Complications
Health plan enrollment and mortality in the Medicare program
Bryan Dowd, Matthew Maciejewski, Heidi O'Connor, Gerald Riley & Yisong Geng
Health Economics, forthcoming
Abstract:
Prior studies have found that Medicare health maintenance organization (HMO) enrollees have lower mortality (over a fixed observation period) than beneficiaries in traditional fee-for-service (FFS) Medicare. We use Medicare Current Beneficiary Survey (MCBS) data to compare 2-year predicted mortality for Medicare enrollees in the HMO and FFS sectors using a sample selection model to control for observed beneficiaries characteristics and unobserved confounders. The difference in raw, unadjusted mortality probabilities was 0.5% (HMO lower). Correcting for numerous observed confounders resulted in a difference of -0.6% (HMO higher). Further adjustment for unobserved confounders resulted in an estimated difference of 3.7 and 4.2% (HMO lower), depending on the specification of geographic-fixed effects. The latter result (4.2%) was statistically significant and consistent with prior studies that did not adjust for unobserved confounding. Our findings suggest there may be unobserved confounders associated with adverse selection in the HMO sector, which had a large effect on our mortality estimates among HMO enrollees. An important topic for further research is to identify such confounders and explore their relationship to mortality. The methods presented in this paper represent a promising approach to comparing outcomes between the HMO and FFS sectors, but further research is warranted.
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Insurers' Negotiating Leverage and the External Effects of Medicare Part D
Darius Lakdawalla & Wesley Yin
NBER Working Paper, August 2010
Abstract:
Public financing of private health insurance may generate external effects beyond the subsidized population, by influencing the size and bargaining power of health insurers. We test for this external effect in the context of Medicare Part D. We analyze how Part D-related insurer size increases impacted retail drug prices negotiated by insurers for their non-Part D commercial market. On average, Part D lowered retail prices for commercial insureds by 5.8% to 8.5%. The cost-savings to the commercial market amount to $3bn per year, which approximates the total annual savings experienced by Part D beneficiaries who previously lacked drug coverage.
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Little Evidence Of Correlation Between Growth In Health Care Spending And Reduced Mortality
Michael Rothberg, Joshua Cohen, Peter Lindenauer, Judith Maselli & Andy Auerbach
Health Affairs, August 2010, Pages 1523-1531
Abstract:
As rapid U.S. health care spending growth continues, the question of whether additional dollars purchase better health or unnecessary care remains in sharp focus for policy makers, large employers, and other stakeholders. To investigate this question, we measured changes in mortality and cost for seven common diagnoses at 122 U.S. hospitals from 2000 to 2004. After adjusting for inflation, we found little correlation between reduced mortality for certain conditions and increased spending on patients with those conditions. The message to be underscored once again for policy makers is that health care dollars provide inconsistent value, and future spending increases should be targeted to care that improves outcomes.
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Gregory Larkin & Roderick Hooker
American Journal of Bioethics, August 2010, Pages 1-10
Abstract:
Physician assistants (PAs), nurse practitioners (NPs), and medical residents constitute an increasingly significant part of the American health care workforce, yet patient assent to be seen by nonphysicians is only presumed and seldom sought. In order to assess the willingness of patients to receive medical care provided by nonphysicians, we administered provider preference surveys to a random sample of patients attending three emergency departments (EDs). Concurrently, a survey was sent to a random selection of ED residents and PAs. All respondents were to assume the role of patient when presented with hypothetical clinical scenarios and standardized provider definitions. Despite presumptions to the contrary, ED patients are generally unwilling to be seen by PAs, NPs, and residents. While seldom asked in practice, 79.5% of patients fully expect to see a physician regardless of acuity or potential for cost savings by seeing another provider. Patients are more willing to see residents than nonphysicians.
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Niklas Potrafke
Journal of Health Economics, forthcoming
Abstract:
This paper empirically evaluates whether government ideology and electoral motives influenced the growth of public health expenditures in 18 OECD countries over the 1971-2004 period. The results suggest that incumbents behaved opportunistically and increased the growth of public health expenditures in election years. Government ideology did not have an influence. These findings indicate (1) the importance of public health in policy debates before elections and (2) the political pressure towards re-organizing public health policy platforms especially in times of demographic change.
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Health Plan Competition For Medicaid Enrollees Based On Performance Does Not Improve Quality Of Care
Bruce Guthrie, Glenna Auerback & Andrew Bindman
Health Affairs, August 2010, Pages 1507-1516
Abstract:
Incentives to improve the quality of care provided in Medicaid managed care plans are increasingly common and take many forms. One is a pay-for-performance program that automatically assigns new enrollees to better-performing Medicaid plans in California. Our qualitative and quantitative study of this program examined the expected and actual impacts of the performance incentive on all areas of care. We compared quality outcomes in plans included in the pay-for-performance, "auto-assignment" incentive and comparable outcomes in plans that were not included. We found that quality did not improve significantly faster in plans included in the incentive scheme. Combined with some evidence of negative impact on other areas of care, the findings raise questions about the usefulness of this program in California Medicaid, and about similar programs in other states.
