Risky pool
If Slow Rate Of Health Care Spending Growth Persists, Projections May Be Off By $770 Billion
David Cutler & Nikhil Sahni
Health Affairs, May 2013, Pages 841-850
Abstract:
Despite earlier forecasts to the contrary, US health care spending growth has slowed in the past four years, continuing a trend that began in the early 2000s. In this article we attempt to identify why US health care spending growth has slowed, and we explore the spending implications if the trend continues for the next decade. We find that the 2007-09 recession, a one-time event, accounted for 37 percent of the slowdown between 2003 and 2012. A decline in private insurance coverage and cuts to some Medicare payment rates accounted for another 8 percent of the slowdown, leaving 55 percent of the spending slowdown unexplained. We conclude that a host of fundamental changes - including less rapid development of imaging technology and new pharmaceuticals, increased patient cost sharing, and greater provider efficiency - were responsible for the majority of the slowdown in spending growth. If these trends continue during 2013-22, public-sector health care spending will be as much as $770 billion less than predicted. Such lower levels of spending would have an enormous impact on the US economy and on government and household finances.
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Healthcare Exceptionalism? Productivity and Allocation in the U.S. Healthcare Sector
Amitabh Chandra et al.
Harvard Working Paper, February 2013
Abstract:
The conventional wisdom in health economics is that large differences in average productivity across hospitals are the result of idiosyncratic, institutional features of the healthcare sector which dull the role of market forces that exists in other sectors. Strikingly, however, productivity dispersion across hospitals is, if anything, smaller than in narrowly defined manufacturing industries such as concrete. While this fact admits multiple interpretations, we also find evidence against the conventional wisdom that the healthcare sector does not operate like an industry subject to standard market forces. In particular, we find that more productive hospitals have higher market shares at a point in time and are more likely to expand over time. For example, a 10 percent increase in hospital productivity today is associated with about 4 percent more patients in 5 years. Taken together, these facts suggest that the healthcare may have more in common with "traditional" sectors than is often assumed.
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Chapin White
Health Affairs, May 2013, Pages 935-943
Abstract:
Many policy makers believe that when Medicare constrains its payment rates for hospital inpatient care, private insurers end up paying higher rates as a result. I tested this "cost-shifting" theory using a unique new data set that combines MarketScan private claims data with Medicare hospital cost reports. Contrary to the theory, I found that hospital markets with relatively slow growth in Medicare inpatient hospital payment rates also had relatively slow growth in private hospital payment rates during 1995-2009. Using regression analyses, I found that a 10 percent reduction in Medicare payment rates led to an estimated reduction in private payment rates of 3 percent or 8 percent, depending on the statistical model used. These payment rate spillovers may reflect an effort by hospitals to rein in their operating costs in the face of lower Medicare payment rates. Alternatively, hospitals facing cuts in Medicare payment rates may also cut the payment rates they seek from private payers to attract more privately insured patients. My findings indicate that repealing cuts in Medicare payment rates would not slow the growth in spending on hospital care by private insurers and would in fact be likely to accelerate the growth in private insurers' costs and premiums.
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The effect of socioeconomic status on access to primary care: An audit study
Michelle Olah, Gregory Gaisano & Stephen Hwang
Canadian Medical Association Journal, 2 April 2013, Pages E263-E269
Background: Health care office staff and providers may discriminate against people of low socioeconomic status, even in the absence of economic incentives to do so. We sought to determine whether socioeconomic status affects the response a patient receives when seeking a primary care appointment.
Methods: In a single unannounced telephone call to a random sample of family physicians and general practices (n = 375) in Toronto, Ontario, a male and a female researcher each played the role of a patient seeking a primary care physician. Callers followed a script suggesting either high (i.e., bank employee transferred to the city) or low (i.e., recipient of social assistance) socioeconomic status, and either the presence or absence of chronic health conditions (diabetes and low back pain). We randomized the characteristics of the caller for each office. Our primary outcome was whether the caller was offered an appointment.
Results: The proportion of calls resulting in an appointment being offered was significantly higher when the callers presented themselves as having high socioeconomic status than when they presented as having low socioeconomic status (22.6% v.14.3%, p = 0.04) and when the callers stated the presence of chronic health conditions than when they did not (23.5% v. 12.8%, p = 0.008). In a model adjusted for all independent variables significant at a p value of 0.10 or less (presence of chronic health conditions, time since graduation from medical school and membership in the College of Family Physicians of Canada), high socioeconomic status was associated with an odds ratio of 1.78 (95% confidence interval 1.02-3.08) for the offer of an appointment. Socioeconomic status and chronic health conditions had independent effects on the likelihood of obtaining an appointment.
Interpretation: Within a universal health insurance system in which physician reimbursement is unaffected by patients' socioeconomic status, people presenting themselves as having high socioeconomic status received preferential access to primary care over those presenting themselves as having low socioeconomic status.
