The RAND Health Insurance Experiment, three decades later

The Effects on Hospital Utilization of the 1966 and 2014 Health Insurance Coverage Expansions in the United States

BACKGROUND

Persons with comprehensive health insurance use more hospital care than those who are uninsured or have high-deductible plans. Consequently, analysts generally assume that expanding coverage will increase society-wide use of inpatient services. However, a limited supply of beds might constrain this growth.

OBJECTIVE

To determine how the implementations of Medicare and Medicaid (1966) and the Patient Protection and Affordable Care Act (ACA) (2014) affected hospital use.

DESIGN

Repeated cross-sectional study.

SETTING

Nationally representative surveys.

PARTICIPANTS

Respondents to the National Health Interview Survey (1962 to 1970) and Medical Expenditure Panel Survey (2008 to 2015).

MEASUREMENTS

Mean hospital discharges and days were measured, both society-wide and among subgroups defined by income, age, and health status. Changes between preexpansion and postexpansion periods were analyzed using multivariable negative binomial regression.

RESULTS

Overall hospital discharges averaged 12.8 per 100 persons in the 3 years before implementation of Medicare and Medicaid and 12.7 per 100 persons in the 4 years after (adjusted difference, 0.2 discharges [95% CI, -0.1 to 0.4 discharges] per 100 persons; P = 0.26). Hospital days did not change in the first 2 years after implementation but increased later. Effects differed by subpopulation: Adjusted discharges increased by 2.4 (CI, 1.7 to 3.1) per 100 persons among elderly compared with nonelderly persons (P < 0.001) and also increased among those with low incomes compared with high-income populations. For younger and higher-income persons, use decreased. Similarly, after the ACA's implementation, overall hospital use did not change: Society-wide rates of discharge were 9.4 per 100 persons before the ACA and 9.0 per 100 persons after the ACA (adjusted difference, -0.6 discharges [CI, -1.3 to 0.2 discharges] per 100 persons; P = 0.133), and hospital days were also stable. Trends differed for some subgroups, and rates decreased significantly in unadjusted (but not adjusted) analyses among persons reporting good or better health status and increased nonsignificantly among those in worse health.

LIMITATION

Data sources relied on participant recall, surveys excluded institutionalized persons, and follow-up after the ACA was limited.

CONCLUSION

Past coverage expansions were associated with little or no change in society-wide hospital use; increases in groups who gained coverage were offset by reductions among others, suggesting that bed supply limited increases in use. Reducing coverage may merely shift care toward wealthier and healthier persons. Conversely, universal coverage is unlikely to cause a surge in hospital use if growth in hospital capacity is carefully constrained.

PRIMARY FUNDING SOURCE

None.

Reference pricing: The case of screening colonoscopies

We study the introduction of reference pricing to the California Public Employees' Retirement System. Reference pricing changes the relative price of using a hospital versus an ambulatory surgery center (ASC) for patients receiving a colonoscopy, leading to as good as random variation in patients' use of ASCs. We find a 10 percentage point increase in the share of patients using an ASC, leading to a $2300 to $1700 reduction in prices paid for patients who switch to ASCs. Our results suggest that the use of ASCs has a causal effect on prices paid and has no negative effect on patient health outcomes.

How do financial (dis)incentives influence health behaviour and costs? Protocol for a systematic literature review of randomised controlled trials

INTRODUCTION

In this era of rising healthcare costs, there is a growing interest in understanding how funding policies can be used to improve health and healthcare efficiency. Financial incentives (eg, vouchers or access to health insurance) or disincentives (eg, fines or out-of-pocket costs) affect behaviours. To date, reviews have explored the effects of financial (dis)incentives on patient health and behaviour by focusing on specific behaviours or geographical areas. The objective of this systematic review is to provide a comprehensive overview on the use of financial (dis)incentives as a means of influencing health-related behaviour and costs in randomised trials.

METHODS AND ANALYSIS

We will search electronic databases, clinical trial registries and websites of health economic organisations for randomised controlled trials. The initial searches, which were conducted on 13 January 2018, will be updated every 12 months until the completion of data analysis. The reference lists of included studies will be manually screened to identify additional eligible studies. Two researchers will independently review titles, abstracts and full texts to determine eligibility according to a set of predetermined inclusion criteria. Data will be extracted from included studies using a form developed and piloted by the research team. Discrepancies will be resolved through discussion with a third reviewer. Risk of bias will be assessed using the Cochrane Collaboration tool.

ETHICS AND DISSEMINATION

Ethics approval is not required since this is a review of published data. Results will be disseminated through publication in peer-reviewed journals and presentations at relevant conferences.

PROSPERO REGISTRATION NUMBER

CRD42018097140.

Impact of removing cost sharing under the affordable care act (ACA) on mammography and pap test use

BACKGROUND

The Affordable Care Act (ACA) required private insurers and Medicare to cover recommended preventive services without any cost sharing to improve utilization of these services. This study is an attempt to identify the impact of removing cost sharing on mammography and pap test utilization rates.

METHODS

Counterfactual analysis was used to predict what would have been the screening rates in post-ACA if ACA was not there. This was done by estimating a model that examines determinants of dependent variable for the pre-ACA year (pre-ACA year is 2009). The estimated model was then used to predict the dependent variable for the post-ACA year using individual characteristics and other relevant variables unlikely to be affected by ACA (post-ACA year is 2016). Effect of ACA is defined as the difference between the values of dependent variables in post-ACA and the predicted values of dependent variables in the post-ACA year using counterfactual.

