Under observation

Kevin Lewis

October 02, 2017

Three's a Crowd? The Effect of Insurer Participation on Premiums and Cost-Sharing Parameters in the Initial Years of the ACA Marketplaces
Brett Lissenden
American Journal of Health Economics, forthcoming

I examine insurer entry in the states with health insurance marketplaces run through Because insurers offer plans with horizontally differentiated cost-sharing parameters, I use outcomes that measure “premium plus cost-sharing” parameters, a patient's premium plus cost-sharing as a function of their medical utilization. To address the potential endogeneity of insurer entry, I use an instrumental variables approach. In the first year of the marketplaces, I find that an additional insurer decreased premium plus cost-sharing parameters by 5 percent or more. In the second year of the marketplaces, two national insurers entered many of the marketplaces for the first time. Except for inpatient services, I find that a new insurer had no average effect on premium plus cost-sharing parameters. However, new insurer entry was more likely to lower premium plus cost-sharing parameters in counties with fewer incumbent insurers. In counties with three or more incumbent insurers, a new insurer actually increased cost-sharing parameters for emergency room services. The increases may be related to new insurers shifting bargaining power to be more in favor of emergency departments when negotiating costs of medical services.

Politics, Hospital Behavior, and Health Care Spending
Zack Cooper et al.
NBER Working Paper, August 2017 

This paper examines the link between legislative politics, hospital behavior, and health care spending. When trying to pass sweeping legislation, congressional leaders can attract votes by adding targeted provisions that steer money toward the districts of reluctant legislators. This targeted spending provides tangible local benefits that legislators can highlight when fundraising or running for reelection. We study a provision - Section 508 – that was added to the 2003 Medicare Modernization Act (MMA). Section 508 created a pathway for hospitals to apply to get their Medicare payment rates increased. We find that hospitals represented by members of the House of Representatives who voted ‘Yea’ on the MMA were significantly more likely to receive a 508 waiver than hospitals represented by members who voted ‘Nay.’ Following the payment increase generated by the 508 program, recipient hospitals treated more patients, increased payroll, hired nurses, added new technology, raised CEO pay, and ultimately increased their spending by over $100 million annually. Section 508 recipient hospitals formed the Section 508 Hospital Coalition, which spent millions of dollars lobbying Congress to extend the program. After the vote on the MMA and before the vote to reauthorize the 508 program, members of Congress with a 508 hospital in their district received a 22% increase in total campaign contributions and a 65% increase in contributions from individuals working in the health care industry in the members’ home states. Our work demonstrates a pathway through which the link between politics and Medicare policy can dramatically affect US health spending.

Multi-generational Impacts of Childhood Access to the Safety Net: Early Life Exposure to Medicaid and the Next Generation's Health
Chloe East et al.
NBER Working Paper, September 2017 

We examine multi-generational impacts of positive in utero and early life health interventions. We focus on the 1980s Medicaid expansions, which targeted low-income pregnant women, and were adopted differently across states and over time. We use Vital Statistics Natality files to create unique data linking individuals’ in utero Medicaid exposure to the next generation’s health outcomes at birth. We find strong evidence that the health benefits associated with treated generations’ in utero access to Medicaid extend to later offspring in the form of higher average birth weight and decreased incidence of very low birth weight. Later childhood exposure to Medicaid does not lead to persistent health effects across generations. The return on investment is substantially larger than suggested by evaluations of the program that focus only on treated cohorts. 

How Does Medicaid Expansion Affect Premiums in the Health Insurance Marketplaces? New Evidence from Late Adoption in Pennsylvania and Indiana
Lizhong Peng
American Journal of Health Economics, forthcoming 

This paper studies the impact of the recent Affordable Care Act Medicaid expansion on premiums in the health insurance marketplaces. Exploiting the late adoption of the Medicaid expansion in Pennsylvania and Indiana in 2015, I use both difference-in-differences and the synthetic control method to estimate the effect of the Medicaid expansion on marketplace premiums. The preferred estimates indicate that Medicaid expansion is associated with statistically significant lower premiums for gold plans (17 percent) and the second-lowest-priced silver plans (25 percent). I also find evidence that Medicaid expansion decreases average premiums for other silver and bronze plans by about 16 and 13 percent, respectively. Overall, these findings are consistent with lower expected medical cost after Medicaid expansion removed certain low-income individuals from the marketplace risk pools.

Health insurance and the supply of entrepreneurs: New evidence from the Affordable Care Act
James Bailey
Small Business Economics, October 2017, Pages 627–646 

Is the difficulty of purchasing health insurance as an individual or small business a major barrier to entrepreneurship in the USA? I answer this question by taking advantage of the natural experiment provided by the Affordable Care Act’s dependent coverage mandate, which allowed many 19–25 year olds to acquire health insurance independently of their employment. Using a difference-in-difference strategy, I find that the dependent coverage mandate did not increase self-employment among young adults overall, but increased self-employment among disabled young adults by 19–23%.

