Public Health
Are Health Insurance Markets Competitive?
Leemore Dafny
American Economic Review, forthcoming
Abstract:
To gauge the competitiveness of the group health insurance industry, I investigate whether health insurers charge higher premiums, ceteris paribus, to more profitable firms. Such "direct price discrimination" is only feasible in imperfectly competitive settings. Using a proprietary national database of healthplans offered by a sample of large, multisite firms from 1998-2005, I find firms with positive profit shocks subsequently face higher premium growth, even for the same healthplans. Moreover, within a given firm, those sites located in concentrated insurance markets experience the greatest premium increases. The findings suggest healthcare insurers are exercising market power in an increasing number of geographic markets.
----------------------
Néstor Gandelman
Economics & Human Biology, forthcoming
Abstract:
We exploit a natural experiment in Montevideo, Uruguay, in order to analyse the effects on human health of granting formal property rights to untitled individuals. Because of administrative mistakes committed decades ago by an institution that no longer exists, such rights may be transferred to residents of some neighborhoods but not to residents of others. We found that titling reduces the probability of suffering from hypertension and diabetes and in some cases rheumatism and asthma as well within seventeen years of being offered property rights, but we did not find statistically significant evidence that the housing quality functions as a channel between titling and health.
----------------------
Implementing Insurance Market Reforms Under The Federal Health Reform Law
Len Nichols
Health Affairs, June 2010, Pages 1152-1157
Abstract:
Lost in the rhetoric about the supposed government takeover of health care is an appreciation of the inherently federalist approach of the Patient Protection and Affordable Care Act. This federalist tradition, particularly with regard to health insurance, has a history that dates back at least to the 1940s. The new legislation broadens federal power and oversight considerably, but it also vests considerable new powers and responsibilities in the states. The precedents and examples it follows will guide federal and state policy makers, stakeholders, and ordinary citizens as they breathe life into the new law. The challenges ahead are formidable, and the greatest ones are likely to be political.
----------------------
Jonathan Kolstad & Amanda Kowalski
NBER Working Paper, May 2010
Abstract:
In April 2006, the state of Massachusetts passed legislation aimed at achieving near universal health insurance coverage. A key provision of this legislation, and of the national legislation passed in March 2010, is an individual mandate to obtain health insurance. In this paper, we use hospital data to examine the impact of this legislation on insurance coverage, utilization patterns, and patient outcomes in Massachusetts. We use a difference-in-difference strategy that compares outcomes in Massachusetts after the reform to outcomes in Massachusetts before the reform and to outcomes in other states. We embed this strategy in an instrumental variable framework to examine the effect of insurance coverage on outcomes. Among the population discharged from the hospital in Massachusetts, the reform decreased uninsurance by 28% relative to its initial level. Increased coverage affected utilization patterns by decreasing length of stay and the number of inpatient admissions originating from the emergency room. We also find evidence that outpatient care reduced hospitalizations for preventable conditions. At the same time we find no evidence that the cost of hospital care increased. The reform affected nearly all age, gender, income, and race categories. We identify some populations for which insurance had the greatest direct impact on outcomes and others for which the impact on outcomes appears to have occurred through spillovers.
----------------------
Jose Tapia Granados
Social Science & Medicine, forthcoming
Abstract:
Recent publications have argued that the welfare state is an important determinant of population health, and that social democracy in office and higher levels of health expenditure promote health progress. In the period 1950-2000, Greece, Portugal, and Spain were the poorest market economies in Europe, with a fragmented system of welfare provision, and many years of military or authoritarian right-wing regimes. In contrast, the five Nordic countries were the richest market economies in Europe, governed mostly by center or center-left coalitions often including the social democratic parties, and having a generous and universal welfare state. In spite of the socioeconomic and political differences, and a large gap between the five Nordic and the three southern nations in levels of health in 1950, population health indicators converged among these eight countries. Mean decadal gains in longevity of Portugal and Spain between 1950 and 2000 were almost three times greater than gains in Denmark, and about twice as great as those in Iceland, Norway and Sweden during the same period. All this raises serious doubts regarding the hypothesis that the political regime, the political party in office, the level of health care spending, and the type of welfare state exert major influences on population health. Either these factors are not major determinants of mortality decline, or their impact on population health in Nordic countries was more than offset by other health-promoting factors present in Southern Europe.