RESULTS

The counterfactual analysis show that the utilization of mammogram and pap test did not improve following ACA.

CONCLUSION

Removal of cost-sharing under the ACA did not improve mammography or pap test rates. Therefore, financial barrier may not be an important factor in affecting utilization of the screening tests and policy makers should focus on other non-financial barriers in order to improve coverage of the tests.

Externalities and Taxation of Supplemental Insurance: A Study of Medicare and Medigap

Most health insurance uses cost-sharing to reduce excess utilization. Supplemental insurance can blunt the impact of this cost-sharing, increasing utilization and exerting a negative externality on the primary insurer. This paper estimates the effect of private Medigap supplemental insurance on public Medicare spending using Medigap premium discontinuities in local medical markets that span state boundaries. Using administrative data on the universe of Medicare beneficiaries, we estimate that Medigap increases an individual's Medicare spending by 22.2 percent. We calculate that a 15 percent tax on Medigap premiums generates savings of $12.9 billion annually with a standard error of $4.9 billion.

High-Deductible Health Plans and Prevention

High-deductible health plans (HDHPs) are becoming more popular owing to their potential to curb rising health care costs. Relative to traditional health insurance plans, HDHPs involve higher out-of-pocket costs for consumers, which have been associated with lower utilization of health services. We focus specifically on the impact that HDHPs have on the use of preventive services. We critique the current evidence by discussing the benefits and drawbacks of the research designs used to examine this relationship. We also summarize the findings from the most methodologically sophisticated studies. We conclude that the balance of the evidence shows that HDHPs are reducing the use of some preventive service, especially screenings. However, it is not clear if HDHPs affect all preventive services. Additional research is needed to determine why variability in conclusions exists among studies. We describe an agenda for future research that can further inform public health decision makers on the impact of HDHPs on prevention.

Co-insurance and health care utilization in Japanese patients with rheumatoid arthritis: a discontinuity regression approach

Background

Co-insurance rates in Japan decrease when patients turn 70 years of age. We aim to compare changes in medical demand for Japanese patients with rheumatoid arthritis (RA) at age 70 prior to 2014, when there was a reduction in co-insurance rates from 30 to 10%, with changes in medical demand at age 70 after 2014 when co-insurance rates decreased from 30% to only 20%.

Methods

We used administrative data from large Japanese hospitals. We employed a discontinuity regression (RD) approach to control for unobserved endogeneity in the data.

Results

We identified a total of 7343 patients with RA, 4905 (67%) turned age 70 before April, and found that a 20% decrease in co-insurance was associated with increased utilization of more expensive biologic RA drugs, more outpatient visits and higher total medical costs. However, a 10% decrease in co-insurance for patients who turned 70 after 2014 did not significantly change demand for medical services.

Conclusions

For the younger cohort, we did not observe any changes in medical demand after a price decrease. We therefore conclude that the economic goal of cost sharing, namely a behavioural change towards lower health-care utilization, is not achieved in this particular cohort of chronic patients.

Electronic supplementary material

The online version of this article (10.1186/s12939-019-0920-7) contains supplementary material, which is available to authorized users.

Impact of Financial Incentives on Health Outcomes and Costs of Care among Medicaid Beneficiaries with Diabetes in Hawai'i

The Hawai'i Patient Reward And Incentives to Support Empowerment (HI-PRAISE) project, part of the Medicaid Incentives for Prevention of Chronic Diseases program of the Affordable Care Act, examined the impact of financial incentives on Medicaid beneficiaries with diabetes. It included an observational pre-post study which was conducted at nine Federally Qualified Health Centers (FQHCs) between 2013 to 2015. The observational study enrolled 2,003 participants. Participants could earn up to $320/year in financial incentives. Primary outcomes were change in hemoglobin A1c, blood pressure, and cholesterol; secondary outcomes included compliance with American Diabetes Association (ADA) standards of diabetes care and cost effectiveness. Generalized estimating equation models were used to assess differences in clinical outcomes and general linear models were utilized to estimate the medical costs per patient/day. Changes in clinical outcomes in the observational study were statistically significant: mean hemoglobin A1c decreased from 8.56% to 8.24% (P < .0001); mean systolic blood pressure decreased from 125.16 to 124.18 mm Hg (P = .0137); mean diastolic blood pressure decreased from 75.54 to 74.78 mm Hg (P = .0005); total cholesterol decreased from 180.77 to 174.21 mg/dl (P < .0001); and low-density lipoprotein decreased from 106.17 to 98.55 mg/dl (P < .0001). Improved ADA compliance was also observed. A key limitation was a reduced sample size due to participant's fluctuating Medicaid eligibility status. HI-PRAISE showed no reduction in total health cost during the project period.

Effects of China's urban basic health insurance on preventive care service utilization and health behaviors: Evidence from the China Health and Nutrition Survey

Background

Lifestyle choices are important determinants of individual health. Few studies have investigated changes in health behaviors and preventive activities brought about by the 2007 implementation of Urban Resident Basic Health Insurance (URBMI) in China. This study, therefore, aimed to explore whether URBMI has reduced individuals’ incentives to adopt healthy behaviors and utilize preventive care services.