Nursing Care Disparities in Neonatal Intensive Care Units
Eileen Lake et al.
Health Services Research, forthcoming

Data Sources/Study Setting: Survey of random samples of licensed nurses in four large U.S. states.

Study Design: This was a retrospective, secondary analysis of 1,037 staff nurses in 134 NICUs classified into three groups based on their percent of infants of black race. Measures included the average patient load, individual nurses’ patient loads, professional nursing characteristics, nurse work environment, and nursing care missed on the last shift. 

Principal Findings: The patient-to-nurse ratio was significantly higher in high-black hospitals. Nurses in high-black NICUs missed nearly 50 percent more nursing care than in low-black NICUs. Lower nurse staffing (an additional patient per nurse) significantly increased the odds of missed care, while better practice environments decreased the odds.

The impact of Medicare Part D on cognitive functioning at older ages
Tae-Young Pak & GwanSeon Kim
Social Science & Medicine, forthcoming 

Research has shown that the establishment of Medicare prescription drug benefit in 2006 leads to improvement in medication adherence and mortality outcomes. Despite a clear connection between physical/mental health and the risk of dementia, little is known about the extent to which this reform has affected the cognitive functioning of the elderly. Using data from the Health and Retirement Study and difference-in-differences approach, this study provides the first evidence on the cognition-enhancing effects of Medicare Part D. Our estimates show that Part D implementation is associated with 1.6% increase in cognitive functioning or 1.1-year delay of cognitive aging among benefit-eligible persons. Further analyses indicate that most of the cognitive benefits accrue to the vulnerable populations who previously lacked prescription drug coverage, and that a reduction in cardiovascular mortality is the most likely pathway through which the expansion improved cognitive functioning.

Physician Practice Consolidation Driven By Small Acquisitions, So Antitrust Agencies Have Few Tools To Intervene
Cory Capps, David Dranove & Christopher Ody
Health Affairs, September 2017, Pages 1556-1563 

The growing concentration of physician markets throughout the United States has been raising antitrust concerns, yet the Department of Justice and the Federal Trade Commission have challenged only a small number of mergers and acquisitions in this field. Using proprietary claims data from states collectively containing more than 12 percent of the US population, we found that 22 percent of physician markets were highly concentrated in 2013, according to federal merger guidelines. Most of the increases in physician practice size and market concentration resulted from numerous small transactions, rather than a few large transactions. Among highly concentrated markets that had increases large enough to raise antitrust concerns, only 28 percent experienced any individual acquisition that would have been presumed to be anticompetitive under federal merger guidelines. Furthermore, most acquisitions were below the dollar thresholds that would have required the parties to report the transaction to antitrust authorities. Under present mechanisms, federal authorities have only limited ability to counteract consolidation in most US physician markets.

Price Effects of a Merger: Evidence from a Physicians’ Market
Thomas Koch & Shawn Ulrick
Federal Trade Commission Working Paper, August 2017

Physicians’ practices vary widely, as do their effectiveness and reimbursement. Using a merger of six orthopaedic groups in southeastern Pennsylvania, we find that such groups can generate large, anti-competitive price increases without any demonstrated increases in quality (indirectly measured by way of revealed preference) or efficiency. Further, we find that these price increases were targeted at certain beneficiaries, payors and codes, so any research design that omits care and billing along any of these dimensions is likely to be biased.

Uncompensated Care and the Collapse of Hospital Payment Regulation: An Illustration of the Tinbergen Rule
Jeffrey Clemens & Benedic Ippolito
NBER Working Paper, August 2017


Hospital payment regulation has historically been introduced to meet multiple policy objectives. The primary objective of "all-payer" rate setting regimes was to control costs through consistent, centrally regulated payments. These regimes were often linked, however, to an ancillary goal of financing care for the uninsured. We show that this secondary objective made states' all-payer regimes economically and legally unstable. Their economic instability reflected a feedback loop from surcharge rates to insurance coverage rates and back to the quantities of uncompensated care in need of being financed. The erosion of all-payer regimes' surcharge bases was particularly pronounced when health maintenance organizations were exempted from surcharge collections, creating a regulatory arbitrage opportunity. The economic and legal instability we highlight could largely have been avoided by financing the cost of uncompensated care provision through taxation of income or other standard revenue bases. These developments thus illustrate the wisdom of the Tinbergen Rule, which recommends that independent policy objectives be met with independent policy instruments.