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Alexander Ryu et al.
Health Affairs, May 2013, Pages 835-840
Abstract:
During and immediately after the recent recession, national health expenditures grew exceptionally slowly. During 2009-11 per capita national health spending grew about 3 percent annually, compared to an average of 5.9 percent annually during the previous ten years. Policy experts disagree about whether the slower health spending growth was temporary or represented a long-term shift. This study examined two factors that might account for the slowdown: job loss and benefit changes that shifted more costs to insured people. Based on an examination of data covering more than ten million enrollees with health care coverage from large firms in 2007-11, we found that these enrollees' out-of-pocket costs increased as the benefit design of their employer-provided coverage became less generous in this period. We conclude that such benefit design changes accounted for about one-fifth of the observed decrease in the rate of growth. However, we also observed a slowdown in spending growth even when we held benefit generosity constant, which suggests that other factors, such as a reduction in the rate of introduction of new technology, were also at work. Our findings suggest cautious optimism that the slowdown in the growth of health spending may persist - a change that, if borne out, could have a major impact on US health spending projections and fiscal challenges facing the country.
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The Oregon Experiment - Effects of Medicaid on Clinical Outcomes
Katherine Baicker et al.
New England Journal of Medicine, 2 May 2013, Pages 1713-1722
Background: Despite the imminent expansion of Medicaid coverage for low-income adults, the effects of expanding coverage are unclear. The 2008 Medicaid expansion in Oregon based on lottery drawings from a waiting list provided an opportunity to evaluate these effects.
Methods: Approximately 2 years after the lottery, we obtained data from 6387 adults who were randomly selected to be able to apply for Medicaid coverage and 5842 adults who were not selected. Measures included blood-pressure, cholesterol, and glycated hemoglobin levels; screening for depression; medication inventories; and self-reported diagnoses, health status, health care utilization, and out-of-pocket spending for such services. We used the random assignment in the lottery to calculate the effect of Medicaid coverage.
Results: We found no significant effect of Medicaid coverage on the prevalence or diagnosis of hypertension or high cholesterol levels or on the use of medication for these conditions. Medicaid coverage significantly increased the probability of a diagnosis of diabetes and the use of diabetes medication, but we observed no significant effect on average glycated hemoglobin levels or on the percentage of participants with levels of 6.5% or higher. Medicaid coverage decreased the probability of a positive screening for depression (-9.15 percentage points; 95% confidence interval, -16.70 to -1.60; P=0.02), increased the use of many preventive services, and nearly eliminated catastrophic out-of-pocket medical expenditures.
Conclusions: This randomized, controlled study showed that Medicaid coverage generated no significant improvements in measured physical health outcomes in the first 2 years, but it did increase use of health care services, raise rates of diabetes detection and management, lower rates of depression, and reduce financial strain.
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Medicare Essential: An Option To Promote Better Care And Curb Spending Growth
Karen Davis, Cathy Schoen & Stuart Guterman
Health Affairs, May 2013, Pages 900-909
Abstract:
Medicare's core benefit design reflects private insurance as of 1965, with separate coverage for hospital and physician services (and now prescription drugs) and no protection against catastrophic costs. Modernizing Medicare's benefit design to offer comprehensive benefits, financial protection, and incentives to choose high-value care could improve coverage and lower beneficiary costs. We describe a new option we call Medicare Essential, which would combine Medicare's hospital, physician, and prescription drug coverage into an integrated benefit with an annual limit on out-of-pocket expenses for covered benefits. Cost sharing would be reduced for enrollees who seek care from high-quality low-cost providers. Out-of-pocket savings from lower premiums and health care costs for a Medicare Essential enrollee could be $173 per month, compared to what an enrollee would pay with traditional Medicare, prescription drug and private supplemental coverage. Financed by a budget-neutral premium, we estimate that this new plan choice could reduce total health spending relative to current projections by $180 billion and reduce employer retiree spending by $90 billion during 2014-23. Given its potential, such an alternative should be a part of the debate over the future of Medicare.
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Does the US health care safety net discourage private insurance coverage?
Xuezheng Qin & Gordon Liu
European Journal of Health Economics, June 2013, Pages 457-469
Abstract:
The large and growing uninsured population poses an alarming threat to the US health care system, and is a major target of the Obama health reform. This paper investigates analytically and empirically the degree to which the absence of health insurance in the US reflects the availability of the health care safety net, such as the guaranteed or charitable care provided by emergency rooms, community health centers and physicians. Our theoretical model demonstrates that the safety net can be a real alternative to health insurance, thus discouraging private insurance purchase in the market setting. In particular, when the community premium rate fails to reflect the value of such resources, not purchasing insurance becomes a rational decision for a sizeable portion of the population. The calibrated simulation based on US statistics indicates about 15.75 % of the uninsured population, or 7.2 million people in US, are attributable to the existing safety net system. Further empirical analysis using nationally representative data shows consistently that the presence of local safety net resources may reduce the probability of individual insurance purchase by as much as 45.9 %.
