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Does getting cancer incentivize individuals to switch from Medicare managed care to FFS?

November 8, 2011 in Cancer, Medicaid/Medicare, Medicare Advantage, Quality | No comments

Medicare beneficiaries have a choice: pick the standard Medicare fee-for-service (FFS) benefit or rely on managed care plans to supply their healthcare through the Medicare Advantage (MA) program.  Many Medicare beneficiaries prefer MA because it offers them lower out-of-pocket costs and provide benefits not available in the traditional FFS Medicare program. Other beneficiaries prefer the FFS benefit because MA plans typically restrict provider choice in an effort to control costs.

The quality of care in Medicare MA relative to FFS, however, has still not yet been consistently evaluated.  Because beneficiaries can switch from MA to FFS each year, if quality is low, healthy individuals may prefer MA to reap the reduced cost sharing benefits, but when they become sick they may switch to Medicare FFS.

A study by Elkin and co-authors evaluates whether or not this is the case for beneficiaries who get cancer.

Data and Methodology

“We identified Medicare managed care enrollees aged 65 years or older who were diagnosed with a first primary breast (n = 28 331), colorectal (n = 26 494), prostate (n = 29 046), or lung (n = 31 243) cancer from January 1, 1995, through December 31, 2002, in Surveillance, Epidemiology, and End Results (SEER) cancer registry records linked with Medicare enrollment files. Cancer patients were pair-matched to cancer-free enrollees by age, sex, race, and geographic location. We estimated rates of voluntary disenrollment to fee-for-service Medicare in the 2 years after each cancer patient ’ s diagnosis, adjusted for plan characteristics and Medicare managed care penetration, by use of Cox proportional hazards regression.”

Results

The authors find that MA beneficiaries with cancer are less likely to switch to FFS than a cancer-free beneficiary. The hazard ratios range from 0.78 for colorectal cancer to 0.86 for prostate cancer. The results were consistent across various age, sex, race, cancer stage and region strata.

The likely reason for this finding is that people who have a serious disease do not want to change coverage. Even if the FFS benefit offers improved access to better care, there are significant costs of switching coverage. The new FFS providers may have less knowledge of the individual beneficiary’s health condition and the change can be stressful for the beneficiary as well. A worthwhile analysis to confirm whether this is the case would be to examine whether FFS beneficiaries who contract cancer are more likely to switch to a MA plan after contracting cancer. If the transaction cost/care coordination is driving Elkin’s results, then FFS beneficiaries with cancer should also be less likely to switch to MA than cancer-free FFS beneficiaries.

It could also be the case that MA provides high quality care for the most prevalent cancers (i.e., prostate, lung, colorectal, and breast), but there is a significant improvement in quality when beneficiaries visit FFS providers when they have rarer diseases. To confirm whether or not this is the case, the authors examine whether beneficiaries with non-Hodgkin lymphoma, acute leukemia, and soft tissue sarcoma are more likely to switch to FFS. The authors found no effect of these cancer diagnoses on the likelihood of disenrollment from a managed care plan.

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Do doctors tailor the care they provide based on the patient’s health plan?

October 12, 2011 in Physician Compensation | 1 comment

Many studies (including my own) have shown that physicians paid via capitation  perform fewer services than those paid via fee-for-service (FFS).  In the current health care world, however, most physicians treat patients from a variety of different insurance systems (notable exceptions are doctors working at Kaiser and the VA).

Two important research questions come to mind:

  • Do doctors tailor the care they provide to individual patients based on their insurance or is care provided based on the overall mix of a physician’s panel?
  • Are these same effects observed for physicians who own their own practice compared to those who are employees?

According to a paper by Landon et al. (2011), “ Physicians in highly capitated practices had the lowest total costs and intensity of care, suggesting that these physicians develop an overall approach to care that also applies to their FFS patients.”  The authors used data from the Community Tracking Study Physician Survey to reach this conclusion.

This result, however, was only shown to hold for primary care physicians.  The reimbursement differences for each individual patient may be smaller than the physician’s time (and psychic) cost to determine each patient’s payor and alter their recommended treatment regimen accordingly.  Thus, this conclusion makes sense for PCPs.

For specialists, however, this conclusion may or may not hold.  Particularly, for specialists who generally provide expensive procedures, altering care recommendations for individual patients based on their insurance coverage could have a very significant effect on the practice’s bottom line.

