We compare healthcare spending in public and private Medicare using newly available claims data from Medicare Advantage (MA) insurers. MA insurer revenues are 30 percent higher than their healthcare spending. Healthcare spending is 25 percent lower for MA enrollees than for enrollees in traditional Medicare (TM) in the same county with the same risk score. Spending differences between MA and TM are similar across sub-populations of enrollees and sub-categories of care, with similar reductions for “high value” and “low value” care. Spending differences primarily reflect differences in healthcare utilization; spending per encounter and hospital payments per admission are very similar in MA and TM. Geographic variation in MA spending is about 20 percent higher than in TM, but geographic variation in hospital prices is about 20 percent lower. We present evidence consistent with MA plans encouraging substitution to less expensive care, such as primary rather than specialist care, and outpatient rather than inpatient surgery, and with employing various types of utilization management. Some of the overall spending differences between MA and TM may be driven by selection on unobservables, and we report a range of estimates of this selection effect using mortality outcomes to proxy for selection.
Healthcare Spending and Utilization in Public and Private Medicare by Vilsa Curto, Liran Einav, Amy Finkelstein, Jonathan Levin, Jay Bhattacharya :: SSRNFebruary 12, 2017
Certification mark law — a branch of trademark law — itself enables consequences that undermine the law’s own goals through inadequate regulation or oversight. Because the law allows certification standards to be kept vague, high-level, and underdeveloped, a certifier can choose to exclude certain businesses inconsistently or arbitrarily, even when those businesses’ goods or services would seem to qualify for the certification mark (particularly to consumers). Moreover, even when a certification standard is clear and complete, certifiers can wield their marks anticompetitively. They can do so through redefinition — something certification mark law currently allows without oversight — to ensure that certain businesses’ goods or services will not qualify for the mark. Both of these forms of certification mark manipulation undermine the goals of certification marks: to protect consumers by providing them with succinct information on goods’ or services’ characteristics and to promote competition by ensuring that any businesses’ goods or services sharing certain characteristics salient to consumers qualify for a mark certifying those characteristics. The law should be restructured to curb this conduct. I advocate for robust procedural regulation of certification standardmaking and decisionmaking that would detect and punish poor certification behavior. Moreover, for anticompetitive behavior that nonetheless slips through the regulatory cracks, I suggest that attentive antitrust scrutiny be arrayed to catch it.
The Benefits of Avoiding Cancer (or Dying from Cancer): Evidence from a Four-Country Study by Anna Alberini, Milan Ščasný :: SSRNFebruary 12, 2017
We use stated-preference methods to estimate the cancer Value per Statistical Life (VSL) and Value per Statistical Case (VSCC) from a representative sample of 45-60-year olds in four countries in Europe. We ask respondents to report information about their willingness to pay for health risk reductions that are different from those used in earlier valuation work because they are comprised of two probabilities — that of getting cancer, and that of dying from it (conditional on getting it in the first place). The product of these two probabilities is the unconditional cancer mortality risk. Our hypothetical risk reductions also include two qualitative attributes — quality-of-life impacts and pain. The results show that respondents did appear to have an intuitive grasp of compound probabilities, and took into account each component of the unconditional cancer mortality risk when answering the valuation questions. We estimate the cancer VSL to be between € 1.9 and 5.7 million, depending on whether the (unconditional) mortality risk was reduced by lowering the chance of getting cancer, increasing the chance of surviving cancer, or both. The VSCC is estimated to be up to € 0.550 million euro, and its magnitude depends on the initial (conditional) cancer mortality and on the improvement in survival. We interpret these as “pure” mortality and cancer risk values, stripped of morbidity, pain or quality-of-life effects. The survey responses show that impacts on daily activities and pain have little or no effect on the WTP to reduce the adverse health risks.
Automobile safety is an issue of public health and welfare. People die when automobile manufacturers cut corners. Consequently, it is imperative that the governing regulatory agency, the National Highway Traffic Safety Administration, impose effective, fair penalties for violations of safety regulations. Current penalties have consisted, almost entirely, of monetary penalties against corporate entities. This framework has insulated the real decision makers — the executives — from liability. It has allowed them to pad their personal bank accounts while running over driver safety. To effectively enforce safety regulations, deter infringement, and save lives, NHTSA should utilize individual accountability. Drawing on the resources surrounding the responsible corporate officer doctrine this Note proposes a version of that doctrine for executives within the automobile industry: the imposition of negligence based civil penalties upon responsible corporate officers.
