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Physician Beliefs and Patient Preferences: A New Look at Regional Variation in Health Care Spending
David Cutler et al.
NBER Working Paper, August 2013
Abstract:
There is considerable controversy about the causes of regional variations in healthcare expenditures. We use vignettes from patient and physician surveys, linked to Medicare expenditures at the level of the Hospital Referral Region, to test whether patient demand-side factors, or physician supply-side factors, explains regional variations in Medicare spending. We find patient demand is relatively unimportant in explaining variations. Physician organizational factors (such as peer effects) matter, but the single most important factor is physician beliefs about treatment: 36 percent of end-of-life spending, and 17 percent of U.S. health care spending, are associated with physician beliefs unsupported by clinical evidence.
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International Health Economics
Mark Egan & Tomas Philipson
NBER Working Paper, August 2013
Abstract:
Perhaps because health care is a local service sector, health economists have paid little attention to international linkages between domestic health care economies. However, the growth in domestic health care sectors is often attributed to medical innovations whose returns are earned worldwide. Because world returns drive innovation and innovation is central to spending growth, spending growth in a given country is thereby highly affected by health care economies and policies of other countries. This paper analyzes the unique positive and normative implications of these innovation-induced linkages across countries when governments centrally price health care. Providing world returns to medical innovation under such central pricing involves a public-goods problem; the taxation to fund reimbursements involves a private domestic cost with an international benefit of medical innovation. This has the direct normative implication that medical innovations have inefficiently low world returns. It also has the positive implication that reimbursements in one country depend negatively on those of others; reimbursements are "strategic substitutes" through free riding. Because reimbursements are strategic substitutes, world concentration of health care is a significant issue. A small European country has no access-innovation trade-off in its pricing; it will have low reimbursements because it does not affect world returns and sees the same innovations regardless of its reimbursement policy. The public-goods problem of innovation thereby implies that the United States, despite being the world's largest buyer, will pay the highest reimbursements. This problem also implies that free riding counteracts the standard positive impact of larger world markets on innovation when health care concentration falls. Indeed, currently, health care is highly concentrated; about half of world health care spending occurs in the United States, despite that fact that it makes up only about one-fifth of the world economy. We assess the effect that emerging markets will have on this concentration and thus world returns. We use pharmaceutical reimbursement data from 1996-2010 to provide IV estimates of the degree to which domestic reimbursements are strategic substitutes. We find that these estimates imply that world returns from innovation may actually fall from a growth in "market size" of BRICS countries as a result of increased free riding in non-BRICS countries. The overall analysis has important positive implications for spending patterns across countries as well as normative implications for evaluating domestic or regional health care reforms.
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Shawna Chapman, Jean Hall & Janice Moore
Journal of Disability Policy Studies, September 2013, Pages 113-121
Abstract:
This article reports on qualitative findings from a mixed methods study that explored the efficacy of providing enhanced health benefits and services to people with chronic health conditions to reduce their application rates to federal disability programs. Comparing an intervention and control group, the study found that those who received enhanced benefits had reduced health decline. To explore reasons for this reduction, authors conducted focus groups with a sample of participants from both groups. Four themes emerged: (a) Due to the effects of their conditions, most participants believed their health would worsen over time; (b) Intervention group members said their health deterioration would be slowed or prevented, while control group members worried about more rapid decline and the future; (c) Intervention group members related their beliefs about continued health to their ability to access care; (d) Control group members were more likely than intervention group members to indicate they applied or were interested in applying for social security disability benefits. These themes suggest that people who believe they have access to quality health care feel their health can and will improve over time. If health care reform leads to the availability of more comprehensive coverage for people with potentially disabling conditions, growth in federal disability programs may slow.
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Low-Socioeconomic-Status Enrollees In High-Deductible Plans Reduced High-Severity Emergency Care
Frank Wharam et al.
