To care or not to care
The Utility of Health and Wealth
Moshe Levy & Adi Rizansky Nir
Journal of Health Economics, forthcoming
Abstract:
Tradeoffs between health and wealth are among the most important decisions individuals make, and are central to social and economic policy. Yet, only a few studies have investigated the utility of health and wealth empirically. This paper investigates this utility function both theoretically and empirically. We conduct detailed personal interviews with 180 cancer patients, and also obtain questionnaires from 132 diabetes patients. We find strong support for the utility function U(h,w) = h•log(w), where h denotes health and w denotes wealth.
----------------------
Does Universal Coverage Improve Health? The Massachusetts Experience
Charles Courtemanche & Daniela Zapata
NBER Working Paper, March 2012
Abstract:
In 2006, Massachusetts passed health care reform legislation designed to achieve nearly universal coverage through a combination of insurance market reforms, mandates, and subsidies that later served as the model for national health care reform. Using individual-level data from the Behavioral Risk Factor Surveillance System, we provide evidence that health care reform in Massachusetts led to better overall self-assessed health. An assortment of robustness checks and placebo tests support a causal interpretation of the results. We also document improvements in several determinants of overall health, including physical health, mental health, functional limitations, joint disorders, body mass index, and moderate physical activity. The health effects were strongest among women, minorities, near-elderly adults, and those with incomes low enough to qualify for the law's subsidies. Finally, we use the reform to instrument for health insurance and estimate a sizeable impact of coverage on health. The effects on coverage were strongest for men, non-black minorities, young adults, and those who qualified for the subsidies, while the effects of coverage were strongest for women, blacks, the near-elderly, and middle-to-upper income individuals.
----------------------
Frank McClellan et al.
Clinical Orthopaedics and Related Research, forthcoming
Background: There is a perception that socioeconomically disadvantaged patients tend to sue their doctors more frequently. As a result, some physicians may be reluctant to treat poor patients or treat such patients differently from other patient groups in terms of medical care provided.
Questions/purposes: We (1) examined existing literature to refute the notion that poor patients are inclined to sue doctors more than other patients, (2) explored unconscious bias as an explanation as to why the perception of the poor being more litigious may exist despite evidence to the contrary, and (3) assessed the role of culturally competent awareness and knowledge in confronting physician bias.
Methods: We reviewed medical and social literature to identify studies that have examined differences in litigation rates and related medical malpractice claims among socioeconomically disadvantaged patients versus other groups of patients.
Results: Contrary to popular perception, existing studies show poor patients, in fact, tend to sue physicians less often. This may be related to a relative lack of access to legal resources and the nature of the contingency fee system in medical malpractice claims.
Conclusions: Misperceptions such as the one examined in this article that assume a relationship between patient poverty and medical malpractice litigation may arise from unconscious physician bias and other social variables. Cultural competency can be helpful in mitigating such bias, improving medical care, and addressing the risk of medical malpractice claims.
----------------------
Health-care reform and bankruptcy: Evidence from Massachusetts
Kayla Badding, Frank Stephenson & Melissa Yeoh
Applied Economics Letters, Fall 2012, Pages 1741-1744
Abstract:
Previous research claims that medical expenses are a leading cause of bankruptcy in the United States. Using data from the 50 states and the District of Columbia from 2001 to 2010, this article examines the relationship between Massachusetts' 2006 health-care reform and bankruptcy filings. After including state- and year-fixed effects and other covariates, the results indicate that, contrary to expectations, bankruptcy filings increased following Massachusetts' move towards universal medical insurance coverage.
----------------------
Medicare spending, mortality rates, and quality of care
Jack Hadley & James Reschovsky
International Journal of Health Care Finance and Economics, March 2012, Pages 87-105
Abstract:
We applied instrumental variable analysis to a sample of 388,690 Medicare beneficiaries predicted to be high-cost cases to estimate the effects of medical care use on the relative odds of death or experiencing an avoidable hospitalization in 2006. Contrary to conclusions from the observational geographic variations literature, the results suggest that greater medical care use is associated with statistically significant and quantitatively meaningful health improvements: a 10% increase in medical care use is associated with a 8.4% decrease in the mortality rate and a 3.8% decrease in the rate of avoidable hospitalizations.
