care utilization, and, in turn, fueling further medical expansion. We use OECD (Organization for Economic Co-operation and Development) Health Data, World Development Indicators, the World Values Survey, and the European Values Study to fit a difference-in-differences model that removes unobserved cross-national heterogeneity and any period trend that is shared across nations. We find that three dimensions of medical expansion at the societal level (medical investment, medical professionalization/specialization, and an expanded pharmaceutical industry) negatively affect individual subjective health. These findings are robust to different model specifications. We conclude by discussing possible explanations for the adverse effect of medical expansion on subjective health, and how this effect may be related to other mechanisms through which medicine expands.
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Childhood Medicaid Coverage and Later Life Health Care Utilization
Laura Wherry et al.
NBER Working Paper, February 2015
Abstract:
Policy-makers have argued that providing public health insurance coverage to the uninsured lowers long-run costs by reducing the need for expensive hospitalizations and emergency department visits later in life. In this paper, we provide evidence for such a phenomenon by exploiting a legislated discontinuity in the cumulative number of years a child is eligible for Medicaid based on date of birth. We find that having more years of Medicaid eligibility in childhood is associated with fewer hospitalizations and emergency department visits in adulthood for blacks. Our effects are particularly pronounced for hospitalizations and emergency department visits related to chronic illnesses and those of patients living in low-income neighborhoods. Furthermore, we find suggestive evidence that these effects are larger in states where the difference in the number of Medicaid-eligible years across the cutoff birth date is greater. We do not find effects on hospitalizations related to appendicitis or injury, two conditions that are unlikely to be affected by medical intervention in childhood. Our calculations suggest that lower rates of hospitalizations and emergency department visits during one year in adulthood offset between 3 and 5 percent of the initial costs of expanding Medicaid. This implies substantial savings if the decline in utilization spans multiple years or grows with age.
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Ling Zhu & Jennifer Clark
State Politics & Policy Quarterly, forthcoming
Abstract:
The question of how the American political process shapes inequality remains unsettled. While recent studies break ground by linking inequality to political institutions, much of this work focuses on national-level income inequality. The literature is lacking in its examination of inequality in other issue areas at the subnational level. This research explores how partisanship in government affects subnational-level inequality in health care coverage in the context of racial diversity. Using a new Gini-coefficient measure of inequality in health insurance coverage, we find a negative relationship between the seat share of Democratic representatives and inequality in health care coverage but only in states with racially diverse populations. Moreover, Democratic-controlled state legislatures mitigate the negative impact of racial diversity on inequality in health care coverage. These results highlight the importance of examining the partisan foundation of health care inequality in the context of racial diversity.
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Amanda Kowalski
Journal of Business & Economic Statistics, forthcoming
Abstract:
Efforts to control medical care costs depend critically on how individuals respond to prices. I estimate the price elasticity of expenditure on medical care using a censored quantile instrumental variable (CQIV) estimator. CQIV allows estimates to vary across the conditional expenditure distribution, relaxes traditional censored model assumptions, and addresses endogeneity with an instrumental variable. My instrumental variable strategy uses a family member’s injury to induce variation in an individual’s own price. Across the conditional deciles of the expenditure distribution, I find elasticities that vary from -0.76 to -1.49, which are an order of magnitude larger than previous estimates.
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Did the Affordable Care Act's Dependent Coverage Mandate Increase Premiums?
Briggs Depew & James Bailey
Journal of Health Economics, May 2015, Pages 1–14
Abstract:
We investigate the impact of the Affordable Care Act's dependent coverage mandate on insurance premiums. The expansion of dependent coverage under the ACA allows young adults to remain on their parent's private health insurance plans until the age of 26. We find that the mandate has led to a 2.5-2.8 percent increase in premiums for health insurance plans that cover children, relative to single-coverage plans. We are able to conclude that employers did not pass on the entire premium increase to employees through higher required plan contributions.
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Michael Dickstein et al.
