Findings

Getting Between You and Your Doctor

Kevin Lewis

October 13, 2009

The Devil is in the Third Year: A Longitudinal Study of Erosion of Empathy in Medical School

Mohammadreza Hojat, Michael Vergare, Kaye Maxwell, George Brainard, Steven Herrine, Gerald Isenberg, Jon Veloski & Joseph Gonnella
Academic Medicine, September 2009, Pages 1182-1191

Purpose: This longitudinal study was designed to examine changes in medical students' empathy during medical school and to determine when the most significant changes occur.

Method: Four hundred fifty-six students who entered Jefferson Medical College in 2002 (n=227) and 2004 (n=229) completed the Jefferson Scale of Physician Empathy at five different times: at entry into medical school on orientation day and subsequently at the end of each academic year. Statistical analyses were performed for the entire cohort, as well as for the "matched" cohort (participants who identified themselves at all five test administrations) and the "unmatched" cohort (participants who did not identify themselves in all five test administrations).

Results: Statistical analyses showed that empathy scores did not change significantly during the first two years of medical school. However, a significant decline in empathy scores was observed at the end of the third year which persisted until graduation. Findings were similar for the matched cohort (n=121) and for the rest of the sample (unmatched cohort, n=335). Patterns of decline in empathy scores were similar for men and women and across specialties.

Conclusions: It is concluded that a significant decline in empathy occurs during the third year of medical school. It is ironic that the erosion of empathy occurs during a time when the curriculum is shifting toward patient-care activities; this is when empathy is most essential. Implications for retaining and enhancing empathy are discussed.

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How sensitive is physician performance to alternative compensation schedules? Evidence from a large network of primary care clinics

Lorens Helmchen & Anthony Lo Sasso
Health Economics, forthcoming

Abstract:
Despite its centrality for the provision of health care, physician compensation remains understudied, and existing studies either fail to control for time trends, cover small samples from highly particular settings, or examine empirically negligible changes in reward levels. Using a four-year sample of 59 physicians and 1.1 million encounters, we study how physicians at a network of primary care clinics responded when their salaried compensation plan was replaced with a lower salary plus substantial piece rates for encounters and select procedures. Although patient characteristics remained unchanged, physicians increased encounters by 11 to 61%, both by increasing encounters per day and days worked at the network, and increased procedures to the maximum reimbursable level.

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Increased Spending On Health Care: Long-Term Implications For The Nation

Michael Chernew, Richard Hirth & David Cutler
Health Affairs, September/October 2009, Pages 1253-1255

Abstract:
This paper updates one we published in 2003, describing the implications of continued health care spending growth for the consumption of nonhealth goods and services. Our estimates now show that at approximately long-run average rates of excess health spending growth, 119 percent of the real increase in per capita income would be devoted to health spending over the 2007-2083 projection period. We argue that an alternative scenario, under which health spending grew just one percentage point faster than real per capita income, is "affordable," although 53.6 percent of real income growth over the period would go to health care. Moreover, even with the more favorable assumption, the nation would still face important challenges paying for care and dividing up the burden. This analysis thus supports the argument that reforms that would dramatically slow the rate of health care spending growth are necessary, especially if the nation hopes to maintain a reasonable amount of consumption of nonhealth goods and services.

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Estimating willingness to pay for Medicare using a dynamic life-cycle model of demand for health insurance

Ahmed Khwaja
Journal of Econometrics, forthcoming

Abstract:
Medicare is the largest health insurance program in the U.S. This paper uses a dynamic random utility model of demand for health insurance in a life-cycle human capital framework with endogenous production of health to calculate the individual willingness to pay (WTP) for Medicare. The model accounts for the feature that the demand for health insurance is derived through the demand for health, which is jointly determined with the production of health over the life-cycle. The WTP measure incorporates the effects of Medicare insurance on aggregate consumption through effects on medical expenditures and mortality, and consumption utility of health. The model is estimated using panel data from the Health and Retirement Study. The average WTP or change in lifetime expected utility resulting from delaying the age of eligibility to 67 is found to be $24,947 in 1991 dollars ($39,435 in 2008 dollars). However, there is considerable variation in the WTP, e.g., in 1991 dollars the WTP of individuals who have less than a high school education and are white is $28,347 ($44,810 in 2008 dollars), while the WTP of those with at least a college degree and who are neither white nor black is $15,584 ($24,635 in 2008 dollars). More generally, the less educated have a higher WTP to avoid a policy change that delays availability of Medicare benefits. Additional model simulations imply that the primary benefits of Medicare are insurance against medical expenditures with relatively smaller benefits in terms of improved health status and longevity. Medicare also leads to large increases in medical utilization due to deferring of medical care prior to eligibility.