Methods

Data were drawn from two waves of the China Health and Nutrition Survey. Respondents were categorized according to their insurance situation before and after the URBMI reform in 2006 and 2011. Propensity score matching and difference-in-differences methods were used to measure levels of preventive care and behavior changes over time. Estimations were also made based on gender, self-reported health, and income.

Results

We found that URBMI implementation did not change residents’ utilization of preventive care services or their smoking habits, drinking habits, or other risky behaviors overall. However, the likelihood of sedentariness did increase by five percentage points. Females tended to be more sedentary while males were less likely to drink soft drinks. Residents with poor self-reported health exercised less while those who reported good health were more likely to be sedentary. Low- and middle-income residents were likely to be sedentary while middle-income people tended to smoke after becoming insured.

Conclusion

Since URBMI implementation, some unhealthy behaviors like sedentariness have increased among those who were newly insured, and different subgroups have reacted differently. This suggests that the insurance design needs to be optimized and effective measures need to be adopted to help improve people’s lifestyle choices.

The medical assistance system and inpatient health care provision: Empirical evidence from short-term hospitalizations in Japan

This paper uses two nationally representative sets of medical claims data from medical assistance and universal public health insurance systems to examine how medical assistance system assignment affects short-term inpatient health care provision. In Japan, the medical assistance system, which is part of a public assistance system, provides medical care services for its beneficiaries without imposing any financial burdens, such as copayments or advance premium payments. These circumstances can lead to inpatient costs, as physicians may provide more treatments because there is a financial incentive. Because the assignment of public assistance in Japan is not random but is subject to means testing by the local government, I employ the instrumental variable model to control the potential correlation. I find that medical expenditure is significantly higher for medical assistance patients than for universal public health insurance patients, with an arc elasticity of approximately 0.20. This elasticity is slightly greater than that found for inpatient care in the randomized RAND Health Insurance Experiment and recent empirical studies on low-income populations. In addition, the elasticities for patients who receive medication, treatment and surgery are greater.

Creating a preference for prevention: the role of universal health care in the demand for preventive care among Mexico's vulnerable populations

The introduction of Seguro Popular (SP)- providing health insurance to over 50 million Mexicans since the early 2000s-represents a large shift in health care delivery to the Mexican population. And yet, its impact on Mexico's marginalized communities has been little studied, and its impact on health is unclear. Using a survey of poor urban Mexicans and Mexican Ministry of Health administrative data, this article investigates SP's effect on those at the most risk for health disparities by looking at the impact of the programme on demand for preventive care services, especially among women, children and the indigenous. Three outcomes important to Mexico's burden of disease are explored: general physical exams, diabetes screening, and cervical cancer screening. Ordinary least square regressions show that the introduction of SP is associated with an increase in demand for all three services, but these results are likely biased due to selection into the programme. I then use the staggered geographic roll out of SP between 2004 and 2007 to identify the causal impact of the programme on demand. I use length of exposure to SP as an instrumental variable to predict SP affiliation in 2009. Two stage least squares estimates of the causal impact of SP on demand for preventive care services finds that SP affiliation increases adult demand for physicals, but does not affect demand for diabetes screening. Additionally, I find that female and child SP affiliates are less likely to demand physicals, while affiliates who identify as indigenous are less likely to demand physicals but more likely to demand cervical cancer screenings.

Private provision of social insurance: drug-specific price elasticities and cost sharing in Medicare Part D

We explore how private drug plans set cost-sharing in the context of Medicare Part D. While publicly-provided drug coverage typically involves uniform cost-sharing across drugs, we document substantial heterogeneity in the cost-sharing for different drugs within privately-provided plans. We also document that private plans systematically set higher consumer cost sharing for drugs or classes associated with more elastic demand; to do so we estimate price elasticities of demand across more than 150 drugs and across more than 100 therapeutic classes. We conclude by discussing the various channels that likely affect private plans' cost-sharing decisions.

Understanding and misunderstanding randomized controlled trials

Randomized Controlled Trials (RCTs) are increasingly popular in the social sciences, not only in medicine. We argue that the lay public, and sometimes researchers, put too much trust in RCTs over other methods of investigation. Contrary to frequent claims in the applied literature, randomization does not equalize everything other than the treatment in the treatment and control groups, it does not automatically deliver a precise estimate of the average treatment effect (ATE), and it does not relieve us of the need to think about (observed or unobserved) covariates. Finding out whether an estimate was generated by chance is more difficult than commonly believed. At best, an RCT yields an unbiased estimate, but this property is of limited practical value. Even then, estimates apply only to the sample selected for the trial, often no more than a convenience sample, and justification is required to extend the results to other groups, including any population to which the trial sample belongs, or to any individual, including an individual in the trial. Demanding 'external validity' is unhelpful because it expects too much of an RCT while undervaluing its potential contribution. RCTs do indeed require minimal assumptions and can operate with little prior knowledge. This is an advantage when persuading distrustful audiences, but it is a disadvantage for cumulative scientific progress, where prior knowledge should be built upon, not discarded. RCTs can play a role in building scientific knowledge and useful predictions but they can only do so as part of a cumulative program, combining with other methods, including conceptual and theoretical development, to discover not 'what works', but 'why things work'.

