Health Care Trends

Kevin Lewis

May 17, 2010

Loss Aversion and the Framing of the Health Care Reform Debate

David Eckles & Brian Schaffner
The Forum: A Journal of Applied Research in Contemporary Politics, April 2010

The high-stakes debate over health care reform captured the public's attention for nearly a year. Options ranging from fully nationalized insurance to maintaining the status quo were considered, though little consensus as to the appropriate solution emerged. Most surveys indicated an agreement that a problem existed with the current health care system and a clear and consistent majority favored taking some action on health care reform. However, clear public support for any specific reform proposal was difficult to muster since most individuals also indicated satisfaction with their own health care. This paper explores this disconnect in public opinion within the context of loss aversion. We note that even as elites actively attempted to frame the issue to counteract the public's loss averse tendencies, these strategies met with little success in generating support for Obama's reform plan. However, we also argue that these loss averse tendencies will now work against any Republican efforts to repeal the health reform legislation.


Private-Payer Profits Can Induce Negative Medicare Margins

Jeffrey Stensland, Zachary Gaumer & Mark Miller
Health Affairs, May 2010, Pages 1045-1051

A common assumption is that hospitals have little control over their costs and must charge high rates to private health insurers when Medicare rates are lower than hospital costs. We present evidence that contradicts that common assumption. Hospitals with strong market power and higher private-payer and other revenues appear to have less pressure to constrain their costs. Thus, these hospitals have higher costs per unit of service, which can lead to losses on Medicare patients. Hospitals under more financial pressure-with less market share and less ability to charge higher private rates-often constrain costs and can generate profits on Medicare patients.


The relationship between health and GDP in OECD countries in the very long run

Robyn Swift
Health Economics, forthcoming

This paper uses Johansen multivariate cointegration analysis to examine the relationship between health and GDP for 13 OECD countries over the last two centuries, for periods ranging from 1820-2001 to 1921-2001. A similar, long run, cointegrating relationship between life expectancy and both total GDP and GDP per capita was found for all the countries estimated. The relationships have a significant influence on both total GDP and GPD per capita in most of the countries estimated, with 1% increase in life expectancy resulting in an average 6% increase in total GDP in the long run, and 5% increase in GDP per capita. Total GDP and GDP per capita also have a significant influence on life expectancy for most countries. There is no evidence of changes in the relationships for any country over the periods estimated, indicating that shifts in the major causes of illness and death over time do not appear to have influenced the link between health and economic growth.


The Impact of Tort Reform on Private Health Insurance Coverage, February 2010

Ronen Avraham & Max Schanzenbach
American Law and Economics Review, forthcoming

This study evaluates tort reform's impact on private health insurance coverage. Tort reform may reduce costly damage awards and defensive medicine. On the other hand, tort reform may increase health care costs by reducing doctors' caretaking or increasing questionable treatments. Reducing health care costs should increase health insurance coverage rates, while cost increases should decrease coverage rates. We find that between 1981 and 2007 damage caps, collateral source reform, and joint-and-several liability reform increased health insurance coverage among price-sensitive groups between one-half and one percentage points each. We conclude that tort reform reduces health care costs, at least for price-sensitive groups.


Paying For Performance In Primary Care: Potential Impact On Practices And Disparities

Mark Friedberg, Dana Gelb Safran, Kathryn Coltin, Marguerite Dresser & Eric Schneider
Health Affairs, May 2010, Pages 926-932

Performance-based payments are increasingly common in primary care. With persistent disparities in the quality of care that different populations receive, however, such payments may steer new resources away from the care of racial and ethnic minorities and people of low socioeconomic status. We simulated performance-based payments to Massachusetts practices serving higher and lower shares of patients from these vulnerable communities in Massachusetts. Typical practices serving higher shares of vulnerable populations would receive less per practice compared to others, by estimated amounts of more than $7,000. These findings suggest that pay-for-performance programs should monitor and address the potential impact of performance-based payments on health care disparities.


