For the time being, this completes my review of plan quality literature. You’ll find it all under the — wait for it — plan quality tag.
From ”Market and Plan Characteristics Related to HMO Quality and Improvement,” by Dennis Scanlon, Shailender Swaminathan, Michael Chernew, and Woolton Lee” (MCRR, 2006):
The HMO HHI was not significantly related to health plan performance for the majority of chronic-care measures examined, though it was related to HMO performance on the CAHPS measure. Our results also suggest that while plans in more competitive HMO markets experience more rapid growth on the CAHPS plan rating, HMO competition generally is not related to growth in the chronic-care HEDIS measures. [...]
We do find evidence that performance is better where HMOs are more prevalent. This may reflect increased acceptance within the medical community of population health-management approaches in markets with sizable HMO penetration or simply greater clout of HMOs, individually or collectively, in those markets.
CAHPS is a consumer satisfaction survey. HEDIS includes process and outcome measures. The results are telling us that competition has an effect on consumer satisfaction-type quality but not on more likely health-improving quality. If health-improving quality is a credence good and satisfaction-type quality is an experience or search good, this makes total sense. Why should plans compete on things people can’t assess?
As Catherine McLaughlin and Paul Ginsberg put it in “Competition, Quality, and the Role of the Consumer” (Milbank Quarterly, 1998),
Consumers can play an important role in forcing providers to offer services of acceptable quality. To do this, however, they must be able to assess quality. And there’s the rub. Even if consumers were able to judge the interpersonal and amenity aspects of quality, they usuall lack bot the information and the knowledge necessary to judge whether the technical quality of the product is unacceptably low.  This inability is at the heart of why many policy makers and analysts fear that an increase in consumers’ price sensitivity, or even in their awareness of the interpersonal and amenity aspects of quality, will cause providers to reduce technical quality in order to cut prices.
I don’t see why that logic doesn’t apply to health plans as well.
Sometimes health plan health-improving quality measures (the technical type of quality McLaughlin and Ginsberg wrote of) are available to consumers. Do they act on them? Do they avail themselves of the information? Do they view it as applicable and relevant? With that, let’s turn to ”Competition and Health Plan Performance Evidence from Health Maintenance Organization Insurance Markets,” by Dennis Scanlon, Shailender Swaminathan, Michael Chernew, James Bost, and John Shevock (Medical Care, 2005):
Greater competition, as measured by the Herfindahl index, was associated with inferior health plan performance on 3 of 6 quality dimensions. Plans in markets with greater HMO penetration perform better on HEDIS- but not CAHPS-based dimensions of performance. Plans that make their data available publicly perform significantly better on both the HEDIS and CAHPS domains, performing one third to three quarters of a standard deviation better than plans that don’t make their results available publicly.
Plans in more competitive markets in 1999 did not achieve better quality after controlling for other important covariates, although plans in markets with a high degree of HMO penetration are performing better on the HEDIS quality dimensions.
So, public reporting of quality measures makes a difference, but competition doesn’t. (Or, based on other studies, when it does, it’s only on satisfaction, not clinical, quality.) It could be that plans try to compete on clinical quality, but can’t really affect it because,
competition among plans may result in providers finding it more difficult to respond to HMOs’ competing quality initiatives with the incentive to respond to any one plan reduced if the market is fragmented.
Of course, you know what that’s an argument for, right? If consolidation improves quality by removing competing incentives, then what does that mean in the limit of a single payer? Aaron gave us one answer.*
* More market-oriented readers, please chill. The market offers good things, even in health care, including innovations people care about (drug coverage for Medicare beneficiaries, for example) and choice that people value. You can love the market for those things. I can’t take that away from you, nor do I want to.