How Product Standardization Affects Choice: Evidence from the Massachusetts Health Insurance Exchange by Keith Marzilli Ericson and Amanda Starc (National Bureau of Economic Research)
Standardization of complex products is touted as improving consumer decisions and intensifying price competition, but evidence on standardization is limited. We examine a natural experiment: the standardization of health insurance plans on the Massachusetts Health Insurance Exchange. Pre-standardization, firms had wide latitude to design plans. A regulatory change then required firms to standardize the cost-sharing parameters of plans and offer seven defined options; plans remained differentiated on network, brand, and price. Standardization led consumers on the HIX to choose more generous health insurance plans and led to substantial shifts in brands’ market shares. We decompose the sources of this shift into three effects: price, product availability, and valuation. A discrete choice model shows that standardization changed the weights consumers attach to plan attributes (a valuation effect), increasing the salience of tier. The availability effect explains the bulk of the brand shifts. Standardization increased consumer welfare in our models, but firms captured some of the surplus by reoptimizing premiums. We use hypothetical choice experiments to replicate the effect of standardization and conduct alternative counterfactuals.
Should Health Care Systems Become Insurers? By Nirav R. Shah and Dave A. Chokshi (JAMA)
Incentives under the Affordable Care Act (ACA) are spurring increasing numbers of health care systems to assume the risk of paying for patient care, blurring the boundaries between care delivery organizations and insurers. New arrangements such as bundled payments, value-based purchasing, and accountable care organizations (ACOs) transfer financial risk from payers to health care systems. The union of payer and care delivery functions may engender opportunities for health systems to invest in prevention and more comprehensive, coordinated, patient-centered care.
Impact of Changes in Medicaid Coverage on Physician Provision of Safety Net Care by Lindsay Sabik and Sabina Gandhi (Medical Care)
The Patient Protection and Affordable Care Act will expand Medicaid coverage substantially, with the goal of improving the health of low-income individuals and reducing disparities in coverage and access. Whether insurance expansions are successful in achieving this goal will depend in part on physician response to changes in insurance coverage mix and the effect of this response on access to care for low-income safety net populations. We estimate both market-level and physician-level fixed effects models, to consider changes in market-level Medicaid rates on measures of physician acceptance of new patients (both Medicaid patients and uninsured patients unable to pay), revenue from Medicaid, and provision of charity care. We also stratify the sample to investigate whether effects differ among office-based versus facility-based physicians. Increases in Medicaid coverage are associated with statistically significant decreases in the likelihood that physicians will accept new uninsured patients who are unable to pay, particularly among office-based physicians. Increases in Medicaid coverage are not associated with changes in acceptance of new Medicaid patients.
Reductions in Medicare Payments and Patient Outcomes: An Analysis of 5 Leading Medicare Conditions by Yu-Chu Shen and Vivian Wu (Medical Care)
The Affordable Care Act enacted significant Medicare payment reductions to providers, yet the effects of such major reductions on patients remain unclear. We used the Balanced Budget Act (BBA) of 1997 as a natural experiment to study the long-term consequence of major payment reductions on patient outcomes. Using 100% Medicare claims between 1995 and 2005, hospital database, and published reports on BBA policy components, we compared changes in outcomes between hospitals facing small and large BBA payment reductions across 3 periods (pre-BBA, initial-BBA, and post-BBA) using instrumental variable hospital fixed-effects regression models. Mortality trends between hospitals in small and large payment-cut categories were similar between pre-BBA and initial-BBA periods, but diverged in the post-BBA period. Relative to the small-cut hospitals, hospitals in the large-cut category experienced smaller decline in 1-year mortality rates in the post-BBA period compared with their pre-BBA trends by 0.8–1.4 percentage points, depending on the condition (P<0.05 for all conditions, except for hip fracture). We found consistent evidence across multiple conditions that reductions in Medicare payments are associated with slower improvement in mortality outcomes.
Full Disclosure — Out-of-Pocket Costs as Side Effects by Peter A. Ubel, Amy P. Abernethy, and S. Yousuf Zafar (New England Journal of Medicine)
Public Reporting, Consumerism, and Patient Empowerment by Robert S. Huckman, and Mark A. Kelley (New England Journal of Medicine)