Room: Phillips 219
Time: Mon 13:15 PM-14:45 PM

What We Didn’t Know about Health Insurance before Implementing Reform

Chair: Haizhen Lin

Session Description

The federal government spent much of the last year legislating the most significant changes in health care policy since the introduction of Medicare and Medicaid in the 1960’s. Much of the new legislation involves the expansion of health insurance coverage and new health insurance regulations for insurers, employers, and health care providers. The Congressional Budget Office and numerous researchers provided valuable statistical information on the expected financial impact of many of the proposed reforms. However, due to the complexity of the legislation, several important economic factors that are likely to influence patient welfare could not be taken into consideration.
This session examines three aspects of health insurance markets in the U.S. that were not fully accounted for in health care reform legislation, but are likely to influence the quality of patient health care and/or patient costs in the future. Jean Abraham and her coauthors use AHRQ Medical Expenditure Panel Survey data to construct the first regression-based estimates we know of, of loading fees for health insurance premiums by firm size. They find that loading fees are more than four times higher for firms with fewer than 100 workers, versus firms with 10,000+ employees. These data suggest that if health insurance exchanges are successful in pooling small firms, then their employees could see remarkable reductions in health insurance premiums.
Darius Lakdawalla and his coauthors use a unique detailed advertising database for 1000 pharmaceutical products to track direct-to-consumer advertising after the introduction of Medicare Part D. They find that implementation of Part D coincided with a substantial rise in direct-to-consumer advertising expenditures for drugs with higher fractions of Medicare patients. At the same time, there was no appreciable effect on direct-to-physician advertising expenditures. These results suggest that planned reductions in the generosity of Medicare Advantage plans could shift advertising expenditures and corresponding utilization of drugs by seniors yet again. The subsequent impact on patient health outcomes is an important area for future investigation.
Vivian Ho and her coauthors use a dataset with detailed financial information from hospitals in Texas to test whether hospitals cost-shift losses in caring for one patient population by raising prices charged to the privately insured. They find some evidence of cost shifting from the Medicare population to the privately insured, but no evidence of cost shifting from the uninsured or Medicaid patients to private-pay patients. The findings suggest that increased market concentration among hospitals may instead explain rising prices faced by private pay hospital patients over the last decade. These results suggest that the market power of hospitals may be an important factor which was ignored in health care reform legislation.
These papers provide examples where health care reform is likely to have important unintended consequences. Some of these effects may improve patient welfare, while others may make consumers worse off.

Key Terms None

Session Organizer: Vivian Ho (Rice University)

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Presentations

1. A Burden or Merely a Load: New Empirical Estimates of Health Insurance Loading Fees by Group Size

   Presenter: Jean Abraham (University of Minnesota)

   Discussant: Edward Miller (Agency for Healthcare Research and Quality (AHRQ))

2. Pharmaceutical Advertising and Medicare Part D

   Presenter: Neeraj Sood (University of Southern California)

   Discussant: Ginger Zhe Jin (University of Maryland)

3. Do Hospitals Shift the Costs of the Uninsured to Private Payers?

   Presenter: Vivian Ho (Rice University)

   Discussant: Pierre Thomas Léger (HEC Montréal)