Healthy Supply Chains

Kevin Lewis

November 15, 2021

Life expectancy in nursing homes
Robert Brent
Applied Economics, forthcoming

It is well known that life expectancy in nursing homes (NHs) is lower for older adults than those residing elsewhere. In this paper, we attempt to discover the exact extent of this loss of life expectancy, and whether it can be explained by pre-existing health state conditions, especially the seriousness of dementia. We use a parametric survival model, on a large data set spanning up to 13 years, which covers health states and types of residence for all time periods until a person dies. In the absence of health state controls, the loss of life expectancy is 47 months. Accounting for health states still leads to a 41-month loss of life. Even those with serious dementia would live longer lives if not residing in a NH. We then value the estimated loss of life years. The losses are large, equal to $1.7 million per NH resident, and $1.87 trillion for the US NH population. 

Money-Back Guarantees and Service Quality: The Marketing of In-Vitro Fertilization Services
Shan Yu, Mrinal Ghosh & Madhu Viswanathan
Journal of Marketing Research, forthcoming

Marketing practices like Money-Back Guarantees (MBG) are prevalent in many expert service markets but are often decried as marketing gimmicks that take advantage of vulnerable and poorly informed consumers. In this research, conducted in the market for In-Vitro Fertilization (IVF) services, the authors empirically assess differences in quality of care between clinics that offer MBG programs, compared to those that don't, to investigate whether MBG programs can serve a purpose consistent with signaling and insurance theories. The analysis is conducted on a unique longitudinal dataset that includes information on clinic-level treatment, outcome statistics and clinic characteristics for fertility clinics in the U.S., state-level insurance mandates, and demographic and geographic characteristics. Using an instrumental variable approach to account for the endogeneity of MBG decision made by fertility clinics, the authors find that MBG clinics, on average, offer better treatment outcomes in terms of success rates while undertaking lower risks. The results are consistent with signaling theory predictions that market-based programs like MBG can serve as signals of unobservable clinic quality despite the incentives for clinics to engage in opportunistic behaviors. 

Does Research Save Lives? The Local Spillovers of Biomedical Research on Mortality
Rebecca McKibbin & Bruce Weinberg
NBER Working Paper, October 2021

This paper investigates the local impact of biomedical research on mortality in the USA. Causally estimating the marginal value of biomedical research is challenging due to a lack of micro data linking health outcomes to plausibly exogenous variation in research. We create a new linkage between a research database (PubMed) and administrative death records that enables research to be related to mortality at the geographic, disease and time level. We then estimate the marginal impact of biomedical research on mortality using hospital market (HRR) level shocks to research activity by disease. Our identification strategy builds on the literature on the dissemination of knowledge, specifically that of local knowledge spillovers. By utilizing variation across diseases, time and distance from research we control for additional trends relative to the current literature. Our results show that an additional research publication on average reduces local mortality from a disease by 0.35%. Our results also provide novel evidence that there are health benefits to the local communities (local spillovers) in which biomedical research is conducted. 

The Economics of Medical Procedure Innovation
David Dranove et al.
NBER Working Paper, October 2021

This paper explores the economic incentives for medical procedure innovation. Using a proprietary dataset on billing code applications for emerging medical procedures, we highlight two mechanisms that could hinder innovation. First, the administrative hurdle of securing permanent, reimbursable billing codes substantially delays innovation diffusion. We find that Medicare utilization of innovative procedures increases nearly nine-fold after the billing codes are promoted to permanent (reimbursable) from provisional (non-reimbursable). However, only 29 percent of the provisional codes are promoted within the five-year probation period. Second, medical procedures lack intellectual property rights, especially those without patented devices. When appropriability is limited, specialty medical societies lead the applications for billing codes. We indicate that the ad hoc process for securing billing codes for procedure innovations creates uncertainty about both the development process and the allocation and enforceability of property rights. This stands in stark contrast to the more deliberate regulatory oversight for pharmaceutical innovations. 