Thus, although I think this is an interesting study, it would also be interesting to see how the results were similar or different in the case of specialist compensation.

Source:

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Does Physician income increase from treating more complex patients?

July 18, 2011 in International Health Care Systems, Physician Compensation, Supply of Medical Services | 2 comments

In Denmark at least, the answer is no.

“From the theoretical model we find that higher levels of patient complexity lead GPs [General Practitioners] to choose a lower list size, whereas the effect on income is ambiguous. The effect on total utility (income and leisure) is, however, shown to be negative. Using empirical datafrom 1039 solo practices we find that patient complexity reduces both list size and income and conclude that amixed per capita and fee for service remuneration system does not fully compensate practices with more complexpatients. Differentiated per capita payment may represent a means of ensuring fair and equal income of GPs.”

Differentiated per capita payments may provide a fairer mechanism for compensating physicians for treating more complex patients. This type of reform, however, would also incentivize providers to upcode patient diagnoses in order to increase their per capita payments. Thus, this paper may provide the optimal solution in the case where providers are honest, but this same solution may not be optimal in the case where physicians are potentially dishonest.

The remainder of this post reviews how the authors arrived at the conclusions discussed below.

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“The country’s dismal rates of vaginal birth after Caesarean”

March 9, 2010 in Nonphysician Clinicians, Physician Compensation | No comments

From the N.Y. Times:

The national Caesarean rate, 31.8 percent, has been rising steadily for the last 11 years and is fed by repeat patients. Critics say that doctors are performing too many Caesareans, needlessly exposing women and infants to surgical risks and running up several billion dollars a year in excess bills, precisely the kind of overuse that a health care overhaul is supposed to address.

In fact, the rate of vaginal birth after Caesarean (VBAC) is now below 10%.  Some doctors claim that VBACs risk tearing the mother’s scar tissue on her uterus, but others–including the profiled women on a Navajo reservation–successfully undergo multiple VBACs.  Why are the rates VBAC rates so low?

  • Fears of malpractice
  • Physicians make more money Caesarean rather than a vaginal birth
  • Caesarean’s use fewer physician hours than vaginal births
  • Fewer expected number of pregnancies
  • Patient demand

Why are Caesarean rates so much lower on the Navajo reservation?  On the reservation, physicians are federally insured against malpractice, are paid a salary, and the use of midwives is much more common.  Additionally, Navajo “couples often want more than two children, but repeated Caesareans increase the risk of each pregnancy, so doctors and patients are motivated to avoid the surgery.”

To see further evidence of how different physician compensation methods can alter surgery rates, see my own study in Health Economics.

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Cochrane Review: The effect of capitation, fee-for-service (FFS) and mixed payment systems on primary care physician behavior

July 21, 2008 in Academic Articles, Physician Compensation | Permalink

Primary care physicians can be compensated in a number of ways. The most popular are capitation, fee-for-service, salary, or some mixture of the three. But how does the physician compensation method affect care levels? This is the question Gosden et al. (2000) try to answer in their Cochrane review. The authors search the literature for randomized trials or controlled before and after studies in order to see how changing physician compensation affects the quantity and quality of care.

A summary of the 4 papers which met Gosden et al.’s criteria is below.

Category Davidson 1992 Hickson 1987 Krasnik 1990 Hutchinson 1996
Country US US Denmark Canada
Type Randomized Trial Randomized Trial Before-and-After Before-and-After
Payment i) age-adjusted capitation; ii) Medicaid FFS; iii) more lucrative FFS i) FFS; ii) Salary Control: Cap/FFS mix; Intervention: Capitation only, changes to Cap/FFS mix Before: FFS; After: mixed capitation, ambulatory care incentive
Physicians Primary Care Providers (PCPs) Residents General Practitioners (GPs) GPs/Family Physicians
Results Comparing FFS and capitation, there was no difference in the number of PCP visits. There was no difference in the number of patients attended The number of face-to-face and phone visits was higher in the control group than the intervention group. Hospital days decrease in all groups, but the change is similar across all payment types.

Controlling for covariates, there were 0.5-0.6 more visits for the capitation group compared to the Medicaid FFS. There were more ER visits for the salaried group compare to the FFS group. After the FFS was implemented in the intervention group, visits increased and converged to that of the control group.

The new, more lucrative FFS increase PCP visits by .8-.9 per patient compared to the Medicaid FFS. Salaried doctors have fewer well-child visits per enrollee After the FFS implementation [intervention group], the number of diagnostic and curative services order increased.

