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Thursday, January 24, 2013

Evidence of insurability

 

Equilibrium Labor Market Search and Health Insurance Reform

Naoki Aizawa & Hanming Fang
NBER Working Paper, January 2013

Abstract:
We present and empirically implement an equilibrium labor market search model where risk averse workers facing medical expenditure shocks are matched with firms making health insurance coverage decisions. Our model delivers a rich set of predictions that can account for a wide variety of phenomenon observed in the data including the correlations among firm sizes, wages, health insurance offering rates, turnover rates and workers' health compositions. We estimate our model by Generalized Method of Moments using a combination of micro data sources including Survey of Income and Program Participation (SIPP), Medical Expenditure Panel Survey (MEPS) and Robert Wood Johnson Foundation Employer Health Insurance Survey. We use our estimated model to evaluate the equilibrium impact of the 2010 Affordable Care Act (ACA) and find that it would reduce the uninsured rate among the workers in our estimation sample from 20.12% to 7.27%. We also examine a variety of alternative policies to understand the roles of different components of the ACA in contributing to these equilibrium changes. Interestingly, we find that the uninsured rate will be even lower (at 6.44%) if the employer mandate in the ACA is eliminated.

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The Impact of the Managed Care Backlash on Health Care Costs: Evidence from State Regulation of Managed Care Cost Containment Practices

Maxim Pinkovskiy
MIT Working Paper, November 2012

Abstract:
During the late 1990s, there was a substantial cultural, media and legal backlash against the cost-containment practices of managed care organizations (particularly, HMOs). Most states passed a variety of laws in this period that restricted the cost-cutting measures that managed care firms could use. I exploit panel variation in the passage of these regulations across states and over time to investigate the effects of the managed care backlash, as proxied by this legislation, on health care cost growth. I find that the backlash had a strong effect on health care costs, and can statistically explain much of the rise in health spending as a share of U.S. GDP between 1993 and 2005 (amounting to 1% - 1.5% of GDP). I also investigate the effects of the managed care backlash on intensity of care, hospital salaries and technology adoption. I conclude that managed care was largely successful in keeping health care costs on a sustainable path relative to the size of the economy.

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On Average, Physicians Spend Nearly 11 Percent Of Their 40-Year Careers With An Open, Unresolved Malpractice Claim

Seth Seabury et al.
Health Affairs, January 2013, Pages 111-119

Abstract:
The US malpractice system is widely regarded as inefficient, in part because of the time required to resolve malpractice cases. Analyzing data from 40,916 physicians covered by a nationwide insurer, we found that the average physician spends 50.7 months - or almost 11 percent - of an assumed forty-year career with an unresolved, open malpractice claim. Although damages are a factor in how doctors perceive medical malpractice, even more distressing for the doctor and the patient may be the amount of time these claims take to be adjudicated. We conclude that this fact makes it important to assess malpractice reforms by how well they are able to reduce the time of malpractice litigation without undermining the needs of the affected patient.

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What Good Is Wealth without Health? The Effect of Health on the Marginal Utility of Consumption

Amy Finkelstein, Erzo Luttmer & Matthew Notowidigdo
Journal of the European Economic Association, January 2013, Pages 221-258

Abstract:
We estimate how the marginal utility of consumption varies with health. To do so, we develop a simple model in which the impact of health on the marginal utility of consumption can be estimated from data on permanent income, health, and utility proxies. We estimate the model using the Health and Retirement Study's panel data on the elderly and near-elderly, and proxy for utility with measures of subjective well-being. Across a wide range of alternative specifications and assumptions, we find that the marginal utility of consumption declines as health deteriorates, and we are able to clearly reject the null of no state dependence. Our point estimates indicate that a one-standard-deviation increase in the number of chronic diseases is associated with a 10%-25% decline in the marginal utility of consumption relative to this marginal utility when the individual has no chronic diseases. We present some simple, illustrative calibration results that suggest that state dependence of the magnitude we estimate can have a substantial effect on important economic problems such as the optimal level of health insurance benefits and the optimal level of life-cycle savings.