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Michael Macdonnell & Ara Darzi
Health Affairs, April 2013, Pages 653-660
Abstract:
Many factors combine to drive the growth in health spending worldwide, but the introduction of new technologies, drugs, and therapies is probably the most important. However, in contrast to other industries, innovations in health care have not tended to reduce the need for labor. In fact, labor still accounts for the largest proportion of expenditures in many health systems. But labor-saving technologies, workforce innovations, and patient self-care approaches are now emerging and altering health care's labor structure. For example, in Mexico more than one million households pay $5 per month to access a health advice hotline before setting foot in a physician's office. In India assembly line-style eye surgery has dramatically reduced cost without sacrificing quality. Policy makers should focus on such labor-saving innovations; reform reimbursement systems to encourage them; tackle professionals' resistance; and remove regulatory barriers. Bold experiments to redesign health services around patient self-care approaches are also warranted.
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Waiting Time and Socioeconomic Status - An Individual-Level Analysis
Karin Monstad, Lars Birger Engesæter & Birgitte Espehaug
Health Economics, forthcoming
Abstract:
Waiting time is a rationing mechanism that is used in publicly funded healthcare systems. From an equity viewpoint, it is regarded as preferable to co-payments. However, long waits are an indication of poor quality of service. To our knowledge, this analysis is the first to benefit from individual-level data from administrative registers to investigate the relationship between waiting time, income, and education. Furthermore, it makes use of an extensive set of medical information that serves as indicators of patient need. Differences in waiting time by socioeconomic status are detected. For men, there is a statistically highly significant negative association between income and waiting time, driven by men in the highest income group, which constitutes 12% of all men. More educated women, that is, those having an education above compulsory schooling, experience lower waiting time than their fellow sisters with the lowest level of education.
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Richard Heijink, Xander Koolman & Gert Westert
European Journal of Health Economics, June 2013, Pages 527-538
Abstract:
Healthcare expenditures rise as a share of GDP in most countries, raising questions regarding the value of further spending increases. Against this backdrop, we assessed the value of healthcare spending growth in 14 western countries between 1996 and 2006. We estimated macro-level health production functions using avoidable mortality as outcome measure. Avoidable mortality comprises deaths from certain conditions "that should not occur in the presence of timely and effective healthcare". We investigated the relationship between total avoidable mortality and healthcare spending using descriptive analyses and multiple regression models, focussing on within-country variation and growth rates. We aimed to take into account the role of potential confounders and dynamic effects such as time lags. Additionally, we explored a method to estimate macro-level cost-effectiveness. We found an average yearly avoidable mortality decline of 2.6-5.3 % across countries. Simultaneously, healthcare spending rose between 1.9 and 5.9 % per year. Most countries with above-average spending growth demonstrated above-average reductions in avoidable mortality. The regression models showed a significant association between contemporaneous and lagged healthcare spending and avoidable mortality. The time-trend, representing an exogenous shift of the health production function, reduced the impact of healthcare spending. After controlling for this time-trend and other confounders, i.e. demographic and socioeconomic variables, a statistically significant relationship between healthcare spending and avoidable mortality remained. We tentatively conclude that macro-level healthcare spending increases provided value for money, at least for the disease groups, countries and years included in this study.
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Catastrophic Medical Malpractice Payouts in the United States
Paul Bixenstine et al.
Journal for Healthcare Quality, forthcoming
Abstract:
Catastrophic medical malpractice payouts, $1 million or greater, greatly influence physicians' practice, hospital policy, and discussions of healthcare reform. However, little is known about the specific characteristics and overall cost burden of these payouts. We reviewed all paid malpractice claims nationwide using the National Practitioner Data Bank over a 7-year period (2004-2010) and used multivariate regression to identify risk factors for catastrophic and increased overall payouts. Claims with catastrophic payouts represented 7.9% (6,130/77,621) of all paid claims. Factors most associated with catastrophic payouts were patient age less than 1 year; quadriplegia, brain damage, or lifelong care; and anesthesia allegation group. Compared with court judgments, settlement was associated with decreased odds of a catastrophic payout (odds ratio, 0.31; 95% confidence interval [CI], 0.22-0.42) and lower estimated average payouts ($124,863; 95% CI, $101,509-144,992). A physician's years in practice and previous paid claims history had no effect on the odds of a catastrophic payout. Catastrophic payouts averaged $1.4 billion per year or 0.05% of the National Health Expenditures. Preventing catastrophic malpractice payouts should be only one aspect of comprehensive patient safety and quality improvement strategies. Future studies should evaluate the benefits of targeted interventions based on specific patient safety event characteristics.
