Lives at stake

Kevin Lewis

December 07, 2015

The Long-Term Impacts of Medicaid Exposure in Early Childhood: Evidence from the Program's Origin

Michel Boudreaux, Ezra Golberstein & Donna McAlpine
Journal of Health Economics, forthcoming

This paper examines the long-term impact of exposure to Medicaid in early childhood on adult health and economic status. The staggered timing of Medicaid's adoption across the states created meaningful variation in cumulative exposure to Medicaid for birth cohorts that are now in adulthood. Analyses of the Panel Study of Income Dynamics suggest exposure to Medicaid in early childhood (age 0-5) is associated with statistically significant and meaningful improvements in adult health (age 25-54), and this effect is only seen in subgroups targeted by the program. Results for economic outcomes are imprecise and we are unable to come to definitive conclusions. Using separate data we find evidence of two mechanisms that could plausibly link Medicaid's introduction to long-term outcomes: contemporaneous increases in health services utilization for children and reductions in family medical debt.


Dependent Health Insurance Laws and College Enrollment: Is There Evidence of College Lock?

David Yaskewich
Journal of Family and Economic Issues, December 2015, Pages 557-569

For many years, the tax code gave an incentive for employers to offer dependent coverage for full-time students up to the age of 24. Recently, a provision in the Patient Protection and Affordable Care Act of 2010 mandated that the definition of a dependent include young adults up to age 26, regardless of student status. Many states have passed similar mandates. The newly-acquired dependent status of non-students may encourage some young adults to avoid college. I compared a state that made the largest changes to its definition of a dependent (New Jersey) to a neighboring state that made no change (Pennsylvania). This study estimated that New Jersey’s law reduced college enrollment by 15–24 % in New Jersey relative to Pennsylvania.


Insurance, race/ethnicity, and sex in the search for a new physician

Rajiv Sharma, Arnab Mitra & Miron Stano
Economics Letters, December 2015, Pages 150–153

We employed simulated patient calls to a national random sample of primary care physicians to assess appointment availability for adults who differed by insurance, race/ethnicity, and sex. The disparities we found are much larger than those reported in previous assessments, highlighting the importance of including race/ethnicity and sex in such research.


New evidence on factors affecting the level and growth of US health care spending

James Thornton & Svetlana Beilfuss
Applied Economics Letters, Winter 2016, Pages 15-18

The dual problems of high and rising medical care expenditures and substantial differences in spending across geographic regions have long plagued the US health care system. We provide new evidence to explain why some states and regions of the country spend much more on medical care than others, and why health care spending for the nation as a whole has been growing rapidly over the last several decades. To do this, we estimate a health care spending panel data model using annual data on all 50 states for the period 1993–2009. Our model includes a number of socio-economic, health care provider, lifestyle and environmental variables that past studies indicate may affect the level or growth of aggregate health care spending. We exploit the time effect component of our model to obtain an upper-bound estimate of the effect of advances in medical technology. Our findings indicate that the most important factors influencing the level of spending are availability of providers, income, excessive alcohol consumption, Medicaid coverage, HMO health plans and the proportion of the population elderly and African-American. The principal drivers of growth have been the continual introduction of new medical technologies, and the growth of providers and income.


It's About Time: Effects of the Affordable Care Act Dependent Coverage Mandate On Time Use

Gregory Colman & Dhaval Dave
NBER Working Paper, November 2015

One of the main purposes of the Patient Protection and Affordable Care Act (ACA) is to enable Americans to make more productive use of their time. This is apparent in the rationale given for the ACA’s extension of dependent care coverage, which requires employer-sponsored insurance plans that cover the children of insured workers to continue to cover these dependents until they turn 26. A number of studies have examined the effect of the dependent care coverage provision on insurance coverage, health, healthcare utilization, and labor supply among young adults. None that we are aware of has directly examined effects on time use. If, as suggested by prior work, the provision reduced the amount of time young adults work, the question arises, what have these adults done with the extra time? A related question is whether the change made them better off. We use the American Time Use Survey from 2003-2013 to answer these two main questions, providing several contributions to the literature on the ACA. Models are based on a difference-in-differences framework, and the results suggest that the ACA’s dependent coverage provision has reduced job-lock, as well as the duration of the average doctor’s visit, including time spent waiting for and receiving medical care, among persons ages 19-25. The latter effect is consistent with a substitution from hospital ER utilization to greater routine physician care. The extra time has gone into socializing, and to a lesser extent, into education and job search. Availability of insurance and change in work time appear to have increased young adults’ subjective well-being, enabling them to spend time on activities they view as more meaningful than those they did before insurance became available.