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Price Controls for Medical Innovations in a Life Cycle Perspective

Gilad Sorek
Health Economics, forthcoming

Abstract:
We study the market for new medical technologies from a life cycle perspective, incorporating the fact that healthcare utilization is biased towards old age. Contrary to conventional wisdom, we find that price controls on medical innovations can expand investment in medical R&D and results in Pareto superior social outcomes, a consequence of the price controls' ability to increase saving. Importantly, this finding occurs only when the price cap regime is extensive: selective regulation on few technologies - such as pharmaceuticals alone - have the conventional negative effect on innovation.

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San Francisco's ‘Pay Or Play' Employer Mandate Expanded Private Coverage By Local Firms And A Public Care Program

Carrie Colla, William Dow & Arindrajit Dube
Health Affairs, January 2013, Pages 69-77

Abstract:
In 2008 San Francisco implemented a pay-or-play employer mandate that required firms operating in the city to provide health insurance coverage for employees or contribute to the city's "public option" health access program, Healthy San Francisco. Using data from our Bay Area Employer Health Benefits Survey, we found that in the first two years after implementation, more employers offered insurance and provided employee health benefit coverage relative to employers outside San Francisco not subject to the mandate. Sixty-seven percent reported in 2009 that they had expanded benefits since 2007. Although 22 percent of firms responding to the survey reported contributing to Healthy San Francisco for some employees, we observed no crowd-out of private insurance. Premium changes between 2007 and 2009 were similar in San Francisco and surrounding areas, but more of the burden of premium contributions in San Francisco shifted from workers to employers. Overall, 64 percent of firms responding to the survey supported the employer mandate. San Francisco's experience indicates that such a mandate is feasible, increases access, and is acceptable to many employers, which bodes well for the national employer mandate that will take effect under the Affordable Care Act in 2014.

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Access to primary care in Hong Kong, Greater London and New York City

Pui Hing Chau et al.
Health Economics, Policy and Law, January 2013, Pages 95-109

Abstract:
We investigate avoidable hospital conditions (AHC) in three world cities as a way to assess access to primary care. Residents of Hong Kong are healthier than their counterparts in Greater London or New York City. In contrast to their counterparts in New York City, residents of both Greater London and Hong Kong face no financial barriers to an extensive public hospital system. We compare residence-based hospital discharge rates for AHC, by age cohorts, in these cities and find that New York City has higher rates than Hong Kong and Greater London. Hong Kong has the lowest hospital discharge rates for AHC among the population 15-64, but its rates are nearly as high as those in New York City among the population 65 and over. Our findings suggest that in contrast to Greater London, older residents in Hong Kong and New York face significant barriers in accessing primary care. In all three cities, people living in lower socioeconomic status neighborhoods are more likely to be hospitalized for an AHC, but neighborhood inequalities are greater in Hong Kong and New York than in Greater London.

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The Demand for Health Care by the Poor under Universal Health Care Coverage

Jacob Nielsen Arendt
Journal of Human Capital, Winter 2012, Pages 316-335

Abstract:
This study addresses the use of health care by the poor in a universal health care system. The results show that the poor make the least use of all health care services, with or without copayments. Differences in health care use at the upper end of the income distribution vanish when controlling for observed characteristics, while substantial differences between the poor and the nonpoor persist. The results are remarkably robust across different types of health care and poverty measures but suggest that the effect of poverty is higher for poverty measures based on permanent income and for preventive health care.

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Effect of Medicaid Disease Management Programs on Emergency Admissions and Inpatient Costs

Matthew Conti
Health Services Research, forthcoming

Objective: To determine the impact of state Medicaid diabetes disease management programs on emergency admissions and inpatient costs.