Moral Hazard in Health Insurance: What We Know and How We Know It

We describe research on the impact of health insurance on healthcare spending ("moral hazard"), and use this context to illustrate the value of and important complementarities between different empirical approaches. One common approach is to emphasize a credible research design; we review results from two randomized experiments, as well as some quasi-experimental studies. This work has produced compelling evidence that moral hazard in health insurance exists-that is, individuals, on average, consume less healthcare when they are required to pay more for it out of pocket-as well as qualitative evidence about its nature. These studies alone, however, provide little guidance for forecasting healthcare spending under contracts not directly observed in the data. Therefore, a second and complementary approach is to develop an economic model that can be used out of sample. We note that modeling choices can be consequential: different economic models may fit the reduced form but deliver different counterfactual predictions. An additional role of the more descriptive analyses is therefore to provide guidance regarding model choice.

Patient cost-sharing, socioeconomic status, and children's health care utilization

This paper estimates the effect of cost-sharing on the demand for children's and adolescents' use of medical care. We use a large population-wide registry dataset including detailed information on contacts with the health care system as well as family income. Two different estimation strategies are used: regression discontinuity design exploiting age thresholds above which fees are charged, and difference-in-differences models exploiting policy changes. We also estimate combined regression discontinuity difference-in-differences models that take into account discontinuities around age thresholds caused by factors other than cost-sharing. We find that when care is free of charge, individuals increase their number of doctor visits by 5-10%. Effects are similar in middle childhood and adolescence, and are driven by those from low-income families. The differences across income groups cannot be explained by other factors that correlate with income, such as maternal education.

Out-of-pocket costs, primary care frequent attendance and sample selection: Estimates from a longitudinal cohort design

This paper examines the effect of out-of-pocket costs on subsequent frequent attendance in primary care using data from the Personality and Total Health (PATH) Through Life Project, a representative community cohort study from Canberra, Australia. The analysis sample comprised 1197 respondents with two or more GP consultations, and uses survey data linked to administrative health service use (Medicare) data which provides data on the number of consultations and out-of-pocket costs. Respondents identified in the highest decile of GP use in a year were defined as Frequent Attenders (FAs). Logistic regression models that did not account for potential selection effects showed that out-of-pocket costs incurred during respondents' prior two consultations were significantly associated with subsequent FA status. Respondents who incurred higher costs ($15-$35; or >$35) were less likely to become FAs than those who incurred no or low (<AUS$15 per consultation) costs, with no difference evident between the no and low-cost groups. However, a counterfactual model that adjusted for factors associated with the selection into payment levels did not find an influence of payment, with only a non-significant gradient in the expected direction. Hence these findings raise doubts that price drives FA behaviour, suggesting that co-payments are unlikely to affect the number of GP consultations amongst frequent attenders.

Decomposition of moral hazard

This study seeks to simulate the portion of moral hazard that is due to the income transfer contained in the coinsurance price reduction. Healthcare spending of uninsured individuals from the MEPS with a priority health condition is compared with the predicted counterfactual spending of those same individuals if they were insured with either (1) a conventional policy that paid off with a coinsurance rate or (2) a contingent claims policy that paid off by a lump sum payment upon becoming ill. The lump sum payment is set to be equal to the insurer's predicted spending under the coinsurance policy. The proportion of moral hazard that is efficient is calculated as the proportion of total moral hazard that is generated by this lump sum payment. We find that the efficient proportion of moral hazard varies from disease to disease, but is the highest for those with diabetes and cancer.

Supplemental Insurance and Racial Health Disparities under Medicare Part B

OBJECTIVE

To assess the impact of preferences, socioeconomic status (SES), and supplemental insurance (SI) on racial/ethnic disparities in the probability and use of services at physicians' offices, hospitals, and emergency departments among Medicare beneficiaries enrolled in Part B.

RESEARCH DESIGN AND SUBJECTS

This study includes black and white beneficiaries from the 2009-2011 panel of the Medicare Current Beneficiary Survey who were enrolled in Medicare Part B. Logit and negative binomial multivariate regression analysis were used in conjunction with rank-and-replace methods to determine factors influencing utilization and black-white utilization disparities.

PRINCIPAL FINDINGS

Among Part B beneficiaries, significant disparities exist for each studied service. Examining contributing factors, 12-19 percent of the black-white health-adjusted difference in the probability of use is explained by differences in SES, whereas differences in the distribution of SI accounts for 20 percent or more. For volume, SES is found to account for 2-11 percent of differences with SI making up another 9-10 percent.

CONCLUSIONS

A substantial portion of the difference in black-white beneficiary use of outpatient services is due to SI. Policies aimed at increasing coverage are likely to increase the probability of visits with modest increases in volume.

User Fees in General Practice: Willingness to Pay and Potential Substitution Patterns-Results from a Danish GP Patient Survey

BACKGROUND

Increases in public expenditures to general practitioner (GP) services and specialist care have spurred debate over whether to implement user fees for healthcare services such as GP consultations in Denmark.

OBJECTIVE

The objective of this study was to examine Danish patients' attitudes towards user fees and their willingness to pay (WTP) for a consultation, and to investigate how user charges may impact patients' behaviour.

METHODS

A questionnaire survey was conducted in a GP clinic.