NBER Working Paper, January 2015
Abstract:
Under the Affordable Care Act, individual states have discretion in how they define coverage regions, within which insurers must charge the same premium to buyers of the same age, family structure, and smoking status. We exploit variation in these definitions to investigate whether the size of the coverage region affects outcomes in the ACA marketplaces. We find large consequences for small and rural markets. When states combine small counties with neighboring urban areas into a single region, the included rural markets see .6 to .8 more active insurers, on average, and savings in annual premiums of between $200 and $300.
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Medicare Is Scrutinizing Evidence More Tightly For National Coverage Determinations
James Chambers et al.
Health Affairs, February 2015, Pages 253-260
Abstract:
We examined Medicare national coverage determinations for medical interventions to determine whether or not they have become more restrictive over time. National coverage determinations address whether particular big-ticket medical items, services, treatment procedures, and technologies can be paid for under Medicare. We found that after we adjusted for the strength of evidence and other factors known to influence the determinations of the Centers for Medicare and Medicaid Services (CMS), the evidentiary bar for coverage has risen. More recent coverage determinations (from mid-March 2008 through August 2012) were twenty times less likely to be positive than earlier coverage determinations (from February 1999 through January 2002). Furthermore, coverage during the study period was increasingly and positively associated both with the degree of consistency of favorable findings in the CMS reviewed clinical evidence and with recommendations made in clinical guidelines. Coverage policy is an important payer tool for promoting the appropriate use of medical interventions, but CMS’s rising evidence standards also raise questions about patients’ access to new technologies and about hurdles for the pharmaceutical and device industries as they attempt to bring innovations to the market.
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Lindsay Sabik & Cathy Bradley
Health Economics, forthcoming
Abstract:
This paper investigates the effect of expansion to near-universal health insurance coverage in Massachusetts on breast and cervical cancer screening. We use data from 2002 to 2010 to compare changes in receipt of mammograms and Pap tests in Massachusetts relative to other New England states. We also consider the effect specifically among low-income women. We find positive effects of Massachusetts health reform on cancer screening, suggesting a 4 to 5% increase in mammograms and 6 to 7% increase in Pap tests annually. Increases in both breast and cervical cancer screening are larger 3 years after the implementation of reform than in the year immediately following, suggesting that there may be an adjustment or learning period. Low-income women experience greater increases in breast and cervical cancer screening than the overall population; among women with household income less than 250% of the federal poverty level, mammograms increase by approximately 8% and Pap tests by 9%. Overall, Massachusetts health reform appears to have increased breast and cervical cancer screening, particularly among low-income women. Our results suggest that reform was successful in promoting preventive care among targeted populations.
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Pricing Regulation and Imperfect Competition on the Massachusetts Health Insurance Exchange
Keith Marzilli Ericson & Amanda Starc
Review of Economics and Statistics, forthcoming
Abstract:
We analyze insurance-pricing regulation under imperfect competition on Massachusetts’ health insurance exchange. Differential markups lead to price variation apart from cost variation. Coarse insurer pricing strategies identify consumer demand. Younger consumers are twice as price sensitive as older consumers. Older consumers thus face higher markups over costs. Modified community rating links prices for consumers differing in both costs and preferences, and changes the marginal consumer firms face. Stricter regulations transfer resources from low-cost to high-cost consumers, reduce firm profits, and increase overall consumer surplus.
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Patient Responses to Incentives in Consumer-directed Health Plans: Evidence from Pharmaceuticals
Peter Huckfeldt et al.
NBER Working Paper, February 2015
Abstract:
Prior studies suggest that consumer-directed health plans (CDHPs) -characterized by high deductibles and health care accounts- reduce health costs, but there is concern that enrollees indiscriminately reduce use of low-value services (e.g., unnecessary emergency department use) and high-value services (e.g., preventive care). We investigate how CDHP enrollees change use of pharmaceuticals for chronic diseases. We compare two large firms where nearly all employees were switched to CDHPs to firms with conventional health insurance plans. In the first firm’s CDHP, pharmaceuticals were subject to the deductible, while in the second firm pharmaceuticals were exempt. Employees in the first firm shifted the timing of drug purchases to periods with lower cost sharing and were more likely to use lower-cost drugs, but the largest effect of the CDHP was to reduce utilization. Employees in the second firm also reduced utilization, but did not shift the timing or use of low cost drugs.