US Pharmaceutical Innovation in an International Context

Salomeh Keyhani, Steven Wang, Paul Hebert, Daniel Carpenter & Gerard Anderson
American Journal of Public Health, June 2010, Pages 1075-1080

Objectives: We explored whether the United States, which does not regulate pharmaceutical prices, is responsible for the development of a disproportionate share of the new molecular entities (NMEs; a drug that does not contain an active moiety previously approved by the Food and Drug Administration) produced worldwide.

Methods: We collected data on NMEs approved between 1992 and 2004 and assigned each NME to an inventor country. We examined the relation between the proportion of total NMEs developed in each country and the proportion of total prescription drug spending and gross domestic product (GDP) of each country represented.

Results: The United States accounted for 42% of prescription drug spending and 40% of the total GDP among innovator countries and was responsible for the development of 43.7% of the NMEs. The United Kingdom, Switzerland, and a few other countries innovated proportionally more than their contribution to GDP or prescription drug spending, whereas Japan, South Korea, and a few other countries innovated less.

Conclusions: Higher prescription drug spending in the United States does not disproportionately privilege domestic innovation, and many countries with drug price regulation were significant contributors to pharmaceutical innovation.


Good for Living? On the Relationship between Globalization and Life Expectancy

Andreas Bergh & Therese Nilsson
World Development, forthcoming

This paper analyzes the relationship between three dimensions (economic, social, and political) of globalization and life expectancy using a panel of 92 countries covering the 1970-2005 period. Using different estimation techniques and sample groupings, we find that economic globalization has a robust positive effect on life expectancy, even when controlling for income, nutritional intake, literacy, number of physicians, and several other factors. The result also holds when the sample is restricted to low-income countries only. In contrast, political and social globalization have no such robust effects.


The Growing Financial Burden Of Health Care: National And State Trends, 2001-2006

Peter Cunningham
Health Affairs, May 2010, Pages 1037-1044

The financial burden of health care - the ratio of total out-of-pocket spending for health care services and premiums to total family income - continues to increase nationally. As a result of this trend, more people have been exposed to high costs and lack essential services. This study examines trends nationally and among selected states between 2001 and 2006. The results show considerable state-to-state variation associated mainly with differences in family income and, to a lesser extent, out-of-pocket spending for insurance premiums. Nationally, middle- and higher-income people with private insurance experienced the largest increases in financial burden. Moreover, almost 30 percent of the U.S. population either had a high financial burden of health costs or were uninsured. These facts underscore that escalating health care costs affect all socioeconomic strata, not just the poor.


Sunk Cost and Commitment to Medical Treatment

Martin Coleman
Current Psychology, June 2010, Pages 121-134

The influence of prior, irretrievable, investment (sunk cost) on commitment to medical treatment was investigated. Three studies were run investigating the influence of sunk cost in the form of money, time, and effort. A total of 637 participants (314 male) with a mean age of 19.58 years were recruited from an undergraduate population. A computer program simulated the process of arranging a course of physiotherapy. Participants invested one of three amounts of sunk cost (under budget, on budget, or over budget) into arranging sessions with a chiropractor. Participants then decided how much time they wished to commit to these chiropractor sessions or to an alternative treatment with a better chance of success. Results revealed a significant effect of invested money, a significant effect of invested effort, but no effect of invested time. Invested money produced a sunk cost effect, while invested effort appeared to exert influence via cognitive dissonance. The implications for healthcare decision-making are discussed.


Do Strikes Kill? Evidence from New York State

Jonathan Gruber & Samuel Kleiner
NBER Working Paper, March 2010

Concerns over the impacts of hospital strikes on patient welfare led to substantial delay in the ability of hospitals to unionize. Once allowed, hospitals unionized rapidly and now represent one of the largest union sectors of the U.S. economy. Were the original fears of harmful hospital strikes realized as a result? In this paper we analyze the effects of nurses' strikes in hospitals on patient outcomes. We utilize a unique dataset collected on nurses' strikes over the 1984 to 2004 period in New York State, and match these strikes to a restricted use hospital discharge database which provides information on treatment intensity, patient mortality and hospital readmission. Controlling for hospital specific heterogeneity, patient demographics and disease severity, the results show that nurses' strikes increase in-hospital mortality by 19.4% and 30-day readmission by 6.5% for patients admitted during a strike, with little change in patient demographics, disease severity or treatment intensity. This study provides some of the first analytical evidence on the effects of health care strikes on patients, and suggests that hospitals functioning during nurses' strikes are doing so at a lower quality of patient care.