The Affordable Care Act's insurance market regulations' effect on coverage
Gal Wettstein
Health Economics, forthcoming 

Much of the debate surrounding reform of the Patient Protection and Affordable Care Act (ACA) revolves around its insurance market regulation. This paper studies the impact on health insurance coverage of those provisions. Using data from the American Community Survey, years 2008–2015, I focus on individuals, ages 26 to 64, who are ineligible for the subsidies or Medicaid expansions included in the ACA to isolate the effect of its market regulation. To account for time trends, I utilize a differences-in-differences approach with a control group of residents of Massachusetts who were already subject to a similarly regulated health insurance market. I find that the ACA's regulations caused an increase of 0.95 percentage points in health insurance coverage for my sample in 2014. This increase was concentrated among younger individuals, suggesting that the law's regulations ameliorated adverse selection in the individual health insurance market.

Healthy Business? Managerial Education and Management in Healthcare
Nicholas Bloom et al.
Harvard Working Paper, September 2017

We investigate the link between hospital performance and managerial education by collecting a large database of management practices and skills in hospitals across nine countries. We find that hospitals that are closer to universities offering both medical education and business education have higher management quality, more MBA trained managers and lower mortality rates. This is true compared to the distance to universities that offer only business or medical education (or neither). We argue that supplying joint MBA-healthcare courses may be a channel through which universities increase medical business skills and raise clinical performance.

Most Marketplace Plans Included At Least 25 Percent Of Local-Area Physicians, But Enrollment Disparities Remained
Aditi Sen et al.
Health Affairs, September 2017, Pages 1615-1623 

The Affordable Care Act allows commercial insurers participating in the Marketplaces to vary the size of their provider networks as long as the providers are “sufficient” in numbers and types. Concerns have been growing over the increasing use of restricted-provider or narrow networks in Marketplace plans because of their implications for reduced access to care, but little is known about the breadth and stability of these networks over time or what types of enrollees choose such plans. Using national data, we found that in 2016, 60 percent of provider networks in plans offered in the federally facilitated Marketplaces included at least one-quarter of local-area physicians, and that consumers’ access to broad-network plans remained stable between 2015 and 2016. Hispanic and low-income people made up a disproportionate share of enrollees in smaller-network plans (those with fewer than one-quarter of local-area physicians). It will be important to monitor the impact of narrow networks on access to and quality of care as well as on health outcomes.

The Effect of Medicaid on Dental Care of Poor Adults: Evidence from the Oregon Health Insurance Experiment
Katherine Baicker et al.
Health Services Research, forthcoming 

Data Sources: Primary and secondary data on health care use and outcomes for participants in Oregon's 2008 Medicaid lottery.

Data Collection: Data were collected for lottery participants over 2 years, including mail surveys (N = 23,777) and in-person questionnaires (N = 12,229). Emergency department (ED) records were matched to lottery participants in Portland (N = 24,646).

Principal Findings: Medicaid coverage significantly reduced the share of respondents who reported needing dental care (−9.8 percentage points, p < .001) or having unmet dental care needs (−13.5 percentage points, p < 0.001). Medicaid doubled the share visiting the ED for dental care (+2.6 percentage points, p = .003) and the use of anti-infective medications often prescribed for dental care, but it had no detectable effect on uncovered dental care or out-of-pocket spending.

Returns to Pharmaceutical Innovation in the Market for Oral Chemotherapy in Response to Insurance Coverage Expansion
Caroline Bennette et al.
NBER Working Paper, September 2017

We estimated the average returns, in terms of patient survival, to the marginal innovations in oral chemotherapy market induced by Part D expansion of oral chemotherapy coverage for elderly individuals by mandating inclusion of “all or substantially all” oral anti-cancer medications on plans’ formularies. We exploited exogenous variation in the age of diagnosis for different cancer sites - and therefore the relative expansion in market size for different cancers under the Medicare’s prescription drug coverage – to isolate the effect of Part D on innovation and the health benefits that these innovative technologies provide. Using data from FDA and clinical studies from January 1994 to December 2016, we find that the approval rate for oral chemotherapies increased an additional 5.7% (95% CI: 1.7, 9.8) after implementation of Part D for every 1% increase in exposure to the Medicare market. In contrast, greater exposure to Medicare was associated with a smaller increase in the indication-specific survival gains reported in the drug’s label (3.2% [95% CI: 2.1, 4.3]) and 8.0% [95% CI: 6.1, 9.8] lower in absolute and relative gains, respectively). Similar trends were not observed for intravenously administered chemotherapy whose coverage was largely unaffected by Part D. These findings suggest that there could be diminishing returns to incentives for pharmaceutical innovation created by broad coverage mandates and that health policy tools, such as value–based pricing, may help maximize the health benefits provided by future pharmaceutical innovations.