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Do Medicaid HMOs reduce utilization? Evidence from Florida obstetrics
Atul Gupta
Stanford Working Paper, November 2014
Abstract:
Using hospital discharge data on Medicaid patients, I test whether physicians choose C-sections less often for HMO patients relative to non-HMO patients. I find that the odds of an HMO patient receiving a primary C-section are about 40% lower, holding all else equal. The effect is heterogeneous and declines in magnitude as patients become more complex. A stylized principal-agent model of physician procedure choice estimates that physicians put about 20% less weight on patient related factors for non-HMO patients relative to HMO enrollees. Hence the agency distortion is more severe in the case of non-HMO patients.
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Quality Ratings and Premiums in the Medicare Advantage Market
Ian McCarthy & Michael Darden
Emory University Working Paper, January 2015
Abstract:
We examine the response of Medicare Advantage contracts to published quality ratings. We identify the effect of star ratings on premiums using a regression discontinuity design that exploits plausibly random variation around rating thresholds. We find that 3, 3.5, and 4-star contracts in 2009 significantly increased their 2010 monthly premiums by $20 or more relative to contracts just below the respective threshold values. High quality contracts also disproportionately dropped $0 premium plans or expanded their offering of positive premium plans. Welfare results suggest that the estimated premium increases reduced consumer welfare by over $250 million among the affected beneficiaries.
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The Local Influence of Pioneer Investigators on Technology Adoption: Evidence from New Cancer Drugs
Leila Agha & David Molitor
NBER Working Paper, January 2015
Abstract:
Local opinion leaders may play a key role in easing information frictions associated with technology adoption. This paper analyzes the influence of physician investigators who lead pivotal clinical trials for new cancer drugs. By comparing diffusion patterns across many drugs, we separate correlated regional demand for new technology from information spillovers. Using original data on clinical trial study authors for 21 new cancer drugs along with Medicare claims data from 1998-2008, we find that patients in the lead investigator’s region are initially 36% more likely to receive the new drug, but utilization converges within four years. We further demonstrate that “superstar” physicians, identified by trial role or citation history, have substantially broader influence than less prominent physicians.
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Interpreting Pre-trends as Anticipation: Impact on Estimated Treatment Effects from Tort Reform
Anup Malani & Julian Reif
Journal of Public Economics, April 2015, Pages 1–17
Abstract:
While conducting empirical work, researchers sometimes observe changes in outcomes before adoption of a new policy. The conventional diagnosis is that treatment is endogenous. This observation is also consistent, however, with anticipation effects that arise naturally out of many theoretical models. This paper illustrates that distinguishing endogeneity from anticipation matters greatly when estimating treatment effects. It provides a framework for comparing different methods for estimating anticipation effects and proposes a new set of instrumental variables to address the problem that subjects’ expectations are unobservable. Finally, this paper examines a specific set of tort reforms that was not targeted at physicians but was likely anticipated by them. Interpreting pre-trends as evidence of anticipation increases the estimated effect of these reforms by a factor of two compared to a model that ignores anticipation.
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Nicholas Osborne et al.
Journal of the American Medical Association, 3 February 2015, Pages 496-504
Importance: The American College of Surgeons National Surgical Quality Improvement Program (ACS NSQIP) provides feedback to hospitals on risk-adjusted outcomes. It is not known if participation in the program improves outcomes and reduces costs relative to nonparticipating hospitals.
Design, Setting, and Participants: Quasi-experimental study using national Medicare data (2003-2012) for a total of 1 226 479 patients undergoing general and vascular surgery at 263 hospitals participating in ACS NSQIP and 526 nonparticipating hospitals. A difference-in-differences analytic approach was used to evaluate whether participation in ACS NSQIP was associated with improved outcomes and reduced Medicare payments compared with nonparticipating hospitals that were otherwise similar. Control hospitals were selected using propensity score matching (2 control hospitals for each ACS NSQIP hospital).