Data: National InPatient Sample sponsored by the Agency for Healthcare Research and Quality Project for the years from 2000 to 2008 using 18 states.

Study Design: A difference-in-difference methodology compares costs and number of emergency admissions for Washington, Texas, and Georgia, which implemented disease management programs between 2000 and 2008, to states that did not undergo the transition to managed care (N = 103).

Data Extraction: Costs and emergency admissions were extracted for diabetic Medicaid enrollees diagnosed in the reform and non-reform states and collapsed into state and year cells.

Principal Findings: In the three treatment states, the implementation of disease management programs did not have statistically significant impacts on the outcome variables when compared to the control states.

Conclusions: States that implemented disease management programs did not achieve improvements in costs or the number of emergency of admissions; thus, these programs do not appear to be an effective way to reduce the burden of this chronic disease.

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The Determinants of Pricing in Pharmaceuticals: Are US Prices Really So High?

Antonio Cabrales & Sergi Jiménez-Martín
Health Economics, forthcoming

Abstract:
This paper studies price determination in pharmaceutical markets using data for 25 countries, 6 years, and a comprehensive list of products from the MIDAS IMS database. A key finding is that the USA has prices that are not significantly higher than those of countries with similar income levels, especially those that are ‘lightly regulated'. More importantly, price differences to the US levels increase for ‘branded', world top selling, or innovative products, and decrease, regardless of the level of regulation for mature or widely diffused molecules. Because prices for top selling molecules may be easier to perceive and recollect and more important for companies, they may bias the public discussion about international price differences.

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Primary Care Physician Shortages Could Be Eliminated Through Use Of Teams, Nonphysicians, And Electronic Communication

Linda Green & Sergei Savin & Yina Lu
Health Affairs, January 2013, Pages 11-19

Abstract:
Most existing estimates of the shortage of primary care physicians are based on simple ratios, such as one physician for every 2,500 patients. These estimates do not consider the impact of such ratios on patients' ability to get timely access to care. They also do not quantify the impact of changing patient demographics on the demand side and alternative methods of delivering care on the supply side. We used simulation methods to provide estimates of the number of primary care physicians needed, based on a comprehensive analysis considering access, demographics, and changing practice patterns. We show that the implementation of some increasingly popular operational changes in the ways clinicians deliver care - including the use of teams or "pods," better information technology and sharing of data, and the use of nonphysicians - have the potential to offset completely the increase in demand for physician services while improving access to care, thereby averting a primary care physician shortage.

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Effects of Universal Health Insurance on Health Care Utilization, and Supply-Side Responses: Evidence from Japan

Ayako Kondo & Hitoshi Shigeoka
Journal of Public Economics, forthcoming

Abstract:
We investigate the effects of a massive expansion in health insurance coverage on health care utilization and supply-side responses, by focusing on universal health insurance introduced in Japan in 1961. There are two major findings. First, health care utilization (measured in terms of admissions, inpatient days, and outpatient visits to hospitals) increased significantly. Second, we also find a supply response but the size of the supply response differs across service types: while the number of beds increases, effects on the number of medical institutions, physicians, and nurses are either negligible or inconclusive. Our results suggest that countries planning a large expansion in health insurance coverage would need to generate sufficient financial resources to cover the surge in health care expenditures, both in the short and long run. Our results also indicate that any slowdown in the supply-side response may constrain the ability of the health care system to meet increased demand.

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Surgical never events in the United States

Winta Mehtsun et al.
Surgery, forthcoming

Background: Surgical never events are being used increasingly as quality metrics in health care in the United States. However, little is known about their costs to the health care system, the outcomes of patients, or the characteristics of the providers involved. We designed a study to describe the number and magnitude of paid malpractice claims for surgical never events, as well as associated patient and provider characteristics.

Methods: We used the National Practitioner Data Bank, a federal repository of medical malpractice claims, to identify malpractice settlements and judgments of surgical never events, including retained foreign bodies, wrong-site, wrong-patient, and wrong-procedure surgery. Payment amounts, patient outcomes, and provider characteristics were evaluated.