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The Welfare Effects of Medical Malpractice Liability

Darius Lakdawalla & Seth Seabury
NBER Working Paper, September 2009

Abstract:
Policymakers and the public are concerned about the role of medical malpractice liability in the rising cost of medical care. We use variation in the generosity of local juries to identify the causal impact of malpractice liability on medical costs, mortality, and social welfare. The effect of malpractice on medical costs is large relative to its share of medical expenditures, but relatively modest in absolute terms — growth in malpractice payments over the last decade and a half contributed at most 5.0% to the total real growth in medical expenditures, which topped 33% over this period. On the other side of the ledger, malpractice liability leads to modest reductions in patient mortality; the value of these more than likely exceeds the cost impacts of malpractice liability. Therefore, policies that reduce expected malpractice costs are unlikely to have a major impact on health care spending for the average patient, and are also unlikely to be cost-effective over conventionally accepted ranges for the value of a statistical life.

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The Impact of Tort Reform on Employer-Sponsored Health Insurance Premiums

Ronen Avraham, Leemore Dafny & Max Schanzenbach
UT Austin Working Paper, September 2009

Abstract:
We evaluate the effect of tort reform on employer-sponsored health insurance premiums by exploiting state-level variation in the timing of reforms. Using a dataset of healthplans representing over 10 million Americans annually between 1998 and 2006, we find that caps on non-economic damages, collateral source reform, and joint and several liability reform reduce premiums by 1 to 2 percent each. These reductions are concentrated in PPOs rather than HMOs, suggesting that can HMOs can reduce "defensive" healthcare costs even absent tort reform. The results are the first direct evidence that tort reform reduces healthcare costs in aggregate; prior research has focused on particular medical conditions.

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Has Medicare Part D Improved the Health of Elderly Americans?

Frank Lichtenberg
Columbia University Working Paper, August 2009

Abstract:
To provide evidence about the impact of Medicare Part D on the health status of elderly Americans, we estimate two types of Difference-in-Deviation-from-Trend models of three indicators of health status: hospitalization rates, nursing home resident rates, and mortality rates. In the first type, the treatment groups and the control groups are defined on the basis of age. In the second type, the treatment groups and the control groups are defined on the basis of location (state), because the extent to which seniors had drug coverage prior to Part D varied across states. The estimates are consistent with the hypothesis that Part D has reduced the hospitalization and nursing home resident rates of elderly patients. Also, the mortality rate of the elderly declined at a faster rate during 2005-6 than it had during either 1999-2005 or 2002-2005, whereas the mortality rate of the non-elderly did not decline at a faster rate.

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Insurer Bargaining and Negotiated Drug Prices in Medicare Part D

Darius Lakdawalla & Wesley Yin
NBER Working Paper, September 2009

Abstract:
A controversial feature of Medicare Part D is its reliance on private insurers to negotiate drug prices and rebates with retail pharmacies and drug manufacturers. Central to this controversy is whether increases in market power — an undesirable feature in most settings — confer benefits in health insurance markets, where larger buyers may obtain better prices for their members. We test whether insurers that experience larger enrollment increases due to Part D negotiate lower drug prices with pharmacies. Overall, we find that 100,000 additional insureds lead to 2.5-percent lower pharmacy prices negotiated by the insurer, and 5-percent reductions in pharmacy profits earned on prescriptions filled by enrollees of that insurer. Estimated enrollment effects are much larger for drugs with therapeutic substitutes, and virtually zero for branded drugs without therapeutic substitutes. We also present evidence that most insurer savings are, on the margin, passed on as lower premiums. Out-of-sample estimation suggests that modest insurer consolidation would generate significant savings to Medicare, along with premium reductions and enrollment increases. Finally, we find that greater enrollment leads to lower pharmacy prices negotiated by insurers for their non-Part D market — an external benefit to the commercially enrolled associated with administering Part D through private insurers.

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The Challenge of Measuring Quality of Care From the Electronic Health Record

Carol Roth, Yee-Wei Lim, Joshua Pevnick, Steven Asch & Elizabeth McGlynn
American Journal of Medical Quality, September 2009, Pages 385-394

Abstract:
The electronic health record (EHR) is seen by many as an ideal vehicle for measuring quality of health care and monitoring ongoing provider performance. It is anticipated that the availability of EHR-extracted data will allow quality assessment without the expensive and time-consuming process of medical record abstraction. A review of the data requirements for the indicators in the Quality Assessment Tools system suggests that only about a third of the indicators would be readily accessible from EHR data. Other factors involving complexity of required data elements, provider documentation habits, and EHR variability make the task of quality measurement more difficult than may be appreciated. Accurately identifying eligible cases for quality assessment and validly scoring those cases with EHR-extracted data will pose significant challenges but could potentially plummet the cost and therefore expand the use of quality assessment.