Results: After accounting for patient factors and preexisting time trends toward improved outcomes, there were no statistically significant improvements in outcomes at 1, 2, or 3 years after (vs before) enrollment in ACS NSQIP. For example, in analyses comparing outcomes at 3 years after (vs before) enrollment, there were no statistically significant differences in risk-adjusted 30-day mortality (4.3% after enrollment vs 4.5% before enrollment; relative risk [RR], 0.96 [95% CI, 0.89 to 1.03]), serious complications (11.1% after enrollment vs 11.0% before enrollment; RR, 0.96 [95% CI, 0.91 to 1.00]), reoperations (0.49% after enrollment vs 0.45% before enrollment; RR, 0.97 [95% CI, 0.77 to 1.16]), or readmissions (13.3% after enrollment vs 12.8% before enrollment; RR, 0.99 [95% CI, 0.96 to 1.03]). There were also no differences at 3 years after (vs before) enrollment in mean total Medicare payments ($40 [95% CI, −$268 to $348]), or payments for the index admission (−$11 [95% CI, −$278 to $257]), hospital readmission ($245 [95% CI, −$231 to $721]), or outliers (−$86 [95% CI, −$1666 to $1495]).
Conclusions and Relevance: With time, hospitals had progressively better surgical outcomes but enrollment in a national quality reporting program was not associated with the improved outcomes or lower Medicare payments among surgical patients. Feedback on outcomes alone may not be sufficient to improve surgical outcomes.
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David Etzioni et al.
Journal of the American Medical Association, 3 February 2015, Pages 505-511
Importance: Programs that analyze and report rates of surgical complications are an increasing focus of quality improvement efforts. The most comprehensive tool currently used for outcomes monitoring in the United States is the American College of Surgeons (ACS) National Surgical Quality Improvement Program (NSQIP).
Design, Setting, and Participants: Data from the University HealthSystem Consortium from January 2009 to July 2013 were used to identify elective hospitalizations representing a broad spectrum of elective general/vascular operations in the United States. Data on hospital participation in the NSQIP were obtained through review of semiannual reports published by the ACS. Hospitalizations at any hospital that discontinued or initiated participation in the NSQIP during the study period were excluded after the date on which that hospital’s status changed. A difference-in-differences approach was used to model the association between hospital-based participation in NSQIP and changes in rates of postoperative outcomes over time.
Results: The cohort included 345 357 hospitalizations occurring in 113 different academic hospitals; 172 882 (50.1%) hospitalizations were in NSQIP hospitals. Hospitalized patients were predominantly female (61.5%), with a mean age of 55.7 years. The types of procedures performed most commonly in the analyzed hospitalizations were hernia repairs (15.7%), bariatric (10.5%), mastectomy (9.7%), and cholecystectomy (9.0%). After accounting for patient risk, procedure type, underlying hospital performance, and temporal trends, the difference-in-differences model demonstrated no statistically significant differences over time between NSQIP and non-NSQIP hospitals in terms of likelihood of complications (adjusted odds ratio, 1.00; 95% CI, 0.97-1.03), serious complications (adjusted odds ratio, 0.98; 95% CI, 0.94-1.03), or mortality (adjusted odds ratio, 1.04; 95% CI, 0.94-1.14).
Conclusions and Relevance: No association was found between hospital-based participation in the NSQIP and improvements in postoperative outcomes over time within a large cohort of patients undergoing elective general/vascular operations at academic hospitals in the United States. These findings suggest that a surgical outcomes reporting system does not provide a clear mechanism for quality improvement.