Results: We identified a total of 9,744 paid malpractice settlement and judgments for surgical never events occurring between 1990 and 2010. Malpractice payments for surgical never events totaled $1.3 billion. Mortality occurred in 6.6% of patients, permanent injury in 32.9%, and temporary injury in 59.2%. Based on literature rates of surgical adverse events resulting in paid malpractice claims, we estimated that 4,082 surgical never event claims occur each year in the United States. Increased payments were associated with severe patient outcomes and claims involving a physician with multiple malpractice reports. Of physicians named in a surgical never event claim, 12.4% were later named in at least 1 future surgical never event claim.

Conclusion: Surgical never events are costly to the health care system and are associated with serious harm to patients. Patient and provider characteristics may help to guide prevention strategies.

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The Redistribution Of Graduate Medical Education Positions In 2005 Failed To Boost Primary Care Or Rural Training

Candice Chen et al.
Health Affairs, January 2013, Pages 102-110

Abstract:
Graduate medical education (GME), the system to train graduates of medical schools in their chosen specialties, costs the government nearly $13 billion annually, yet there is little accountability in the system for addressing critical physician shortages in specific specialties and geographic areas. Medicare provides the bulk of GME funds, and the Medicare Prescription Drug, Improvement, and Modernization Act of 2003 redistributed nearly 3,000 residency positions among the nation's hospitals, largely in an effort to train more residents in primary care and in rural areas. However, when we analyzed the outcomes of this recent effort, we found that out of 304 hospitals receiving additional positions, only 12 were rural, and they received fewer than 3 percent of all positions redistributed. Although primary care training had net positive growth after redistribution, the relative growth of nonprimary care training was twice as large and diverted would-be primary care physicians to subspecialty training. Thus, the two legislative and regulatory priorities for the redistribution were not met. Future legislation should reevaluate the formulas that determine GME payments and potentially delink them from the hospital prospective payment system. Furthermore, better health care workforce data and analysis are needed to link GME payments to health care workforce needs.

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The Impact of Consumer Health Information on the Demand for Health Services

Debra Sabatini Dwyer & Hong Liu
Quarterly Review of Economics and Finance, forthcoming

Abstract:
This paper empirically examines whether consumers use health information, from non-physician information sources, as a substitute or complement for health services-namely for physician visits and emergency room (ER) visits. An indicator of patient trust in physicians is developed and used as a proxy for potential unobserved heterogeneity that may drive both consumers' propensity to seek information and to use physician services. The results, after correcting for sample selection bias and controlling for unobserved heterogeneity, concur with the literature, that consumer health information increases the likelihood of visiting a physician as well as the frequency of visits on average. However, low-trust consumers tend to substitute self-care through consumer health information for physician services. Further, better-informed consumers make significantly fewer ER visits suggesting that information may be improving efficiency in the market.

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Does COBRA's Retroactive Coverage Feature Encourage Delayed Enrollment?

David Zimmer
Contemporary Economic Policy, January 2013, Pages 135-144

Abstract:
The Consolidated Omnibus Reconciliation Act (COBRA) of 1985, which aimed to protect individuals experiencing employment separation from losing employer-provided health insurance, contains a feature that is unusual among health insurance markets. Individuals eligible for COBRA have 60 days following employment separation to elect coverage, and if they elect, coverage is retroactive back to the date of employment separation. This paper investigates whether employment separators take advantage of COBRA's retroactive coverage provision by delaying enrollment until after incurring medical expenses. Results indicate that an individual whose household incurs medical expenses during the months after employment separation is approximately 1-10 percentage points more likely to subsequently enroll in COBRA, depending on the magnitude of expenses.