The Effect of Medicaid on Care and Outcomes for Chronic Conditions: Evidence from the Oregon Health Insurance Experiment
Heidi Allen & Katherine Baicker
NBER Working Paper, October 2021

Health insurance may play an important role not only in immediate access to care but in the management of chronic disease, which would have implications for long-run care needs as well as health outcomes. Such causal connections are often difficult to establish, but we use Oregon’s 2008 Medicaid lottery to assess the management of diabetes and asthma, as well as several markers of physical health. This analysis complements several prior studies by introducing new data elements and by analyzing chronically ill subpopulations. While we had previously found that having insurance increases the diagnosis and use of medication for diabetes, we show here that it does not significantly increase the likelihood of diabetic patients receiving recommended care such as eye exams and regular blood sugar monitoring, nor does it improve the management of patients with asthma. We also find no effect on measures of physical health including pulse, obesity, or blood markers of chronic inflammation. Effects of Medicaid on health care utilization appear similar for those with and without pre-lottery diagnoses of chronic physical health conditions. Thus, while Medicaid is an important determinant of access to care overall, it does not appear that Medicaid alone has detectable effects on the management of several chronic physical health conditions, at least over the first two years in this setting. However, sample limitations highlight the value of additional research. 

Performance Pay in Insurance Markets: Evidence from Medicare
Michele Fioretti & Hongming Wang
Review of Economics and Statistics, forthcoming

Public procurement bodies increasingly resort to pay-for-performance contracts to promote efficient spending. We show that firm responses to pay-for-performance can widen the inequality in accessing social services. Focusing on the quality bonus payment initiative in Medicare Advantage, we find that higher quality-rated insurers responded to bonus payments by selecting healthier enrollees with premium differences across counties. Selection is profitable because the quality rating fails to adjust for differences in enrollee health. Selection inflated the bonus payments and shifted the supply of high-rated insurance to the healthiest counties, reducing access to lower-priced, higher-rated insurance in the riskiest counties. 

ACA Marketplaces Became Less Affordable Over Time For Many Middle-Class Families, Especially The Near-Elderly
Paul Jacobs & Steven Hill
Health Affairs, November 2021, Pages 1713-1721

The Affordable Care Act provides tax credits for Marketplace insurance, but before 2021, families with incomes above four times the federal poverty level did not qualify for tax credits and could face substantial financial burdens when purchasing coverage. As a measure of affordability, we calculated potential Marketplace premiums as a percentage of family income among families with incomes of 401–600 percent of poverty. In 2015 half of this middle-class population would have paid at least 7.7 percent of their income for the lowest-cost bronze plan; in 2019 they would have paid at least 11.3 percent of their income. By 2019 half of the near-elderly ages 55–64 would have paid at least 18.9 percent of their income for the lowest-cost bronze plan in their area. The American Rescue Plan Act temporarily expanded tax credit eligibility for 2021 and 2022, but our results suggest that families with incomes of 401–600 percent of poverty will again face substantial financial burdens after the temporary subsidies expire. 

Racial Disparities in Avoidable Hospitalizations in Traditional Medicare and Medicare Advantage 
Sungchul Park, Paul Fishman & Norma Coe
Medical Care, November 2021, Pages 989-996

Compared with traditional Medicare (TM), Medicare Advantage (MA) has the potential to reduce racial disparities in hospitalizations for ambulatory care sensitive conditions (ACSC). As racial disparities may be partly attributable to unequal treatment based on where people live, this suggests the need of examining geographic variations in racial disparities.

We analyzed the 2015−2016 Medicare Provider Analysis and Review files. We used propensity score matching to account for differences in characteristics between TM and MA beneficiaries. Then, we conducted linear regression and estimated adjusted outcomes for TM and MA beneficiaries by race. Also, we estimated racial differences in adjusted outcomes by insurance and hospital referral region (HRR).