RESULTS

A total of 343 individual persons answered the questionnaire. One hundred and seventy (50%) persons were not willing to pay for a consultation. Among patients reporting positive WTP values, the mean WTP was 137 (standard deviation 140) Danish kroner (DKK). Patients who were 65 years old or older were more likely to be willing to pay for a GP consultation than patients under the age of 65 years. Furthermore, patients with a personal annual income of more than 200,000 DKK were more likely to be willing to pay for a consultation than other income groups. With respect to patients with a positive WTP value, their own assessment of the seriousness of the consultation and their self-assessed health influenced the amount they would be willing to pay. Finally, we observed a stated willingness to substitute GP consultations with alternatives that are free of charge.

CONCLUSION

About half of the patients with an appointment for a GP consultation are willing to pay for the consultation. User charges may potentially influence the patients' behaviour. ClinicalTrials.gov NCT01784731.

Health care demand elasticities by type of service

We estimate within-year price elasticities of demand for detailed health care services using an instrumental variable strategy, in which individual monthly cost shares are instrumented by employer-year-plan-month average cost shares. A specification using backward myopic prices gives more plausible and stable results than using forward myopic prices. Using 171 million person-months spanning 73 employers from 2008 to 2014, we estimate that the overall demand elasticity by backward myopic consumers is -0.44, with higher elasticities of demand for pharmaceuticals (-0.44), specialists visits (-0.32), MRIs (-0.29) and mental health/substance abuse (-0.26), and lower elasticities for prevention visits (-0.02) and emergency rooms (-0.04). Demand response is lower for children, in larger firms, among hourly waged employees, and for sicker people. Overall the method appears promising for estimating elasticities for highly disaggregated services although the approach does not work well on services that are very expensive or persistent.

Pay less, consume more? The price elasticity of home care for the disabled elderly in France

Little is known about the price sensitivity of demand for home care of the disabled elderly. We partially fill this knowledge gap by using administrative data on the beneficiaries of the main French home care subsidy program in a department and exploiting interindividual variation in provider prices. We address the potential endogeneity of prices by taking advantage of the unequal spatial coverage of providers and instrumenting price by the number of municipalities served by a provider. We estimate a price elasticity of around -0.4 that is significantly different from both 0 and -1. This less than proportionate response of consumption to price has implications for the efficiency and redistributive impact of variation in the level of copayments in home care subsidy schemes.

The association between insurance type and cost-related delay in care: a survey

OBJECTIVES

Massachusetts has insurance rates similar to those projected under the Affordable Care Act, but many of the state's patients are insured through private insurance plans with high out-of-pocket costs. We aimed to explore the relationship between insurance type (private vs public) and delays in care due to cost, stratified by income.

STUDY DESIGN

Cross-sectional study.

METHODS

We conducted a study of English-speaking adults recruited from the waiting rooms of the emergency department or outpatient clinics of a large healthcare system in western Massachusetts. Our primary outcome was the association between insurance type and cost-related delay in care, stratified by income.

RESULTS

Of 800 individuals approached, 619 (77%) completed the survey. Participants were 60.6% male and 40.2% white, 37.2% Hispanic, and 12.6% black. The majority (61.4%) of those surveyed had public insurance, 34.1% had private insurance, and 4.5% were uninsured. Overall, 13.3% reported delays in seeking care that were related to cost. The impact of insurance on delay of care differed significantly by income tertile (P = .02): in the middle-income group ($12,500 to <$25,000 per person annually), privately insured respondents were more likely to delay care due to cost compared with publicly insured subjects (15.6% vs 8.1%; odds ratio [OR], 4.4; 95% confidence interval [CI], 1.9-10.2, unadjusted; OR, 2.2; 95% CI, 0.9-5.8, adjusted).

CONCLUSIONS

Cost-related delays in care are prevalent despite the presence of an insurance mandate. Middle-income, privately insured patients report more cost-related delays in care compared with publicly insured patients with similar incomes.

Healthcare Coinsurance Elasticity Coefficient Estimation Using Monthly Cross-sectional, Time-series Claims Data

Published estimates of the healthcare coinsurance elasticity coefficient have typically relied on annual observations of individual healthcare expenditures even though health plan membership and expenditures are traditionally reported in monthly units and several studies have stressed the need for demand models to recognize the episodic nature of healthcare. Summing individual healthcare expenditures into annual observations complicates two common challenges of statistical inference, heteroscedasticity, and regressor endogeneity. This paper estimates the elasticity coefficient using a monthly panel data model that addresses the heteroscedasticity and endogeneity problems with relative ease. Healthcare claims data from employees of King County, Washington, during 2005 to 2011 were used to estimate the mean point elasticity coefficient: -0.314 (0.015 standard error) to -0.145 (0.015 standard error) depending on model specification. These estimates bracket the -0.2 point estimate (range: -0.22 to -0.17) derived from the famous Rand Health Insurance Experiment. Copyright © 2016 John Wiley & Sons, Ltd.

Bunching at the kink: implications for spending responses to health insurance contracts

A large literature in empirical public finance relies on "bunching" to identify a behavioral response to non-linear incentives and to translate this response into an economic object to be used counterfactually. We conduct this type of analysis in the context of prescription drug insurance for the elderly in Medicare Part D, where a kink in the individual's budget set generates substantial bunching in annual drug expenditure around the famous "donut hole". We show that different alternative economic models can match the basic bunching pattern, but have very different quantitative implications for the counterfactual spending response to alternative insurance contracts. These findings illustrate the importance of modeling choices in mapping a compelling reduced form pattern into an economic object of interest.