The Effects of the Massachusetts Health Reform on Household Financial Distress

Bhashkar Mazumder & Sarah Miller
American Economic Journal: Economic Policy, forthcoming

A major benefit of health insurance coverage is that it protects the insured from unexpected medical costs that may devastate their personal finances. In this paper, we use detailed credit report information on a large panel of individuals to examine the effect of a major health care reform in Massachusetts in 2006 on a broad set of financial outcomes. We exploit plausibly exogenous variation in the impact of the reform across counties and age groups using levels of pre-reform insurance coverage as a measure of the potential effect of the reform. We find that the reform reduced the total amount of debt that was past due, the fraction of all debt that was past due, improved credit scores and reduced personal bankruptcies. We also find suggestive evidence that the reform decreased third party collections. The effects are most pronounced for individuals who had limited access to credit markets before the reform. These results show that health care reform has implications that extend well beyond the health and health care utilization of those who gain insurance coverage.


Information Frictions and Adverse Selection: Policy Interventions in Health Insurance Markets

Benjamin Handel, Jonathan Kolstad & Johannes Spinnewijn
NBER Working Paper, November 2015

A large literature has analyzed pricing inefficiencies in health insurance markets due to adverse selection, typically assuming informed, active consumers on the demand side of the market. However, recent evidence suggests that many consumers have information frictions that lead to suboptimal health plan choices. As a result, policies such as information provision, plan recommendations, and smart defaults to improve consumer choices are being implemented in many applied contexts. In this paper we develop a general framework to study insurance market equilibrium and evaluate policy interventions in the presence of choice frictions. Friction-reducing policies can increase welfare by facilitating better matches between consumers and plans, but can decrease welfare by increasing the correlation between willingness-to-pay and costs, exacerbating adverse selection. We identify relationships between the underlying distributions of consumer (i) costs (ii) surplus from risk protection and (iii) choice frictions that determine whether friction-reducing policies will be on net welfare increasing or reducing. We extend the analysis to study how policies to improve consumer choices interact with the supply-side policy of risk-adjustment transfers and show that the effectiveness of the latter policy can have important implications for the effectiveness of the former. We implement the model empirically using proprietary data on insurance choices, utilization, and consumer information from a large firm. We leverage structural estimates from prior work with these data and highlight how the model's micro-foundations can be estimated in practice. In our specific setting, we find that friction-reducing policies exacerbate adverse selection, essentially leading to the market fully unraveling, and reduce welfare. Risk-adjustment transfers are complementary, substantially mitigating the negative impact of friction-reducing policies, but having little effect in their absence.


Estimating Equilibrium in Health Insurance Exchanges: Price Competition and Subsidy Design Under the ACA

Pietro Tebaldi
Stanford Working Paper, November 2015

The recent US health care reform (Patient Protection and Affordable Care Act; ACA) instituted a subsidy program that provides discounts on health insurance premiums for low-income households. Any evaluation of the ACA or other related programs necessitates the estimation of consumer demand and the way subsidies affect insurers' costs and market power. To do so, I combine data from the first year of the Californian ACA exchange - where 90% of buyers receive federal subsidies - with an equilibrium model of insurance demand and imperfect competition. Taking advantage of ACA pricing restrictions and regional variation in market composition, I identify and estimate demand and cost, and then assess outcomes under the current and alternative subsidy designs. I find that, compared to a voucher program, the current design leads to a substantial increase in market power: Price increases do not translate one-for-one to premium increases, and this leads to a less elastic demand response, hence higher markups. I also show that varying subsidies by age could be an attractive possibility: increasing participation of younger individuals - estimated to be cheaper to cover and more price sensitive - reduces market power and average cost. I estimate that this implies that participation is 30% greater and per-insured public expenditure is 15% lower when compared to the current subsidy design.


The Effects of Medicaid Eligibility on Mental Health Services and Out-of-Pocket Spending for Mental Health Services

Ezra Golberstein & Gilbert Gonzales
Health Services Research, forthcoming

Data Sources: Secondary data from the 1998–2011 Medical Expenditure Panel Survey Household Component merged with National Health Interview Survey and state Medicaid eligibility rules data.

