Care for money

Kevin Lewis

August 24, 2015

National Health Expenditure Projections, 2014–24: Spending Growth Faster Than Recent Trends

Sean Keehan et al.
Health Affairs, August 2015, Pages 1407-1417

Health spending growth in the United States is projected to average 5.8 percent for 2014–24, reflecting the Affordable Care Act’s coverage expansions, faster economic growth, and population aging. Recent historically low growth rates in the use of medical goods and services, as well as medical prices, are expected to gradually increase. However, in part because of the impact of continued cost-sharing increases that are anticipated among health plans, the acceleration of these growth rates is expected to be modest. The health share of US gross domestic product is projected to rise from 17.4 percent in 2013 to 19.6 percent in 2024.


Can Walmart make us healthier? Prescription drug prices and health care utilization

Florencia Borrescio Higa
Journal of Health Economics, forthcoming

This paper analyzes how prices in the retail pharmaceutical market affect health care utilization. Specifically, I study the impact of Walmart's $4 Prescription Drug Program on utilization of antihypertensive drugs and on hospitalizations for conditions amenable to drug therapy. Identification relies on the change in the availability of cheap drugs introduced by Walmart's program, exploiting variation in the distance to the nearest Walmart across ZIP codes in a difference-in-differences framework. I find that living close to a source of cheap drugs increases utilization of antihypertensive medications by 7 percent and decreases the probability of an avoidable hospitalization by 6.2 percent.


Mortality, Hospitalizations, and Expenditures for the Medicare Population Aged 65 Years or Older, 1999-2013

Harlan Krumholz et al.
Journal of the American Medical Association, 28 July 2015, Pages 355-365

Objective: To comprehensively describe national trends in mortality, hospitalizations, and expenditures in the Medicare fee-for-service population between 1999 and 2013.

Results: The sample consisted of 68 374 904 unique Medicare beneficiaries (fee-for-service and Medicare Advantage). All-cause mortality for all Medicare beneficiaries declined from 5.30% in 1999 to 4.45% in 2013 (difference, 0.85 percentage points; 95% CI, 0.83-0.87). Among fee-for-service beneficiaries (n = 60 056 069), the total number of hospitalizations per 100 000 person-years decreased from 35 274 to 26 930 (difference, 8344; 95% CI, 8315-8374). Mean inflation-adjusted inpatient expenditures per Medicare fee-for-service beneficiary declined from $3290 to $2801 (difference, $489; 95% CI, $487-$490). Among fee-for-service beneficiaries in the last 6 months of life, the number of hospitalizations decreased from 131.1 to 102.9 per 100 deaths (difference, 28.2; 95% CI, 27.9-28.4). The percentage of beneficiaries with 1 or more hospitalizations decreased from 70.5 to 56.8 per 100 deaths (difference, 13.7; 95% CI, 13.5-13.8), while the inflation-adjusted inpatient expenditure per death increased from $15 312 in 1999 to $17 423 in 2009 and then decreased to $13 388 in 2013. Findings were consistent across geographic and demographic groups.

Conclusions and Relevance: Among Medicare fee-for-service beneficiaries aged 65 years or older, all-cause mortality rates, hospitalization rates, and expenditures per beneficiary decreased from 1999 to 2013. In the last 6 months of life, total hospitalizations and inpatient expenditures decreased in recent years.


Equilibria in Health Exchanges: Adverse Selection versus Reclassification Risk

Ben Handel, Igal Hendel & Michael Whinston
Econometrica, July 2015, Pages 1261–1313

This paper studies regulated health insurance markets known as exchanges, motivated by the increasingly important role they play in both public and private insurance provision. We develop a framework that combines data on health outcomes and insurance plan choices for a population of insured individuals with a model of a competitive insurance exchange to predict outcomes under different exchange designs. We apply this framework to examine the effects of regulations that govern insurers' ability to use health status information in pricing. We investigate the welfare implications of these regulations with an emphasis on two potential sources of inefficiency: (i) adverse selection and (ii) premium reclassification risk. We find substantial adverse selection leading to full unraveling of our simulated exchange, even when age can be priced. While the welfare cost of adverse selection is substantial when health status cannot be priced, that of reclassification risk is five times larger when insurers can price based on some health status information. We investigate several extensions including (i) contract design regulation, (ii) self-insurance through saving and borrowing, and (iii) insurer risk adjustment transfers.


Estimating Equilibrium in Health Insurance Exchanges: Analysis of the Californian Market under the ACA

Pietro Tebaldi
Stanford Working Paper, April 2015

This paper develops and estimates a model of a regulated health insurance exchange, in which insurers’ ability to adjust prices across buyers with different observed risk or preferences is restricted. I show conditions under which the joint distribution of risk and preferences is identified, even when the econometrician does not observe any information on individual risk. These primitives can then be used to simulate equilibrium under alternative regulations. I estimate the model with data from the first year of the Californian exchange under the Affordable Care Act, where age-rating restrictions and a subsidy program determine the way in which insurers’ decisions translate to expected profits. For this market, I investigate alternative designs of the subsidy program. Compared to the subsidy formula mandated by the healthcare reform, the adoption of a voucher program – providing buyers with a lump-sum equal to 70-80% of their expected expenditure – would transfer welfare away from insurers, favoring consumers and/or taxpayers. Simulations of equilibrium under this alternative policy result in total coverage between 100-115% of the levels achieved by the current regulations, while also reducing government expenditure, average premiums, and markups, by 0-20%, 12-15%, and 22-27%, respectively.