Can We Close The Income And Wealth Gap Between Specialists And Primary Care Physicians?

Bryan Vaughn, Steven DeVrieze, Shelby Reed & Kevin Schulman
Health Affairs, May 2010, Pages 933-940

Over their lifetimes, primary care physicians earn lower incomes-and accumulate considerably less wealth-than their specialist counterparts. This gap influences medical students, who are choosing careers in primary care in declining numbers. We estimated career wealth accumulation across specialists, primary care physicians, physician assistants, business school graduates, and college graduates. We then compared specialists, represented by cardiologists, to primary care physicians in four scenarios. The wealth gap is substantial; narrowing it would require substantial reductions in specialists' practice income or increases in primary care physicians' practice income, or both, of more than $100,000 a year. Current proposals for increasing primary care physician supply would do little to lessen these differences.


The road to efficiency? Re-examining the impact of the primary care physician workforce on health care utilization rates

David Bradley Wright & Thomas Ricketts
Social Science & Medicine, June 2010, Pages 2006-2010

Research suggests that primary care physicians may help to control health care costs by encouraging more efficient service use. However, most studies do not account for data aggregation effects that can significantly affect the direction and magnitude of findings. To re-examine the association between the proportion of primary care physicians and health care utilization rates in an area, and investigate the potential impact of aggregating data to different geographic levels on these observed associations, we estimate four distinct cross-sectional multivariate regression models to predict health care utilization at the county level and the metropolitan statistical area (MSA) level using data from 2007. Our study focuses on health care utilization in the United States using inpatient admissions, outpatient visits, emergency room visits, and total (both inpatient and outpatient) surgeries as dependent variables in separate regressions. The key independent variable is the proportion of primary care physicians in the area. Several community-level control variables are also included. We find that a higher proportion of primary care physicians in the area's physician supply is associated with a decreased number of inpatient admissions at the MSA level, but not the county level, and a decreased number of emergency room visits at the county level, but not the MSA level. Outpatient visits and total surgeries are not associated with the proportion of primary care physicians. From our findings we are able to conclude that there is some evidence that a higher concentration of primary care physicians is associated with a decrease in health care utilization, but these findings depend on the level of aggregation. Investigators should be aware of the implications of aggregating data and acknowledge any resultant limitations.


Private Schools of the Caribbean: Outsourcing Medical Education

Lynn Eckhert
Academic Medicine, April 2010, Pages 622-630

Twenty-five percent of the U.S. physician workforce is made up of international medical graduates (IMGs), a growing proportion of whom (27% in 2005) are U.S. citizens. Most IMGs graduate from "offshore medical schools" (OMSs), for-profit institutions primarily located in the Caribbean region and established to train U.S. students who will return home to practice medicine. Following the recent call for a larger physician workforce, OMSs rapidly increased in number. Unlike U.S. schools, which must be accredited by the Liaison Committee on Medical Education, OMSs are recognized by their home countries and may not be subject to a rigorous accreditation process. Although gaps in specific data exist, a closer look at OMSs reveals that most enroll three groups of students per year, and many educate students initially at "offshore campuses" and later at clinical sites in the United States. Students from some OMSs are eligible for the U.S. Federal Family Education Loan Program. The lack of uniform data on OMSs is problematic for state medical boards, which struggle to assess the quality of the medical education offered at any one school and which, in some cases, disapprove a school. With the United States' continued reliance on IMGs to meet its health needs, the public and the profession will be best served by knowing more about medical education outside of the United States. Review of medical education in OMSs whose graduates will become part of U.S. health care delivery is timely as the United States reforms its health-care-delivery system.


from the


A weekly newsletter with free essays from past issues of National Affairs and The Public Interest that shed light on the week's pressing issues.


to your National Affairs subscriber account.

Already a subscriber? Activate your account.


Unlimited access to intelligent essays on the nation’s affairs.

Subscribe to National Affairs.