Health Affairs, August 2013, Pages 1398-1406
Abstract:
One-third of US workers now have high-deductible health plans, and those numbers are expected to grow in 2014 as implementation of the Affordable Care Act continues. There is concern that high-deductible health plans might cause enrollees of low socioeconomic status to forgo emergency care as a result of burdensome out-of-pocket costs. We analyzed emergency department (ED) visits and hospitalizations over two years among enrollees insured in high-deductible plans through small employers in Massachusetts. We found that plan members of low socioeconomic status experienced 25-30 percent reductions in high-severity ED visits over both years, while hospitalizations declined by 23 percent in year 1 but rose again in year 2. Similar trends were not found among high-deductible plan members of high socioeconomic status. Our findings suggest that plan members of low socioeconomic status at small firms responded inappropriately to high-deductible plans and that initial reductions in high-severity ED visits might have increased the need for subsequent hospitalizations. Policy makers and employers should consider proactive strategies to educate high-deductible plan members about their benefit structures or identify members at higher risk of avoiding needed care. They should also consider implementing means-based deductibles.
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Racial/Ethnic Differences in Medicare Experiences and Immunization: The Role of Disease Burden
Nate Orr et al.
Medical Care, September 2013, Pages 823-831
Objective: To investigate disease burden and its possible impact on racial/ethnic health disparities for measures of secondary and tertiary access to health care, such as access to health plan information, obtaining recommended care in a timely manner, and immunization.
Subjects: A total of 355,874 beneficiaries over the age of 64 years who responded to the 2008 Medicare Consumer Assessment of Healthcare Providers and Systems (CAHPS) survey.
Methods: We fit a series of linear, case-mix adjusted models predicting Medicare CAHPS measures of patient experience and immunization from race/ethnicity, a 0 to 6 count of disease burden, and their interaction.
Results: Disparities between non-Hispanic whites and other racial/ethnic groups are largest among beneficiaries with no major health conditions. Disparities between whites and other racial/ethnic groups on getting care quickly and immunization are mitigated at higher levels of disease burden. Disparities persist at higher levels of disease burden for getting information from one's health plan.
Discussion: Whites have better overall access to care than other beneficiaries with Medicare in the absence of major health conditions. Disparities in getting care quickly and immunizations are smaller among beneficiaries with greater disease burden, perhaps as a function of integration into the health care system gained through management of health issues. These results underscore the importance of outreach to minorities with low utilization and few or no major health conditions.
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The Role of Agents and Brokers in the Market for Health Insurance
Pinar Karaca-Mandic, Roger Feldman & Peter Graven
NBER Working Paper, August 2013
Abstract:
Health insurance markets in the United States are characterized by imperfect information, complex products, and substantial search frictions. Insurance agents and brokers play a significant role in helping employers navigate these problems. However, little is known about the relation between the structure of the agent/broker market and access and affordability of insurance. This paper aims to fill this gap by investigating the influence of agents/brokers on health insurance decisions of small firms, which are particularly vulnerable to problems of financing health insurance. Using a unique membership database from the National Association of Health Underwriters together with a nationally representative survey of employers, we find that small firms in more competitive agent/broker markets are more likely to offer health insurance and at lower premiums. Moreover, premiums are less dispersed in more competitive agent/broker markets.
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James Robinson & Timothy Brown
Health Affairs, August 2013, Pages 1392-1397
Abstract:
Some employers are implementing reference-pricing benefit designs, which establish limits on the amount they will pay for some procedures covered by employer-sponsored insurance. Employees are required to pay the difference between the employer's contribution limit and the actual price received by the hospital. These initiatives encourage patients to select low-price facilities and indirectly encourage facilities to reduce prices to increase patient volume. We evaluated the impact of reference pricing on the use of and prices paid for knee and hip replacement surgery by members of the California Public Employees' Retirement System (CalPERS) from 2008 to 2012, using enrollees in Anthem Blue Cross as a comparison group. In the first year after implementation, surgical volumes for CalPERS members increased by 21.2 percent at low-price facilities and decreased by 34.3 percent at high-price facilities. Prices charged to CalPERS members declined by 5.6 percent at low-price facilities and by 34.3 percent at high-price facilities. Our analysis indicates that in 2011 reference pricing accounted for $2.8 million in savings for CalPERS and $0.3 million in lower cost sharing for CalPERS members.