The Impacts of China's Urban Employee Basic Medical Insurance on Healthcare Expenditures and Health Outcomes

At the end of 1998, China launched a government-run mandatory insurance program, the urban employee basic medical insurance (UEBMI), to replace the previous medical insurance system. Using the UEBMI reform in China as a natural experiment, this study identifies variations in patient cost sharing that were imposed by the UEBMI reform and examines their effects on the demand for healthcare services. Using data from the 1991-2006 waves of the China Health and Nutrition Survey, we find that increased cost sharing is associated with decreased outpatient medical care utilization and expenditures but not with decreased inpatient care utilization and expenditures. Patients from low-income and middle-income households or with less severe medical conditions are more sensitive to prices. We observe little impact on patient's health, as measured by self-reported health status. Copyright © 2015 John Wiley & Sons, Ltd.

The Impact of Health Insurance on Preventive Care and Health Behaviors: Evidence from the First Two Years of the ACA Medicaid Expansions

The U.S. population receives suboptimal levels of preventive care and has a high prevalence of risky health behaviors. One goal of the Affordable Care Act (ACA) was to increase preventive care and improve health behaviors by expanding access to health insurance. This paper estimates how the ACA-facilitated state-level expansions of Medicaid in 2014 affected these outcomes. Using data from the Behavioral Risk Factor Surveillance System, and a difference-in-differences model that compares states that did and did not expand Medicaid, we examine the impact of the expansions on preventive care (e.g., dental visits, immunizations, mammograms, cancer screenings), risky health behaviors (e.g., smoking, heavy drinking, lack of exercise, obesity), and self-assessed health. We find that the expansions increased insurance coverage and access to care among the targeted population of low-income childless adults. The expansions also increased use of certain forms of preventive care, but there is no evidence that they increased ex ante moral hazard (i.e., there is no evidence that risky health behaviors increased in response to health insurance coverage). The Medicaid expansions also modestly improved self-assessed health.

The health conditions and the health care consumption of the uninsured

This paper investigates the difference in the health conditions and the health care consumption of uninsured individuals as compared to individuals with private insurance, using a nationally representative data set of inpatient hospital admissions from the US. In line with the previous literature, our results indicate that uninsured individuals are, on average, in worse health conditions. However, if we compare individuals within the same diagnosis category, the uninsured are actually healthier, with a lower number of chronic conditions and a lower risk of mortality. This indicates that the uninsured are admitted to the hospital only for more serious conditions. In addition, our results show that uninsured individuals consume less health care. In particular, conditional on being admitted to a hospital and controlling for health conditions, the uninsured have lower total charges, fewer procedures, and a higher mortality rate.

Does Full Insurance Increase the Demand for Health Care?

We estimate the causal impact of having full health insurance on healthcare expenditures. We take advantage of a unique quasi-experimental setup in which deductibles and co-payments were zero in a managed care plan and nonzero in regular insurance, until a policy change forced all individuals with an active plan to cover a minimum amount of their expenses. Using panel data and a nonlinear difference-in-differences strategy, we find a demand elasticity of about -0.14 comparing full insurance with the cost-sharing model and a significant upward shift in the likelihood to generate costs. Copyright © 2015 John Wiley & Sons, Ltd.

Life cycle responses to health insurance status

This paper studies the lifetime effects of exogenous changes in health insurance coverage (e.g. Medicare, PPACA, termination of employer-provided plans) on the dynamic optimal allocation (consumption, leisure, health expenditures), status (health and wealth), and welfare. We solve, simulate, and structurally estimate a parsimonious life cycle model with endogenous exposure to morbidity and mortality risks, and exogenous health insurance. By varying coverage, we identify the marginal effects of insurance when young and/or when old on allocations, statuses, and welfare. Our results highlight positive effects of insurance on health, wealth and welfare, as well as mid-life substitution away from healthy leisure in favor of more health expenses, caused by peaking wages, and accelerating health issues.

Copayments and physicians visits: A panel data study of Swedish regions 2003-2012

OBJECTIVE

This paper analyzes how primary care physician visits are affected by the level of copayment in Sweden.

DATA SOURCE

We use data between the years 2003-2012 from 21 Swedish health care regions that have the mandate to set their own level of copayment. The copayment per visit varies between €10 and €20 for these years and regions.

STUDY DESIGN

Our strategy to identify the causal effect and deal with unobserved endogeneity of price changes on physician visits is based on a panel data model using fixed effects to control for region and time and regional-variation in time trends.

PRINCIPAL FINDING

We cannot reject that the copayment has no statistical or economic effect of significance, and we estimate the "zero effect" with very high precision.

CONCLUSION

In a setting with sub-national regions with autonomy to set co-payments the results points to that the copayment is not an important predictor for the number of health care visits. The result is in line with some previous studies on European data where the range of copayments used tends to be relatively low.

