Life Savings
The Long-term Impact of Medicare Payment Reductions on Patient Outcomes
Vivian Wu & Yu-Chu Shen
NBER Working Paper, March 2011
Abstract:
This study examines the long term impact of Medicare payment reductions on patient outcomes using a natural experiment - the Balance Budget Act (BBA) of 1997. We use predicted Medicare revenue changes due to BBA, with simulated BBA payment cuts as an instrument, to categorize hospitals by degrees of payment cuts (small, moderate, or large), and follow Medicare patient outcomes in these hospitals over a 11 year panel: 1995-1997 pre-BBA, 1998-2000 initial years of BBA, and 2001-2005 post-BBA years. We find that Medicare AMI mortality trends stay similar across hospitals when comparing between pre-BBA and initial-BBA periods. However, the effect became measurable in 2001-2005: hospitals facing large payment cuts saw increased mortality rates relative to that of hospitals facing small cuts in the post-BBA period (2001-2005) after controlling for their pre-BBA trends. We find support that part of the worsening AMI patient outcomes in the large-cut hospitals is explained by reductions in staffing level and operating cost following the payment cuts, and that in-hospital mortality is not affected partly due to patients being discharged earlier (shorter length-of-stay).
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NIH Disease Funding Levels and Burden of Disease
Leslie Gillum et al.
PLoS ONE, February 2011, e16837
Background: An analysis of NIH funding in 1996 found that the strongest predictor of funding, disability-adjusted life-years (DALYs), explained only 39% of the variance in funding. In 1998, Congress requested that the Institute of Medicine (IOM) evaluate priority-setting criteria for NIH funding; the IOM recommended greater consideration of disease burden. We examined whether the association between current burden and funding has changed since that time.
Methods: We analyzed public data on 2006 NIH funding for 29 common conditions. Measures of US disease burden in 2004 were obtained from the World Health Organization's Global Burden of Disease study and national databases. We assessed the relationship between disease burden and NIH funding dollars in univariate and multivariable log-linear models that evaluated all measures of disease burden. Sensitivity analyses examined associations with future US burden, current and future measures of world disease burden, and a newly standardized NIH accounting method.
Results: In univariate and multivariable analyses, disease-specific NIH funding levels increased with burden of disease measured in DALYs (p = 0.001), which accounted for 33% of funding level variation. No other factor predicted funding in multivariable models. Conditions receiving the most funding greater than expected based on disease burden were AIDS ($2474 M), diabetes mellitus ($390 M), and perinatal conditions ($297 M). Depression ($719 M), injuries ($691 M), and chronic obstructive pulmonary disease ($613 M) were the most underfunded. Results were similar using estimates of future US burden, current and future world disease burden, and alternate NIH accounting methods.
Conclusions: Current levels of NIH disease-specific research funding correlate modestly with US disease burden, and correlation has not improved in the last decade.
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Medicaid's Effect on Single Women's Labor Supply: Evidence from the Introduction of Medicaid
Erin Strumpf
Journal of Health Economics, forthcoming
Abstract:
This paper examines the impact of the introduction of the Medicaid program on labor supply decisions among single women in the late 1960's and early 1970's. I use a differences-in-differences-in-differences methodology to estimate the effect of Medicaid on eligible women's labor force participation, using variation in the timing of Medicaid implementation across states and in eligibility across demographic groups. Using March supplements to the CPS from 1963-1975, I find no evidence that women who were eligible for Medicaid decreased their labor supply relative to ineligible women, in contrast to clear theoretical predictions of a negative supply response. Positive point estimates suggest that health benefits from health insurance coverage may have contributed to relative increases in labor supply. These results add to an emerging consensus that public health insurance programs for low-income parents and children may be able to improve access to care without substantial indirect costs from labor supply distortions.
