Session Recap: Health Care Cost Containment
November 11, 2014 02:00 PM
By Sana Ahmad, Rutgers University
Chair: Joelle Abramowitz, U. S. Census Bureau
Discussant: Lauren Hersch Nicholas, Johns Hopkins University
The U.S. health care system is the most costly in the world, yet several performance and quality metrics lag behind other developed countries. Additionally, healthcare costs are growing at an alarming and unsustainable rate. The following looks the problem of health care costs from various angles.
Mandate-Based Health Care Reform and Business Activity: Evidence from Massachusetts by Nadia Greenhalgh-Stanley and Shawn Rohlin, Kent State University
Shawn Rohlin, a student at Kent State University, presents research looking at the Massachusetts employer mandate to see if there are impacts of such policy on businesses. The Massachusetts reform impacted business in that it required businesses with 11 or more employees to offer a cafeteria plan coverage to their employees or to pay a penalty. Using Dun and Bradstreet data, the authors were able to look at effect of reform on new businesses to gauge effect on entrepreneurship, on established business to assess effect business survival, and on the overall Massachusetts economy. Using the difference-in-difference methodology and border approach to determine counterfactual area, the authors look at business activity using Geographical Information Systems tools.
Results show that the new and existing firms are very sensitive to the employment cutoff, implying that reform has the potential to distort incentives. Specifically, the authors report that, compared to border counterfactual area, Massachusetts experiences a 1.5% short term decrease in new business activity for firms with 11-24 employees, which is followed by longer-term increase of 6.1% in businesses with 10 or more employees. Additionally there was no significant effect on existing and total business. The authors conclude that overall, reform that includes mandate for coverage provision by employers might have negative impacts on businesses.
There are various policy implications that follow form these results. Politicians and researchers who design reform packages must keep in mind the potential for negative externalities, such as impact of insurance mandates on businesses. The discussant indicated the authors should further explore the characteristics of the employees at the small firms to better understand small firm dynamics and the reasons small firms behave as they do.
Physician Payments Under Health Care Reform by Adam Shapiro, Federal Reserve Bank of San Francisco
In this presentation, Adam Shapiro from the Federal Reserve Bank of San Francisco seeks to study impact on medical-care prices of health care reform. With health care prices accounting for 1/5 of the overall economy, understanding effects of policies on health care sector prices is essential. Health care reform might affect provider payments by private insurance due to changes in competitive environment or due to increase in healthcare demand from newly insured beneficiaries. The authors examine Massachusetts, which implemented reform in 2006 leading to increase in insurance coverage of 5-6%. Using MarketScan dataset, the authors use physician insurance claims from 2003 to 2010 to show that reform had the impact of increasing physician prices by as much as 10-20% in Massachusetts as compared to control area. They payment shock came when passage of reform law was becoming a certainty, potentially resulting from the anticipated change by physicians and adjustments through contracts being negotiated in anticipation of the changes.
One less policymakers might learn from this work is to be cognizant of potential unexpected, or unwanted, impacts of a policy. A policy that is meant to reduce prices might not work as expected, given the market in which providers operate. Additionally, with the rapid dissemination of information as we have today, people can get information even before the legislation is passed, and legislators must be aware of this. One point the discussant highlights is the dearth of discussion regarding the plausibility of observed effects. Additionally, the need for more robustness in the synthetic control group is also highlighted.
Do Doctors Engage in Risk Selection? Unintended Consequences of Physician-Level Financial Incentives by Diane Alexander, Princeton University
Diane Alexander, an Economics Ph.D. student at Princeton University, looks at results from a New Jersey hospital demonstration to test provider response to incentives. By looking at a $19 million gain-sharing pilot program in New Jersey, in which hospitals gave doctors bonuses for reducing cost for admitted Medicare patients, Diane is able to tease out impacts on physician behavior of payment model changes. In looking at both participating and non-participating hospitals, it is possible to look at impact on physician behavior in participating hospitals after program introduction. Using the NJ billing records’ hospital discharge data and utilizing a difference-in-difference model, the author finds strong empirical that among admitted patients, healthier patients are sent to hospitals offering bonuses and among participating hospitals, non ER admissions increase. Whereas admission threshold is reduced for high-bonus patients, there is an increase in admission threshold for low-bonus patients. Diane did not find evidence for reduction in number of services performed.
It appears, thus, that doctors respond to incentives by sorting patients and changing admissions decisions. Naïve evaluations comparing hospital costs before and after for participating hospitals would show program to be a success, but this would be due to better patient health. In terms of potential policy implications, Diane highlighted the need for more careful evaluation programs, especially if a program goal is to be informative on national reform. Additionally, when designing national reform, it is important to take into account the externality dye to the policies. It is important to consider, thus, that payment models that seek to reduce costs by changing provider behavior might change physician behavior to offset intended effect of policy.
The Economic Impact of Intensive Case Management on Costly Uninsured Patients in Emergency Departments: And Evaluation of New Mexico’s Care One Program by Brady P. Horn, Maurice Moffett, and David Sklar, University of New Mexico
Brady P. Horn began his discussion by pointing out that disproportionate share of costs incurred by a small number of patients. The authors of this paper evaluate the impact of Care One, a program at University of New Mexico that is meant to target high-risk patients. The program involves delivering case management and care coordination to the most costly patients at the emergency department in Albuquerque, New Mexico who often have difficulty navigating the healthcare system. Using a difference-in-difference model, the authors look at impact of Care One program on the hospital individual level billing charges. The researchers preliminary results show that, compared to a quasi-control group of next most expensive patients at a point in time, the Care One group had significant substantial reduction in billing charges.
There are many policy implications of the research. The authors show that that care management might be one effective way of managing costly patients who have very complex problems. Additionally, while cost will decrease, attributing resources to such a population might increase overall equity in the system by providing individualized case management. One point by the discussant was regarding the non-linearity of expenditures, which might be rectified using quintile regression or by taking logs of the outcome.