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John Hernandez, Susanne Machacz & James Robinson
Health Affairs, February 2015, Pages 261-270
Abstract:
Medicare pioneered add-on payments to facilitate the adoption of innovative technologies under its hospital prospective payment system. US policy makers are now experimenting with broader value-based payment initiatives, but these have not been adjusted for innovation. This article examines the structure, processes, and experience with Medicare’s hospital new technology add-on payment program since its inception in 2001 and compares it with analogous payment systems in Germany, France, and Japan. Between 2001 and 2015 CMS approved nineteen of fifty-three applications for the new technology add-on payment program. We found that the program resulted in $201.7 million in Medicare payments in fiscal years 2002–13 — less than half the level anticipated by Congress and only 34 percent of the amount projected by CMS. The US program approved considerably fewer innovative technologies, compared to analogous technology payment mechanisms in Germany, France and Japan. We conclude that it is important to adjust payments for new medical innovations within prospective and value-based payment systems explicitly as well as implicitly. The most straightforward method to use in adjusting value-based payments is for the insurer to retrospectively adjust spending targets to account for the cost of new technologies. If CMS made such retrospective adjustments, it would not financially penalize hospitals for adopting beneficial innovations.
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Cost Saving and Quality of Care in a Pediatric Accountable Care Organization
Kelly Kelleher et al.
Pediatrics, forthcoming
Background and objectives: Accountable care organizations (ACOs) are responsible for costs and quality across a defined population. To succeed, the ACO must improve value by reducing costs while either maintaining or improving the quality of care. We examined changes from 2008 through 2013 in the cost and quality of care for Partners for Kids (PFK), a pediatric ACO serving an Ohio Medicaid population.
Methods: We measured the historical cost of care for PFK and gathered comparison statewide Ohio Medicaid fee-for-service (FFS) and managed care (MC) cost histories. Changes in quality of care measures were assessed by using 15 Agency for Healthcare Research and Quality Pediatric Quality Indicators and 4 indicators targeted by PFK.
Results: PFK per-member-per-month costs were lower in 2008 than either FFS or MC (P < .001) costs and grew at a rate of $2.40 per year compared with FFS increases of $16.15 per year (P < .001) and MC increases of $6.47 per year (P < .121) with ∼3.5 million member-months each year. The quality of care of children in PFK improved significantly (P < .05) in 2011–2013 versus 2008–2010 on 5 quality measures (including 2 composite measures) and declined significantly on 3 measures. Other measures did not change or were rare events with no measureable change.
Conclusions: PFK reduced the growth in costs compared with FFS Medicaid and averages less than MC Medicaid. This slowing in cost growth was achieved without diminishing the overall quality or outcomes of care. PFK thus improved the value of care for Medicaid children.
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Appointment Availability after Increases in Medicaid Payments for Primary Care
Daniel Polsky et al.
New England Journal of Medicine, 5 February 2015, Pages 537-545
Background: Providing increases in Medicaid reimbursements for primary care, a key provision of the Affordable Care Act (ACA), raised Medicaid payments to Medicare levels in 2013 and 2014 for selected services and providers. The federally funded increase in reimbursements was aimed at expanding access to primary care for the growing number of Medicaid enrollees. The reimbursement increase expired at the end of 2014 in most states before policymakers had much empirical evidence about its effects.
Methods: We measured the availability of and waiting times for appointments in 10 states during two periods: from November 2012 through March 2013 and from May 2014 through July 2014. Trained field staff posed as either Medicaid enrollees or privately insured enrollees seeking new-patient primary care appointments. We estimated state-level changes over time in a stable cohort of primary care practices that participated in Medicaid to assess whether willingness to provide appointments for new Medicaid enrollees was related to the size of increases in Medicaid reimbursements in each state.
Results: The availability of primary care appointments in the Medicaid group increased by 7.7 percentage points, from 58.7% to 66.4%, between the two time periods. The states with the largest increases in availability tended to be those with the largest increases in reimbursements, with an estimated increase of 1.25 percentage points in availability per 10% increase in Medicaid reimbursements (P=0.03). No such association was observed in the private-insurance group. During the same periods, waiting times to a scheduled new-patient appointment remained stable over time in the two study groups.