Study Design: Instrumental variables regression models were used to estimate the impact of expanded Medicaid eligibility on health insurance coverage, mental health services utilization, and out-of-pocket spending for mental health services.

Principal Findings: Medicaid expansions significantly increased health insurance coverage and reduced out-of-pocket spending on mental health services for low-income adults. Effects of expanded Medicaid eligibility on out-of-pocket spending were strongest for adults with psychological distress. Expanding Medicaid eligibility did not significantly increase the use of mental health services.

Conclusions: Previous Medicaid eligibility expansions did not substantially increase mental health service utilization, but they did reduce out-of-pocket mental health care spending.


Physician spending and subsequent risk of malpractice claims: Observational study

Anupam Jena et al.
BMJ, November 2015

Study question: Is a higher use of resources by physicians associated with a reduced risk of malpractice claims?

Methods: Using data on nearly all admissions to acute care hospitals in Florida during 2000-09 linked to malpractice history of the attending physician, this study investigated whether physicians in seven specialties with higher average hospital charges in a year were less likely to face an allegation of malpractice in the following year, adjusting for patient characteristics, comorbidities, and diagnosis. To provide clinical context, the study focused on obstetrics, where the choice of caesarean deliveries are suggested to be influenced by defensive medicine, and whether obstetricians with higher adjusted caesarean rates in a year had fewer alleged malpractice incidents the following year.

Study answer and limitations: The data included 24 637 physicians, 154 725 physician years, and 18 352 391 hospital admissions; 4342 malpractice claims were made against physicians (2.8% per physician year). Across specialties, greater average spending by physicians was associated with reduced risk of incurring a malpractice claim. For example, among internists, the probability of experiencing an alleged malpractice incident in the following year ranged from 1.5% (95% confidence interval 1.2% to 1.7%) in the bottom spending fifth ($19 725 (£12 800; €17 400) per hospital admission) to 0.3% (0.2% to 0.5%) in the top fifth ($39 379 per hospital admission). In six of the specialties, a greater use of resources was associated with statistically significantly lower subsequent rates of alleged malpractice incidents. A principal limitation of this study is that information on illness severity was lacking. It is also uncertain whether higher spending is defensively motivated.


Medical Malpractice Damage Caps and Provider Reimbursement

Andrew Friedson
Health Economics, forthcoming

A common state legislative maneuver to combat rising healthcare costs is to reform the tort system by implementing caps on noneconomic damages awardable in medical malpractice cases. Using the implementation of caps in several states and large database of private insurance claims, I estimate the effect of damage caps on the amount providers charge to insurance companies as well as the amount that insurance companies reimburse providers for medical services. The amount providers charge insurers is unresponsive to tort reform, but the amount that insurers reimburse providers decreases for some procedures.


Effect of Decreasing County Mental Health Services on the Emergency Department

Arica Nesper et al.
Annals of Emergency Medicine, forthcoming

Study objective: We evaluate the effect of decreasing county mental health services on the emergency department (ED).

Methods: This is a retrospective before-and-after study at a Level I academic university hospital adjacent to the county mental health treatment center. On October 1, 2009, the county decreased its inpatient psychiatric unit from 100 to 50 beds and closed its outpatient unit. Electronic health record data were collected for ED visits for the 8 months before the decrease in county services (October 2008 to May 2009) and the 8 months after the decrease (October 2009 to May 2010). Data for all adult patients (≥18 years) evaluated for a psychiatric consultation by a licensed clinical social worker were included. Outcome measures included the number of patients evaluated and the ED length of stay for those patients.

Results: One thousand three hundred ninety-two patient visits included a psychiatry consultation for the study period. The median age was 38 years (interquartile range [IQR] 27, 49), with no difference in age between periods. The mean number of daily psychiatry consultations increased from 1.3 (95% confidence interval [CI] 1.2 to 1.5) before closure to 4.4 (95% CI 4.1 to 4.7) afterward, with a difference in means of 3.0 visits (95% CI 2.7 to 3.3 visits). Average ED length of stay for psychiatry consultation patients was 14.1 hours (95% CI 13.1 to 15.0 hours) before closure and 21.9 hours (95% CI 20.7 to 23.2 hours) afterward, with a difference in means of 7.9 hours (95% CI 5.5 to 10.2 hours).

Conclusion: The number of visits and length of stay for patients undergoing psychiatric consultation in the ED increased significantly after a decrease in county mental health services. This phenomenon has important implications for future policy to address the challenges of caring for patients with psychiatric needs in our communities.