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Regulatory Redistribution in the Market for Health Insurance
Jeffrey Clemens
Harvard Working Paper, November 2010
Abstract:
Health insurance regulations can redistribute from the healthy to the sick, as when they exclude the use of pre-existing conditions in determining an individual's insurance premium. I investigate how regulations of this form, which reduce premiums for the sick while raising them for the healthy, interact with tax-financed public insurance programs. In the early 1990s, several states strictly regulated premiums and product offerings in the markets where small firms and individuals acquire insurance. Within 3 years of adopting these regulations, private coverage of children had fallen by 9 percentage points in the regulated markets relative to equivalent markets in other states (as estimated using the large-group markets within each state as an additional control). Subsequent public insurance expansions covered millions of pregnant women, disabled individuals, and sicker-than-average children. During these expansions, private coverage rates rose by an excess of 7 percentage points in the regulated markets relative to control markets. The analysis reveals an important complementarity between regulations and public insurance: without substantial public insurance programs, strict regulation of premiums and product offerings can lead to significant coverage losses due to adverse selection. Health-based redistribution must take place primarily through tax-financed programs when insurance purchases are voluntary.
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Health insurance and the consumer bankruptcy decision: Evidence from expansions of Medicaid
Tal Gross & Matthew Notowidigdo
Journal of Public Economics, forthcoming
Abstract:
Anecdotal evidence and several observational studies suggest that out-of-pocket medical costs are pivotal in a large fraction of consumer bankruptcy decisions. In this paper, we assess the contribution of medical costs to household bankruptcy risk by exploiting plausibly exogenous variation in publicly provided health insurance. Using cross-state variation in Medicaid expansions from 1992 to 2004, we find that a 10 percentage point increase in Medicaid eligibility reduces personal bankruptcies by 8%, with no evidence that business bankruptcies are similarly affected. We interpret our findings with a model in which health insurance imperfectly substitutes for other forms of financial protection, and we use the model to present simple calibration results which illustrate how our reduced-form parameter estimate affects the optimal level of health insurance benefits. We conclude with calculations which suggest that out-of-pocket medical costs are pivotal in roughly 26% of personal bankruptcies among low-income households.
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Brian Barnes
Yale Law Journal, November 2010, Pages 328-365
Abstract:
This Note argues that rescission - the traditional remedy for innocent misrepresentations on insurance applications - systematically overcompensates insurance companies. In short, rescission allows insurers to refuse benefits to people who make innocent misrepresentations and suffer losses even while retaining the premiums of similarly situated people who never file claims. The principles of contract law do not compel this result, and courts have made insurance law doctrine less coherent in an effort to avoid it. Given the problems that rescission creates in the innocent misrepresentation context, this Note proposes an alternative remedy called "actuarially fair reformation." Actuarially fair reformation would avoid rescission's market-distorting inefficiencies by awarding misrepresenting insureds the amount of insurance that their premiums could have financed.
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Neil Fleming et al.
Health Affairs, March 2011, Pages 481-489
Abstract:
The incentives in the American Recovery and Reinvestment Act to expand the "meaningful use" of electronic health record systems have many health care professionals searching for information about the cost and staff resources that such systems require. We report the cost of implementing an electronic health record system in twenty-six primary care practices in a physician network in north Texas, taking into account hardware and software costs, as well as the time and effort invested in implementation. For an average five-physician practice, implementation cost an estimated $162,000, with $85,500 in maintenance expenses during the first year. We also estimate that the HealthTexas network implementation team and the practice implementation team needed 611 hours, on average, to prepare for and implement the electronic health record system, and that "end users" - physicians, other clinical staff, and nonclinical staff - needed 134 hours per physician, on average, to prepare for use of the record system in clinical encounters.
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Does managed care affect the diffusion of psychotropic medications?
Marisa Domino
Health Economics, forthcoming
Abstract:
Newer technologies to treat many mental illnesses have shown substantial heterogeneity in diffusion rates across states. In this paper, I investigate whether variation in the level of managed care penetration is associated with changes in state-level diffusion of three newer classes of psychotropic medications in fee-for-service Medicaid programs from 1991 to 2005. Three different types of managed care programs are examined: capitated managed care, any type of managed care and behavioral health carve-outs. A fourth-order polynomial fixed effect regression model is used to model the diffusion path of newer antidepressant and antipsychotic medications controlling for time-varying state characteristics. Substantial differences are found in the diffusion paths by the degree of managed care use in each state Medicaid program. The largest effect is seen through spillover effects of capitated managed care programs; states with greater capitated managed care have greater initial shares of newer psychotropic medications. The influence of carve-outs and of all types of managed care combined on the diffusion path was modest.