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The Affordable Care Act Has Led To Significant Gains In Health Insurance And Access To Care For Young Adults

Benjamin Sommers et al.
Health Affairs, January 2013, Pages 165-174

Abstract:
The Affordable Care Act enables young adults to remain as dependents on their parents' health insurance until age twenty-six, and recent evidence suggests that as many as three million young adults have gained coverage as a result. However, there has been no evidence yet on the policy's effect on access to care, and questions remain about the coverage impact on important subgroups. Using data from two nationally representative surveys, comparing young adults who gained access to dependent coverage to a control group (adults ages 26-34) who were not affected by the new policy, we found sizable coverage gains for adults ages 19-25. The gains continued to grow throughout 2011 (up 6.7 percentage points from September 2010 to September 2011), with the largest gains seen in unmarried adults, nonstudents, and men. Analysis of the timing of the policy impact suggested that early gains in coverage were greatest for people in worse health. We found strong evidence of increased access to care because of the law, with significant reductions in the number of young adults who delayed getting care and in those who did not receive needed care because of cost.

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Does hospital competition harm equity? Evidence from the English National Health Service

Richard Cookson, Mauro Laudicella & Paolo Li Donni
Journal of Health Economics, forthcoming

Abstract:
Increasing evidence shows that hospital competition under fixed prices can improve quality and reduce cost. Concerns remain, however, that competition may undermine socio-economic equity in the utilisation of care. We test this hypothesis in the context of the pro-competition reforms of the English National Health Service progressively introduced from 2004 to 2006. We use a panel of 32,482 English small areas followed from 2003 to 2008 and a difference in differences approach. The effect of competition on equity is identified by the interaction between market structure, small area income deprivation and year. We find a negative association between market competition and elective admissions in deprived areas. The effect of pro-competition reform was to reduce this negative association slightly, suggesting that competition did not undermine equity.

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Association of Medicare Part D Medication Out-of-Pocket Costs with Utilization of Statin Medications

Pinar Karaca-Mandic et al.
Health Services Research, forthcoming

Objectives: To examine the association between statin out-of-pocket (OOP) costs and utilization among the Medicare Part D population.

Data Sources/Study Setting: 2006-2008 administrative claims and enrollment data for the 5 percent Medicare sample.

Study Design: Sample included 346,583 beneficiary-year observations of statin users enrolled in stand-alone prescription drug plans, excluding low-income subsidy recipients. We estimated the association between a plan's OOP statin costs and statin utilization using an instrumental variable approach to account for potential bias due to plan selection. Adherence was defined as percentage of days covered (PDC) of at least 80 percent. Plan OOP costs were constructed for a representative market basket of statin medications. Analyses controlled for demographic characteristics, cardiovascular disease risk, co-morbidity presence, and regional characteristics.

Principal Findings: About 67 percent of the sample had a PDC of at least 80 percent. An increase in annual statin OOP from $200 (50th percentile) to $240 (75th percentile) was associated with a reduction in the rate of adherent beneficiaries from 67 percent to 56 percent (p < .001).

Conclusions: Greater OOP costs for statins are associated with reductions in statin utilization.

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What It Will Take To Achieve The As-Yet-Unfulfilled Promises Of Health Information Technology

Arthur Kellermann & Spencer Jones
Health Affairs, January 2013, Pages 63-68

Abstract:
A team of RAND Corporation researchers projected in 2005 that rapid adoption of health information technology (IT) could save the United States more than $81 billion annually. Seven years later the empirical data on the technology's impact on health care efficiency and safety are mixed, and annual health care expenditures in the United States have grown by $800 billion. In our view, the disappointing performance of health IT to date can be largely attributed to several factors: sluggish adoption of health IT systems, coupled with the choice of systems that are neither interoperable nor easy to use; and the failure of health care providers and institutions to reengineer care processes to reap the full benefits of health IT. We believe that the original promise of health IT can be met if the systems are redesigned to address these flaws by creating more-standardized systems that are easier to use, are truly interoperable, and afford patients more access to and control over their health data. Providers must do their part by reengineering care processes to take full advantage of efficiencies offered by health IT, in the context of redesigned payment models that favor value over volume.