----------------------
Welfare State and Life Satisfaction: Evidence from Public Health Care
Kaisa Kotakorpi & Jani-Petri Laamanen
Economica, July 2010, Pages 565-583
Abstract:
We examine the link between the welfare state and citizens' subjective wellbeing by using evidence from public health care services. By combining local-level data on public health care and individual-level data on life satisfaction, we show that relatively high expenditures in health care have a positive effect on individuals' life satisfaction in our data. We find some evidence for an 'ends-against-the-middle' equilibrium in provision of public health care, where middle-income individuals prefer higher public expenditure than low-income or high-income individuals. Further, our results indicate that the welfare benefit of public provision depends on individual political orientation.
----------------------
Academic Retainer Medicine: An Innovative Business Model for Cross-Subsidizing Primary Care
David Lucier, Nicholas Frisch, Brian Cohen, Michael Wagner, Deeb Salem & David Fairchild
Academic Medicine, June 2010, Pages 959-964
Abstract:
Retainer-medicine primary care practices, commonly referred to as "luxury" or "concierge" practices, provide enhanced services to patients beyond those available in traditional practices for a yearly retainer fee. Adoption of retainer practices has been largely absent in academic health centers (AHCs). Reasons for this trend stem primarily from ethical concerns, such as the potential for patient abandonment when physicians downsize from larger, traditional practices to smaller, retainer-medicine practices. In 2004, the Department of Medicine at Tufts Medical Center developed an academic retainer-medicine primary care practice within the Division of General Medicine that not only generates financial support for the division but also incorporates a clinical and business model that is aligned with the mission and ethics of an academic institution. In contrast to private retainer-medicine practices, this unique business model addresses several of the ethical issues associated with traditional retainer practices-it does not restrict net access to care and it neutralizes concerns about patient abandonment. Addressing the growing primary care shortage, the model also presents the opportunity for a retainer practice to cross-subsidize the expansion of general medicine in an academic medical setting. The authors elucidate the benefits, as well as the inherent challenges, of embedding an academic retainer-medicine practice within an AHC.
----------------------
Could We Have Covered More People At Less Cost? Technically, Yes; Politically, Probably Not
Elizabeth McGlynn, Amado Cordova, Jeffrey Wasserman & Federico Girosi
Health Affairs, June 2010, Pages 1142-1146
Abstract:
The process by which Congress considers legislation rarely affords the public an opportunity to examine how the outcomes might change if components of the law were structured differently. We evaluated how the recently enacted health reform law performed relative to a large number of alternative designs on measures of effectiveness and efficiency. We found that only a few different approaches would produce both more newly insured people and a lower cost to the government. However, these are characterized by design options that seemed politically untenable, such as higher penalties, lower subsidies, or less generous Medicaid expansion.
----------------------
Imperfect information in a quality-competitive hospital market
Hugh Gravelle & Peter Sivey
Journal of Health Economics, forthcoming
Abstract:
We examine the implications of policies to improve information about the qualities of profit seeking duopoly hospitals which face the same regulated price and compete on quality. We show that if the hospital costs of quality are similar then better information increases the quality of both hospitals. However if the costs are sufficiently different improved information will reduce the quality of both hospitals. Moreover, even when quality increases, better information may increase or decrease patient welfare depending on whether an ex post or ex ante view of welfare is taken.
----------------------
Institutional Feedback and Support for the Welfare State: The Case of National Health Care
Jason Jordan
Comparative Political Studies, July 2010, Pages 862-885
Abstract:
Researchers interested in the political consequences of the welfare state argue that cross-country variations in the design of social policy institutions produce distinct patterns of public support for the welfare state. This research proposes an institutional feedback effect in which welfare institutions, once created, transform political debate, generate new constituencies, and alter how individuals and interest groups interpret their preferences. Existing research has found mixed results for these proposed institutional feedback effects on public opinion. This project contributes to research on institutional feedback through an analysis of cross-national variation in public support for national health care. National health care provides a unique opportunity for studying institutional feedback by avoiding problems with the measurement of key variables common to previous work in this area. This research offers evidence in support of institutional feedback effects by demonstrating links between the structure of health care institutions and public attitudes.