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It's the Writing on the Wall: Whiteboards Improve Inpatient Satisfaction With Provider Communication
Siddhartha Singh et al.
American Journal of Medical Quality, March/April 2011, Pages 127-131
Abstract:
Although keeping patients informed is a part of quality hospital care, inpatients often report they are not well informed. The authors placed whiteboards in each patient room on medicine wards in their hospital and asked nurses and physicians to use them to improve communication with inpatients. The authors then examined the effect of these whiteboards by comparing satisfaction with communication of patients discharged from medical wards before and after whiteboards were placed to satisfaction with communication of patients from surgical wards that did not have whiteboards. Patient satisfaction scores (0-100 scale) with communication improved significantly on medicine wards: nurse communication (+6.4, P < .001), physician communication (+4.0, P = .04), and involvement in decision making (+6.3, P = .002). Patient satisfaction scores did not change significantly on surgical wards. There was no secular trend, and the authors excluded a trend in overall patient satisfaction. Whiteboards could be a simple and effective tool to increase inpatient satisfaction with communication.
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Potential Savings From Greater Use of $4 Generic Drugs
Yuting Zhang, Lei Zhou & Walid Gellad
Archives of Internal Medicine, 14 March 2011, Pages 468-469
Abstract:
Discounted generic medication programs ($4 per 30-day supply or $10 per 90-day supply) are available at pharmacies of many retail stores, such as Wal-Mart and Target. While most prescription drug coverage requires patients to pay $10 to $11 per 30-day supply for generic drugs and $25 to $27 for preferred brand-name drugs between 2006 and 2009, anyone regardless of insurance, pays only $4 for qualifying generic drugs through these programs. Use of $4 programs could potentially save patients and society billions of dollars. To our knowledge, our study is the first to evaluate who may be using $4 programs and potential national savings from broad use of these programs.
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Rachel Henke, Ron Goetzel, Janice McHugh & Fik Isaac
Health Affairs, March 2011, Pages 490-499
Abstract:
Johnson & Johnson Family of Companies introduced its worksite health promotion program in 1979. The program evolved and is still in place after more than thirty years. We evaluated the program's effect on employees' health risks and health care costs for the period 2002-08. Measured against similar large companies, Johnson & Johnson experienced average annual growth in total medical spending that was 3.7 percentage points lower. Company employees benefited from meaningful reductions in rates of obesity, high blood pressure, high cholesterol, tobacco use, physical inactivity, and poor nutrition. Average annual per employee savings were $565 in 2009 dollars, producing a return on investment equal to a range of $1.88-$3.92 saved for every dollar spent on the program. Because the vast majority of US adults participate in the workforce, positive effects from similar programs could lead to better health and to savings for the nation as a whole.
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The influence of managed care on generic prescribing rates: An analysis of HMO physicians
Jennifer Rice
Applied Economics, March 2011, Pages 787-796
Abstract:
Retail expenditures on prescription drugs continue to grow annually by double digits, while the share of prescriptions dispensed as generics remains relatively constant. Efforts to curtail rising drug expenditures have been exhibited by Managed Care Organizations (MCOs), yet drug expenditures continue to rise. Using the National Ambulatory Medical Care Survey (NAMCS) for 1997-2000, this study examines how managed care, specifically Health Maintenance Organizations (HMOs), influence the physician's decision to prescribe the generic version of a multi-source drug. The findings show that HMO physicians are not significantly more likely to prescribe generic drugs than non-HMO physicians. Among HMO physicians, different cost reduction tools effect generic prescribing behaviour in different ways, with, the size of the effect depending on the patient and physician relationship with the HMO.
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Against Homeopathy - A Utilitarian Perspective
Kevin Smith
Bioethics, forthcoming
Abstract:
I examine the positive and negative features of homeopathy from an ethical perspective. I consider: (a) several potentially beneficial features of homeopathy, including non-invasiveness, cost-effectiveness, holism, placebo benefits and agent autonomy; and (b) several potentially negative features of homeopathy, including failure to seek effective healthcare, wastage of resources, promulgation of false beliefs and a weakening of commitment to scientific medicine. A utilitarian analysis of the utilities and disutilities leads to the conclusion that homeopathy is ethically unacceptable and ought to be actively rejected by healthcare professionals.