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The Quality of Hospital Care for Medicaid and Private Pay Patients
Joel Weissman, Christine Vogeli & Douglas Levy
Medical Care, May 2013, Pages 389-395
Context: Understanding Medicaid performance relative to private payers and among other states may lead to better value.
Design, Setting, and Participants: Hospital Quality Alliance data from 2007-2008 were used to create composite "all-or-none" quality scores for nearly 900,000 nonelderly adult patients hospitalized with acute myocardial infarction (AMI), congestive heart failure (CHF), or pneumonia.
Main Outcome Measures: Differences in the quality of care received by Medicaid compared with privately insured patients at the national and state levels.
Results: Nationally, 88% of Medicaid beneficiaries received all appropriate processes of care when hospitalized for AMI, compared with 73% for CHF and 77% for pneumonia. Private patients received higher quality of care than Medicaid patients, but differences were small (1.3 percentage point difference, pneumonia; 2.7, AMI; 2.9, CHF; all P<0.05). At the state level, the differences averaged <3 percentage points across all conditions, but some states (2-8 states depending on the condition) exhibited significant (P<0.05) differences of >5 percentage points in favor of private patients. Two states exhibited significantly better quality of care for their Medicaid patients in excess of 5 percentage points. Quality scores for both Medicaid and private patients varied significantly by state but were highly correlated (correlations for AMI=0.80, CHF=0.84, pneumonia=0.80; all P<0.001).
Conclusions: Small national differences in quality between hospitalized Medicaid and private patients are promising, although merit close monitoring as states are forced to curb Medicaid reimbursements. Although quality for Medicaid patients varied by state, high correlations with private patients suggest that the factors driving quality have more to do with geographic factors in the delivery of hospital services than with state-established Medicaid policies.
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Mergers When Prices are Negotiated: Evidence from the Hospital Industry
Gautam Gowrisankaran, Aviv Nevo & Robert Town
NBER Working Paper, March 2013
Abstract:
In healthcare and other bilateral oligopoly markets, prices are often negotiated by the contracting parties. Many hospitals have merged in recent years in part to gain bargaining leverage with managed care organizations (MCOs), leading to several antitrust trials. We specify and estimate a bargaining model of competition between hospitals and MCOs using claims and discharge data from Northern Virginia. We find that MCO bargaining restrains hospital prices significantly relative to standard insurance. Increasing patient coinsurance tenfold would reduce prices by 16%. A proposed hospital acquisition that was challenged by the Federal Trade Commission would have significantly raised hospital prices.
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Katharine Levit et al.
Health Affairs, May 2013, Pages 952-962
Abstract:
The 2007-09 recession had a dramatic effect on behavioral health spending, with the effect most prominent for private, state, and local payers. During the recession behavioral health spending increased at a 4.6 percent average annual rate, down from 6.1 percent in 2004-07. Average annual growth in private behavioral health spending during the recession slowed to 2.7 percent from 7.2 percent in 2004-07. State and local behavioral health spending showed negative average annual growth, -1.2 percent, during the recession, compared with 3.7 percent increases in 2004-07. In contrast, federal behavioral health spending growth accelerated to 11.1 percent during the recession, up from 7.2 percent in 2004-07. These behavioral health spending trends were driven largely by increased federal spending in Medicaid, declining private insurance enrollment, and severe state budget constraints. An increased federal Medicaid match reduced the state share of Medicaid spending, which prevented more drastic cuts in state-funded behavioral health programs during the recession. Federal Medicaid served as a critical safety net for people with behavioral health treatment needs during the recession.
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Impact of Providing Fee Data on Laboratory Test Ordering: A Controlled Clinical Trial
Leonard Feldman et al.
JAMA Internal Medicine, forthcoming
Objective: To determine whether we could decrease the number of laboratory tests ordered by presenting providers with test fees at the time of order entry in a tertiary care hospital, without adding extra steps to the ordering process.
Participants: All providers, including physicians and nonphysicians, who ordered laboratory tests through the computerized provider order entry system at The Johns Hopkins Hospital.
Intervention: We randomly assigned 61 diagnostic laboratory tests to an "active" arm (fee displayed) or to a control arm (fee not displayed). During a 6-month baseline period (November 10, 2008, through May 9, 2009), we did not display any fee data. During a 6-month intervention period 1 year later (November 10, 2009, through May 9, 2010), we displayed fees, based on the Medicare allowable fee, for active tests only.
Main Outcome Measures: We examined changes in the total number of orders placed, the frequency of ordered tests (per patient-day), and total charges associated with the orders according to the time period (baseline vs intervention period) and by study group (active test vs control).
Results: For the active arm tests, rates of test ordering were reduced from 3.72 tests per patient-day in the baseline period to 3.40 tests per patient-day in the intervention period (8.59% decrease; 95% CI, -8.99% to -8.19%). For control arm tests, ordering increased from 1.15 to 1.22 tests per patient-day from the baseline period to the intervention period (5.64% increase; 95% CI, 4.90% to 6.39%) (P < .001 for difference over time between active and control tests).
