1
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Xu M, Bittschi B. Does the abolition of copayment increase ambulatory care utilization?: a quasi-experimental study in Germany. THE EUROPEAN JOURNAL OF HEALTH ECONOMICS : HEPAC : HEALTH ECONOMICS IN PREVENTION AND CARE 2022; 23:1319-1328. [PMID: 35084631 DOI: 10.1007/s10198-022-01430-4] [Citation(s) in RCA: 1] [Impact Index Per Article: 0.5] [Reference Citation Analysis] [Abstract] [Key Words] [MESH Headings] [Track Full Text] [Subscribe] [Scholar Register] [Received: 06/20/2021] [Accepted: 01/06/2022] [Indexed: 06/14/2023]
Abstract
Due to a problematic situation with public finances, Germany introduced a copayment scheme for ambulatory care visits in 2004. In 2012, Germany achieved a balanced budget, and copayment was abolished on the 1st of January 2013. This policy change offers a rare opportunity to explore the impact of the abolition of copayment, compared to the much more frequently studied introduction of copayment. We therefore investigate the development of ambulatory care and inpatient care utilization following this policy change among people over 50 in Germany, as well as the heterogeneous impacts among vulnerable people, such as the low-income population, the chronically ill and the elderly over the age of 65. We use data from the Survey of Health, Ageing and Retirement in Europe and adopt a difference-in-differences approach with matching. We found that the abolition of copayment only caused an increase in ambulatory care use in the shorter term, while leading to a significant reduction in the longer term. In addition, we find a negative effect on inpatient care use, i.e., the hospitalization offset effect. Finally, we demonstrate that vulnerable people were more sensitive to the abolition of copayment.
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Affiliation(s)
- Mingming Xu
- School of Public Health (Shenzhen), Sun Yat-sen University, Gongchang Road 66, Shenzhen, 518107, China.
- Department of Economics and Management, Karlsruhe Institute of Technology, Kronenstraβe 34, 76133, Karlsruhe, Germany.
| | - Benjamin Bittschi
- Austrian Institute of Economic Research (WIFO), Arsenal, Objekt 20, 1030, Vienna, Austria
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2
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Jaspersen JG. When full insurance may not be optimal: The case of restricted substitution. HEALTH ECONOMICS 2022; 31:1249-1257. [PMID: 35266230 DOI: 10.1002/hec.4491] [Citation(s) in RCA: 0] [Impact Index Per Article: 0] [Reference Citation Analysis] [Abstract] [Key Words] [MESH Headings] [Track Full Text] [Subscribe] [Scholar Register] [Received: 04/01/2021] [Revised: 10/19/2021] [Accepted: 02/18/2022] [Indexed: 06/14/2023]
Abstract
Even when heavily subsidized, a substantial portion of people choose to forgo purchasing health insurance coverage. In this note, I introduce an explanation for this phenomenon which does not assume choice errors, incorrect beliefs, differently priced uncompensated care, or information asymmetries. When individuals are incapable of freely trading off health and wealth and the initial allocation of goods is suboptimal from their perspective, the standard result of demand for actuarially fair insurance in a single good world does not generalize to the health insurance context. Thus, people might not purchase full health insurance coverage even if it is priced at actuarially fair levels. I argue that this situation is particularly likely to occur in the low-income population, and hence it is relevant for the achievement of universal health coverage.
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Affiliation(s)
- Johannes G Jaspersen
- LMU Munich School of Management, LMU Munich, Ludwig-Maximilians-Universität, Munich, Germany
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3
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Hlávka JP, Yu JC, Goldman DP, Lakdawalla DN. The economics of alternative payment models for pharmaceuticals. THE EUROPEAN JOURNAL OF HEALTH ECONOMICS : HEPAC : HEALTH ECONOMICS IN PREVENTION AND CARE 2021; 22:559-569. [PMID: 33725260 PMCID: PMC8169601 DOI: 10.1007/s10198-021-01274-4] [Citation(s) in RCA: 3] [Impact Index Per Article: 1.0] [Reference Citation Analysis] [Abstract] [Key Words] [MESH Headings] [Grants] [Track Full Text] [Subscribe] [Scholar Register] [Received: 08/18/2020] [Accepted: 02/17/2021] [Indexed: 05/11/2023]
Abstract
Pharmaceuticals are priced uniformly by convention, but vary in their degree of effectiveness for different disease indications. As more high-cost therapies have launched, the demand for alternative payment models (APMs) has been increasing in many advanced markets, despite their well-documented limitations and challenges to implementation. Among policy justifications for such contracts is the maximization of value given scarce resources. We show that while uniform pricing rules can handle variable effectiveness in efficient markets, market inefficiencies of other kinds create a role for different value-based pricing structures. We first present a stylized theoretical model of efficient interaction among drug manufacturers, payers, and beneficiaries. In this stylized setting, uniform pricing works well, even when treatment effects are variable. We then use this framework to define market failures that result in obstacles to uniform pricing. The market failures we identify include: (1) uncertainty of patient distribution, (2) asymmetric beliefs, (3) agency imperfection by payer, (4) agency imperfection by provider, and (5) patient behavior and treatment adherence. We then apply our insights to real-world examples of alternative payment models, and highlight challenges related to contract implementation.