Empty Discarded Pack Data and the Prevalence of Illicit Trade in Cigarettes by Alberto Aziani, Jonathan Kulick, Neill Norman, James E. Prieger :: SSRNFebruary 12, 2017
Illicit trade in tobacco products (ITTP) is big business in the United States and creates many harms including reduced tax revenues; damages to the economic interests of legitimate actors; funding for organized-crime and terrorist groups; negative effects of participation in illicit markets, such as violence and incarceration; and reduced effectiveness of smoking-reduction policies, leading to increased damage to health.
To improve data availability for study in this area, we describe and make available a large, novel set of data from empty discarded pack (EDP) studies. In EDP studies, teams of researchers collect all cigarette packs discarded (either in trash receptacles or as litter) in the public spaces of selected neighborhoods. Packs are examined for the absence of local tax stamps, signs of non-authentic packaging or stamps, and other indications of potential tax evasion or counterfeit product. We describe the data and analyze the prevalence of ITTP. Data from 23 collections in 10 U.S. cities from 2010 to 2014 are available, yielding 106,500 observations (by far the largest dataset of its kind available for academic study). Each observation includes dozens of variables covering the brand, location to the ZIP code level, tax status, counterfeit status, and other information about the pack.
There is significant evidence of tax avoidance (up to 74% of packs in New York City). In some markets there is also a significant amount of illicit trade (up to over half the market in New York City), which includes bootlegging, counterfeits, cigarettes produced for illicit-market sales, and cigarettes without any tax stamps. These data will be highly useful for research in illicit markets and organized crime.
Screening in Contract Design: Evidence from the ACA Health Insurance Exchanges by Michael Geruso, Timothy J. Layton, Daniel Prinz :: SSRNFebruary 12, 2017
By steering patients to cost-effective substitutes, the tiered design of prescription drug formularies can improve the efficiency of healthcare consumption in the presence of moral hazard. However, a long theoretical literature describes how contract design can also be used to screen consumers by profitability. In this paper, we study this type of screening in the ACA Health Insurance Exchanges. We first show that despite large regulatory transfers that neutralize selection incentives for most consumer types, some consumers are unprofitable in a way that is predictable by their prescription drug demand. Then, using a difference-in-differences strategy that compares Exchange formularies where these selection incentives exist to employer plan formularies where they do not, we show that Exchange insurers design formularies as screening devices that are differentially unattractive to unprofitable consumer types. This results in inefficiently low levels of coverage for the corresponding drugs in equilibrium. Although this type of contract distortion has been highlighted in the prior theoretical literature, until now empirical evidence has been rare. The impact on out-of-pocket costs for consumers affected by the distortion is substantial — potentially thousands of dollars per year — and the distortion creates an equilibrium in which contracts that efficiently trade off moral hazard and risk protection cannot exist.
The Affordable Care Act: Moving Forward in the Coming Years by Lawrence O. Gostin, David A. Hyman, Peter D. Jacobson :: SSRNFebruary 12, 2017
President Barack Obama signed the Affordable Care Act (ACA) in 2010 with no Republican support. The ACA has been politically divisive ever since, with the House repeatedly voting for repeal. Earlier this year, Congress successfully passed a repeal, with the Senate using a legislative process called “reconciliation,” which requires only a simple majority for certain tax and spending bills. However, Congress failed to override a presidential veto.
President-elect Donald Trump pledged to “repeal and replace” the ACA, but would keep the most popular features: (1) guaranteed issue — health plans must enroll applicants regardless of pre-existing conditions; and (2) dependent coverage — health plans must keep dependent children on their parents plan until age 26. Although his reform package has not been announced, it will likely include health savings accounts (HSAs), cross-border insurance sales, Medicaid block grants to states, and a cap on non-economic damages.
In this Viewpoint, we examine potential reforms of the ACA through the lens of empirical evidence to find whether they are likely to be effective, particularly in ensuring access to health insurance at a reasonable cost, and in a stable insurance market. We conclude that the public has a right to expect their representatives to find common ground and adopt evidence-based policies that expand coverage at a reasonable cost.