Unbiased Analysis of Today's Healthcare Issues

Covered California and Adverse Selection

Written By: Jason Shafrin - Jun• 18•15

The Affordable Care Act requires all individuals to be offered the same premium regardless of health status. Although there are some ratings bands based on age and smoking status, most people who purchase insurance on health insurance exchanges receive the same premium for any given insurance product from any given insurance company. The insurance products in the exchange, however, do vary in how generously the medical costs. Platinum products cover the largest share of patient cost but also have the highest premiums; catastrophic plans cover the smallest share of patient health care cost, but have the lowest premiums. Other metal tier plans (in decreasing order of generosity) include gold, silver and bronze plans.

 

This begs the question whether there is adverse selection where patients who are sicker are more likely to choose more generous plans. A paper by Bindman et al. (2015) examines just this question. They use data from the health insurance exchange in California known as Covered California.

coveredcali

They find that patients who elect more generous plans with higher premiums are more likely to be older and sicker patients. Additionally, they find that patients who are sicker were more likely to sign up for Covered California immediately (October 2013), whereas those who signed up in the last months of enrollment (March and April 2014) were significantly healthier. The authors find some variability in risk score across health plan but as the four largest plans made up 91% of the market, most of this variability was confined to small plans.

 

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Quotation of the Day

Written By: Jason Shafrin - Jun• 16•15

“Everything is vague to a degree you do not realize till you have tried to make it precise.”

  • Bertrand Russell

HT: The Browser

Funding Physician Medical Education

Written By: Jason Shafrin - Jun• 15•15

Each year, more than $15 billion of taxpayers’ money is spent to support physicians in residency training. About one-third of this amount comes from Medicaid, the Department of Veterans Affairs, and the Health Resources and Services Administration. The remaining nearly $10 billion flows through the Medicare program, primarily to academic medical centers via a complex system of direct graduate medical education (DGME) payments for residents in approved training positions and indirect medical education (IME) payments intended to compensate teaching hospitals for the added costs of caring for Medicare beneficiaries in a training environment.

 

How is this money being spent? Is it being spent wisely? The Medicare Payment Advisory Commission (MedPAC) recommended cutting IME payments by more than 50% (about $3.5 billion) and using these funds to create performance-based incentive programs. An Institute of Medicine (IOM) committee also considered these questions as well. What did they conclude?

 

According to an essay by Gail Willensky, the IOM committee made a number of recommendations. One of them was to gradually eliminate the DGME and IME programs and instead transform them into (1) an Operational Fund that continues to support existing and future Medicare funded training positions and (2) a Transformation Fund to support innovations in how GME funding is used. The IOM committee also recommended a “single national, geographically adjusted payment per resident. These payments would be made directly to GME sponsoring organizations and, over time, would move to a performance-based system informed by the Transformation Fund pilots.”

 

Representatives from the American Association of Medical Colleges, American Hospital Association, and American Medical Association generally did not approve of this plan. They cite a pending physician shortage of nearly 100,000. The IOM committee, however, assumed that forecasting physician supply is difficult and assumed that a pending shortage is not imminent.

 

In a typical market, increased demand would increase worker interest in becoming a physician. However, this market is constrained because slots at medical schools are limited. Physicians from abroad could practice in the US, but it is unclear whether this could fill a void if there was a large shortage. Additionally, the trend towards increased use of physician extenders such as nurse practitioners and physician assistants could increase the productivity of physicians and decrease the need for physicians. Despite this uncertainty, one thing that is certain is that the fight over funding the education of the nation’s physicians is likely to continue.

Changes in Health Insurance Coverage: 2013-2015

Written By: Jason Shafrin - Jun• 14•15

As expected, more of the aged 18-64 market is shifting to marketplace coverage and Medicaid coverage, whereas the share of individuals uninsured or covered by other insurance arrangements are falling.

There has been little change in employer coverage. However, it is possible that there is a broader shift away from employer coverage, but the improving economy has improved employment rates. Thus, we will need a few more years of data to examine how employer coverage will change in the long-run, especially for small and medium size firms.

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Friday Links

Written By: Jason Shafrin - Jun• 12•15

Are doctors and nurses to blame for high health care costs?