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Reinsurance for High Health Costs: Benefits, Limitations, and Alternatives
William Dow, Brent Fulton & Katherine Baicker
Forum for Health Economics & Policy, 2010
Abstract:
Government-sponsored reinsurance for individuals with high health costs is a commonly proposed strategy to improve access and affordability in the individual and small-group health insurance markets. While reinsurance may have some benefits, other schemes may be more effective at accomplishing the same goals at lower cost. Reinsurance can be seen as a crude special case of risk-adjusted insurance subsidies. This paper estimates the effect of different reinsurance schemes on insurance premiums and insurers' disincentives to enroll potentially high-cost individuals. We find that reinsurance is relatively ineffective at reducing cream-skimming incentives and argue that more sophisticated risk-adjustment schemes are more effective, particularly under community rating with guaranteed issue. Although in the past risk adjustment had been considered too complex to implement in practice, recent experience suggests that it is now feasible, and we argue that incorporation of risk adjustment would strengthen current health insurance reform efforts.
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CPT fee differentials and visit upcoding under Medicare Part B
Christopher Brunt
Health Economics, forthcoming
Abstract:
Medicare Part B pays outpatient physicians according to the billed Current Procedural Terminology (CPT) codes, which differ in procedure and intensity. Since many performed services merely differ by intensity, physicians have an incentive to upcode services to increase profitability of a visit. Using nationally representative data from the 2001 to 2003 Medicare Current Beneficiary Survey, this paper explores the effect of Medicare Part B fee differentials on the upcoding of general office visits (i.e. for established patient visits with CPT codes of 99212-99215). It finds strong evidence that these fee differentials influence physician's coding choice for billing purposes across a variety of specialties. For general office visits, Medicare outlays attributable to upcoding may sum to as much as 15% of total expenditures for such visits. Medicare has much to gain financially by clarifying its classification rules. Until the distinctions between types of Medicare visits are redefined in a way that eliminates ambiguity, upcoding under Medicare Part B is likely to continue.
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Choice, numeracy, and physicians-in-training performance: The case of Medicare Part D
Yaniv Hanoch, Talya Miron-Shatz, Helen Cole, Mary Himmelstein & Alex Federman
Health Psychology, July 2010, Pages 454-459
Objective: In this study, we examined the effect of choice-set size and numeracy levels on a physician-in-training's ability to choose appropriate Medicare drug plans.
Design: Medical students and internal medicine residents (N = 100) were randomly assigned to 1 of 3 surveys, differing only in the number of plans to be evaluated (3, 10, and 20). After reviewing information about stand-alone Medicare prescription drug plans, participants answered questions about what plan they would advise 2 hypothetical patients to choose on the basis of a brief summary of the relevant concerns of each patient. Participants also completed an 11-item numeracy scale.
Main outcome measure: Ability to answer correctly questions about hypothetical Medicare Part D insurance plans and numeracy levels.
Results: Consistent with our hypotheses, increases in choice sets correlated significantly with fewer correct answers, and higher numeracy levels were associated with more correct answers. Hence, our data further highlight the role of numeracy in financial- and health-related decision making, and also raise concerns about physicians' ability to help patients choose the optimal Part D plan.
Conclusion: Our data indicate that even physicians-in-training perform more poorly when choice size is larger, thus raising concerns about the capacity of physicians-in-training to successfully navigate Medicare Part D and help their patients pick the best drug plan. Our results also illustrate the importance of numeracy in evaluating insurance-related information and the need for enhancing numeracy skills among medical students and physicians.
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Consequences of SCHIP Expansions for Household Well-Being
Lindsey Leininger, Helen Levy & Diane Schanzenbach
Forum for Health Economics & Policy, 2010
Abstract:
About 7.4 million children were covered by the State Children's Health Insurance Program (SCHIP) at some point during fiscal year 2008. Many of these children would probably have had private coverage in the absence of SCHIP; recent estimates of the extent of "crowd-out" associated with SCHIP are about 60 percent (Gruber and Simon 2008). The high rate of crowd-out means that the program is not as effective as it could be at reducing the number of uninsured children and has been a political liability for the program. Both political concerns and policy research focusing on crowd-out in SCHIP build on more than a decade of similar attention to the crowd-out associated with the Medicaid expansions of the late 1980s and early 1990s. While there is little doubt that expanding eligibility for public insurance to children who are not poor will lead some to substitute public for private coverage, this substitution should increase total resources available to these households in two ways. First, those who drop private coverage in order to enroll their children in SCHIP can take whatever they had been spending on health insurance and spend it on something else. Second, public insurance requires less cost-sharing than a typical private insurance policy, providing first-dollar coverage with minimal co-payments. This means that switching from private to public coverage reduces a family's out-of-pocket medical spending, freeing up even more of the family's resources for other uses. From the perspective of a low-income family, then, crowd-out is a windfall. In this paper we ask: what do these families do with the additional resources? We address this question with an empirical analysis of consumption data from the Consumer Expenditure Survey. We find that eligibility for SCHIP is associated with an increase in overall expenditure, and most of this increase is allocated to consumption of transportation or saving for retirement. These results suggest that the SCHIP expansions substantially improved the material well-being of the low-income families it is intended to assist - including those who had previously been paying for their own coverage. This evidence should allow a better accounting of the benefits and not just the costs of recent expansions in public health insurance programs.