----------------------
Mandate-Based Health Reform and the Labor Market: Evidence from the Massachusetts Reform
Jonathan Kolstad & Amanda Kowalski
NBER Working Paper, March 2012
Abstract:
We model the labor market impact of the three key provisions of the recent Massachusetts and national "mandate-based" health reforms: individual and employer mandates and expansions in publicly-subsidized coverage. Using our model, we characterize the compensating differential for employer-sponsored health insurance (ESHI) -- the causal change in wages associated with gaining ESHI. We also characterize the welfare impact of the labor market distortion induced by health reform. We show that the welfare impact depends on a small number of "sufficient statistics" that can be recovered from labor market outcomes. Relying on the reform implemented in Massachusetts in 2006, we estimate the empirical analog of our model. We find that jobs with ESHI pay wages that are lower by an average of $6,058 annually, indicating that the compensating differential for ESHI is only slightly smaller in magnitude than the average cost of ESHI to employers. Because the newly-insured in Massachusetts valued ESHI, they were willing to accept lower wages, and the deadweight loss of mandate-based health reform was less than 5% of what it would have been if the government had instead provided health insurance by levying a tax on wages.
----------------------
Andrew Ryan, Brahmajee Nallamothu & Justin Dimick
Health Affairs, March 2012, Pages 585-592
Abstract:
Hospital Compare, Medicare's public reporting initiative, began reporting measures of hospital quality for almost all US acute care hospitals in 2005. The impact of this public reporting initiative on patient mortality is unknown. We used Medicare claims data from the period 2000-08 to estimate the effect of Hospital Compare on thirty-day mortality for heart attack, heart failure, and pneumonia. Our analysis indicates that the fact that hospitals had to report quality data under Hospital Compare led to no reductions in mortality beyond existing trends for heart attack and pneumonia and led to a modest reduction in mortality for heart failure. We conclude that Medicare's public reporting initiative for hospitals has had a minimal impact on patient mortality.
----------------------
Doc, what would you do if you were me? On self-other discrepancies in medical decision making
Rocio Garcia-Retamero & Mirta Galesic
Journal of Experimental Psychology: Applied, March 2012, Pages 38-51
Abstract:
Doctors often make decisions for their patients and predict their patients' preferences and decisions to customize advice to their particular situation. We investigated how doctors make decisions about medical treatments for their patients and themselves and how they predict their patients' decisions. We also studied whether these decisions and predictions coincide with the decisions that the patients make for themselves. We document 3 important findings. First, doctors made more conservative decisions for their patients than for themselves (i.e., they more often selected a safer medical treatment). Second, doctors did so even if they accurately predicted that their patients would want a riskier treatment than the one they selected. Doctors, therefore, showed substantial self-other discrepancies in medical decision making and did not make decisions that accurately reflected their patients' preferences. Finally, patients were not aware of these discrepancies and thought that the decisions their doctors made for themselves would be similar to the decisions they made for their patients. We explain these results in light of 2 current theories of self-other discrepancies in judgment and decision making: the risk-as-feelings hypothesis and the cognitive hypothesis. Our results have important implications for research on expert decision making and for medical practice, and shed some light on the process underlying self-other discrepancies in decision making.
----------------------
Judith Rietjens et al.
Social Science & Medicine, April 2012, Pages 1282-1287
Abstract:
Medical end-of-life decisions, defined as end-of-life practices with a potential or certain life-shortening effect, precede almost 50% of deaths in Western countries, and receive ample medical-ethical attention. This systematic review aims to detect whether there are differences in the prevalence of medical end-of-life decisions in ‘vulnerable' patient groups. In 2009, five major databases were scrutinized for publications containing original data on the prevalence of euthanasia/physician-assisted suicide, life-ending without explicit patient request, intensified symptom alleviation, non-treatment decisions and palliative sedation by social factors (eg age, gender and SES). Heterogeneous findings were pooled using a random effects model. We identified 6377 papers of which 51 papers were selected, involving over 1.09 million patients. Most publications reported the prevalence of non-treatment decisions. The most studied social factors were age and gender. Among patients older than eighty years, non-treatment decisions occurred more frequently compared with younger patients, while intensified symptom alleviation, palliative sedation, euthanasia/physician-assisted suicide and life-ending without explicit request were practiced less often. Similar patterns of association, although less strong, were found for female patients compared with males and those with lower levels of education versus more highly-educated patients. We conclude that the administration of medication with a potential or certain life-shortening effect seemed generally to be practiced less often among the elderly, females and less well-educated patients compared with younger, male or more educated patients, while decisions that include the withdrawal or withholding of treatments seem to be more common in these groups. Further studies should focus on investigating whether these differences reflect less than optimal end-of-life care for specific patient groups.
