Health Care

Members of the NBER's Health Care Program met December 6 in Cambridge. Program Director Jonathan Gruber of MIT and Research Associates Leemore Dafny of Harvard University, Benjamin R. Handel of University of California, Berkeley and Neale Mahoney of University of Chicago organized the meeting. These researchers' papers were presented and discussed:

Shooshan Danagoulian, Wayne State University; Daniel S. Grossman, West Virginia University; and David Slusky, University of Kansas

Office Visits Preventing Emergency Room Visits: Evidence from the Flint Water Switch

Emergency department visits are costly to providers and to patients. Danagoulian, Grossman, and Slusky use the Flint water crisis to test if an exogenous increase in office visits reduced avoidable emergency room visits. In September 2015, citizens in Flint became aware of increased lead levels in their drinking water, resulting from the switch from Lake Huron to the Flint River. Using Medicaid claims for 20132016, the researchers find that this information shock increased the share of enrollees with lead tests by 1.7 percentage points. Additionally, it increased office visits immediately following the information shock, then decreased them afterwards. This led to a reduction of 4.9 preventable, non-emergent, and primary care treatable emergency room visits per 1000 eligible children (8.2%). This decrease is present in shifts from emergency room visits to office visits across several common conditions. The results suggest following lead tests, children were more likely to receive care from the same clinic and that establishing care reduces the likelihood a parent will take their child to receive care at the emergency room for conditions treatable in an office setting. The results are potentially applicable to any situation in which individuals are induced to seek more care in an office visit setting.

Liran Einav, Stanford University and NBER; Amy Finkelstein, MIT and NBER; Yunan Ji, Harvard University; and Neale Mahoney, University of Chicago and NBER

Voluntary Regulation: Evidence from Medicare Payment Reform

Government programs are often offered on an optional basis to market participants. Einav, Finkelstein, Ji, and Mahoney explore the economics of such voluntary regulation in the context of a Medicare payment reform, in which one medical provider receives a single ("bundled") payment for a sequence of related healthcare services, instead of separate service-specific payments. The program was originally implemented as a 5-year randomized trial, with mandatory participation by hospitals assigned to the new payment model, but after two years participation was unexpectedly made voluntary for half of these hospitals. Using detailed claim-level data the researchers document that voluntary participation is more likely for hospitals who can increase revenue without changing behavior ("selection on levels") and for hospitals that had large changes in behavior when participation was mandatory ("selection on slopes"). To assess outcomes under counterfactual regimes, the researchers estimate a simple model of responsiveness to and selection into the program. They find that the current voluntary regime generates inefficient transfers to hospitals and reduces social welfare compared to the status quo, but that alternative (feasible) designs could be welfare improving. The analysis highlights key design elements to consider under voluntary regulation.

Pierre-Thomas Léger and Wu Jiashan, University of Illinois at Chicago, and Robert Town, University of Texas at Austin and NBER

A Theory of Geographic Variations in Medical Care

Léger, Town, and Jiashan provide a testable theory of geographic variations in health care expenditure and utilization that reconciles the stylized facts on geographic variations. The model is rather straightforward yet provides insight into the underlying phenomena of variations, its potential causes and the welfare and consequences of different policy initiatives. The researchers model imperfectly competitive, capacity constrained and perfectly altruistic providers as facing two different patient populations: privately insured and Medicare. Providers face fixed prices for treating Medicare population while they negotiate reimbursement rates for their privately insured patients. In the model, payers have different technologies for monitoring provider behavior. Unlike the widely held hypothesis that geographic differences are driven by differences in provider culture, this model focuses on differences in provider incentives that lead to differences in the care that is delivered. Specifically, in the researchers' framework, variation in health care utilization and expenditures is generated by underlying geographic variation in the model's primitives of provider market structure and productivity. These differences, in turn, lead to different incentives for physicians to treat based on the type of insurance of the patient. The model is then calibrated and run through a series of counterfactual policy experiments.