Conclusions and Relevance: Presenting fee data to providers at the time of order entry resulted in a modest decrease in test ordering. Adoption of this intervention may reduce the number of inappropriately ordered diagnostic tests.
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Diagnosis and Unnecessary Procedure Use: Evidence from C-Section
Janet Currie & Bentley MacLeod
NBER Working Paper, May 2013
Abstract:
This paper provides a model of diagnostic skill as an element of provider quality that is separate from a doctor's skill in performing procedures. Unlike higher surgical skill, which leads to higher use of surgical procedures across the board, better diagnostic skill results in fewer procedures for the low risk, but more procedures for the high risk. That is, better diagnostic skill improves the matching between patients and procedures leading to better health outcomes. Taking the model to data on C-sections, the most common surgical procedure performed in the U.S., we show that improving diagnostic skills from the 25th to the 75th percentile of the observed distribution would reduce C-section rates by 11.7% among the low risk, and increase them by 4.6% among the high risk. Since there are many more low risk than high risk women, improving diagnosis would reduce overall C-section rates. Moreover, such an improvement in diagnostic skill would improve health outcomes for both high risk and low risk women, while improvements in surgical skill have the greatest impact on high risk women. These results are consistent with the hypothesis that efforts to improve diagnosis through methods such as checklists, computer assisted diagnosis, and collaborative decision making may improve patient outcomes.
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Three Large-Scale Changes To The Medicare Program Could Curb Its Costs But Also Reduce Enrollment
Christine Eibner et al.
Health Affairs, May 2013, Pages 891-899
Abstract:
With Medicare spending projected to increase to 24 percent of all federal spending and to equal 6 percent of the gross domestic product by 2037, policy makers are again considering ways to curb the program's spending growth. We used a microsimulation approach to estimate three scenarios: imposing a means-tested premium for Part A hospital insurance, introducing a premium support credit to purchase health insurance, and increasing the eligibility age to sixty-seven. We found that the scenarios would lead to reductions in cumulative Medicare spending in 2012-36 of 2.4-24.0 percent. However, the scenarios also would increase out-of-pocket spending for enrollees and, in some cases, cause millions of seniors not to enroll in the program and to be left without coverage. To achieve substantial cost savings without causing substantial lack of coverage among seniors, policy makers should consider benefit changes in combination with other options, such as some of those now being contemplated by the Obama administration and Congress.
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Geoffrey Joyce, Julie Zissimopoulos & Dana Goldman
Journal of Health Economics, forthcoming
Abstract:
Despite its success, Medicare Part D has been widely criticized for the gap in coverage, the so-called "doughnut hole". We compare the use of prescription drugs among beneficiaries subject to the coverage gap with usage among beneficiaries who are not exposed to it. We find that the coverage gap does, indeed, disrupt the use of prescription drugs among seniors with diabetes. But the declines in usage are modest and concentrated among higher cost, brand-name medications. Demand for high cost medications such as antipsychotics, antiasthmatics, and drugs of the central nervous system decline by 8% to 12% in the coverage gap, while use of lower cost medications with high generic penetration such as beta blockers, ACE inhibitors and antidepressants decline by 3% to 4% after reaching the gap. More importantly, lower adherence to medications is not associated with increases in medical service use.
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Price Shopping in Consumer-Directed Health Plans
Neeraj Sood et al.
Forum for Health Economics and Policy, forthcoming
Abstract:
We use health insurance claims data from 63 large employers to estimate the extent of price shopping for nine common outpatient services in consumer-directed health plans (CDHPs) compared to traditional health plans. The main measures of price shopping include (1) the total price paid on the claim, (2) the share of claims from low- and high-cost providers, and (3) the savings from price shopping relative to choosing prices randomly. All analyses control for individual and zip code level demographics and plan characteristics. We also estimate differences in price shopping within CDHPs depending on expected health care costs and whether the service was bought before or after reaching the deductible. For eight out of nine services analyzed, prices paid by CDHP and traditional plan enrollees did not differ significantly; CDHP enrollees paid 2.3% less for office visits. Similarly, office visits was the only service where CDHP enrollment resulted in a significantly larger share of claims from low-cost providers and greater savings from price shopping relative to traditional plans. There was also no evidence that, within CDHP plans, consumers with lower expected medical expenses exhibited more price shopping or that consumers exhibited more price shopping before reaching the deductible.
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Panos Kanavos et al.