Corporate Investors Increased Common Ownership In Hospitals And The Postacute Care And Hospice Sectors
Annabelle Fowler et al.
Health Affairs, September 2017, Pages 1547-1555 

The sharing of investors across firms is a new antitrust focus because of its potential negative effects on competition. Historically, the ability to track common investors across the continuum of health care providers has been limited. Thus, little is known about common investor ownership structures that might exist across health care delivery systems and how these linkages have evolved over time. We used data from the Provider Enrollment, Chain, and Ownership System of the Centers for Medicare and Medicaid Services to identify common investor ownership linkages across the acute care, postacute care, and hospice sectors within the same geographic markets. To our knowledge, this study provides the first description of common investor ownership trends in these sectors. We found that the percentage of acute care hospitals having common investor ties to the postacute or hospice sectors increased from 24.6 percent in 2005 to 48.9 percent in 2015. These changes have important implications for antitrust, payment, and regulatory policies.

The Labor-Market Effects of Occupational Licensing Laws in Nursing
Marc Law & Mindy Marks
Industrial Relations, October 2017, Pages 640–661

We study the labor-market impacts of occupational licensing laws on nursing, an economically important occupation. States adopted licensing of registered and practical nurses at different times, which allows us to estimate the effects of licensing on wages and participation for each nursing profession. We find that licensure raised wages by 5 to 10 percent but there is no evidence that it reduced overall participation. Additionally, we show that licensure equalizes wages within the occupation with minority wages rising faster than nonminority wages; however, licensing had a negative but not statistically significant impact on the participation of minorities in nursing.

Maximizing Intervention Effectiveness
Vishal Gupta et al.
University of Southern California Working Paper, August 2017

Frequently, policymakers seek to roll out an intervention previously proven effective in a research study, perhaps subject to resource constraints. However, since different subpopulations may respond differently to the same treatment, there is no a priori guarantee that the intervention will be as effective in the targeted population as it was in the study. How then should policymakers target individuals to maximize intervention effectiveness? We propose a novel robust optimization approach that leverages evidence typically available in a published study. Our approach is tractable -- real-world instances are easily optimized in minutes with off-the-shelf software -- and flexible enough to accommodate a variety of resource and fairness constraints. We compare our approach with current practice by proving tight, performance guarantees for both approaches which emphasize their structural differences. We also prove an intuitive interpretation of our model in terms of regularization, penalizing differences in the demographic distribution between targeted individuals and the study population. Although the precise penalty depends on the choice of uncertainty set, we show for special cases that we can recover classical penalties from the covariate matching literature on causal inference. Finally, using real data from a large teaching hospital, we compare our approach to current practice in the particular context of reducing emergency department utilization by Medicaid patients through case management. We find that our approach can offer significant benefits over current practice, particularly when the heterogeneity in patient response to the treatment is large.

Networks In ACA Marketplaces Are Narrower For Mental Health Care Than For Primary Care
Jane Zhu, Yuehan Zhang & Daniel Polsky
Health Affairs, September 2017, Pages 1624-1631

There is increasing concern about the extent to which narrow-network plans, generally defined as those including fewer than 25 percent of providers in a given health insurance market, affect consumers’ choice of and access to specialty providers—particularly in mental health care. Using data for 2016 from 531 unique provider networks in the Affordable Care Act Marketplaces, we evaluated how network size and the percentage of providers who participate in any network differ between mental health care providers and a control group of primary care providers. Compared to primary care networks, participation in mental health networks was low, with only 42.7 percent of psychiatrists and 19.3 percent of nonphysician mental health care providers participating in any network. On average, plan networks included 24.3 percent of all primary care providers and 11.3 percent of all mental health care providers practicing in a given state-level market. These findings raise important questions about provider-side barriers to meeting the goal of mental health parity regulations: that insurers cover mental health services on a par with general medical and surgical services. Concerted efforts to increase network participation by mental health care providers, along with greater regulatory attention to network size and composition, could improve consumer choice and complement efforts to achieve mental health parity.

High Levels Of Capitation Payments Needed To Shift Primary Care Toward Proactive Team And Nonvisit Care
Sanjay Basu et al.
Health Affairs, September 2017, Pages 1599-1605 


Capitated payments in the form of fixed monthly payments to cover all of the costs associated with delivering primary care could encourage primary care practices to transform the way they deliver care. Using a microsimulation model incorporating data from 969 US practices, we sought to understand whether shifting to team- and non-visit-based care is financially sustainable for practices under traditional fee-for-service, capitated payment, or a mix of the two. Practice revenues and costs were computed for fee-for-service payments and a range of capitated payments, before and after the substitution of team- and non-visit-based services for low-complexity in-person physician visits. The substitution produced financial losses for simulated practices under fee-for-service payment of $42,398 per full-time-equivalent physician per year; however, substitution produced financial gains under capitated payment in 95 percent of cases, if more than 63 percent of annual payments were capitated. Shifting to capitated payment might create an incentive for practices to increase their delivery of team- and non-visit-based primary care, if capitated payment levels were sufficiently high.

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