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Affiliation(s)
- Jakub P Hlávka
- Leonard D. Schaeffer Center for Health Policy and Economics, University of Southern California, Los Angeles, CA, USA.
- Sol Price School of Public Policy, University of Southern California, Los Angeles, CA, USA.
| | - Jeffrey C Yu
- Leonard D. Schaeffer Center for Health Policy and Economics, University of Southern California, Los Angeles, CA, USA
- USC School of Pharmacy, University of Southern California, Los Angeles, CA, USA
| | - Dana P Goldman
- Leonard D. Schaeffer Center for Health Policy and Economics, University of Southern California, Los Angeles, CA, USA
- Sol Price School of Public Policy, University of Southern California, Los Angeles, CA, USA
- USC School of Pharmacy, University of Southern California, Los Angeles, CA, USA
| | - Darius N Lakdawalla
- Leonard D. Schaeffer Center for Health Policy and Economics, University of Southern California, Los Angeles, CA, USA
- Sol Price School of Public Policy, University of Southern California, Los Angeles, CA, USA
- USC School of Pharmacy, University of Southern California, Los Angeles, CA, USA
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4
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Wang C, Sweetman A. Delisting eye examinations from public health insurance: Empirical evidence from Canada regarding impacts on patients and providers. Health Policy 2020; 124:540-548. [PMID: 32276853 DOI: 10.1016/j.healthpol.2020.03.006] [Citation(s) in RCA: 1] [Impact Index Per Article: 0.3] [Reference Citation Analysis] [Abstract] [Key Words] [Track Full Text] [Journal Information] [Subscribe] [Scholar Register] [Received: 06/15/2019] [Revised: 01/20/2020] [Accepted: 03/10/2020] [Indexed: 11/25/2022]
Abstract
This paper examines the impacts of delisting routine eye exam services on patient eye care utilization and on providers' labour market outcomes in a public healthcare system. Provincial governments in Canada started to de-insure routine eye examinations from the basket of publicly insured healthcare services in the early 1990s. We explore these policy changes across Canadian provinces to estimate the impacts of delisting from the supply- and demand-sides. Demand side analysis suggests that, on average, for the working age population delisting decreased the probability of using eye care. However, the number of visits among those who continued to use eye care services did not change. Additionally, the delisting may have had unintended consequences by causing a large negative impact among low-income individuals, and there is suggestive evidence of a positive spillover on utilization by publicly-funded patients over age 64. On the supply side, using Canadian census data we find that delisting eye exams decreased optometrists' weekly work hours, raised their annual work weeks and had little effect on their income.
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Affiliation(s)
- Chao Wang
- International School of Economics and Management, Capital University of Economics and Business, Beijing, 100070, PR China.
| | - Arthur Sweetman
- Ontario Research Chair in Health Human Resources, Department of Economics, McMaster University, 1280 Main Street West, Hamilton, Ontario, L8S 4M4, Canada; Centre for Health Economics and Policy (CHEPA), McMaster University, Institute for the Study of Labor (IZA), Bonn, Germany.