Health Affairs, April 2013, Pages 753-761
Abstract:
The United States spends considerably more per capita on prescription drugs than other countries in the Organization for Economic Cooperation and Development (OECD). Drawing on the Intercontinental Medical Statistics Midas database, we examined the variation in drug prices among selected OECD countries in 2005, 2007, and 2010 to determine which country paid the highest prices for brand-name drugs, what factors led to variation in per capita drug spending, and what factors contributed to the rate of increase in drug spending. We found that depending on how prices were weighted for volume across the countries, brand-name prescription drug prices were 5-198 percent higher in the United States than in the other countries in all three study years. (A limitation is that many negotiated price discounts obtained in the United States may not be fully reflected in the results of this study.) A contributor to higher US per capita drug spending is faster uptake of new and more expensive prescription drugs in the United States relative to other countries. In contrast, the other OECD countries employed mechanisms such as health technology assessment and restrictions on patients' eligibility for new prescription drugs, and they required strict evidence of the value of new drugs. Similarly, US health care decision makers could consider requiring pharmaceutical manufacturers to provide more evidence about the value of new drugs in relation to the cost and negotiating prices accordingly.
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The impact of pharmaceutical innovation on longevity and medical expenditure in France, 2000-2009
Frank Lichtenberg
Economics & Human Biology, forthcoming
Abstract:
Longitudinal, disease-level data are used to analyze the impact of pharmaceutical innovation on longevity (mean age at death) and medical expenditure in France during the period 2000-2009. The estimates imply that pharmaceutical innovation increased mean age at death by 0.29 years (3.43 months) during this period - about one-fifth of the total increase in longevity. This estimate is smaller than those obtained in previous studies of Germany and the U.S., but the rate of adoption of new drugs was lower in France. Longevity is much more strongly related to the number of drugs than it is to the number of drug classes. Pharmaceutical innovation during 2000-2009 is estimated to have increased per capita pharmaceutical expenditure by $125 (26%) in 2009, but most (87%) of this increase was offset by a reduction in hospital expenditure. The baseline estimate of the cost per life-year gained from pharmaceutical innovation in France during 2000-2009 is about $8100. This estimate is fairly close to the mean of estimates obtained ($10,800) from U.S., German, and Australian studies.
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Amalia Miller, Christine Eibner & Carole Roan Gresenz
International Review of Law and Economics, forthcoming
Abstract:
This paper studies the potential impact on consumers of regulatory arbitrage based on financing of employment-based health insurance plans in the United States. Consumers enrolled in self-insured health plans, for which employers are financially responsible for medical claims, make up a majority of Americans with employer-sponsored health coverage. Unlike their fully insured counterparts, self-insured plans are not subject to state health insurance regulation. They are also exempt from certain provisions in the Patient Protection and Affordable Care Act (ACA). Employers who offer health plans can thus avoid certain insurance regulations and consumer protections by electing to self-insure. This research explores the impact of self-insurance on consumer welfare and how that is expected to change under the ACA. We describe the major consumer concerns regarding self-insurance - firm financial solvency, benefit generosity and stability, claims adjudication and recourse options - and present qualitative and quantitative evidence on their importance. We find a substantial degree of similarity between self-insured and fully insured plans with regard to benefit generosity and stability, at least with respect to available measures. In addition, we find no evidence that enrollees in self-insured plans face higher denial rates. While the ACA will not directly affect claims adjudication, it will improve recourse options for consumers with all plans and narrow the regulatory differences that existed between financing types. Policymakers must work to ensure the transparency of recourse options for enrollees in self and fully insured plans. In terms of financial solvency, while stop loss coverage is more common among smaller versus larger self-insured firms and such coverage typically commences at lower attachment points for smaller firms, roughly one-fourth of self-insured firms with fewer than 200 employees do not have such coverage. The ability of small firms without stop loss coverage to manage the risks associated with health care claims is uncertain, as are the consequences of health care expenditure-related risk for the overall financial solvency of the firm. Further, the financial security of firms who purchase stop loss coverage, and - by extension, the solvency of health plan benefits provided to employees - depends critically on the reliability of the stop loss insurer. State insurance commissioners may want to carefully consider the adequacy and appropriateness of their regulatory oversight of stop loss insurers in light of the potential move among smaller employers into the self-insured and stop loss marketplace.
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Ewout van Ginneken, Katherine Swartz & Philip Van der Wees
Health Affairs, April 2013, Pages 744-752
Abstract:
Since the 1990s some European countries have had regulated health insurance exchanges or have incorporated elements of exchange markets into their health systems. Health reforms in Switzerland and the Netherlands in 1996 and 2006, respectively, created managed competition in the countries' health insurance markets, which are somewhat analogous to the US state and federally operated health insurance exchanges scheduled to begin operations in 2013 under the Affordable Care Act. We review the Swiss and Dutch experience with exchanges and offer specific lessons for the US exchanges. First, risk-adjustment mechanisms - which provide premium adjustments intended to compensate health plans for enrolling people expected to have high medical costs - need to be sophisticated and continually updated. Second, it is important to determine why people eligible for coverage don't enroll and to craft responses that will overcome enrollment barriers. Third, applying for subsidies must be simple. Fourth, insurers will need bargaining power similar to that of providers to create a level playing field for negotiating about prices and quality of services, and interim cost containment measures may be necessary. Fifth and finally, insurers and consumers alike will need meaningful information about providers' costs and quality of care so they can become prudent purchasers of health services, since managed competition among health plans by itself will not substantially drive down health costs.