The Efficiency Consequences of Health Care Privatization: Evidence from Medicare Advantage Exits

Mark Duggan, Jonathan Gruber & Boris Vabson
NBER Working Paper, October 2015

There is considerable controversy over the use of private insurers to deliver public health insurance benefits. We investigate the efficiency consequences of patients enrolling in Medicare Advantage (MA), private managed care organizations that compete with the traditional fee-for-service Medicare program. We use exogenous shocks to MA enrollment arising from plan exits from New York counties in the early 2000s, and utilize unique data that links hospital inpatient utilization to Medicare enrollment records. We find that individuals who were forced out of MA plans due to plan exit saw very large increases in hospital utilization. These increases appear to arise through plans both limiting access to nearby hospitals and reducing elective admissions, yet they are not associated with any measurable reduction in hospital quality or patient mortality.


Overconfidence and Health Insurance Participation Among the Elderly

Wei Huang & Mi Luo
Harvard Working Paper, November 2015

People may have imperfect information about their health status and thus make suboptimal decisions in insurance participation. Using national representative samples of the elderly in US and China, we find that people with lower socio-economic status and poorer health are relatively less likely to realize how unhealthy they are and this overconfidence is associated with no insurance participation. Accurate health information provided through physical examinations induces relatively higher participation among the overconfident people afterwards. These findings contribute a new explanation for the insufficient participation and advantageous selection in health insurance, and provide new insights on the insurance market and policy suggestions.


Prescription Drug Advertising and Drug Utilization: The Role of Medicare Part D

Abby Alpert, Darius Lakdawalla & Neeraj Sood
NBER Working Paper, November 2015

Pharmaceutical firms currently spend over $4 billion on direct-to-consumer advertising (DTCA) of prescription drugs, a nearly 30-fold increase since 1993 that has led to much debate about its value to patients. We examine how DTCA influences drug utilization along the extensive and intensive margins by exploiting a large and plausibly exogenous shock to DTCA driven by the introduction of Medicare Part D in 2006. Using data on advertising for local media markets from Nielsen, we show that Part D led to large relative increases in DTCA in geographic areas with a high concentration of Medicare beneficiaries compared to areas with a low concentration. We examine the effects of this sudden differential increase in advertising on non-elderly individuals to isolate the effects of advertising on drug utilization from the direct effects of Part D. Using data from pharmacy claims, we find substantial differential increases in drug utilization that mirror the increases in DTCA after Part D. These effects are driven both by increased take-up of treatment and improved drug adherence. Our results imply significant spillovers from Medicare Part D onto the under-65 population and an important role for non-price factors in influencing prescription drug utilization.


Higher Incentive Payments in Medicare Advantage's Pay-for-Performance Program Did Not Improve Quality But Did Increase Plan Offerings

Timothy Layton & Andrew Ryan
Health Services Research, forthcoming

Objective: To evaluate the effects of the size of financial bonuses on quality of care and the number of plan offerings in the Medicare Advantage Quality Bonus Payment Demonstration.

Study Design: The Medicare Advantage Quality Bonus Payment Demonstration began in 2012. Under the Demonstration, all Medicare Advantage plans were eligible to receive bonus payments based on plan-level quality scores (star ratings). In some counties, plans were eligible to receive bonus payments that were twice as large as in other counties. We used this variation in incentives to evaluate the effects of bonus size on star ratings and the number of plan offerings in the Demonstration using a differences-in-differences identification strategy. We used matching to create a comparison group of counties that did not receive double bonuses but had similar levels of the preintervention outcomes.

Principal Findings: Results from the difference-in-differences analysis suggest that the receipt of double bonuses was not associated with an increase in star ratings. In the matched sample, the receipt of double bonuses was associated with a statistically insignificant increase of +0.034 (approximately 1 percent) in the average star rating (p > .10, 95 percent CI: −0.015, 0.083). In contrast, the receipt of double bonuses was associated with an increase in the number of plans offered. In the matched sample, the receipt of double bonuses was associated with an overall increase of +0.814 plans (approximately 5.8 percent) (p < .05, 95 percent CI: 0.078, 1.549). We estimate that the double bonuses increased payments by $3.43 billion over the first 3 years of the Demonstration.

Conclusions: At great expense to Medicare, double bonuses in the Medicare Advantage Quality Bonus Payment Demonstration were not associated with improved quality but were associated with more plan offerings.