----------------------
A Location-Based Comparison of Health Care Services in four U.S. States with Efficiency and Equity
M.L. Burkey, J. Bhadury & H.A. Eiselt
Socio-Economic Planning Sciences, June 2012, Pages 157-163
Abstract:
This paper examines the efficiency and equality in geographic accessibility provided by hospitals. We use the criteria efficiency, availability of the service, and equality. Quantitative measures are defined for all criteria, and are measured using a geographical information system. We then compare existing locations with optimal locations satisfying two objectives, one that minimizes hospital-patient distance, and another that captures as many patients as possible within a pre-specified time or distance. The results of our study indicate that the existing locations provide near-optimal geographic access to health care. Some potential for improvement is indicated.
----------------------
Insurance as Delegated Purchasing: Theory and Evidence from Health Care
Robin McKnight, Jonathan Reuter & Eric Zitzewitz
NBER Working Paper, February 2012
Abstract:
Household demand for actuarially unfair insurance against small risks has long puzzled economists. One way to potentially rationalize this demand is to recognize that (non-life) insurance is an incentive-compatible means of engaging an expert buyer. To quantify the benefits of expert buying, we compare prices paid by the insured and uninsured for health care. In categories of health care where uncompensated care is more difficult to obtain (drugs, doctor office visits, and hospital outpatient visits), we find that insurers pay 10-20% less than the uninsured. For forms of care where payment by the uninsured is more likely to be negotiated after services are rendered (hospitalizations and emergency room visits) the uninsured pay about 30% less on average, due largely to the nontrivial share of uninsured who pay 5% or less of their billed charges. At least in settings where free services are difficult to obtain, expert buying is an important benefit of insurance. We discuss the implications of the delegated-purchasing view of insurance for con-sumer-driven health insurance and for self-insurance by employers.
----------------------
http://economics.mit.edu/files/7488
Nathaniel Hendren
MIT Working Paper, December 2011
Abstract:
Across a wide set of non-group insurance markets, applicants are rejected based on observable, often high-risk, characteristics. This paper explores private information as a potential cause. To do so, we develop and test a model in which agents have private information about their risk. We derive a new no-trade result that can theoretically explain how private information could cause rejections. We use the no-trade condition to generate measures of the barrier to trade private information imposes. We develop a new empirical methodology to estimate these measures that uses subjective probability elicitations as noisy measures of agents' beliefs. We apply our approach to three non-group markets: long-term care, disability, and life insurance. Consistent with the predictions of the theory, in all three settings we find larger barriers to trade imposed by private information for those who would be rejected relative to those who are served by the market. For those who would be rejected, private information imposes a barrier to trade equivalent to an implicit tax on insurance premiums of roughly 65-75% in long-term care, 90-130% in disability, and 65-130% in life insurance.
----------------------
Judith Hibbard et al.
Health Affairs, March 2012, Pages 560-568
Abstract:
Advocates of health reform continue to pursue policies and tools that will make information about comparative costs and resource use available to consumers. Reformers expect that consumers will use the data to choose high-value providers - those who offer higher quality and lower prices - and thus contribute to the broader goal of controlling national health care spending. However, communicating this information effectively is more challenging than it might first appear. For example, consumers are more interested in the quality of health care than in its cost, and many perceive a low-cost provider to be substandard. In this study of 1,421 employees, we examined how different presentations of information affect the likelihood that consumers will make high-value choices. We found that a substantial minority of the respondents shied away from low-cost providers, and even consumers who pay a larger share of their health care costs themselves were likely to equate high cost with high quality. At the same time, we found that presenting cost data alongside easy-to-interpret quality information and highlighting high-value options improved the likelihood that consumers would choose those options. Reporting strategies that follow such a format will help consumers understand that a doctor who provides higher-quality care than other doctors does not necessarily cost more.