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Using RD Design to Understand Heterogeneity in Health Insurance Crowd-Out
Thomas Koch
Journal of Health Economics, May 2013, Pages 599-611
Abstract:
Crowd-out, the switching from private to public insurance, is often found, but estimates are rarely consistent with prior measurements. Cutler and Gruber (1996) found crowd-out in up to half of the newly eligible children, while Card and Shore-Sheppard (2004) found almost none. This paper exploits many regression discontinuity (RD) designs to estimate heterogeneous effects of public insurance eligibility. Crowd-out and its impact on spending and utilization is documented across the income spectrum, but effects are smaller at higher income levels. These differences vary by state and correspond to changes in the reimbursement rates of public insurance plans.
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Sue Kim et al.
Health Services Research, forthcoming
Objective: To test the effectiveness of a telephone care management intervention to increase the use of primary and preventive care, reduce hospital admissions, and reduce emergency department visits for Medicaid beneficiaries with disabilities in a managed care setting.
Data Source: Four years (2007-2011) of Medicaid claims data on blind and/or disabled beneficiaries, aged 20-64.
Study Design: Randomized control trial with an intervention group (n = 3,540) that was enrolled in managed care with telephone care management and a control group (n = 1,524) who remained in fee-for-service system without care management services. Multi-disciplinary care coordination teams provided telephone services to the intervention group to address patients' medical and social needs.
Data Collection/Extraction: Medicaid claims and encounter data for all participants were obtained from the state and the managed care organization.
Principal Findings: There was no significant difference in use of primary care, specialist visits, hospital admissions, and emergency department between the intervention and the control group. Care managers experienced challenges in keeping members engaged in the intervention and maintaining contact by telephone.
Conclusions: The lack of success for Medicaid beneficiaries, along with other recent studies, suggests that more intensive and more targeted interventions may be more effective for the high-needs population.
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Michael Anderson, Carlos Dobkin & Tal Gross
Review of Economics and Statistics, forthcoming
Abstract:
Health insurance affects the rate at which individuals visit hospitals and emergency departments (EDs). We identify the causal effect of losing health insurance using a regression discontinuity design. We compare individuals just before and after their 23rd birthdays, which insurers have used as a cutoff after which students are no longer eligible for their parents' health insurance. 1.5 percent of young adults lose their health insurance upon turning 23, and this transition leads to a 1.6-percent decrease in ED visits and a 0.8-percent decrease in hospital stays. We discuss why these estimates are larger than those observed among teenage populations.
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David Stevenson, Matthew Spittal & David Studdert
Medical Care, May 2013, Pages 430-436
Background: The tort system is supposed to help improve the quality and safety of health care, but whether it actually does so is controversial. Most previous studies modeling the effect of negligence litigation on quality of care are ecologic.
Objective: To assess whether the experience of being sued and incurring litigation costs affects the quality of care subsequently delivered in nursing homes.
Research Design, Subjects, Measures: We linked information on 6471 negligence claims brought against 1514 nursing homes between 1998 and 2010 to indicators of nursing home quality drawn from 2 US national datasets (Online Survey, Certification, and Reporting system; Minimum Data Set Quality Measure/Indicator Reports). At the facility level, we tested for associations between 9 quality measures and 3 variables indicating the nursing homes' litigation experience in the preceding 12-18 months (total indemnity payments; total indemnity payments plus administrative costs; ≥1 paid claims vs. none). The analyses adjusted for quality at baseline, case-mix, ownership, occupancy, year, and facility and state random effects.
Results: Nearly all combinations of the 3 litigation exposure measures and 9 quality measures-27 models in all-showed an inverse relationship between litigation costs and quality. However, only a few of these associations were statistically significant, and the effect sizes were very small. For example, a doubling of indemnity payments was associated with a 1.1% increase in the number of deficiencies and a 2.2% increase in pressure ulcer rates.
Conclusions: Tort litigation does not increase the quality performance of nursing homes, and may decrease it slightly.