Health Insurance Generosity and Conditional Coverage: Evidence from Medicaid Managed Care in Kentucky

James Marton & Aaron Yelowitz
Southern Economic Journal, October 2015, Pages 535–555

This article estimates the impact of the introduction of Medicaid managed care (MMC) on the formal Medicaid participation of children. We employ a quasi-experimental approach exploiting the location-specific timing of MMC implementation in Kentucky. Using data from the March Current Population Survey from 1995 to 2003, our findings suggest that the introduction of MMC increases the likelihood of being uninsured and decreases formal Medicaid participation. This finding is consistent with an increase in “conditional coverage,” waiting until medical care is needed to sign up or re-enroll in Medicaid. These effects are concentrated among low-income children and absent for high-income children. We find no evidence of “crowd-in,” substituting private coverage for Medicaid. These results are robust to multiple placebo tests and imply the potential for less formal participation (i.e., more conditional coverage) among the Affordable Care Act-Medicaid expansion population (which is likely to be primarily covered under MMC) than is typically predicted.


All Internal in the Family? Measuring Spillovers from Public Health Insurance

Thomas Koch
Journal of Human Resources, Fall 2015, Pages 959-979

Measurements of the impact of public health insurance have typically focused on the health and insurance outcomes of the newly eligible child. In this paper, I investigate the consequences of public health insurance for the other members of the household. Using a regression discontinuity design, I find that a child’s public health insurance eligibility crowds out the private health insurance of parents by 11 percentage points when it is not accompanied by parental eligibility. This loss of insurance corresponds to changes in self-reported health and preventive care for women.


The Impact of Privacy Regulation and Technology Incentives: The Case of Health Information Exchanges

Idris Adjerid et al.
Management Science, forthcoming

Health information exchanges (HIEs) are healthcare information technology efforts designed to foster coordination of patient care across the fragmented U.S. healthcare system. Their purpose is to improve efficiency and quality of care through enhanced sharing of patient data. Across the United States, numerous states have enacted laws that provide various forms of incentives for HIEs and address growing privacy concerns associated with the sharing of patient data. We investigate the impact on the emergence of HIEs of state laws that incentivize HIE efforts and state laws that include different types of privacy requirements for sharing healthcare data, focusing on the impact of laws that include requirements for patient consent. Although we observe that privacy regulation alone can result in a decrease in planning and operational HIEs, we also find that, when coupled with incentives, privacy regulation with requirements for patient consent can actually positively impact the development of HIE efforts. Among all states with laws creating HIE incentives, only states that combined incentives with consent requirements saw a net increase in operational HIEs; HIEs in those states also reported decreased levels of privacy concern relative to HIEs in states with other legislative approaches. Our results contribute to the burgeoning literature on health information technology and the debate on the impact of privacy regulation on technology innovation. In particular, they show that the impact of privacy regulation on the success of information technology efforts is heterogeneous: both positive and negative effects can arise from regulation, depending on the specific attributes of privacy laws.


The Anatomy of Physician Payments: Contracting Subject to Complexity

Jeffrey Clemens, Joshua Gottlieb & Tímea Laura Molnár
NBER Working Paper, October 2015

The reimbursement rates that private insurers pay to physicians are closely linked to those set by Medicare, despite the well-known limitations of Medicare's fee schedule. We ask to what extent this relationship reflects the use of Medicare's relative price menu as a benchmark, in order to reduce transaction costs in an otherwise complex pricing environment. We analyze 71 million claims from a large private insurer, which represent $6.3 billion in spending over three years. Using two empirical approaches, we estimate that 75 percent of services, accounting for 65 percent of dollars, are benchmarked to Medicare's relative prices. The Medicare-benchmarked share is higher for services provided by small physician groups. It is lower for capital-intensive treatment categories, for which Medicare's average-cost reimbursements deviate most from marginal cost pricing. When the insurer deviates from Medicare's relative prices, these deviations are consistent with adjusting towards the marginal costs of treatment. Our results suggest that providers and private insurers coordinate around Medicare's menu of relative payments for simplicity, but innovate when the value of doing so is likely highest.


EHR Adoption and Hospital Performance: Time-Related Effects

Julia Adler-Milstein, Jordan Everson & Shoou-Yih Lee
Health Services Research, December 2015, Pages 1751–1771

Objective: To assess whether, 5 years into the HITECH programs, national data reflect a consistent relationship between EHR adoption and hospital outcomes across three important dimensions of hospital performance.