PCPs paid via capitation used fewer specialist and hospital resources After the FFS implementation [intervention group], the number referrals to specialists fell

Patients were less likely to reach recommended visit levels in capitation compared to FFS

The original four articles:

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Health Insurance, Physician Compensation and the Quantity of Medical Care

May 30, 2008 in Health Insurance, Hospitals, Physician Compensation, Supply of Medical Services | Permalink

Many studies have attempted to determine how the manner in which physicians are compensated by health insurance companies affects the quantity of medical care provided. Today I will summarize some seminal studies in this field.

Epstein, Begg and McNeil (NEJM 1986)

In this study, the authors examine whether or not there is a difference in the rate of ambulatory testing between physicians in a large fee-for-service (FFS) group and a large prepaid group. The physicians were internists who were caring for patients with uncomplicated hypertension. The authors found that 50% more electrocadriograms (EKGs) were obtained in the FFS group and 40% more chest radiographs were obtained in the FFS group [compared to the prepaid group]. There did not seem to be any difference in testing rates between FFS and prepaid doctors for blood counts and urinalyses. This is not surprising, however, because the profit physicians earned from EKGs and chest radiographs was significantly higher than the profit they made from each blood count or urinalysis. Further, the cost of preforming EKGs and chest radiographs was much higher than the cost to preform blood counts and urinalyses.

Thus, this study concludes that patient testing rates are different between FFS and prepaid doctors, but this effect is only observed for high cost and/or high margin ambulatory tests.

Newhouse and Marquis (JHR 1978)

Physicians may treat patients differently based on how the patient’s insurance company pays them. However, the patient base of most physicians includes a wide variety of health plans and thus it may be difficult to discriminate care levels by insurance type. The “norms hypothesis” predicts that physicians treat patients in accordance with the average or modal insurance coverage in a given metropolitan area. In other words, “the level of a community’s insurance coverage determines physician norms.” If this were true, it would imply that there would be significant variation in medical care quantities across geographic regions but very little variations by patient for each physician.

The authors use data from the RAND Health Insurance Study in Dayton, Ohio. The authors test whether or not the patients own insurance rate will affect hospital admissions, the length of a hospital stay or the number of physician office visits. The authors find no evidence that community-level coinsurance rate impact hospital admissions, while the patient’s own coinsurance rate significantly affects hospital admission. In the 1963 data, neither the community insurance variable nor individual insurance variable had any affect on the length of a hospital stay or the number of physician visits, however in the 1970 data, individual coinsurance rates had a large impact on the length of a hospital stay or the number of physician visits, while the community level coinsurance rate had no impact on these dependent variables.

Hellerstein (RAND J Econ 1998)

Most health policy wonks believe we could significantly reduce health care costs without sacrificing quality by using more generic drugs. Many states have passed “permissive substitution laws” which allow pharmacists to substitute generic drugs in place of name-brand ones unless the physician explicitly instructs them not to do so. Other states use a “two-line” prescription method. With these prescription pads, doctors can sign their name in one of two spots: the first indicates that generic substitution is allowed and the other indicates that the brand name option is medically necessary.

Hellerstein uses data from the 1989 NAMCS, and finds that “30% of the unobserved (residual) variance in the prescription choice is physician-specific, rather than patient specific.” Does an individual’s health insurance influence the physician’s prescribing behavior? This paper finds that an individual’s health insurance does not influence prescribing decisions. However, “conditional on a patient’s insurance status, a patient who switches to a physician with a marginally greater fraction of HMO patients is 10.12% more likely to receive a generically written prescription.”

Summary

Why does the composition of the physician’s patient base seem to matter for Hellerstein (1998), but not for Marquis and Newhouse (1978) or Epstein, Begg and McNeil (NEJM 1986)? The main reason is likely that Hellerstein examines medical care in which physician do not receive any compensation. Physicians receive no more or less revenue from prescribing name brand compared to generic drugs and thus have no incentive to find out how they are being paid by each individual’s insurance company. On the other hand, Marquis and Newhouse found that hospital admissions, the length of the hospital stay, and the number of office visits is affected by an indvidiual’s health insurance variables since this type of medical care is high margin and high cost. Similarly, Epstein, Begg and McNeil (1986) found that how an individual’s insurance company compensates physicians matters for high margin, high cost EKGs and chest radiographs, but does not seem to matter for low margin, low cost blood counts and urinalyses.

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