Which moral hazard? Health care reform under the Affordable Care Act of 2010

Purpose - Moral hazard is a concept that is central to risk and insurance management. It refers to change in economic behavior when individuals are protected or insured against certain risks and losses whose costs are borne by another party. It asserts that the presence of an insurance contract increases the probability of a claim and the size of a claim. Through the US Affordable Care Act (ACA) of 2010, this study seeks to examine the validity and relevance of moral hazard in health care reform and determine how welfare losses or inefficiencies could be mitigated. Design/methodology/approach - This study is divided into three sections. The first contrasts conventional moral hazard from an emerging or alternative theory. The second analyzes moral hazard in terms of the evolution, organization, management, and marketing of health insurance in the USA. The third explains why and how salient reform measures under the ACA might induce health care consumption and production in ways that could either promote or restrict personal health and safety as well as social welfare maximization. Findings - Insurance generally induces health care (over) consumption. However, not every additional consumption, with or without adverse selection, can be considered wasteful or risky, even if it might cost insurers more in the short run. Moral hazard can generate welfare and equity gains. These gains might vary depending on which ACA provisions, insured population, covered illnesses, treatments, and services, as well as health outcomes are taken into account, and because of the relative ambiguities surrounding definitions of "health." Actuarial risk models can nonetheless benefit from incorporating welfare and equity gains into their basic assumptions and estimations. Originality/value - This is the first study which examines the ACA in the context of the new or alternative theory of moral hazard. It suggests that containing inefficient moral hazard, and encouraging its desirable counterpart, are prime challenges in any health care reform initiative, especially as it adapts to the changing demographic and socio-economic characteristics of the insured population and regulatory landscape of health insurance in the USA.

Free Medicines Thanks to Retirement: Impact of Coinsurance Exemption on Pharmaceutical Expenditures and Hospitalization Offsets in a national health service

This paper examines the impact of coinsurance exemption for prescription medicines applied to elderly individuals in Spain after retirement. We use a rich administrative dataset that links pharmaceutical consumption and hospital discharge records for the full population aged 58 to 65 years in January 2004 covered by the public insurer in a Spanish region, and we follow them until December 2006. We use a difference-in-differences strategy and exploit the eligibility age for Social Security to control for the endogeneity of the retirement decision. Our results show that this uniform exemption increases the consumption of prescription medicines on average by 17.5%, total pharmaceutical expenditure by 25% and the costs borne by the insurer by 60.4%, without evidence of any offset effect in the form of lower short term probability of hospitalization. The impact is concentrated among consumers of medicines for acute and other non-chronic diseases whose previous coinsurance rate was 30% to 40%. Copyright © 2015 John Wiley & Sons, Ltd.

BEHAVIORAL HAZARD IN HEALTH INSURANCE

A fundamental implication of standard moral hazard models is overuse of low-value medical care because copays are lower than costs. In these models, the demand curve alone can be used to make welfare statements, a fact relied on by much empirical work. There is ample evidence, though, that people misuse care for a different reason: mistakes, or "behavioral hazard." Much high-value care is underused even when patient costs are low, and some useless care is bought even when patients face the full cost. In the presence of behavioral hazard, welfare calculations using only the demand curve can be off by orders of magnitude or even be the wrong sign. We derive optimal copay formulas that incorporate both moral and behavioral hazard, providing a theoretical foundation for value-based insurance design and a way to interpret behavioral "nudges." Once behavioral hazard is taken into account, health insurance can do more than just provide financial protection - it can also improve health care efficiency.

An Interrupted Time-Series Analysis to Assess Impact of Introduction of Co-Payment on Emergency Room Visits in Cyprus

INTRODUCTION

A co-payment fee of EUR10 was introduced in Cyprus, in order to cope with overcrowding of emergency room services. The scope of this paper is the assessment of the short-term impact of this measure.

METHODS

We used an interrupted time-series autoregressive integrated moving average model, and we analyzed official data from Cyprus' largest emergency room facility for three years.

RESULTS

Co-payment is associated with a 16% statistically significant reduction of emergency room visits. No impact was observed in categories of teenagers, children, infants, and people over 70 years old.

CONCLUSIONS

Co-payment was proven to be effective in Cyprus' emergency room setting and is expected to lessen congestion in the emergency room. The price insensitivity of people aged over 70 years, teenagers, children and infants, merits additional research for the identification of the underlying reasons.

MORAL HAZARD IN HEALTH INSURANCE: DO DYNAMIC INCENTIVES MATTER?

Using data from employer-provided health insurance and Medicare Part D, we investigate whether healthcare utilization responds to the dynamic incentives created by the nonlinear nature of health insurance contracts. We exploit the fact that, because annual coverage usually resets every January, individuals who join a plan later in the year face the same initial ("spot") price of healthcare but a higher expected end-of-year ("future") price. We find a statistically significant response of initial utilization to the future price, rejecting the null that individuals respond only to the spot price. We discuss implications for analysis of moral hazard in health insurance.

Community Health Center Use After Oregon's Randomized Medicaid Experiment

PURPOSE

There is debate about whether community health centers (CHCs) will experience increased demand from patients gaining coverage through Affordable Care Act Medicaid expansions. To better understand the effect of new Medicaid coverage on CHC use over time, we studied Oregon's 2008 randomized Medicaid expansion (the "Oregon Experiment").

METHODS

We probabilistically matched demographic data from adults (aged 19-64 years) participating in the Oregon Experiment to electronic health record data from 108 Oregon CHCs within the OCHIN community health information network (originally the Oregon Community Health Information Network) (N = 34,849). We performed intent-to-treat analyses using zero-inflated Poisson regression models to compare 36-month (2008-2011) usage rates among those selected to apply for Medicaid vs not selected, and instrumental variable analyses to estimate the effect of gaining Medicaid coverage on use. Use outcomes included primary care visits, behavioral/mental health visits, laboratory tests, referrals, immunizations, and imaging.