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Peter Zweifel
Health Affairs, March 2011, Pages 510-518
Abstract:
Policy makers in several industrial countries are seeking to limit the rise in health care cost growth by supporting coordinated or integrated care programs, which differ from most prevailing forms of medical organization in how physicians are paid and how they work in groups. However, as long as fee-for-service payment systems remain an option, general practitioners will be reluctant to embrace coordinated care because it would give them less autonomy in how they practice. A study in Switzerland indicates that general practitioners will require a pay increase of up to 40 percent before they are willing to accept coordinated care, and a similar study found that Swiss consumers wanted a substantial reduction in premiums to accept it. These findings suggest that provisions of US health care reform designed to encourage the growth of coordinated care - such as accountable care organizations and medical homes - may face a challenging future.
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Does continuity of care matter in a health care system that lacks referral arrangements?
Shou-Hsia Cheng, Yen-Fei Hou & Chi-Chen Chen
Health Policy and Planning, March 2011, Pages 157-162
Introduction: Numerous studies have suggested that better continuity of care (COC) can lead to fewer emergency department (ED) visits and fewer hospital admissions. However, these studies were conducted in countries where patients have their own family physician or in countries with referral systems. This study aimed to determine whether the association between lower COC and increased health care utilization may be apparent in a health care system that lacks a family physician or a referral system.
Methods: The study population included a total of 134 422 subjects who made four or more visits to physicians in 2005. Negative binominal regressions were performed to examine the effects of three different COC indices on the numbers of hospital admissions and ED visits in 2005 and in the subsequent year (2006).
Results: The data suggest that lower COC was associated with increased hospital admissions and ED visits in our study population. Compared with the high COC group, subjects in the low and medium COC groups had 42-82% and 39-46% more hospital admissions, respectively, as well as 75-102% and 41-45% more ED visits, respectively, in 2005. Weaker protective effects of COC were also observed in the subsequent year.
Conclusions: This study indicates that lower COC is associated with increased hospital admissions and ED visits, even in a health care system that lacks a referral arrangement framework. This suggests that improving the COC is beneficial both for patients and for the health care system.
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Premium growth and its effect on employer-sponsored insurance
Jessica Vistnes & Thomas Selden
International Journal of Health Care Finance and Economics, March 2011, Pages 55-81
Abstract:
We use variation in premium inflation and general inflation across geographic areas to identify the effects of downward nominal wage rigidity on employers' health insurance decisions. Using employer level data from the 2000 to 2005 Medical Expenditure Panel Survey-Insurance Component, we examine the effect of premium growth on the likelihood that an employer offers insurance, eligibility rates among employees, continuous measures of employee premium contributions for both single and family coverage, and deductibles. We find that small, low-wage employers are less likely to offer health insurance in response to increased premium inflation, and if they do offer coverage they increase employee contributions and deductible levels. In contrast, larger, low-wage employers maintain their offers of coverage, but reduce eligibility for such coverage. They also increase employee contributions for single and family coverage, but not deductibles. Among high-wage employers, all but the largest increase deductibles in response to cost pressures.
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Jenny Reichert et al.
Behavioral Sciences & the Law, forthcoming
Abstract:
Jurors' decision-making processes are often influenced by extra-legal factors, including judgments of defendants and plaintiffs. Two studies comparing the decisions of university students with those of community jurors sought to determine if extra-legal factors such as individual differences (including identity as a student or juror participant), the reason for surgery (medically necessary vs. elective), the type of surgery (e.g., gastric bypass, nasal reconstruction) or weight of the patient influenced jurors' decisions and perceptions in medical malpractice suits, such that participants would hold negative perceptions of overweight patients or patients who undergo elective surgeries. Results indicate that students and jurors differ in perceptions of the patient's injury and perceptions of risk, which explains some of the variance in liability verdicts. Students were more likely to find doctors liable, but also were more likely to assign responsibility to patients than were jurors. Patients who had undergone elective surgery were seen as more responsible for their situation - and their doctors were assigned less responsibility - than those who had undergone a medically necessary surgery. Tests of weight bias showed that jurors found overweight patients less responsible for their situation than patients of normal weight, but students showed the opposite pattern. Theoretical explanations are explored and implications discussed.