Primary Care Appointment Availability For New Medicaid Patients Increased After Medicaid Expansion In Michigan

Renuka Tipirneni et al.
Health Affairs, August 2015, Pages 1399-1406

The Affordable Care Act expands health insurance coverage to millions of Americans, but the availability of health care services for the newly insured population remains uncertain. We conducted a simulated patient (or “secret shopper”) study to assess primary care appointment availability and wait times for new patients with Medicaid or private insurance before and after implementation of Michigan’s Medicaid expansion in 2014. The expansion, which was made possible through a section 1115 waiver, has a unique requirement that new beneficiaries must be seen by a primary care provider within 60–90 days of enrollment. During a period of rapid coverage expansion in Michigan, we found that appointment availability increased 6 percentage points for new Medicaid patients and decreased 2 percentage points for new privately insured patients, compared to availability before the expansion. Wait times remained stable, at 1–2 weeks for both groups. Further research is needed to determine whether access to primary care for newly insured patients will endure over time.


Impact of Health Insurance Type on Trends in Newborn Circumcision, United States, 2000 to 2010

Lee Warner et al.
American Journal of Public Health, September 2015, Pages 1943-1949

Objectives: We explored how changes in insurance coverage contributed to recent nationwide decreases in newborn circumcision.

Methods: Hospital discharge data from the 2000–2010 Nationwide Inpatient Sample were analyzed to assess trends in circumcision incidence among male newborn birth hospitalizations covered by private insurance or Medicaid. We examined the impact of insurance coverage on circumcision incidence.

Results: Overall, circumcision incidence decreased significantly from 61.3% in 2000 to 56.9% in 2010 in unadjusted analyses (P for trend = .008), but not in analyses adjusted for insurance status (P for trend = .46) and other predictors (P for trend = .55). Significant decreases were observed only in the South, where adjusted analyses revealed decreases in circumcision overall (P for trend = .007) and among hospitalizations with Medicaid (P for trend = .005) but not those with private insurance (P for trend = .13). Newborn male birth hospitalizations covered by Medicaid increased from 36.0% (2000) to 50.1% (2010; P for trend < .001), suggesting 390 000 additional circumcisions might have occurred nationwide had insurance coverage remained constant.

Conclusions: Shifts in insurance coverage, particularly toward Medicaid, likely contributed to decreases in newborn circumcision nationwide and in the South. Barriers to the availability of circumcision should be revisited, particularly for families who desire but have less financial access to the procedure.


Unmet Health Care Need in US Adolescents and Adult Health Outcomes

Dougal Hargreaves et al.
Pediatrics, forthcoming

Background: Adolescence is a formative period when health care services have a unique opportunity to influence later health outcomes. Unmet health care need in adolescence is known to be associated with poor contemporaneous health outcomes; it is unknown whether it predicts poor adult health outcomes.

Methods: We used nationally representative data from 14 800 subjects who participated in Wave I (mean age: 15.9 years [1994/1995]) and Wave IV (mean age: 29.6 years [2008]) of the National Longitudinal Study of Adolescent to Adult Health. Logistic regression models were used to estimate the association between unmet health care need in adolescence and 5 self-reported measures of adult health (fair/poor general health, functional impairment, time off work/school, depressive symptoms, and suicidal ideation). Models were adjusted for baseline health, insurance category, age, gender, race/ethnicity, household income, and parental education.

Results: Unmet health care need was reported by 19.2% of adolescents and predicted worse adult health: fair/poor general health (adjusted odds ratio [aOR]: 1.27 [95% confidence interval (CI): 1.00–1.60]); functional impairment (aOR: 1.52 [95% CI: 1.23–1.87]); depressive symptoms (aOR: 1.36 [95% CI: 1.13–1.64]); and suicidal ideation (aOR: 1.30 [95% CI: 1.03–1.68]). There was no significant association between unmet health care need and time off work/school (aOR: 1.13 [95% CI: 0.93–1.36]). Cost barriers accounted for only 14.8% of unmet health care need. The reason for unmet need was not significantly related to the likelihood of poor adult health outcomes.

Conclusions: Reported unmet health care need in adolescence is common and is an independent predictor of poor adult health. Strategies to reduce unmet adolescent need should address health engagement and care quality, as well as cost barriers to accessing services.


Technology Diffusion and Productivity Growth in Health Care

Jonathan Skinner & Douglas Staiger
Review of Economics and Statistics, forthcoming

We draw on macroeconomic models of diffusion and productivity to explain empirical patterns of survival gains in heart attacks. Using Medicare data for 2.8 million patients during 1986-2004, we find that hospitals rapidly adopting cost-effective innovations such as beta blockers, aspirin, and reperfusion, had substantially better outcomes for their patients. Holding technology adoption constant, the marginal returns to spending were relatively modest. Hospitals increasing the pace of technology diffusion (“tigers”) experienced triple the survival gains compared to those with diminished rates (“tortoises”). In sum, small differences in the propensity to adopt effective technology lead to wide productivity differences across hospitals.