RESULTS

The intent-to-treat analyses revealed statistically significant differences in rates of behavioral/mental health visits, referrals, and imaging between patients randomly selected to apply for Medicaid vs those not selected. In instrumental variable analyses, gaining Medicaid coverage significantly increased the rate of primary care visits, laboratory tests, referrals, and imaging; rate ratios ranged from 1.27 (95% CI, 1.05-1.55) for laboratory tests to 1.58 (95% CI, 1.10-2.28) for referrals.

CONCLUSIONS

Our results suggest that use of many different types of CHC services will increase as patients gain Medicaid through Affordable Care Act expansions. To maximize access to critical health services, it will be important to ensure that the health care system can support increasing demands by providing more resources to CHCs and other primary care settings.

THE RESPONSE OF DRUG EXPENDITURE TO NON-LINEAR CONTRACT DESIGN: EVIDENCE FROM MEDICARE PART D

We study the demand response to non-linear price schedules using data on insurance contracts and prescription drug purchases in Medicare Part D. We exploit the kink in individuals' budget set created by the famous "donut hole," where insurance becomes discontinuously much less generous on the margin, to provide descriptive evidence of the drug purchase response to a price increase. We then specify and estimate a simple dynamic model of drug use that allows us to quantify the spending response along the entire non-linear budget set. We use the model for counterfactual analysis of the increase in spending from "filling" the donut hole, as will be required by 2020 under the Affordable Care Act. In our baseline model, which considers spending decisions within a single year, we estimate that "filling" the donut hole will increase annual drug spending by about $150, or about 8 percent. About one-quarter of this spending increase reflects "anticipatory" behavior, coming from beneficiaries whose spending prior to the policy change would leave them short of reaching the donut hole. We also present descriptive evidence of cross-year substitution of spending by individuals who reach the kink, which motivates a simple extension to our baseline model that allows - in a highly stylized way - for individuals to engage in such cross year substitution. Our estimates from this extension suggest that a large share of the $150 drug spending increase could be attributed to cross-year substitution, and the net increase could be as little as $45 per year.

Quality check: does it matter for quality how you organize and pay for health care? A review of the international evidence

Health systems in high-income countries have experienced significant organizational and financial reforms over the last 25 years. The implications of these changes for the effectiveness of health care systems need to be examined, particularly in relation to their effects on the quality of health services (a pertinent issue in the United Kingdom in light of the Francis Report). Systematic review methodology was used to locate and evaluate published systematic reviews of quantitative intervention studies (experimental and observational) on the effects of health system organizational and financial reforms (system financing, funding allocations, direct purchasing arrangements, organization of service provision, and service integration) on quality of care in high-income countries. Nineteen systematic reviews were identified. The evidence on the payment of providers and purchaser-provider splits was inconclusive. In contrast, there is some evidence that greater integration of services can benefit patients. There were no relevant studies located relating to funding allocation reforms or direct purchasing arrangements. The systematic review-level evidence base suggests that the privatization and marketization of health care systems does not improve quality, with most financial and organizational reforms having either inconclusive or negative effects.

The impact of out-of-pocket payments on health care inequity: the case of national health insurance in South Korea

The global financial crisis of 2008 has led to the reinforcement of patient cost sharing in health care policy. This study aimed to explore the impact of direct out-of pocket payments (OOPs) on health care utilization and the resulting financial burden across income groups under the South Korean National Health Insurance (NHI) program with universal population coverage. We used the fourth Korean National Health and Nutrition Examination Survey (KNHNES-IV) and the Korean Household Income and Expenditure Survey (KHIES) of 2007, 2008 and 2009. The Horizontal Inequity Index (HIwv) and the average unit OOPs were used to measure income-related inequity in the quantitative and qualitative aspects of health care utilization, respectively. For financial burden, the incidence rates of catastrophic health expenditure (CHE) were compared across income groups. For outpatient and hospital visits, there was neither pro-poor or pro-rich inequality. The average unit OOPs of the poorest quintile was approximately 75% and 60% of each counterpart in the richest quintile in the outpatient and inpatient services. For the CHE threshold of 40%, the incidence rates were 5.7%, 1.67%, 0.72%, 0.33% and 0.27% in quintiles I (the poorest quintile), II, III, IV and V, respectively. Substantial OOPs under the NHI are disadvantageous, particularly for the lowest income group in terms of health care quality and financial burden.

Behavioral hazard in health insurance

A fundamental implication of standard moral hazard models is overuse of low-value medical care because copays are lower than costs. In these models, the demand curve alone can be used to make welfare statements, a fact relied on by much empirical work. There is ample evidence, though, that people misuse care for a different reason: mistakes, or “behavioral hazard.” Much high-value care is underused even when patient costs are low, and some useless care is bought even when patients face the full cost. In the presence of behavioral hazard, welfare calculations using only the demand curve can be off by orders of magnitude or even be the wrong sign. We derive optimal copay formulas that incorporate both moral and behavioral hazard, providing a theoretical foundation for value-based insurance design and a way to interpret behavioral “nudges.” Once behavioral hazard is taken into account, health insurance can do more than just provide financial protection—it can also improve health care efficiency.