----------------------
Health and historical levels of freedom
Samantha Biggs, Evelyn Dell, Vanessa Dixon, Michel Joffres, Chris Beyrer, Kumanan Wilson, James Orbinski & Edward Mills
Globalization and Health, May 2010
Background: The link between political freedom and health is unclear. We aimed to determine the association by exploring the relationship of historical and cumulative freedom levels with important health outcomes.
Methods: We obtained countrywide health indicators for life expectancy, infant mortality, maternal mortality ratio, % low birth weight babies, Gini coefficient (a measure of wealth inequality) and various markers of freedom based on political rights and civil liberties. We applied multivariable logistic regression to examine the association between health indicators and within-country years of freedom as determined by Freedom House rankings.
Results: The total proportion of free years from 1972-2005, the duration of current freedom level, and the Gini coefficient show independent positive associations with health indicators, which remain after the adjustment for national wealth, total government expenditure, and spending on health. Countries identified as having high total proportion of free years demonstrated significantly better health outcomes than countries with low levels of freedom (life expectancy, Odds Ratio [OR] 7.2, 95% Confidence Interval [CI], 2.3-22.6, infant mortality OR 19.6, 95% CI, 5.6-67.7, maternal mortality ratio, OR 24.3, 95% CI, 6.2-94.9, and % low birth weight babies OR 3.8, 95% CI, 1.4-10.8). This was also the case for infant mortality (OR 3.4, 95% CI, 1.0-8.4), maternal mortality ratio (OR 4.0, 95% CI, 1.2-12.8), and % low birth weight babies (OR 2.6, 95% CI, 1.0-6.6) among countries considered as having medium levels of freedom.
Conclusions: We found strong associations between country-level freedom and important health outcomes. The cumulative level of freedom over time shows stronger associations with all health indicators than the duration of current freedom level.
----------------------
Antitrust Treatment of Nonprofits: Should Hospitals Receive Special Care?
Cory Capps, Guy David & Dennis Carlton
University of Chicago Working Paper, April 2010
Abstract:
Nonprofit hospitals receive favorable tax treatment in exchange for providing socially beneficial activities. Extending this rationale suggests that nonprofit hospital mergers should be evaluated differently than mergers of for-profit hospitals because suppression of competition may also allow nonprofits to cross-subsidize care for the poor. Using detailed California data, we find no evidence that nonprofit hospitals are more likely than for-profit hospitals to provide more charity care or offer unprofitable services in response to an increase in market power. Therefore, we find no empirical justification for different antitrust standards for nonprofit hospitals, as some courts have suggested.
----------------------
An Individual Health Plan Exchange: Which Employees Would Benefit and Why?
Leemore Dafny, Katherine Ho & Mauricio Varela
American Economic Review, May 2010, Pages 485-489
"On average, U.S. workers fortunate enough to be offered health insurance through their place of work are given a small number of choices: 80 percent of firms, accounting for 37 percent of workers, were offered only one plan in 2005. Although there are merits of limited choice - including lower administrative costs for sponsoring employers, and better pooling of risk within a given employee population - substantial consumer surplus is foregone by preventing employees from selecting plans that best suit their needs. In Dafny, Ho, Varela (2010), we build a model to quantify this deadweight loss. Using data on plan offerings and enrollment for 800+ large U.S. firms in 139 geographic markets, over the period 1998-2006, we estimate a model of consumer preferences for characteristics of health plans. We use the parameters of that model to predict employee choices under different hypothetical scenarios of expanded choice, assuming employers' total outlays for health insurance remain constant and plans are made available to new enrollees at 'large group rates.' We quantify those gains for each employee group-year we observe (for example, Big Box Retailer's employees in Houston in 2003), and conclude these gains are sizeable compared to average premiums. We estimate that employees would be willing to forego 10 to 40 percent or more of their employer subsidies for the right to apply those subsidies to the plan of their choosing, with the exact magnitude depending on the demand specification as well as the definition of the expanded choice set."