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Partha Deb, Pravin Trivedi & David Zimmer
Health Economics, forthcoming
Abstract:
In this paper, we estimate a copula-based bivariate dynamic hurdle model of prescription drug and nondrug expenditures to test the cost-offset hypothesis, which posits that increased expenditures on prescription drugs are offset by reductions in other nondrug expenditures. We apply the proposed methodology to data from the Medical Expenditure Panel Survey, which have the following features: (i) the observed bivariate outcomes are a mixture of zeros and continuously measured positives; (ii) both the zero and positive outcomes show state dependence and inter-temporal interdependence; and (iii) the zeros and the positives display contemporaneous association. The point mass at zero is accommodated using a hurdle or a two-part approach. The copula-based approach to generating joint distributions is appealing because the contemporaneous association involves asymmetric dependence. The paper studies samples categorized by four health conditions: arthritis, diabetes, heart disease, and mental illness. There is evidence of greater than dollar-for-dollar cost-offsets of expenditures on prescribed drugs for relatively low levels of spending on drugs and less than dollar-for-dollar cost-offsets at higher levels of drug expenditures.
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Emily Carrier et al.
Health Affairs, August 2013, Pages 1383-1391
Abstract:
Despite widespread agreement that physicians who practice defensive medicine drive up health care costs, the extent to which defensive medicine increases costs is unclear. The differences in findings to date stem in part from the use of two distinct approaches for assessing physicians' perceived malpractice risk. In this study we used an alternative strategy: We linked physicians' responses regarding their levels of malpractice concern as reported in the 2008 Health Tracking Physician Survey to Medicare Parts A and B claims for the patients they treated during the study period, 2007-09. We found that physicians who reported a high level of malpractice concern were most likely to engage in practices that would be considered defensive when diagnosing patients who visited their offices with new complaints of chest pain, headache, or lower back pain. No consistent relationship was seen, however, when state-level indicators of malpractice risk replaced self-rated concern. Reducing defensive medicine may require approaches focused on physicians' perceptions of legal risk and the underlying factors driving those perceptions.
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Catherine DesRoches et al.
Health Affairs, August 2013, Pages 1478-1485
Abstract:
The US health care system is in the midst of an enormous change in the way health care providers and hospitals document, monitor, and share information about health and care delivery. Part of this transition involves a wholesale, but currently uneven, shift from paper-based records to electronic health record (EHR) systems. We used the most recent longitudinal survey of US hospitals to track how they are adopting and using EHR systems. Only 44 percent of hospitals report having and using what we define as at least a basic EHR system. And although 42.2 percent meet all of the federal stage 1 "meaningful-use" criteria, only 5.1 percent could meet the broader set of stage 2 criteria. Large urban hospitals continue to outpace rural and nonteaching hospitals in adopting EHR systems. The increase in adoption overall suggests that the positive and negative financial incentives currently in place across the US health care system are working as intended. However, achieving a nationwide health information technology infrastructure may require efforts targeted at smaller and rural hospitals.
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Julia Adler-Milstein, David Bates & Ashish Jha
Health Affairs, August 2013, Pages 1486-1492
Abstract:
Policy makers are actively promoting the electronic exchange of health information to improve the quality and efficiency of health care. We conducted a national survey of organizations facilitating health information exchange, to assess national progress. We found that 30 percent of hospitals and 10 percent of ambulatory practices now participate in one of the 119 operational health information exchange efforts across the United States, substantial growth from prior surveys. However, we also found that 74 percent of health information exchange efforts report struggling to develop a sustainable business model. Our findings suggest that despite progress, there is a substantial risk that many current efforts to promote health information exchange will fail when public funds supporting these initiatives are depleted.
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Mireille Jacobson et al.