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Amitabh Chandra, Maurice Dalton & Jonathan Holmes
Health Affairs, May 2013, Pages 864-872
Abstract:
Identifying policies that will cut or constrain US health care spending and spending growth dominates reform efforts, yet little is known about whether the drivers of spending levels and of spending growth are the same. Policies that produce a one-time reduction in the level of spending, for example by making hospitals more efficient, may do little to reduce subsequent annual spending growth. To identify factors causing health care spending to grow the fastest, we focused on three conditions in the Medicare population: heart attacks, congestive heart failure, and hip fractures. We found that spending on postacute care - long-term hospital care, rehabilitation care, and skilled nursing facility care - was the fastest growing major spending category and accounted for a large portion of spending growth in 1994-2009. During that period average spending for postacute care doubled for patients with hip fractures, more than doubled for those with congestive heart failure, and more than tripled for those with heart attacks. We conclude that policies aimed at controlling acute care spending, such as bundled payments for short-term hospital spending and physician services, are likely to be more effective if they include postacute care, as is currently being tested under Medicare's Bundled Payment for Care Improvement Initiative.
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Christine Percheski & Sharon Bzostek
Social Science & Medicine, forthcoming
Abstract:
An increasing proportion of children in the United States lives in families with complicated family structures and a mix of immigrant and US-born family members. Eligibility rules for health insurance coverage, however, were not designed with these families in mind. The result can be complicated insurance patterns among siblings within families, with some "sibships" only being partially-insured, and other sibships having both private and public coverage. We hypothesize that mixed coverage among siblings causes confusion and logistical difficulties for parents and may lead to less access to appropriate health care for their children. In this article, we use data from the 2009-2011 National Health Interview Survey (n=51,418 children in 20,478 sibships) to present estimates of the prevalence of mixed health insurance coverage among siblings and describe the predictors of such coverage. We also use linked data from the 2001-2005 National Health Interview Survey and 2002-2007 Medical Expenditure Panel Survey (n=17,871) to show how mixed coverage is related to health care utilization. We find that although few sibships are characterized by different health insurance coverage types, mixed coverage among siblings is far more common among families with mixed nativity status, and blended families with step- and half-siblings. In terms of outcomes, children living in sibships with mixed coverage have significantly lower odds of having a usual source of health care. We also consider whether the association between mixed insurance coverage and health care outcomes differs across particular combinations of insurance coverage. We find that both publicly-insured children who have uninsured siblings and privately-insured children with publicly-insured siblings are less likely to have a usual source of care than similar children with uniformly-insured siblings. Because a usual source of care is associated with better health care outcomes, we argue that policymakers should consider ways to reduce mixed coverage among children and families.
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Informing the uninformed: How drug advertising affects check-up visits
Daniel Hosken & Brett Wendling
International Journal of Industrial Organization, March 2013, Pages 181-194
Abstract:
Direct-to-consumer drug advertising has recently become an important and controversial component of drug marketing. In this paper we examine one of the claimed benefits of drug advertising: encouraging the undiagnosed to seek out medical treatment. We measure how advertising affects an undiagnosed individual's decision to visit a physician for a check-up using detailed person-level panel data on more than 30,000 individuals from the Medical Care Expenditure Panel Survey. We find drug advertising is an important determinant of an individual's decision to get a check-up and that this effect of drug advertising appears to differ by demographic group. While the differences between demographic groups are not statistically different, our point estimates suggest that Blacks and the highly educated are the most responsive to drug advertising.
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Dionne Kringos et al.
Health Affairs, April 2013, Pages 686-694
Abstract:
Strong primary care systems are often viewed as the bedrock of health care systems that provide high-quality care, but the evidence supporting this view is somewhat limited. We analyzed comparative primary care data collected in 2009-10 as part of a European Union-funded project, the Primary Health Care Activity Monitor for Europe. Our analysis showed that strong primary care was associated with better population health; lower rates of unnecessary hospitalizations; and relatively lower socioeconomic inequality, as measured by an indicator linking education levels to self-rated health. Overall health expenditures were higher in countries with stronger primary care structures, perhaps because maintaining strong primary care structures is costly and promotes developments such as decentralization of services delivery. Comprehensive primary care was also associated with slower growth in health care spending. More research is needed to explore these associations further, even as the evidence grows that strong primary care in Europe is conducive to reaching important health system goals.
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Yauheniya Varabyov & Jonas Schreyögg
Health Policy, forthcoming
Abstract:
There is a growing interest in the cross-country comparisons of the performance of national health care systems. The present work provides a comparison of the technical efficiency of the hospital sector using unbalanced panel data from OECD countries over the period 2000-2009. The estimation of the technical efficiency of the hospital sector is performed using nonparametric data envelopment analysis (DEA) and parametric stochastic frontier analysis (SFA). Internal and external validity of findings is assessed by estimating the Spearman rank correlations between the results obtained in different model specifications. The panel-data analyses using two-step DEA and one-stage SFA show that countries which have higher health care expenditure per capita tend to have a more technically efficient hospital sector. Whether the expenditure is financed through private or public sources is not related to the technical efficiency of the hospital sector. On the other hand, the hospital sector in countries with higher income inequality and longer average hospital length of stay is less technically efficient.