----------------------
The Impact of Competition on Management Quality: Evidence from Public Hospitals
Nicholas Bloom, Carol Propper, Stephan Seiler & John Van Reenen
NBER Working Paper, May 2010
Abstract:
In this paper we examine the causal impact of competition on management quality. We analyze the hospital sector where geographic proximity is a key determinant of competition, and English public hospitals where political competition can be used to construct instrumental variables for market structure. Since almost all major English hospitals are government run, closing hospitals in areas where the governing party has a small majority is rare due to fear of electoral punishment. We find that management quality - measured using a new survey tool - is strongly correlated with financial and clinical outcomes such as survival rates from emergency heart attack admissions (AMI). More importantly, we find that higher competition (as indicated by a greater number of neighboring hospitals) is positively correlated with increased management quality, and this relationship strengthens when we instrument the number of local hospitals with local political competition. Adding another rival hospital increases the index of management quality by one third of a standard deviation and leads to a 10.7% reduction in heart-attack mortality rates.
----------------------
Saving Billions Of Dollars-And Physicians' Time-By Streamlining Billing Practices
Bonnie Blanchfield, James Heffernan, Bradford Osgood, Rosemary Sheehan & Gregg Meyer
Health Affairs, June 2010, Pages 1248-1254
Abstract:
The U.S. system of billing third parties for health care services is complex, expensive, and inefficient. Physicians end up using nearly 12 percent of their net patient service revenue to cover the costs of excessive administrative complexity. A single transparent set of payment rules for multiple payers, a single claim form, and standard rules of submission, among other innovations, would reduce the burden on the billing offices of physician organizations. On a national scale, our hypothetical modeling of these changes would translate into $7 billion of savings annually for physician and clinical services. Four hours of professional time per physician and five hours of practice support staff time could be saved each week.
----------------------
Robert Kaestner & Nasreen Khan
NBER Working Paper, May 2010
Abstract:
In this paper, we provide an assessment of the effect of Medicare Part D on the previously uninsured. We examine the effect of gaining prescription drug insurance as a result of Medicare Part D on use of prescription drugs, use of other medical services, and health for a nationally representative sample of Medicare beneficiaries. Given the heightened importance of prescription drugs for those with chronic illness, we provide separate estimates for those in poorer health. We find that gaining prescription drug insurance through Medicare Part D was associated with an 63% increase in the number of annual prescriptions, but that obtaining prescription drug insurance is not significantly related to use of other health care services or health, as measured by functional status and self-reported health. Among those in poorer health, we find that gaining prescription drug insurance was associated with a 56% increase in the number of annual prescriptions, and is not significantly related to health. For this group, there is some evidence that prescription drug insurance was associated with a decrease in the use of outpatient services.
----------------------
Hypothetical versus real preferences: Results from an opportunistic field experiment
Stirling Bryan & Sue Jowett
Health Economics, forthcoming
Abstract:
Over recent years there has been renewed interest in cost-benefit analysis (CBA) in health care but the hypothetical bias concern (i.e. the belief that WTP values overstate real preferences) is a remaining anxiety. This paper reports new empirical data comparing hypothetical and real preferences in a health care context, using the clinical setting of patient self-management (PSM) of anticoagulation (warfarin) therapy. The data offer considerable support for the use of WTP and CBAs in a self-management health care context; the hypothetical bias hypothesis is not supported by our data. The generalisability of these results to other health care settings needs to be explored.
----------------------
Myungho Paik, Bernard Black, David Hyman, William Sage & Charles Silver
Northwestern University Working Paper, May 2010
Abstract:
The elderly account for a disproportionate share of medical spending, but little attention has been paid to how they are treated by the medical malpractice system, and how that treatment is affected by tort reform. We compare paid med mal claims (other than nursing home claims) brought by elderly and non-elderly plaintiffs during 1988-2007. Texas adopted a strict cap on non-economic damages and other tort reforms in 2003. During the pre-reform period, elderly paid claims per inpatient day rose from roughly 20% to 60% of the nonelderly rate. The elderly received less per paid claim than the non-elderly, and were far less likely to receive large awards, but mean and median awards converged. Post-reform, there was a sharp drop in claims and payouts per claim for all ages, no evidence of further convergence, and mild evidence of post-reform divergence in claims by the very elderly (85).