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5
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Lavetti K, Simon K. Strategic Formulary Design in Medicare Part D Plans. AMERICAN ECONOMIC JOURNAL. ECONOMIC POLICY 2018; 10:154-192. [PMID: 30662681 PMCID: PMC6335045 DOI: 10.1257/pol.20160248] [Citation(s) in RCA: 12] [Impact Index Per Article: 2.0] [Reference Citation Analysis] [Abstract] [Key Words] [Grants] [Track Full Text] [Subscribe] [Scholar Register] [Indexed: 05/10/2023]
Abstract
The design of Medicare Part D causes most beneficiaries to receive fragmented health insurance, with drug and medical coverage separated. Fragmentation is potentially inefficient since separate insurers optimize over only one component of healthcare spending, despite complementarities and substitutabilities between healthcare types. Fragmentation of only some plans can also lead to market distortions due to differential adverse selection, as integrated plans may use drug formularies to induce enrollment by patients that are profitable in the medical insurance market. We study the design of insurance plans in Medicare Part D, and find that formularies reflects these two differences in incentives.
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Affiliation(s)
- Kurt Lavetti
- Ohio State University, Department of Economics, 1945 N. High St, Columbus, OH
| | - Kosali Simon
- Indiana University and NBER, School of Public and Environmental Affairs, 1315 E 10th St, Bloomington, IN
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6
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Einav L, Finkelstein A, Polyakova M. Private provision of social insurance: drug-specific price elasticities and cost sharing in Medicare Part D. AMERICAN ECONOMIC JOURNAL. ECONOMIC POLICY 2018; 10:122-153. [PMID: 30233766 PMCID: PMC6141206 DOI: 10.1257/pol.20160355] [Citation(s) in RCA: 22] [Impact Index Per Article: 3.7] [Reference Citation Analysis] [Abstract] [Grants] [Track Full Text] [Subscribe] [Scholar Register] [Indexed: 05/10/2023]
Abstract
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.
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Affiliation(s)
- Liran Einav
- Department of Economics, Stanford University, and NBER, 579 Serra Mall, Stanford, CA 94305- 6072
| | - Amy Finkelstein
- Department of Economics, Massachusetts Institute of Technology, and NBER, 77 Massachusetts Avenue, Building E52, Room 442, Cambridge MA 02139
| | - Maria Polyakova
- Department of Health Research and Policy, Stanford University, and NBER, Redwood Building T111, 150 Governor's Lane, Stanford, CA 94305
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7
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Ketcham JD, Kuminoff NV, Powers CA. Choice Inconsistencies among the Elderly: Evidence from Plan Choice in the Medicare Part D Program: Comment. THE AMERICAN ECONOMIC REVIEW 2016; 106:3932-3961. [PMID: 29553221 DOI: 10.1257/aer.20131048] [Citation(s) in RCA: 3] [Impact Index Per Article: 0.4] [Reference Citation Analysis] [Abstract] [MESH Headings] [Track Full Text] [Subscribe] [Scholar Register] [Indexed: 06/08/2023]
Abstract
Consumers' enrollment decisions in Medicare Part D can be explained by Abaluck and Gruber’s (2011) model of utility maximization with psychological biases or by a neoclassical version of their model that precludes such biases. We evaluate these competing hypotheses by applying nonparametric tests of utility maximization and model validation tests to administrative data. We find that 79 percent of enrollment decisions from 2006 to 2010 satisfied basic axioms of consumer theory under the assumption of full information. The validation tests provide evidence against widespread psychological biases. In particular, we find that precluding psychological biases improves the structural model's out-of-sample predictions for consumer behavior.
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Affiliation(s)
| | | | - Christopher A Powers
- US Department of Health and Human Services, Centers for Medicare and Medicaid Services, Office of Enterprise Data and Analytics, Baltimore, MD
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8
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Li Q, Trivedi PK. Adverse and Advantageous Selection in the Medicare Supplemental Market: A Bayesian Analysis of Prescription drug Expenditure. HEALTH ECONOMICS 2016; 25:192-211. [PMID: 25504934 DOI: 10.1002/hec.3133] [Citation(s) in RCA: 1] [Impact Index Per Article: 0.1] [Reference Citation Analysis] [Abstract] [Key Words] [MESH Headings] [Track Full Text] [Subscribe] [Scholar Register] [Received: 11/20/2013] [Revised: 09/15/2014] [Accepted: 11/07/2014] [Indexed: 06/04/2023]
Abstract
This paper develops an extended specification of the two-part model, which controls for unobservable self-selection and heterogeneity of health insurance, and analyzes the impact of Medicare supplemental plans on the prescription drug expenditure of the elderly, using a linked data set based on the Medicare Current Beneficiary Survey data for 2003-2004. The econometric analysis is conducted using a Bayesian econometric framework. We estimate the treatment effects for different counterfactuals and find significant evidence of endogeneity in plan choice and the presence of both adverse and advantageous selections in the supplemental insurance market. The average incentive effect is estimated to be $757 (2004 value) or 41% increase per person per year for the elderly enrolled in supplemental plans with drug coverage against the Medicare fee-for-service counterfactual and is $350 or 21% against the supplemental plans without drug coverage counterfactual. The incentive effect varies by different sources of drug coverage: highest for employer-sponsored insurance plans, followed by Medigap and managed medicare plans.