Study Design: We examined the relationship between EHR adoption and three hospital outcomes (process adherence, patient satisfaction, efficiency) using ordinary least squares models with hospital fixed effects. Time-related effects were assessed through comparing the impact of EHR adoption pre (2008/2009) versus post (2010/2011) meaningful use and by meaningful use attestation cohort (2011, 2012, 2013, Never). We used a continuous measure of hospital EHR adoption based on the proportion of electronic functions implemented.

Principal Findings: Higher levels of EHR adoption were associated with better performance on process adherence (0.147; p < .001) and patient satisfaction (0.118; p < .001), but not efficiency (0.01; p = .78). For all three outcomes, there was a stronger, positive relationship between EHR adoption and performance in 2010/2011 compared to 2008/2009. We found mixed results based on meaningful use attestation cohort.

Conclusions: Performance gains associated with EHR adoption are apparent in more recent years. The large national investment in EHRs appears to be delivering more consistent benefits than indicated by earlier national studies.


Comparison of hypertension healthcare outcomes among older people in the USA and England

Alan Marshall et al.
Journal of Epidemiology & Community Health, forthcoming

Background: The USA and England have very different health systems. Comparing hypertension care outcomes in each country enables an evaluation of the effectiveness of each system.

Method: The English Longitudinal Study of Ageing and the Health and Retirement Survey are used to compare the prevalence of controlled, uncontrolled and undiagnosed hypertension within the hypertensive population (diagnosed or measured within the survey data used) aged 50 years and above in the USA and in England.

Results: Controlled hypertension is more prevalent within the hypertensive population in the USA (age 50–64: 0.53 (0.50 to 0.57) and age 65+: 0.51 (0.49 to 0.53)) than in England (age 50–64: 0.45 (0.42 to 0.48) and age 65+: 0.42 (0.40 to 0.45)). This difference is driven by lower undiagnosed hypertension in the USA (age 50–64: 0.18 (0.15–0.21) and age 65+: 0.13 (0.12 to 0.14)) relative to England (age 50–64: 0.26 (0.24 to 0.29) and age 65+: 0.22 (0.20 to 0.24)). The prevalence of uncontrolled hypertension within the hypertensive population is very similar in the USA (age 50–64: 0.29 (0.26 to 0.32) and age 65+: 0.36 (0.34 to 0.38)) and England (age 50–64: 0.29 (0.26 to 0.32) and age 65+: 0.36 (0.34 to 0.39)). Hypertension care outcomes are comparable across US insurance categories. In both countries, undiagnosed hypertension is positively correlated with wealth (ages 50–64). Uncontrolled hypertension declines with rising wealth in the USA.

Conclusions: Different diagnostic practices are likely to drive the cross-country differences in undiagnosed hypertension. US government health systems perform at least as well as private healthcare and are more equitable in the distribution of care outcomes. Higher undiagnosed hypertension among the affluent may reflect less frequent medical contact.


The Star Treatment: Estimating the Impact of Star Ratings on Medicare Advantage Enrollments

Michael Darden & Ian McCarthy
Journal of Human Resources, Fall 2015, Pages 980-1008

The Centers for Medicare and Medicaid Services (CMS) has calculated and disseminated an overall contract quality star rating system (from one to five stars) for all Medicare Advantage (MA) contracts since 2009. In this paper, we study the effect of CMS-reported star ratings on MA plan enrollment. We formulate a discrete choice demand model for differentiated MA plans and estimate the model with market-level plan enrollment data. We identify separate enrollment effects for each star level using a regression discontinuity research design that exploits plausibly random variation around star thresholds. The results suggest that the 2009 published star ratings directed beneficiaries away from low-rated plans more than actively toward high-rated plans. When we repeat the analysis for 2010 published quality stars, we find no significant effects. We present suggestive evidence that supply-side responses to the star rating system may explain the one-time enrollment response to CMS-published quality stars.


Quality Choice and Market Structure: A Dynamic Analysis of Nursing Home Oligopolies

Haizhen Lin
International Economic Review, November 2015, Pages 1261–1290

This article develops a dynamic model of entry and exit to analyze quality choice and oligopoly market structure in the nursing home industry. I find significant heterogeneity in the competitive effects across market structures: Firms of similar quality levels compete more strongly than dissimilar firms. Sunken entry costs are extremely large, and quality adjustment behavior is governed by significant fixed adjustment costs. A proposal to eliminate low-quality nursing homes is found to cause a large supply-side shortage, and another proposal to lower entry costs has offered a perverse incentive to provide low quality of care.