While White beneficiaries in TM and MA had similar rates of ACSC hospitalizations (163.7 vs. 162.2/10,000 beneficiaries), Black beneficiaries in MA had higher rates of ACSC hospitalizations than Black beneficiaries in TM (221.2 vs. 209.3/10,000 beneficiaries). However, the racial differences were greater in MA than TM (59.0 vs. 45.6/10,000 beneficiaries). Racial differences in ACSC hospitalizations in MA were prevalent across almost all HRRs. 95.5% of HRRs had higher rates of ACSC hospitalizations among Black beneficiaries than White beneficiaries in MA relative to just 54.2% of HRRs in TM. 

The Anatomy of a Hospital System Merger: The Patient Did Not Respond Well to Treatment
Martin Gaynor et al.
NBER Working Paper, November 2021

There is an ongoing merger wave in the US hospital industry, but it remains an open question how hospital mergers change, or fail to change, hospital behavior, performance, and outcomes. In this research, we open the “black box” of practices within hospitals in the context of a mega-merger between two large for-profit chains. Benchmarking the effects of the merger against the acquirer’s stated aims, we show that they achieved some of their goals: they harmonized their electronic medical records and sent managers to target hospitals; after the acquisition, managerial processes were similar across hospitals in the merged chain. However, these interventions failed to drive detectable gains in profitability or patient outcomes. Our findings demonstrate the importance of hospital organizations and internal processes for merger research and policy in health care and the economy more generally. 

Health insurance and the boomerang generation: Did the 2010 ACA dependent care provision affect geographic mobility and living arrangements among young adults?
Pinka Chatterji, Xiangshi Liu & Barış Yörük
Contemporary Economic Policy, forthcoming

Public policies can have unintended effects on young adults' decisions about living arrangements and migration. The Affordable Care Act dependent care provision mandated that private health insurance plans that offer dependent coverage must allow young adults to stay on parents' insurance until age 26. In this paper, we test whether the provision is associated with young adults' propensity to live with/near parents. Data come from the 2008 Survey of Income and Program Participation. Findings indicate that the provision is associated with increased likelihood that young adults live with a parent, and decreased likelihood that young adults live with other relatives/nonrelatives. 

Crowd-Out and Emergency Department Utilization
Cameron Ellis & Meghan Esson
Journal of Health Economics, forthcoming

When consumers gain Medicaid, their cost of healthcare changes. The direction of this change determines how utilization changes. The previously uninsured see a stark decrease in the price of primary care after gaining public insurance. Due to charity care, they may face an increase in the price of emergency department care. The previously insured see a reduction in emergency department prices and decreased access to primary care. We examine the impact of the prior insurance status of the newly publicly insured on substitution between healthcare. We base our identification on California’s LIHP and ACA Medicaid expansions. One challenge we face is estimating crowd-out. We use machine learning techniques to predict prior insurance status based on observable covariates in cross-sectional data. We find an increase in emergency department utilization caused entirely by those crowded-out whose access to primary care has decreased. We find the opposite utilization patterns for the previously uninsured. 

Increasing and dampening the nocebo response following medicine-taking: A randomised controlled trial
Kate MacKrill, Zara Morrison & Keith Petrie
Journal of Psychosomatic Research, November 2021

The nocebo effect is the adverse effects of treatment that cannot be attributed to a medicine. We investigated if we could increase or decrease nocebo responding following medicine taking. A nocebo explanation to reduce side effects was compared with a negative medication news item designed to increase side effects and a control condition.

108 healthy participants enrolled in a between-subjects study purportedly testing the effect of lamotrigine (actually placebo) on mood and cognition. Participants were randomised to watch either a video explaining the nocebo effect; a negative media item on lamotrigine, or control video prior to receiving the tablet. Side effects were assessed at 45-min and 48-h.

The negative media group reported significantly more side effects (M = 0.78, SD = 1.53) than the control group (M = 0.46, SD = 1.80, p = .035) at the end of session and a greater proportion of the negative media group (33%) reported at least one side effect compared to the nocebo explanation (11%) and control group (11%, p = .020). The nocebo explanation group reported significantly fewer side effects (M = 0.38, SD = 1.16) than the control group (M = 1.37, SD = 2.98, p = .038) at the 48-h follow-up.


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