Conclusions: Our study provides early evidence that increased Medicaid reimbursement to primary care providers, as mandated in the ACA, was associated with improved appointment availability for Medicaid enrollees among participating providers without generating longer waiting times.
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Defensive Medicine in Neurosurgery: Does State-Level Liability Risk Matter?
Timothy Smith et al.
Neurosurgery, February 2015, Pages 105–114
Objective: To examine the relationship of defensive medicine — both “assurance” behaviors and “avoidance” behaviors — to the liability environment.
Methods: A 51-question online survey was sent to 3344 US neurosurgeon members of the American Board of Neurological Surgeons (ABNS). The survey was anonymous and conducted over 6 weeks in the spring of 2011. The previously validated questionnaire contained questions on neurosurgeon, patient, and practice characteristics; perceptions of the liability environment; and defensive-medicine behaviors. Bivariate and multivariate analyses examined the state liability risk environment as a predictor of a neurosurgeon's likelihood of practicing defensive medicine.
Results: A total of 1026 neurosurgeons completed the survey (31% response rate). Neurosurgeons' perceptions of their state's liability environment generally corresponded well to more objective measures of state-level liability risk because 83% of respondents correctly identified that they were practicing in a high-risk environment. When controlling for surgeon experience, income, high-risk patient load, liability history, and type of patient insurance, neurosurgeons were 50% more likely to practice defensive medicine in high-risk states compared with low-risk-risk states (odds ratio: 1.5, P < .05).
Conclusion: Both avoidance and assurance behaviors are prevalent among US neurosurgeons and are correlated with subjective and objective measures of state-level liability risk. Defensive medicine practices do not align with patient-centered care and may contribute to increased inefficiency in an already taxed health care system.
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Amanda Kowalski
NBER Working Paper, January 2015
Abstract:
Young people with private health insurance sometimes transition to the public health insurance safety net after they get sick, but popular sources of cross-sectional data obscure how frequently these transitions occur. We use longitudinal data on almost all hospital visits in New York from 1995 to 2011. We show that young privately insured individuals with diagnoses that require more hospital visits in subsequent years are more likely to transition to public insurance. If we ignore the longitudinal transitions in our data, we obscure over 80% of the value of public health insurance to the young and privately insured.
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Regional Growth in Medicare Spending, 1992–2010
Camille Chicklis et al.
Health Services Research, forthcoming
Objective: To determine if regions with high Medicare expenditures in a given setting remain high cost over time.
Data Sources/Study Setting: One hundred percent of national Medicare Parts A and B fee-for-service beneficiary claims data and enrollment for 1992–2010.
Principal Findings: High-cost regions in 1992 are likely to remain high cost in 2010. Stability in regional spending is highest in the home health, inpatient hospital, and outpatient hospital settings over this time period. Despite the persistence of a region's relative spending over time, a region's spending levels in all settings except home health tend to regress toward the mean.
Conclusions: Relatively high-cost regions tend to remain so over long periods of time, even after controlling for patient health status and geographic price variation, suggesting that the observed effect reflects real differences in practice patterns.
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New Evidence on the Persistence of Health Spending
Richard Hirth et al.
Medical Care Research and Review, forthcoming
Abstract:
Surprisingly little is known about long-term spending patterns in the under-65 population. Such information could inform efforts to improve coverage and control costs. Using the MarketScan claims database, we characterize the persistence of health care spending in the privately insured, under-65 population. Over a 6-year period, 69.8% of enrollees never had annual spending in the top 10% of the distribution and the bottom 50% of spenders accounted for less than 10% of spending. Those in the top 10% in 2003 were almost as likely (34.4%) to be in the top 10% five years later as one year later (43.4%). Many comorbid conditions retained much of their predictive power even 5 years later. The persistence at both ends of the spending distribution indicates the potential for adverse selection and cream skimming and supports the use of disease management, particularly for those with the conditions that remained strong predictors of high spending throughout the follow-up period.