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Setting Hospital Rates To Control Costs And Boost Quality: The Maryland Experience

Robert Murray
Health Affairs, September/October 2009, Pages 1395-1405

Abstract:
For decades Maryland has maintained a hospital payment system in which all payers-public and private-pay the same rates. This paper describes Maryland's all-payer hospital payment system-the legislative goals and principles that directed regulatory efforts in the state; how well the system performs in meeting these goals; and current initiatives on payment design, quality-based reimbursement, and their application elsewhere in the health sector. Maryland's rate-setting system is one of the most enduring and successful cost containment programs in the United States. Lessons learned are relevant to other states and provide useful bases for consideration of future health reform strategies.

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An Exploratory Study of FDA New Drug Review Times, Prescription Drug User Fee Acts, and R&D Spending

John Vernon, Joseph Golec, Randall Lutter & Clark Nardinelli
Quarterly Review of Economics and Finance, forthcoming

Abstract:
FDA approval times have declined significantly since the enactment of the Prescription Drug User Fee Act (PDUFA) in 1992. As a result, present value expected returns to pharmaceutical R&D have likely increased. In the current paper we employ a unique survey dataset, one which includes data from 1990 to 1999 on firm-level pharmaceutical R&D expenditures for 7 large, U.S.-based drug companies. We estimate the effect FDA approval times have on firm R&D spending. Controlling for other factors such as pharmaceutical profitability and cash flows, we estimate that a 10 percent decrease (increase) in FDA approval times leads to an increase (decrease) in R&D spending from between 1.4% to 2.0%. Combining this estimate with recent research on the link between PDUFA and FDA approval times, we calculate that for the firms in our sample, R&D spending in the 1990 s increased by an additional 5.0% to 7.2% as a result of this legislation. This amounted to an additional $3.2 billion to $4.6 billion in pharmaceutical R&D expenditures (2005 $US), and possibly several new drugs. Because PDUFA continued to provide incentives for R&D after 1999, and because it is probable that firms not in our sample were similarly affected by PDUFA, our estimates may be conservative. Considering more industry-wide measures of R&D expenditures over a similar time period (1992-2001) we calculate PDUFA may have incentivized an additional $10.8 billion to $15.4 billion in pharmaceutical R&D. Recent economic research has shown that the social rate of return on pharmaceutical R&D is very high; therefore, the social benefits of PDUFA (over and above the benefits of more rapid consumer access) are likely to be substantial.

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Engineering perspectives on healthcare delivery: Can we afford technological innovation in healthcare?

William Rouse
Systems Research and Behavioral Science, September/October 2009, Pages 573-582

Abstract:
This article considers the national challenge of controlling healthcare costs. It is argued that this system-level challenge is better addressed with an engineering approach rather than from the perspective of medical science that, quite rightly, is tailored to address clinical practice. The engineering approach is outlined and three models are proposed for controlling the costs of healthcare so that the growth of these costs tracks the growth of gross domestic product. These models provide insights into the magnitude of efficiency gains needed to accomplish this goal. Possible ways to achieve these gains are discussed.

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Why Do the Elderly Save? The Role of Medical Expenses

Mariacristina De Nardi, Eric French & John Bailey Jones
Federal Reserve Bank Working Paper, July 2009

Abstract:
This paper constructs a rich model of saving for retired single people. Our framework allows for bequest motives and heterogeneity in medical expenses and life expectancies. We estimate the model using AHEAD data and the method of simulated moments. The data show that out-of-pocket medical expenses rise quickly with both age and permanent income. For many elderly people the risk of living long and requiring expensive medical care is a more important driver of old age saving than the desire to leave bequests. Social insurance programs such as Medicaid rationalize the low asset holdings of the poorest. These government programs, however, also benefit the rich because they insure them against their worst nightmares about their very old age: either not being able to afford the medical care that they need, or being left destitute by huge medical bills.