Do Cost Savings from Reductions in Nosocomial Infections Justify Additional Costs of Single-Bed Rooms in Intensive Care Units? A Simulation Case Study

Hessam Sadatsafavi et al.
Journal of Critical Care, forthcoming

Purpose: Evidence shows that single-patient rooms can play an important role in preventing cross-transmission and reducing nosocomial infections in intensive care units (ICUs). This case study investigated whether cost savings from reductions in nosocomial infections justify the additional construction and operation costs of single-bed rooms in ICUs.

Materials and Methods: We conducted deterministic and probabilistic return-on-investment analyses of converting the space occupied by open-bay rooms to single-bed rooms in an exemplary ICU. We used the findings of a study of an actual ICU in which the association between the locations of patients in single-bed versus open-bay rooms with infection risk was evaluated.

Results: Despite uncertainty in the estimates of costs, infection risks, and length of stay, the cost savings from the reduction of nosocomial infections in single-bed rooms in this case substantially outweighed additional construction and operation expenses. The mean value of internal rate of return over a five-year analysis period was 56.18% (95% Credible Interval: 55.34%–57.02%).

Conclusions: This case study shows that although single-patient rooms are more costly to build and operate, they can result in substantial savings compared with open-bay rooms by avoiding costs associated with nosocomial infections.


Effect of Financial Incentives to Physicians, Patients, or Both on Lipid Levels: A Randomized Clinical Trial

David Asch et al.
Journal of the American Medical Association, 10 November 2015, Pages 1926-1935

Objective: To determine whether physician financial incentives, patient incentives, or shared physician and patient incentives are more effective than control in reducing levels of low-density lipoprotein cholesterol (LDL-C) among patients with high cardiovascular risk.

Design, Setting, and Participants: Four-group, multicenter, cluster randomized clinical trial with a 12-month intervention conducted from 2011 to 2014 in 3 primary care practices in the northeastern United States. Three hundred forty eligible primary care physicians (PCPs) were enrolled from a pool of 421. Of 25 627 potentially eligible patients of those PCPs, 1503 enrolled. Patients aged 18 to 80 years were eligible if they had a 10-year Framingham Risk Score (FRS) of 20% or greater, had coronary artery disease equivalents with LDL-C levels of 120 mg/dL or greater, or had an FRS of 10% to 20% with LDL-C levels of 140 mg/dL or greater. Investigators were blinded to study group, but participants were not.

Interventions: Primary care physicians were randomly assigned to control, physician incentives, patient incentives, or shared physician-patient incentives. Physicians in the physician incentives group were eligible to receive up to $1024 per enrolled patient meeting LDL-C goals. Patients in the patient incentives group were eligible for the same amount, distributed through daily lotteries tied to medication adherence. Physicians and patients in the shared incentives group shared these incentives. Physicians and patients in the control group received no incentives tied to outcomes, but all patient participants received up to $355 each for trial participation.

Results: Patients in the shared physician-patient incentives group achieved a mean reduction in LDL-C of 33.6 mg/dL (95% CI, 30.1-37.1; baseline, 160.1 mg/dL; 12 months, 126.4 mg/dL); those in physician incentives achieved a mean reduction of 27.9 mg/dL (95% CI, 24.9-31.0; baseline, 159.9 mg/dL; 12 months, 132.0 mg/dL); those in patient incentives achieved a mean reduction of 25.1 mg/dL (95% CI, 21.6-28.5; baseline, 160.6 mg/dL; 12 months, 135.5 mg/dL); and those in the control group achieved a mean reduction of 25.1 mg/dL (95% CI, 21.7-28.5; baseline, 161.5 mg/dL; 12 months, 136.4 mg/dL; P < .001 for comparison of all 4 groups). Only patients in the shared physician-patient incentives group achieved reductions in LDL-C levels statistically different from those in the control group (8.5 mg/dL; 95% CI, 3.8-13.3; P = .002).

Conclusions and Relevance: In primary care practices, shared financial incentives for physicians and patients, but not incentives to physicians or patients alone, resulted in a statistically significant difference in reduction of LDL-C levels at 12 months. This reduction was modest, however, and further information is needed to understand whether this approach represents good value.


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