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Affiliation(s)
| | - Pravin K Trivedi
- Department of Economics, University of Queensland, Brisbane, Australia
- Department of Economics, Indiana University-Bloomington, Bloomington, IN, USA
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9
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Baicker K, Mullainathan S, Schwartzstein J. BEHAVIORAL HAZARD IN HEALTH INSURANCE. THE QUARTERLY JOURNAL OF ECONOMICS 2015; 130:1623-1667. [PMID: 35602854 PMCID: PMC9121790 DOI: 10.1093/qje/qjv029] [Citation(s) in RCA: 40] [Impact Index Per Article: 4.4] [Reference Citation Analysis] [Abstract] [Grants] [Track Full Text] [Subscribe] [Scholar Register] [Indexed: 05/04/2023]
Abstract
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.
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10
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Ellis RP, Jiang S, Manning WG. Optimal health insurance for multiple goods and time periods. JOURNAL OF HEALTH ECONOMICS 2015; 41:89-106. [PMID: 25727031 DOI: 10.1016/j.jhealeco.2015.01.007] [Citation(s) in RCA: 2] [Impact Index Per Article: 0.2] [Reference Citation Analysis] [Abstract] [Key Words] [MESH Headings] [Track Full Text] [Subscribe] [Scholar Register] [Received: 04/01/2013] [Revised: 01/17/2015] [Accepted: 01/22/2015] [Indexed: 06/04/2023]
Abstract
We examine the efficiency-based arguments for second-best optimal health insurance with multiple treatment goods and multiple time periods. Correlated shocks across health care goods and over time interact with complementarity and substitutability to affect optimal cost sharing. Health care goods that are substitutes or have positively correlated demand shocks should have lower optimal patient cost sharing. Positive serial correlations of demand shocks and uncompensated losses that are positively correlated with covered health services also reduce optimal cost sharing. Our results rationalize covering pharmaceuticals and outpatient spending more fully than is implied by static, one good, or one period models.
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Affiliation(s)
- Randall P Ellis
- Department of Economics, Boston University, 270 Bay State Road, Boston, MA 02215, USA.
| | - Shenyi Jiang
- Central University of Finance and Economics, Beijing, PR China.
| | - Willard G Manning
- Deceased, formerly at Harris School of Public Policy Studies, The University of Chicago, Chicago, IL, USA
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11
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Deb P, Trivedi PK, Zimmer DM. Cost-offsets of prescription drug expenditures: data analysis via a copula-based bivariate dynamic hurdle model. HEALTH ECONOMICS 2014; 23:1242-1259. [PMID: 23956147 DOI: 10.1002/hec.2982] [Citation(s) in RCA: 3] [Impact Index Per Article: 0.3] [Reference Citation Analysis] [Abstract] [Key Words] [MESH Headings] [Track Full Text] [Subscribe] [Scholar Register] [Received: 11/20/2012] [Revised: 05/16/2013] [Accepted: 07/11/2013] [Indexed: 06/02/2023]
Abstract
In this paper, we estimate a copula-based bivariate dynamic hurdle model of prescription drug and nondrug expenditures to test the cost-offset hypothesis, which posits that increased expenditures on prescription drugs are offset by reductions in other nondrug expenditures. We apply the proposed methodology to data from the Medical Expenditure Panel Survey, which have the following features: (i) the observed bivariate outcomes are a mixture of zeros and continuously measured positives; (ii) both the zero and positive outcomes show state dependence and inter-temporal interdependence; and (iii) the zeros and the positives display contemporaneous association. The point mass at zero is accommodated using a hurdle or a two-part approach. The copula-based approach to generating joint distributions is appealing because the contemporaneous association involves asymmetric dependence. The paper studies samples categorized by four health conditions: arthritis, diabetes, heart disease, and mental illness. There is evidence of greater than dollar-for-dollar cost-offsets of expenditures on prescribed drugs for relatively low levels of spending on drugs and less than dollar-for-dollar cost-offsets at higher levels of drug expenditures.
