Spillovers can arise in markets with multiple purchasers relying on shared producers. If producers are constrained in their ability to adjust quality and cost across purchasers, then the influence of a dominant purchaser affects the entire market. Prior studies have found such spillovers in health care, from managed care to non-managed care populations — reducing spending, utilization, and improving outcomes. Similar effects have been identified in the Medicare Advantage market as well, with studies finding declines in utilization and reductions in resource use among the Traditional Medicare population associated with increases in county-level Medicare Advantage penetration. However, no study to date has provided plausibly causal estimates of such spillovers in the post-Affordable Care Act era. Our study does so by exploiting idiosyncratic differences in payments to Medicare Advantage plans that are unrelated to traditional Medicare spending. Further controlling for health status and other potential confounders, we estimate that a one percentage point increase in county-level Medicare Advantage penetration results in a $146 (1.7%) reduction in standardized per enrollee Traditional Medicare spending. We find evidence for reductions in utilization both on the intensive and extensive margins (including reductions in the number of inpatient stays) and across many types of health care services, not all of which have been analyzed in prior Medicare Advantage spillover studies. Our results suggest that spillovers from Medicare Advantage to Traditional Medicare have persisted in the post-Affordable Care Act era.
Since 2006, the Dutch population has faced two different cost-sharing schemes in health insurance for curative care: a mandatory rebate of 255 euros in 2006 and 2007, and since 2008 a mandatory deductible. Using administrative data for the entire Dutch population, we compare the effect of both cost-sharing schemes on healthcare consumption between 2006 and 2013. We use a regression discontinuity design which exploits the fact that persons younger than eighteen years old neither face a rebate nor a deductible. Our fixed effect estimate shows that for individuals around the age of eighteen, a one euro increase of the deductible reduces healthcare expenditures 18 eurocents more than a euro increase of the rebate. These results demonstrate that differences in the design of a cost-sharing scheme can lead to substantial different effects on total healthcare expenditure.
The Effect of Primary Care Visits on Health Care Utilization: Findings from a Randomized Controlled TrialJanuary 10, 2018
We conducted a randomized controlled trial, enrolling low-income uninsured adults to determine whether cash incentives are effective at encouraging a primary care provider (PCP) visit, and at lowering utilization and spending. Subjects were randomized to four groups: untreated controls, and one of three incentive arms with incentives of $0, $25, or $50 for visiting a PCP within six months of group assignment. Compared to the untreated controls, subjects in the incentive groups were more likely to have a PCP visit in the initial six months. They had fewer ED visits in the subsequent six months, but outpatient visits did not decline. We also used the exogenous variation generated by the experiment to obtain causal evidence on the effects of a PCP visit. We observed modest reductions in emergency department use and increased outpatient use, but no reductions in overall spending.
Ambulances are a vital part of emergency medical services. However, they come in single, homogeneous, high intervention form, which is at times unnecessary, resulting in excessive costs for patients and insurers. In this paper, we ask whether UberX’s entry into a city caused substitution away from traditional ambulances for low risk patients, reducing overall volume.
Using a city-panel over-time and leveraging that UberX enter markets sporadically over multiple years, we find that UberX entry reduced the per capita ambulance volume by at least 7%. Our result is robust to numerous specifications.
Service Systems with Heterogeneous Customers: Investigating the Effect of Telemedicine on Chronic CareDecember 20, 2017
Medical specialists treating chronic conditions typically face a heterogeneous set of patients. Such heterogeneity arises because of differences in medical conditions as well as the travel burden each patient faces to visit the clinic periodically. Given this heterogeneity, we compare the strategic behavior of revenue-maximizing and welfare-maximizing specialists and prove that the former will serve a smaller patient population, spend more time with the patients, and have shorter waiting times. We also analyze the impact of telemedicine technology on patient utility and the specialists’ operating decisions. We consider both the case when specialists can freely set their own fee for service and the case when fees are set exogenously by a third-party payer. We prove that with the introduction of telemedicine the specialists become more productive and the overall social welfare increases, though some patients, unexpectedly, will be worse off. Our analytical results lead to some important policy implications for facilitating the further deployment of telemedicine in the care of chronically ill patients.
Market-based health reform solutions dominate the post-Affordable Care Act landscape. Under these plans, competition is supposed to bring down ballooning prices, and patients are to act more like consumers, refusing low-value, medically unnecessary care. Whether one embraces these solutions, one thing is clear: they cannot work absent price transparency—which the U.S. system lacks. To the contrary, the law explicitly enforces open price term contracts between patients and providers.
This Article is the first to synthesize theories of incomplete contracts from traditional law and economics and recent work in the behavioral sciences and to apply these theories to the price transparency problem. It argues that doctrine is out of step with theory, and proposes a contract law solution: an information-forcing penalty default rule. Courts should impose an undesirable default to force the parties to contract around the default. When providers fail to include a price, and it would have been reasonable to do so, courts should fill the gap with a price of $0. Rather than risk not being paid, providers will include a price in the patient contract. Legislative action has been both slow and ineffective in fixing the crucial price transparency problem. At no other time in recent memory has the importance of contract theory been put into such sharp relief and, remarkably, in an area of law that is at the very core of the emerging political economy.
This paper describes current pattern of insurance coverage for precision medicines and, especially, companion diagnostics and explores what coverage would improve efficiency. We find that currently coverage is common for tests and treatments with clinical acceptance used at high volumes but is haphazard across both private insurers and Medicare for precision medicines in general. Analysis of the case of homogenous patient preferences finds that discovery and use of the test that converts an ordinary drug into a precision drug can either increase or decrease total spending, and might call for full or no coverage of test and treatments. Heterogeneity in marginal benefits from testing and treatment can call for partial coverage. Finally, varying threshold levels for diagnostic test results can lead to a demand curve to test and treatment that calls for partial cost sharing. Numerical examples and case studies of several test-treatment combinations illustrate these points.