Written By: Jason Shafrin - Jun• 10•15

A study by Glied, Ma and Pearlstein (2015) says the answer is no. High worker wages are a reasonable place to start for explaining why US healthcare costs are so much higher than other countries as about half of healthcare spending is spent worker compensation. The study by Glied, Ma and Pearlstein does find that:

…average wages earned by health-sector employees are about 3 percent above those of comparable workers in other sectors… Nonprofessional employees in nursing homes and other health care delivery settings earn 10–12 percent less at the mean and median than would be expected based on their characteristics…By contrast, health care professionals earn more than would otherwise be predicted. At the mean, nurses earn about 40 percent more than would be predicted based on education, experience, and demographics, and physicians earn nearly 50 percent more than would be predicted.

The authors found that nursing wages generally increased relative to similar occupations over time, but the largest change in relative earnings occurred for physicians between 1984 and 2008.

Although physician and nurse earnings are higher then similar professions in other industries, nurses earnings have increased relatively modestly over time. Further, as “physicians’ compensation constitutes
less than 10 percent of all health care expenditures, and nursing compensation accounts for
less than 7 percent of expenditures”, differences in earnings can only partly explain the higher level of US healthcare spending relative to other countries. The authors conclude:

These results suggest that efforts to reduce the rate of growth in prices paid for health care services cannot be accommodated primarily through reductions in the pay of health-sector employees. Instead, such efforts will likely require providers to improve their productivity, producing the same services with fewer, or less costly, labor inputs.

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The Mississippi Appendectomy

Written By: Jason Shafrin - Jun• 09•15

Access to care is a key issue for the poor. But for many poor, African-Americans, access to care is not the only impediment to regular visits to their doctor.  History can play a big role as well.

For African-Americans, even going to a doctor can be a fraught historical act in Mississippi. There are the practical reasons that come from being poor and uninsured, but there is also a toxic legacy: the Jim Crow laws of living memory that barred blacks from most doctors’ offices, the widespread practice of sterilizing black women as a form of birth control, a practice so common it became known as “Mississippi appendectomies.” Perhaps it’s no surprise then that Mississippians today are less likely than the rest of the country to seek primary care for chronic conditions and more likely to turn to hospitals when those ailments become more serious and expensive.

Some wounds can take a long time to heal.

Alzheimer’s Awareness Month

Written By: Jason Shafrin - Jun• 08•15

This month is Alzheimer’s awareness month. To draw attention to the burden of irreversible, progressive brain disorder, today the Healthcare Economist is providing some facts about the disease, courtesy of the CDC, the Mayo Clinic, NIH

Alzheimer’s disease is a progressive disease that destroys memory and other important mental functions. It’s the most common cause of dementia — a group of brain disorders that results in the loss of intellectual and social skills. These changes are severe enough to interfere with day-to-day life. In Alzheimer’s disease, the brain cells themselves degenerate and die, causing a steady decline in memory and mental function. Current Alzheimer’s disease medications and management strategies may temporarily improve symptoms.

Alzheimer’s disease damages and kills brain cells, in part through two common abnormalities known as beta-amyloid plaques and tangles.  The disease typically begins around age 60 and the risk of Alzheimer’s disease increases with age.

The CDC estimates that 5 million Americans currently have Alzheimer’s disease, but the prevalence is expected to rise to 14 million by 2050.  Almost half of nursing home residents have Alzheimer’s disease.

There is no cure for Alzheimer’s disease.

Here is a video from PBS describing the evolution of Alzheimer’s.

Obamacare, Narrow Networks, and Quality

Written By: Jason Shafrin - Jun• 07•15

There are a number of ways plans in health insurance marketplace can lower their premiums.  One option is to increase cost sharing.  Plans in the bronze and sliver tier have much lower premiums than those in the gold and platinum tier.  Within any tier, plans can restrict patient access to lower cost providers; this also will reduce cost.  It is a common believe that plans in the health insurance exchange marketplaces have narrower networks and lower quality compared to traditional plans.  Is this true?  A paper by Haeder, Weimer, and Mukamel (2015) find the following:

We found that the common belief that Marketplace plans have narrower networks than their commercial counterparts appears empirically valid. However, there does not appear to be a substantive difference in geographic access as measured by the percentage of people residing in at least one hospital market area. More surprisingly, depending on the measure of hospital quality employed, the Marketplace plans have networks with comparable or even higher average quality than the networks of their commercial counterparts.

One issue is that the researchers measure quality only using the AHRQ quality indicators. While the AHRQ measures do a good job at measuring quality based on mortality and established best practices, they have less insight into whether physicians in the network are more likely to have mastered the latest cutting edge techniques. Nevertheless, it is interesting that plans in the health insurance exchanges appear weakly superior to those outside of the marketplace.
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Links

Written By: Jason Shafrin - Jun• 04•15