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Affiliation(s)
- Partha Deb
- Department of Economics, Hunter College and the Graduate Center, CUNY, and NBER, USA
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12
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Pope B, Deshmukh A, Johnson A, Rohack J. Multilateral contracting and prevention. HEALTH ECONOMICS 2014; 23:397-409. [PMID: 23554156 DOI: 10.1002/hec.2920] [Citation(s) in RCA: 2] [Impact Index Per Article: 0.2] [Reference Citation Analysis] [Abstract] [Key Words] [MESH Headings] [Track Full Text] [Subscribe] [Scholar Register] [Received: 04/18/2011] [Revised: 12/20/2012] [Accepted: 02/15/2013] [Indexed: 06/02/2023]
Abstract
Incentives created through contracts can be used as a means of decentralized control in healthcare systems to ensure more efficient healthcare. In this paper, we consider an insurer contracting with a consumer and a provider. We focus on the trade-off between ex ante moral hazard and insurance, and consider both consumer and provider incentives in the insurer's contracting problem in the presence of unobservable preventive efforts. We study two cases of provider efforts: those that complement consumer efforts and those that substitute for consumer efforts. In the first case, our results show that the provider must have greater incentives when the consumer is healthy to induce effort and that inducing provider effort allows an insurer to offer a more complete insurance contract relative to the bilateral benchmark. In the second case, we state conditions under which these conclusions continue to hold. On the basis of our findings, we discuss the implications and challenges of multilateral contracting in practice.
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Affiliation(s)
- Brandon Pope
- School of Industrial Engineering, Regenstrief Center for Healthcare Engineering, Purdue University, West Lafayette, IN, USA
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13
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Philipson TJ, Zanjani G. Economic Analysis of Risk and Uncertainty Induced by Health Shocks: A Review and Extension. HANDBOOK OF THE ECONOMICS OF RISK AND UNCERTAINTY 2014. [DOI: 10.1016/b978-0-444-53685-3.00008-8] [Citation(s) in RCA: 6] [Impact Index Per Article: 0.6] [Reference Citation Analysis] [Track Full Text] [Subscribe] [Scholar Register] [Indexed: 01/10/2023]
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14
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Goldman DP, McFadden D, Newhouse JP. Introduction. Standard market mechanisms than does traditional Medicare. JOURNAL OF HEALTH ECONOMICS 2013; 32:1258-1262. [PMID: 24308877 DOI: 10.1016/j.jhealeco.2013.10.001] [Citation(s) in RCA: 0] [Impact Index Per Article: 0] [Reference Citation Analysis] [MESH Headings] [Grants] [Track Full Text] [Subscribe] [Scholar Register] [Indexed: 06/02/2023]
Affiliation(s)
- Dana P Goldman
- University of Southern California, United States; NBER, United States
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15
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Glazer J, McGuire TG. A Welfare Measure of "Offset Effects" in Health Insurance. JOURNAL OF PUBLIC ECONOMICS 2012; 96:520-523. [PMID: 22544983 PMCID: PMC3337040 DOI: 10.1016/j.jpubeco.2012.02.007] [Citation(s) in RCA: 3] [Impact Index Per Article: 0.3] [Reference Citation Analysis] [Abstract] [Key Words] [Grants] [Track Full Text] [Subscribe] [Scholar Register] [Indexed: 05/12/2023]
Abstract
Changing health insurance coverage for one service may affect use of other insured services. When improving coverage for one service reduces use of another, the savings are referred to as "offset effects." For example, costs of better coverage for prescription drugs may be partly "offset" by reductions in hospital costs. Offset effects have welfare implications but it has not been clear how to value these impacts in design of health insurance. We show that plan-paid - rather than total -- spending is the right welfare measure of the offset effect, and go on to develop a "sufficient statistic" for evaluating the welfare effects of change in coverage in the presence of multiple goods. We derive a simple rule for when a coverage improvement increases welfare due to offset effects.