----------------------
Maria Trottmann, Peter Zweifel & Konstantin Beck
Journal of Health Economics, January 2012, Pages 231-242
Abstract:
Microeconomic theory predicts that if patients are fully insured and providers are paid fee-for-service, utilization of medical services exceeds the efficient level (‘moral hazard effect'). In Switzerland, both demand-side and supply-side cost sharing have been introduced to mitigate this problem. Analyzing a panel dataset of about 160,000 adults, we find both types of cost sharing to be effective in curtailing the use of medical services. However, when moral hazard mitigation is traded off against risk selection, the minimum-deductible, supply-side cost sharing option ranks first, followed by the medium-deductible demand-side alternative, making the supply-side option somewhat more effective.
----------------------
Public versus private: Evidence on health insurance selection
Cristian Pardo & Whitney Schott
International Journal of Health Care Finance and Economics, March 2012, Pages 39-61
Abstract:
This paper models health insurance choice in Chile (public versus private) as a dynamic, stochastic process, where individuals consider premiums, expected out-of pocket costs, personal characteristics and preferences. Insurance amenities and restrictions against pre-existing conditions among private insurers introduce asymmetry to the model. We confirm that the public system services a less healthy and wealthy population (adverse selection for public insurance). Simulation of choices over time predicts a slight crowding out of private insurance only for the most pessimistic scenario in terms of population aging and the evolution of education. Eliminating the restrictions on pre-existing conditions would slightly ameliorate the level (but not the trend) of the disproportionate accumulation of less healthy individuals in the public insurance program over time.
----------------------
Peter Huckfeldt et al.
NBER Working Paper, February 2012
Abstract:
Medicare continues to implement payment reforms that shift reimbursement from fee-for-service towards episode-based payment, affecting average and marginal reimbursement. We contrast the effects of two reforms for home health agencies. The Home Health Interim Payment System in 1997 lowered both types of reimbursement; our conceptual model predicts a decline in the likelihood of use and costs, both of which we find. The Home Health Prospective Payment System in 2000 raised average but lowered marginal reimbursement with theoretically ambiguous effects; we find a modest increase in use and costs. We find little substantive effect of either policy on readmissions or mortality.
----------------------
Anthony Laverty et al.
Health Affairs, March 2012, Pages 593-601
Abstract:
Amid international concerns about health care safety and quality, there has been an escalation of investigations by health care regulators into adverse events. England has a powerful central health care regulator, the Care Quality Commission, which conducts occasional high-profile investigations into major lapses in quality at individual hospitals. The results have sometimes garnered considerable attention from the news media, but it is not known what effect the investigations have had on patients' behavior. We analyzed trends in admission for discretionary (nonemergency) care at three hospitals that were subject to high-profile investigations by the Healthcare Commission (the predecessor to the Care Quality Commission) between 2006 and 2009. We found that investigations had no impact on utilization for two of the hospitals; in the third hospital, there were significant declines in inpatient admissions, outpatient surgeries, and in numbers of patients coming for their first appointment, but the effects disappeared six months after publication of the investigation report. Thus, the publication and dissemination of highly critical reports by a health care regulator does not appear to have resulted in patients' sustained avoidance of the hospitals that were investigated. Our findings reinforce other evaluations: Reporting designed to affect providers' reputations is likely to spur more improvement in quality and safety than relying on patients to choose their providers based on quality and safety reports, and simplistic assumptions regarding the power of information to drive patient choices are unrealistic.
----------------------
Moral hazard and selection among the poor: Evidence from a randomized experiment
Jörg Spenkuch
Journal of Health Economics, January 2012, Pages 72-85
Abstract:
Not only does economic theory predict high-risk individuals to be more likely to purchase insurance, but insurance coverage is also thought to crowd out precautionary activities. In spite of stark theoretical predictions, there is conflicting empirical evidence on adverse selection, and evidence on ex ante moral hazard is very scarce. Using data from the Seguro Popular Experiment in Mexico, this paper documents patterns of selection on observables into health insurance as well as the existence of non-negligible ex ante moral hazard. More specifically, the findings indicate that (i) agents in poor self-assessed health prior to the intervention have, all else equal, a higher propensity to take up insurance; and (ii) insurance coverage reduces the demand for self-protection in the form of preventive care. Curiously, however, individuals do not sort based on objective measures of their health.