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Health Information Technology and Patient Outcomes: The Role of Organizational and Informational Complementarities

Jeffery McCullough, Stephen Parente & Robert Town
NBER Working Paper, January 2013

Abstract:
Health information technology (IT) adoption, it is argued, will dramatically improve patient care. We study the impact of hospital IT adoption on patient outcomes focusing on the roles of technological and organizational complements in affecting IT's value and explore underlying mechanisms through which IT facilitates the coordination of labor inputs. We link detailed hospital discharge data on all Medicare fee-for-service admissions from 2002-2007 to detailed hospital-level IT adoption information. We employ a difference-in-differences strategy to identify the parameters of interest. For all IT sensitive conditions we find that health IT adoption reduces mortality for the most complex patients but does affect outcomes for the median patient. This implies that the benefits from IT adoption are skewed to large institutions with a severe case mix. We decompose the impact of health IT into care coordination, clinical information management, and other components. The benefits from health IT are primarily experienced by patients whose diagnoses require cross-specialty care coordination and extensive clinical information management.

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Differences in Quality of Care Among Non-Safety-Net, Safety-Net, and Children's Hospitals

Linda Dynan et al.
Pediatrics, forthcoming

Objective: To understand factors associated with pediatric inpatient safety events, we test 2 hypotheses: (1) scarce resources (as measured by Medicaid burden) in safety-net hospitals relative to non-safety-net hospitals result in higher rates of safety events; and (2) higher levels of severity and more chronic conditions in patient populations lead to higher rates of safety events within hospital category and in children's hospitals in comparison with non-children's hospitals.

Methods: All nonnewborn pediatric hospital discharge records, which met criteria for potentially experiencing at least 1 pediatric quality indicator (PDI) event (using Agency for Healthcare Research and Quality's 2009 Nationwide Inpatient Sample and PDI) and weighted to represent national level estimates, were analyzed for patterns of PDI events within and across hospital categories by using bivariate comparisons and multivariable logit models with robust SEs. The outcome measure "ANY PDI" captures the number of pediatric discharges at the hospital level with 1 or more PDI event.

Results: High Medicaid burden does not seem to be a factor in the likelihood of ANY PDI. Severity of illness (adjusted odds ratio high relative to low, 15.12) and presence of chronic conditions (adjusted odds ratio 1 relative to 0, 1.78; relative to 2 or more, 3.38) are the strongest predictors of ANY PDI events.

Conclusions: Our findings suggest that the patient population served, rather than hospital category, best predicts measured quality, underscoring the need for robust risk adjustment when incentivizing quality or comparing hospitals. Thus, problems of quality may not be systemic across hospital categories.

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Serious Mental Illness and Nursing Home Quality of Care

Momotazur Rahman et al.
Health Services Research, forthcoming

Objective: To estimate the effect of a nursing home's share of residents with a serious mental illness (SMI) on the quality of care.

Data Sources: Secondary nursing home level data over the period 2000 through 2008 obtained from the Minimum Data Set, OSCAR, and Medicare claims.

Study Design: We employ an instrumental variables approach to address the potential endogeneity of the share of SMI residents in nursing homes in a model including nursing home and year fixed effects.

Principal Findings: An increase in the share of SMI nursing home residents positively affected the hospitalization rate among non-SMI residents and negatively affected staffing skill mix and level. We did not observe a statistically significant effect on inspection-based health deficiencies or the hospitalization rate for SMI residents.

Conclusions: Across the majority of indicators, a greater SMI share resulted in lower nursing home quality. Given the increased prevalence of nursing home residents with SMI, policy makers and providers will need to adjust practices in the context of this new patient population. Reforms may include more stringent preadmission screening, new regulations, reimbursement changes, and increased reporting and oversight.

By KEVIN LEWIS | 09:00:00 AM