Which Models Can We Trust to Evaluate Consumer Decision Making? Comment on "Choice Inconsistencies among the Elderly"

Jonathan Ketcham, Nicolai Kuminoff & Christopher Powers
NBER Working Paper, July 2015

Neoclassical and psychological models of consumer behavior often make divergent predictions for the welfare effects of paternalistic policies, leaving wide scope for researchers’ choice of a model to influence their policy conclusions. We develop a framework to reduce this model uncertainty and apply it to administrative data on consumer decision making in Medicare Part D. Consumers’ choices for prescription drug insurance plans can be explained by Abaluck and Gruber’s (AER 2011) model of utility maximization with psychological biases or by a neoclassical version of their model that precludes such biases. We evaluate these competing hypotheses using nonparametric tests of utility maximization and a trio of model validation tests. We find that 79% of enrollment decisions in Medicare Part D from 2006-2010 satisfied basic axioms of consumer preference theory under the assumptions of full information, zero transaction cost, and no measurement error. The validation tests provide evidence against widespread psychological biases. In particular, we find that precluding psychological biases improves the structural model’s out-of-sample predictions for consumer behavior.


The Effect of Health Insurance on Workers’ Compensation Filing: Evidence from the Affordable Care Act's Age-Based Threshold for Dependent Coverage

Marcus Dillender
Journal of Health Economics, forthcoming

This paper identifies the effect of health insurance on workers’ compensation (WC) filing for young adults by implementing a regression discontinuity design using WC medical claims data from Texas. The results suggest health insurance factors into the decision to have WC pay for discretionary care. The implied instrumental variables estimates suggest a ten-percentage-point decrease in health insurance coverage increases WC bills by 15.3 percent. Despite the large impact of health insurance on the number of WC bills, the additional cost to WC at age 26 appears to be small as most of the increase comes from small bills.


Long Run Effects of Temporary Incentives on Medical Care Productivity

Pablo Celhay et al.
NBER Working Paper, July 2015

The adoption of new clinical practice patterns by medical care providers is often challenging, even when they are believed to be both efficacious and profitable. This paper uses a randomized field experiment to examine the effects of temporary financial incentives paid to medical care clinics for the initiation of prenatal care in the first trimester of pregnancy. The rate of early initiation of prenatal care was 34% higher in the treatment group than in the control group while the incentives were being paid, and this effect persisted at least 24 months or more after the incentives ended. These results are consistent with a model where the incentives enable providers to address the fixed costs of overcoming organizational inertia in innovation, and suggest that temporary incentives may be effective at motivating improvements in long run provider performance at a substantially lower cost than permanent incentives.


Did Medicare Part D Reduce Mortality?

Jason Huh & Julian Reif
University of Illinois Working Paper, July 2015

We investigate the implementation of Medicare Part D and estimate that this prescription drug benefit program reduced elderly mortality by 2.2 percent annually. This was driven primarily by a reduction in cardiovascular mortality, the leading cause of death for the elderly. There was no effect on cancer mortality, the second leading cause. We validate these results by showing that Medicare Part D increased the utilization of drug treatments for cardiovascular disease, but not for cancer. We calculate that the value of the mortality reduction is equal to one-third of the deadweight loss of the program.


Information Technology and Patient Health: Analyzing Outcomes, Populations, and Mechanisms

Seth Freedman, Haizhen Lin & Jeffrey Prince
NBER Working Paper, July 2015

We study the effect of hospital adoption of electronic medical records (EMRs) on health outcomes, particularly patient safety indicators (PSIs). We find evidence of a positive impact of EMRs on PSIs via decision support rather than care coordination. Consistent with this mechanism, we find an EMR with decision support is more effective at reducing PSIs for less complicated cases, using several different metrics for complication. These findings indicate the negligible impacts for EMRs found by previous studies focusing on the Medicare population and/or mortality do not apply in all settings.


The Impact of Certificate-of-Need Laws on Nursing Home and Home Health Care Expenditures

Momotazur Rahman et al.
Medical Care Research and Review, forthcoming

Over the past two decades, nursing homes and home health care agencies have been influenced by several Medicare and Medicaid policy changes including the adoption of prospective payment for Medicare-paid postacute care and Medicaid-paid long-term home and community-based care reforms. This article examines how spending growth in these sectors was affected by state certificate-of-need (CON) laws, which were designed to limit the growth of providers and have remained unchanged for several decades. Compared with states without CON laws, Medicare and Medicaid spending in states with CON laws grew faster for nursing home care and more slowly for home health care. In particular, we observed the slowest growth in community-based care in states with CON for both the nursing home and home health industries. Thus, controlling for other factors, public postacute and long-term care expenditures in CON states have become dominated by nursing homes.

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