Richard Domurat, University of California, Los Angeles; Isaac Menashe, Covered California; and Wesley Yin, University of California, Los Angeles and NBER

The Role of Behavioral Frictions in Health Insurance Marketplace Enrollment and Risk: Evidence from a Field Experiment (NBER Working Paper 26153)

Domurat, Menashe, and Yin experimentally varied information mailed to 87,000 households in California's health insurance marketplace to study the role of frictions in insurance take-up. Reminders about the enrollment deadline raised enrollment by 1.3 pp (16 percent), in this typically low take-up population. Heterogeneous effects of personalized subsidy information indicate systematic misperceptions about program benefits. Consistent with an adverse selection model with frictional enrollment costs, the intervention lowered average spending risk by 5.1 percent, implying that marginal respondents were 37 percent less costly than inframarginal consumers. The researchers observe the largest positive selection among low income consumers, who exhibit the largest frictions in enrollment. Finally, the intervention raised average consumer WTP for insurance by $25 to $54 per month. These results suggest that frictions may partially explain low measured WTP for marketplace insurance, and that interventions reducing them can improve enrollment and market risk in exchanges.

Diane E. Alexander, Federal Reserve Bank of Chicago, and Molly Schnell, Northwestern University and NBER

The Impacts of Physician Payments on Patient Access, Use, and Health (NBER Working Paper 26095)

Alexander and Schnell examine how the amount a physician is paid influences who they are willing to see. Exploiting large, exogenous changes in Medicaid reimbursement rates, the researchers find that increasing payments for new patient office visits reduces reports of providers turning away beneficiaries: closing the gap in payments between Medicaid and private insurers would reduce more than two-thirds of disparities in access among adults and would eliminate disparities among children. These improvements in access lead to more office visits, better self-reported health, and reduced school absenteeism. The results demonstrate that financial incentives for physicians drive access to care and have important implications for patient health.

Abby E. Alpert, University of Pennsylvania and NBER; William N. Evans and Ethan Lieber, University of Notre Dame and NBER; and David Powell, RAND Corporation

Origins of the Opioid Crisis and Its Enduring Impacts

Overdose deaths involving opioids have increased dramatically since the mid-1990s, leading to the worst drug overdose epidemic in US history, but there is limited empirical evidence on the initial causes. Alpert, Evans, Lieber, and Powell examine the role of the 1996 introduction and marketing of OxyContin as a potential leading cause of the opioid crisis. The researchers leverage cross-state variation in exposure to OxyContin’s introduction due to a state policy that substantially limited OxyContin’s early entry and marketing in select states. Recently-unsealed court documents involving Purdue Pharma show that state-based triplicate prescription programs posed a major obstacle to sales of OxyContin and suggest that less marketing was targeted to states with these programs. The researchers find that OxyContin distribution was about 50% lower in “triplicate states” in the years after the launch. While triplicate states had higher rates of overdose deaths prior to 1996, this relationship flipped shortly after the launch and triplicate states saw substantially slower growth in overdose deaths, continuing even twenty years after OxyContin's introduction. The results show that the introduction and marketing of OxyContin explain a substantial share of overdose deaths over the last two decades.

Benjamin R. Handel and Jonathan T. Kolstad, University of California, Berkeley and NBER, and Thomas Minten and Johannes Spinnewijn, London School of Economics

The Social Determinants of Choice Quality: Evidence from Health Insurance in the Netherlands

Yiqun Chen, Stanford University, and Petra Persson and Maria Polyakova, Stanford University and NBER

The Roots of Health Inequality and The Value of Intra-Family Expertise (NBER Working Paper 25618)

Mounting evidence documents a stark correlation between income and health, yet the causal mechanisms behind this gradient are poorly understood. Chen, Persson, and Polyakova examine the impact of access to expertise on health, and whether unequal access to expertise contributes to the health-income gradient. The empirical setting, Sweden, allows the researchers to shut down inequality in formal access to health care -- they first document that strong socioeconomic gradients nonetheless persist. Second, they study the effect of access to health-related expertise -- captured by the presence of a health professional in the extended family -- on health. Exploiting "admissions lotteries" into medical schools and variation in the timing of degrees, the researchers show that access to intra-family medical expertise has far-reaching health consequences, at all ages: It raises longevity, improves drug adherence and reduces the occurrence of lifestyle-related disease in adulthood, raises vaccination rates in adolescence, and reduces tobacco exposure in utero. Third, the researchers show that the effects of expertise are larger at the lower end of the income distribution -- precisely where access to expertise is scarcer. Unequal access to health-related expertise can account for as much as 18% of the health-SES gradient, and may thus play a significant role in sustaining health inequality.

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