The Problem of the Uninsured, by Isaac Ehrlich and Yong Yin (The National Bureau of Economic Research)
The problem of the uninsured – those eschewing the purchase of health insurance policies – cannot be fully understood without considering informal alternatives to market insurance called “self-insurance” and “self-protection”, including the publicly and charitably-financed safety-net health care system. This paper tackles the problem of the uninsured by formulating a “full-insurance” paradigm that includes all 4 measures of insurance as interacting components, and analyzing their interdependencies. We apply both a baseline and extended versions of the model through calibrated simulations to estimate the degree to which these non-market alternatives can account for the fraction of the non-elderly adults who are uninsured, and estimate their behavioral and policy ramifications. Our results indicate that policy analyses that do not consider the role of self-efforts to avoid health losses can grossly distort the success of the ACA mandate to insure the uninsured and to improve the health and welfare outcomes of the previously uninsured.
Cost-Sharing and Productivity, by Teresa B. Gibson, A. Mark Fendrick and Michael E. Chernew (The National Bureau of Economic Research)
A growing body of literature examines the cross price elasticities between different health care services. For example, increasing the patient out of pocket price for some health care services increases the utilization of other health care services. Yet, the literature has generally ignored the connection between cost sharing for health care services and labor market outcomes. This paper examines the direction and magnitude of the reduced form relationship between patient cost-sharing and work loss following methods used to study the impact of cost-sharing and medical spending, finding a positive, quantitatively meaningful association between cost-sharing and hours absent. We find no such association between cost-sharing and the probability of incurring short-term disability days. This suggests that the cross-market ramifications of higher patient cost sharing extend beyond other health care services to include broad labor market outcomes.
Social Insurance: Connecting Theory to Data, by Raj Chetty and Amy Finkelstein (The National Bureau of Economic Research)
We survey the literature on social insurance, focusing on recent work that has connected theory to evidence to make quantitative statements about welfare and optimal policy. Our review contains two parts. We first discuss motives for government intervention in private insurance markets, focusing primarily on selection. We review the original theoretical arguments for government intervention in the presence of adverse selection, and describe how recent work has refined and challenged the conclusions drawn from early theoretical models. We then describe empirical work that tests for selection in insurance markets, documents the welfare costs of this selection, and analyzes the welfare consequences of potential public policy interventions. In the second part of the paper, we review work on optimal social insurance policies, which are designed to maximize expected utility taking into account the costs of moral hazard. We discuss formulas for the optimal level of insurance benefits in terms of empirically estimable parameters. We then consider the consequences of relaxing the key assumptions underlying these formulas, e.g. by allowing for fiscal externalities or behavioral biases. We also summarize recent work on other dimensions of optimal policy, including mandated savings accounts and the optimal path of benefits. Finally, we discuss the key challenges that remain in understanding the optimal design of social insurance policies.
The Contributions Of Prevention And Treatment To The Decline In Cardiovascular Mortality: Lessons From A Forty-Year Debate, by David S. Jones and Jeremy A. Greene (Health Affairs)
Mortality from coronary heart disease in the United States has fallen 60 percent from its peak in the mid-1960s. Cardiologists and epidemiologists have debated whether this decline reflects better control of risk factors, including lifestyle interventions to reduce smoking or intake of dietary fats, or the power of medical interventions, including defibrillators and therapeutics such as statins. Attempts to resolve this debate and guide health policy have generated sophisticated data sets and techniques for modeling cardiovascular mortality. Neither effort has provided specific guidance for health policy. Historical analysis of the debate over the causes of the decline, concomitant with development of cardiovascular modeling, offers valuable policy lessons about tensions among medical and public health strategies, the changing meanings of disease prevention, and the ability of evidence-based research and models to guide health policy. Policy makers must learn to open up the “black box” of epidemiological models—and of their own decision-making processes—to produce the best evidence-informed policy.
The Vast Majority Of Medicare Part D Beneficiaries Still Don’t Choose The Cheapest Plans That Meet Their Medication Needs, by Chao Zhou and Yuting Zhang (Health Affairs)
When the Medicare Part D prescription drug benefit began in 2006, a primary concern for some policy makers was whether seniors would be able to make smart choices from among the dozens of competing plans. Using 2009 Part D data, we found that only 5.2 percent of beneficiaries chose the cheapest plan. Nationwide, beneficiaries on average spent $368 more annually than they would have spent had they purchased the cheapest plan available in their region, given their medication needs. More than a fifth of beneficiaries spent at least $500 a year more than they needed to. Beneficiaries often overprotected themselves by paying higher premiums for plan features that they did not need, such as generic drug coverage in the coverage gap. Our findings suggest that beneficiaries need more targeted assistance from the government to help them choose plans, such as customized communications about the most cost-effective plans that would cover their medication needs.