----------------------
Does service-level spending show evidence of selection across health plan types?
Randall Ellis, Shenyi Jiang & Tzu-Chun Kuo
Applied Economics, forthcoming
Abstract:
We provide an explanation for the widespread finding that capitated managed care plans attract comparatively healthy, low cost enrollees relative to traditional unmanaged plans. Using disaggregated commercial insurance claims from the Thomson-Reuters MarketScan database, we show that managed care plans spend proportionally less on those types of services that are predicted to be more profitable to ration tightly using a selection index developed by Ellis and McGuire that captures the derivative of profits with respect to reduced spending on disaggregated services. Conventional diagnosis-based risk adjusted premiums reduce selection incentives by about 50% relative to premiums that are not risk-adjusted.
----------------------
An Evidence-Based Incentive System for Medicare's End-Stage Renal Disease Program
Donald Lee & Stefanos Zenios
Management Science, forthcoming
Abstract:
Recent legislations directed Medicare to revamp its decades-old system for reimbursing dialysis treatments, with focus on the risk adjustment of payments and on the transition toward a pay-for-compliance system. To design an optimal payment system that incorporates these features, we develop an empirical method to estimate the structural parameters of the principal-agent model underlying Medicare's dialysis payment system. We use the model and parameter estimates to answer the following questions: Can a pay-for-compliance system based only on the intermediate performance measures currently identified by Medicare achieve first-best? How should patient outcomes be risk adjusted, and what welfare gains can be achieved by doing so? Our main findings are as follows: (1) the current set of intermediate measures identified by Medicare are not comprehensive enough for use alone in a pay-for-compliance system; (2) paying for risk-adjusted downstream outcomes instead of raw downstream outcomes can lengthen the hospital-free life of admitted patients by two weeks per patient per year without increasing Medicare expenditures.
----------------------
Barbara Mintzes
Annual Review of Public Health, 2012, Pages 259-277
Abstract:
Since the global withdrawal of rofecoxib (Vioxx) in 2004, concerns about public health effects of direct-to-consumer advertising (DTCA) have grown. A systematic review of the research evidence on behavioral, health, and cost effects, published in 2005, found four studies meeting inclusion criteria, which showed that DTCA increases prescribing volume and patient demand, and shifts prescribing. From 2005 to 2010, nine studies met similar criteria. These largely confirm previous results. Additional effects include a shift to less appropriate prescribing, differential effects by patient price sensitivity and drug type, switches to less cost-effective treatment, and sustained sales despite a price increase. Claimed effects on adherence do not stand up to scrutiny and are based mainly on negative trials. There is no evidence of improved treatment quality or early provision of needed care. If policy is to be informed by evidence, the strength of research methods and ability to assess causality need to be considered.
----------------------
Melissa McInerney & Kosali Simon
Industrial Relations, January 2012, Pages 57-88
Abstract:
In addition to traditional forms of private and public medical insurance, two other large public programs help pay for costs associated with ill health. In 2008, Workers' Compensation (WC) insurance provided $57.6 billion in medical care and cash benefits to employees who are injured at work or contract a work-related illness, and Social Security Disability Insurance (DI) provided $106 billion to individuals who suffer from permanent disabilities and are unable to engage in substantial gainful activity. During the 1990s, real DI outlays increased nearly 70 percent, whereas real WC cash benefit spending fell by 12 percent. There has been concern that part of this relationship between two of the nation's largest social insurance programs may be due to individuals substituting toward DI as state WC policies tightened. We first show that this negative correlation between the national series does not hold over time within states, the level at which a causal relationship should operate. We then test for a causal effect of changes in WC enrollment on DI applications and new DI cases within states over time, using state policy (the maximum WC benefit) as an instrument for WC enrollment. Despite a strong first stage fit, we find no statistically significant evidence that WC tightening caused DI rolls to increase, although the standard errors are large enough that we cannot reject effects of substantial magnitude. We conclude it is unlikely that state WC changes were a meaningful factor in explaining the rise in DI during our study period of 1986-2001, although further study using individual level data is warranted.