NBER Working Paper, July 2013
Abstract:
We investigate the role of physician agency and competition in determining health care supply and patient outcomes. A 2005 change to Medicare fees had a large, negative impact on physician profit margins for providing chemotherapy treatment. In response to these cuts, physicians increased their provision of chemotherapy and changed the mix of chemotherapy drugs they administered. The increase in treatment improved patient survival. These changes were larger in states that experienced larger decreases in physician profit margins. Finally while physician response was larger in more competitive markets, survival improvements were larger in less competitive markets.
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The Labor Market Effects of California's Minimum Nurse Staffing Law
Elizabeth Munnich
Health Economics, forthcoming
Abstract:
In 2004, California became the first state to implement statewide minimum nurse-to-patient ratios in general hospitals. In spite of years of work to establish statewide staffing regulations, there is little evidence that the law was effective in attracting more nurses to the hospital workforce or improving patient outcomes. This paper examines the effects of this legislation on employment and wages of registered nurses. By using annual financial data from California hospitals, I show that nurse-to-patient ratios in medical/surgical units increased substantially following the staffing mandate. However, survey data from two nationally representative datasets indicate that the law had no effect on the aggregate number of registered nurses or the hours they worked in California hospitals, and at most a modest effect on wages. My findings suggest that offsetting changes in labor demand due to hospital closures, combined with reclassification of workers within hospitals, and mitigated the employment effects of California's staffing regulation. This paper cautions that California's experience with minimum nurse staffing legislation may not be generalizable to states considering similar policies in very different hospital markets.
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The Potential Employment Impact of Health Reform on Working-Age Adults With Disabilities
Alice Levy, Brian Bruen & Leighton Ku
Journal of Disability Policy Studies, September 2013, Pages 102-112
Abstract:
Programs serving people with disabilities create employment disincentives in the form of public health insurance that ties eligibility to an inability to work. In 2009, insurance coverage decreased with employment for working-age people with disabilities. Health reform has the potential to ameliorate these employment disincentives by reforming the private health insurance system and by severing the link between eligibility for public health insurance and an inability to work. The authors predict the impact of the Affordable Care Act on working-age adults with disabilities using a simulation model based on 2009 American Community Survey data from Massachusetts, which enacted a similar reform in 2006. They estimate that more than 2 million adults with disabilities will gain coverage and that coverage rates will be higher among the employed. Although health reform may remove some existing employment disincentives, implementation issues are key determinants to insurance and employment outcomes.
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Utilization of non-US educated nurses in US hospitals: Implications for hospital mortality
Donna Felber Neff et al.
International Journal for Quality in Health Care, September 2013, Pages 366-372
Objectives: To determine whether, and under what circumstance, US hospital employment of non-US-educated nurses is associated with patient outcomes.
Design: Observational study of primary data from 2006 to 2007 surveys of hospital nurses in four states (California, Florida, New Jersey and Pennsylvania). The direct and interacting effects of hospital nurse staffing and the percentage of non-US-educated nurses on 30-day surgical patient mortality and failure-to-rescue were estimated before and after controlling for patient and hospital characteristics.
Participants: Data from registered nurse respondents practicing in 665 hospitals were pooled with patient discharge data from state agencies.
Results: The effect of non-US-educated nurses on both mortality and failure-to-rescue is nil in hospitals with lower than average patient to nurse ratios, but pronounced in hospitals with average and poor nurse to patient ratios. In hospitals in which patient-to-nurse ratios are 5:1 or higher, mortality is higher when 25% or more nurses are educated outside of the USA than when <25% of nurses are non-US-educated. Moreover, the effect of having >25% non-US-educated nurses becomes increasingly deleterious as patient-to-nurse ratios increase beyond 5:1.
Conclusions: Employing non-US-educated nurses has a negative impact on patient mortality except where patient-to-nurse ratios are lower than average. Thus, US hospitals should give priority to achieving adequate nurse staffing levels, and be wary of hiring large percentages of non-US-educated nurses unless patient-to-nurse ratios are low.