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Selection Stories: Understanding Movement Across Health Plans
David Cutler, Bryan Lincoln & Richard Zeckhauser
Journal of Health Economics, forthcoming
Abstract:
This study assesses the factors influencing the movement of people across health plans. We distinguish three types of cost-related transitions: adverse selection, the movement of the less healthy to more generous plans; adverse retention, the tendency for people to stay where they are when they get sick; and aging in place, enrollees' inertia in plan choice, leading plans with older enrollees to increase in relative cost over time. Using data from the Group Insurance Commission in Massachusetts, we show that adverse selection and aging in place are both quantitatively important. Either can materially impact equilibrium enrollments, especially when premiums to enrollees reflect these costs.
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Patricia Tong
Health Economics, forthcoming
Abstract:
This article investigates how a change in minimum nurse staffing regulation for California skilled nursing facilities (SNFs) affects nurse employment and how induced changes in nurse staffing affect patient mortality. In 2000, legislation increased the minimum nurse staffing standard and altered the calculation of nurse staffing, which created incentives to shift employment to lower skilled nurse labor. SNFs constrained by the new regulation increase absolute and relative hours worked by the lowest skilled type of nurse. Using this regulation change to instrument for measured nurse staffing levels, it is determined that increases in nurse staffing reduce on-site SNF patient mortality.
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Pharmaceutical Price Discrimination and Social Welfare
Frank Lichtenberg
Capitalism and Society, 2010
Abstract:
Price discrimination is an extremely common type of pricing strategy engaged in by virtually every business with some discretionary pricing power. The issue of whether price discrimination reduces or increases social welfare has been considered by economists since at least 1920. At that time, it was demonstrated that, under certain (restrictive) conditions, price discrimination will reduce social welfare. Subsequent research has shown that price discrimination can increase social welfare, and that a necessary (but not a sufficient) condition for welfare to rise is that total output with discrimination exceeds the no-discrimination level. First, we present evidence about international drug price differentials. Drug prices in the top 5 countries are almost five times as high as they are in the bottom five countries. Certain features of the drug price distribution are surprising. For example, according to our drug price index, the price of drugs in Mexico (which has the second-highest drug prices) is 24% higher than it is in the U.S. (which ranks sixth out of 38 countries). There is a highly significant positive correlation between per capita income and the drug price index: on average, the price of drugs is lower in low-income countries. However, there are large deviations from the regression line. Countries (particularly low-income countries) with similar levels of income pay vastly different prices for drugs. Next, we examine income-related price differentials in the U.S. When price is defined as the amount paid by the patient, there is an inverted-U-shaped relationship between income and price. People in the lowest income category pay 25% less than high income people (16% less if cases when the patient paid nothing are excluded), but people in the middle income category (whose income is 125-200% of the poverty line) pay 6% more than high income people (whose income exceeds 400% of the poverty line). We perform an empirical investigation of whether the necessary condition for price discrimination to increase welfare-that it increase total output-is satisfied in the case of international pharmaceutical prices, by analyzing the relationship across drugs between total output growth and growth in international price dispersion. Drugs that had larger increases in international price dispersion had larger increases in total utilization, controlling for the growth in the mean price of the drug and the drug's vintage. Numerous studies have shown that increased prescription drug use results in improved health outcomes, or the converse: reductions in drug use result in worse health outcomes, such as higher risk of hospitalization and death. In addition to increasing the output of existing products, the ability to engage in price discrimination is likely to increase the number of new products. Contrary to the assumptions of some theoretical models, some markets that would not be served under uniform pricing will be served under price discrimination. This would be the case whenever there are fixed production costs, and the pharmaceutical industry has much higher fixed costs (especially R&D expense) as a percentage of sales than most other industries. Studies have shown that the amount of pharmaceutical R&D investment is influenced by factors (other than the ability to price discriminate) that determine the expected profitability of investment. Studies have also provided evidence that the development and use of new drugs has resulted in significant increases in longevity and health, and that overall, new drugs have been highly cost-effective.