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Fragmentation in Mental Health Benefits and Services: A Preliminary Examination into Consumption and Outcomes

Barak Richman, Frank Sloan & Dan Grossman
Duke Working Paper, August 2009

Abstract:
This chapter, presented at a conference on Our Fragmented Health Care System at the Petrie-Flom Center for Health Law Policy, discusses consumption disparities in outpatient mental health services among a diverse insured working population. We first observe that despite paying equal insurance premiums and enjoying equal insurance coverage, lower-income and non-white workers consume fewer insurance benefits than their white and higher-income coworkers. We do not find any evidence, however, that this leads to adverse health outcomes. We additionally find that non-whites and low-income individuals are more likely than their white and high-income counterparts to obtain mental health care from general practitioners rather than mental healthcare providers, and nearly twice as likely not to follow up with a mental health provider after hospitalization with a mental health diagnosis. These findings suggest that low-income and non-white individuals might be paying for health services that primarily benefit their white and more affluent coworkers. Many of these regressive consequences can be attributed to mental health insurance carve-outs, which is a product of the fragmented delivery of health care.

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There is a Time to Keep Silent and a Time to Speak, the Hard Part is Knowing Which is Which: Striking the Balance between Privacy Protection and the Flow of Health Care Information

Daniel Gilman & James Cooper
FTC Working Paper, September 2009

Abstract:
This paper explores fundamental policy trade-offs between health information technology (HIT) and regulatory protection of health information privacy and data security. The paper argues that barriers to HIT development and adoption have been complex, including not just misaligned payment incentives — addressed by the ARRA — but significant implementation issues, risk, "cultural" barriers to adoption, standard-setting issues, network externalities, and regulatory costs. We then focus on one species of regulatory costs that may be especially amenable to reform — those imposed by privacy and data security regulations. We investigate the expected tangible privacy harms related to HIT and find them to be less stark than some believe. We suggest that data security may be a more efficient substitute for many consent and breach notification requirements. We also examine the costs associated with state regulation of medical privacy and find them to be substantial. Although we do not advocate any particular legislative response to the costs of state regulation, we consider the express preemption of state law in the field as a potentially efficient response to those costs. Views expressed in this abstract and the accompanying paper are those of the authors alone, and do not represent the views of the Federal Trade Commission or any of its individual Commissioners.

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Estimating Heterogeneity in the Benefits of Medical Treatment Intensity

William Evans & Craig Garthwaite
NBER Working Paper, September 2009

Abstract:
Federal and state laws passed in the late 1990s increased considerably postpartum stays for newborns. Using all births in California over the 1995-2001 period, 2SLS estimates suggest that, for the average newborn impacted by the law, increased treatment intensity had modest and statistically insignificant (p-value>0.05) impacts on readmission probabilities. Allowing the treatment effect to vary by pre-existing conditions or the pre-law propensity score of being discharged early, two objective measures of medical need, demonstrates that the law had large and statistically significant impacts for those with the greatest likelihood of a readmission. These results demonstrate heterogeneity in the returns to greater treatment intensity, and the returns to the average and marginal patient vary considerably.

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Why doctors choose small towns: A developmental model of rural physician recruitment and retention

Christine Hancock, Alan Steinbach, Thomas Nesbitt, Shelley Adler & Colette Auerswald
Social Science & Medicine, November 2009, Pages 1368-1376

Abstract:
Shortages of health care professionals have plagued rural areas of the USA for more than a century. Programs to alleviate them have met with limited success. These programs generally focus on factors that affect recruitment and retention, with the supposition that poor recruitment drives most shortages. The strongest known influence on rural physician recruitment is a "rural upbringing," but little is known about how this childhood experience promotes a return to rural areas, or how non-rural physicians choose rural practice without such an upbringing. Less is known about how rural upbringing affects retention. Through twenty-two in-depth, semi-structured interviews with both rural- and urban-raised physicians in northeastern California and northwestern Nevada, this study investigates practice location choice over the life course, describing a progression of events and experiences important to rural practice choice and retention in both groups. Study results suggest that rural exposure via education, recreation, or upbringing facilitates future rural practice through four major pathways. Desires for familiarity, sense of place, community involvement, and self-actualization were the major motivations for initial and continuing small-town residence choice. A history of strong community or geographic ties, either urban or rural, also encouraged initial rural practice. Finally, prior resilience under adverse circumstances was predictive of continued retention in the face of adversity. Physicians' decisions to stay or leave exhibited a cost-benefit pattern once their basic needs were met. These results support a focus on recruitment of both rural-raised and community-oriented applicants to medical school, residency, and rural practice. Local mentorship and "place-specific education" can support the integration of new rural physicians by promoting self-actualization, community integration, sense of place, and resilience. Health policy efforts to improve the physician workforce must address these complexities in order to support the variety of physicians who choose and remain in rural practice.


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