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16
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Glazer J, Huskamp HA, McGuire TG. A Prescription for Drug Formulary Evaluation: An Application of Price Indexes. Forum Health Econ Policy 2012; 15:1558-9544.1296. [PMID: 23372543 PMCID: PMC3556729 DOI: 10.1515/1558-9544.1296] [Citation(s) in RCA: 3] [Impact Index Per Article: 0.3] [Reference Citation Analysis] [Abstract] [Grants] [Track Full Text] [Journal Information] [Subscribe] [Scholar Register] [Indexed: 11/15/2022]
Abstract
Existing economic approaches to the design and evaluation of health insurance do not readily apply to coverage decisions in the multi-tiered drug formularies characterizing drug coverage in private health insurance and Medicare. This paper proposes a method for evaluating a change in the value of a formulary to covered members based on the economic theory of price indexes. A formulary is cast as a set of demand-side prices, and our measure approximates the compensation (positive or negative) that would need to be paid to consumers to accept the new set of prices. The measure also incorporates any effect of the formulary change on plan drug acquisition costs and "offset effects" on non-drug services covered by the plan. Data needed to calculate formulary value are known or can be forecast by a health plan. We illustrate the method with data from a move from a two- to a three-tier formulary.
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17
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Basu A, Jena AB, Philipson TJ. The impact of comparative effectiveness research on health and health care spending. JOURNAL OF HEALTH ECONOMICS 2011; 30:695-706. [PMID: 21696840 PMCID: PMC3242481 DOI: 10.1016/j.jhealeco.2011.05.012] [Citation(s) in RCA: 24] [Impact Index Per Article: 1.8] [Reference Citation Analysis] [Abstract] [Key Words] [MESH Headings] [Grants] [Track Full Text] [Subscribe] [Scholar Register] [Received: 12/28/2009] [Revised: 05/23/2011] [Accepted: 05/25/2011] [Indexed: 05/21/2023]
Abstract
Comparative effectiveness research (CER) is thought to identify what works and does not work in health care. We interpret CER as infusing evidence on product quality into markets, shifting the relative demand for products in CER studies. We analyze how shifts in demand affect health and health care spending and demonstrate that CER may raise or lower overall health when treatments have heterogeneous effects, but payers respond with product-specific coverage policies. Among patients with schizophrenia, we calibrate that subsidy policies based on the clinical trial CATIE may have reduced overall health by inducing some patients to switch away from schizophrenia treatments that were effective for them towards winners of the CER.
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18
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Baicker K, Goldman D. Patient cost-sharing and healthcare spending growth. THE JOURNAL OF ECONOMIC PERSPECTIVES : A JOURNAL OF THE AMERICAN ECONOMIC ASSOCIATION 2011; 25:47-68. [PMID: 21595325 DOI: 10.1257/jep.25.2.47] [Citation(s) in RCA: 40] [Impact Index Per Article: 3.1] [Reference Citation Analysis] [Abstract] [MESH Headings] [Track Full Text] [Subscribe] [Scholar Register] [Indexed: 05/21/2023]
Abstract
In this paper, we explore the role patient incentives play in slowing healthcare spending growth. Evidence suggests that while patients do indeed respond to financial incentives, cost-sharing does not uniformly improve value; rather, cost-sharing provisions must be deliberately structured and targeted to reduce care of low marginal value. Other mechanisms may be helpful in targeting particular populations or types of utilization. The spillover effects between privately insured and publicly insured populations as well as market imperfections suggest a potential role for public policy in promoting insurance design that slows spending growth while increasing the health that each dollar buys.
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Affiliation(s)
- Katherine Baicker
- Department of Health Policy and Management at the Harvard School of Public Health, Boston, Massachusetts, USA.
