Reading list

If you’re interested in value-based insurance design (as I am), check out the publications listed at the University of Michigan’s Center for Value-Based Insurance Design.

Health Care Reform — What Went Wrong on the Way to the Courthouse, by Mark A. Hall

Regional variations in medical spending and utilization: a longitudinal analysis of US Medicare population, by Andrew J. Rettenmaier, Zijun Wang

One of the perceived symptoms of US Medicare inefficiency is the existence of the dramatic variation in spending and utilization in different areas of the country. This study uses the Continuous Medicare History Sample, a large longitudinal 5% sample of all Medicare beneficiaries from 1974 to 2003, to study the issue. We show that the spending and utilization disparities are significant at the aggregate state level. More importantly, the variation shows signs of narrowing over time, particularly in the earlier years of the sample period and in some cases following major reforms. However, it remains significant even after an array of demographic, demand and supply side factors are controlled for.

[Book] The Corporate Practice of Medicine, by James C. Robinson.

One of the country’s leading health economists presents a provocative analysis of the transformation of American medicine from a system of professional dominance to an industry under corporate control. James Robinson examines the economic and political forces that have eroded the traditional medical system of solo practice and fee-for-service insurance, hindered governmental regulation, and invited the market competition and organizational innovations that now are under way. The trend toward health care corporatization is irreversible, he says, and it parallels analogous trends toward privatization in the world economy.

The physician is the key figure in health care, and how physicians are organized is central to the health care system, says Robinson. He focuses on four forms of physician organization to illustrate how external pressures have led to health care innovations: multispecialty medical groups, Independent Practice Associations (IPAs), physician practice management firms, and physician-hospital organizations. These physician organizations have evolved in the past two decades by adopting from the larger corporate sector similar forms of ownership, governance, finance, compensation, and marketing.

In applying economic principles to the maelstrom of health care, Robinson highlights the similarities between competition and consolidation in medicine and in other sectors of the economy. He points to hidden costs in fee-for-service medicine—overtreatment, rampant inflation, uncritical professional dominance regarding treatment decisions—factors often overlooked when newer organizational models are criticized.

Not everyone will share Robinson’s appreciation for market competition and corporate organization in American health care, but he challenges those who would return to the inefficient and inequitable era of medicine from which we’ve just emerged. Forcefully written and thoroughly documented, The Corporate Practice of Medicine presents a thoughtful—and optimistic—view of a future health care system, one in which physician entrepreneurship is a dynamic component.

Evidence on the Efficacy of Inpatient Spending on Medicare Patients, by R Kaestner and J Silber

Context: It is widely believed that a significant amount, perhaps as much as 20 to 30 percent, of health care spending in the United States is wasted, despite market forces such as managed care organizations and large, self-insured firms with a financial incentive to eliminate waste of this magnitude.

Methods: This article uses Medicare claims data to study the association between inpatient spending and the thirty-day mortality of Medicare patients admitted to hospitals between 2001 and 2005 for surgery (general, orthopedic, vascular) and medical conditions (acute myocardial infarction [AMI], congestive heart failure [CHF], stroke, and gastrointestinal bleeding).

Findings: Estimates from the analysis indicated that except for AMI patients, a 10 percent increase in inpatient spending was associated with a decrease of between 3.1 and 11.3 percent in thirty-day mortality, depending on the type of patient.

Conclusions: Although some spending may be inefficient, the results suggest that the amount of waste is less than conventionally believed, at least for inpatient care.

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