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Group Purchasing Organizations, Monopsony, and Antitrust Policy
Roger Blair & Christine Piette Durrance
Managerial and Decision Economics, forthcoming
Abstract:
Group purchasing organizations (GPOs) consolidate the purchasing power of their members and negotiate contracts with input suppliers on their behalf. GPOs have received attention from the Department of Justice and Federal Trade Commission because of concerns over monopsony power and standardization of hospital production costs. GPOs have been criticized in the literature for their contracting practices, which may appear to be exclusionary, and their funding mechanism, which may lead to incentive incompatibility. We analyze these competitive concerns in turn. We find GPOs to be procompetitive and suggest an antitrust policy that preserves the benefits of GPO operations while protecting consumers from any competitive shortcomings.
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The January Effect: Medication Reinitiation among Medicare Part D Beneficiaries
Cameron Kaplan & Yuting Zhang
Health Economics, forthcoming
Abstract:
The Medicare prescription drug program (Part D) standard benefit includes deductible, initial coverage, coverage gap and catastrophic coverage phases. As beneficiaries enter each phase, their out-of-pocket medication costs change discontinuously. The benefit cycle restarts on 1 January of the next year. Taking advantage of variation in drug coverage, we study how individuals reinitiate discontinued medications in response to the non-linear price schedule. Because some beneficiaries who receive low-income subsidies (LIS) have zero or fixed small copayments throughout the year, we perform a difference-in-difference analysis by using the LIS group as a comparison. We find that individuals delay reinitiating important medications in December and are significantly more likely to reinitiate in January than in other months. Although we find some evidence that reinitiation is lower in the final months of the year, it is mostly driven by those who face higher prices due to the coverage gap. Our study suggests that individuals respond more to the current price of medications and do not anticipate future prices as well as theory would suggest.
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Weiwei Chen, Albert Okunade & Gregory Lubiani
Health Economics, forthcoming
Abstract:
Economic theory suggests that income growth could lead to changes in consumption quantity and quality as the spending on a commodity changes. Similarly, the volume and quality of healthcare consumption could rise with incomes because of demographic changes, usage of innovative medical technologies, and other factors. Hospital healthcare spending is the largest component of aggregate US healthcare expenditures. The novel contribution of our paper is estimating and decomposing the income elasticity of hospital care expenditures (HOCEXP) into its quantity and quality components. By using a 1999-2008 panel dataset of the 50 US states, results from the seemingly unrelated regressions model estimation reveal the income elasticity of HOCEXP to be 0.427 (std. error = 0.044), with about 0.391 (calculated std. error = 0.044) arising from care quality improvements and 0.035 (std. error = 0.050) emanating from the rise in usage volume. Our novel research findings suggest the following: (i) the quantity part of hospital expenditure is inelastic to income change; (ii) almost the entire income-induced rise in hospital expenditure comes from care quality changes; and (iii) the 0.427 income elasticity of HOCEXP, the largest component of total US healthcare expenditure, makes hospital care a normal commodity and a much stronger technical necessity than aggregate healthcare. Policy implications are discussed.
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Shifting Administrative Burden to the State: The Case of Medicaid Take-Up
Pamela Herd et al.
Public Administration Review, forthcoming
Abstract:
Administrative burden is an individual's experience of policy implementation as onerous. Such burdens may be created because of a desire to limit payments to ineligible claimants, but they also serve to limit take-up of benefits by eligible claimants. For citizens, this burden may occur through learning about a program; complying with rules and discretionary bureaucratic behavior to participate; and the psychological costs of participating in an unpopular program. Using a mixed-method approach, the authors explain process changes that reduced individual burden and demonstrate how this resulted in increased take-up in Medicaid in the state of Wisconsin. The findings inform the planned expansion of Medicaid under the Patient Protection and Affordable Care Act. A key design principle for Medicaid and other means-tested programs is that it is possible to increase program take-up while maintaining program integrity by shifting administrative burdens from the citizen to the state.