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19
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McGuire TG. Demand for Health Insurance11Research on this chapter was partially supported by NIA P01 AG032952, The Role of Private Plans in Medicare, and NIMH R01 MH094290. I am grateful to Martin Anderson, Sebastian Bauhoff, Pedro Pita Barros, Emily Corcoran, Jacob Glazer, Mark Pauly, Anna Sinaiko, and Jacob Wallace for many helpful comments. HANDBOOK OF HEALTH ECONOMICS 2011. [DOI: 10.1016/b978-0-444-53592-4.00005-0] [Citation(s) in RCA: 10] [Impact Index Per Article: 0.8] [Reference Citation Analysis] [Track Full Text] [Subscribe] [Scholar Register] [Indexed: 01/09/2023]
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20
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Who Ordered That? The Economics of Treatment Choices in Medical Care. HANDBOOK OF HEALTH ECONOMICS 2011. [DOI: 10.1016/b978-0-444-53592-4.00006-2] [Citation(s) in RCA: 42] [Impact Index Per Article: 3.2] [Reference Citation Analysis] [Track Full Text] [Subscribe] [Scholar Register] [Indexed: 02/02/2023]
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21
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Munkin MK, Trivedi PK. Disentangling incentives effects of insurance coverage from adverse selection in the case of drug expenditure: a finite mixture approach. HEALTH ECONOMICS 2010; 19:1093-1108. [PMID: 20625979 DOI: 10.1002/hec.1636] [Citation(s) in RCA: 1] [Impact Index Per Article: 0.1] [Reference Citation Analysis] [Abstract] [MESH Headings] [Track Full Text] [Subscribe] [Scholar Register] [Indexed: 05/29/2023]
Abstract
This paper takes a finite mixture approach to model heterogeneity in incentive and selection effects of drug coverage on total drug expenditure among the Medicare elderly US population. Evidence is found that the positive drug expenditures of the elderly population can be decomposed into two groups different in the identified selection effects and interpreted as relatively healthy with lower average expenditures and relatively unhealthy with higher average expenditures, accounting for approximately 25 and 75% of the population, respectively. Adverse selection into drug insurance appears to be strong for the higher expenditure component and weak for the lower expenditure group.
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Affiliation(s)
- Murat K Munkin
- Department of Economics, University of South Florida, 4202 East Fowler Avenue, Tampa, FL 33620, USA.
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22
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Chandra A, Gruber J, McKnight R. Patient Cost-Sharing and Hospitalization Offsets in the Elderly. THE AMERICAN ECONOMIC REVIEW 2010; 100:193-213. [PMID: 21103385 PMCID: PMC2982192 DOI: 10.1257/aer.100.1.193] [Citation(s) in RCA: 166] [Impact Index Per Article: 11.9] [Reference Citation Analysis] [Abstract] [MESH Headings] [Grants] [Track Full Text] [Subscribe] [Scholar Register] [Indexed: 05/17/2023]
Abstract
In the Medicare program, increases in cost sharing by a supplemental insurer can exert financial externalities. We study a policy change that raised patient cost sharing for the supplemental insurer for retired public employees in California. We find that physician visits and prescription drug usage have elasticities that are similar to those of the RAND Health Insurance Experiment (HIE). Unlike the HIE, however, we find substantial "offset" effects in terms of increased hospital utilization. The savings from increased cost sharing accrue mostly to the supplemental insurer, while the costs of increased hospitalization accrue mostly to Medicare.
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Affiliation(s)
- Amitabh Chandra
- Kennedy School of Government, Harvard University, 79 JFK Street, Cambridge, MA 02138, and NBER
| | - Jonathan Gruber
- Department of Economics, MIT, 50 Memorial Drive E52-355, Cambridge, MA 02142, and NBER
| | - Robin McKnight
- Department of Economics, Wellesley College, 106 Central Street, Wellesley, MA 02481, and NBER
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23
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Ellis RP, Manning WG. Optimal health insurance for prevention and treatment. JOURNAL OF HEALTH ECONOMICS 2007; 26:1128-1150. [PMID: 17997176 DOI: 10.1016/j.jhealeco.2007.09.002] [Citation(s) in RCA: 16] [Impact Index Per Article: 0.9] [Reference Citation Analysis] [Abstract] [MESH Headings] [Track Full Text] [Subscribe] [Scholar Register] [Received: 05/23/2007] [Revised: 09/05/2007] [Accepted: 09/07/2007] [Indexed: 05/25/2023]
Abstract
This paper reexamines the efficiency-based arguments for optimal health insurance, extending the classic analysis to consider optimal coverage for prevention and treatment separately. Our paper considers the tradeoff between individuals' risk reduction on the one hand, and both ex ante and ex post moral hazard on the other. We demonstrate that it is always desirable to offer at least some insurance coverage for preventive care if individual consumers ignore the impact of their preventive care on the health premium. Using a utility-based framework, we reconfirm the conventional tradeoff between risk avoidance (by risk sharing) and moral hazard for insuring treatment goods. Uncompensated losses that reduce effective income provide a new efficiency-based argument for more generous insurance coverage for prevention and treatment of health conditions. The optimal coinsurance rates for prevention and for treatment are not identical.
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Affiliation(s)
- Randall P Ellis
- Department of Economics, Boston University, 270 Bay State Road, Boston, MA 022l5, USA.
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