Reading list

Choice Inconsistencies among the Elderly: Evidence from Plan Choice in the Medicare Part D Program, by Jason Abaluck and Jonathan Gruber (AER)

We evaluate the choices of elders across their insurance options under the Medicare Part D Prescription Drug plan, using a unique dataset of prescription drug claims matched to information on the characteristics of choice sets. We document that elders place much more weight on plan premiums than on expected out-of-pocket costs; value plan financial characteristics beyond any impacts on their own financial expenses or risk; and place almost no value on variance- reducing aspects of plans. Partial equilibrium welfare analysis implies that welfare would have been 27 percent higher if patients had all chosen rationally.

Emergency Department Visits in Veterans Affairs Medical Facilities, S. Nicole Hastings, Valerie A. Smith, Morris Weinberger, Kenneth E. Schmader, Maren K. Olsen, and Eugene Z. Oddone (AJMC)

Objective: To identify the frequency of, and risk factors for, repeat emergency department (ED) visits and hospitalizations following a treat-andrelease ED visit in patients from Veterans Affairs Medical Centers (VAMCs).

Study Design: Retrospective cohort study.

Methods: Subjects were veterans who visited 1 of 102 VAMC EDs between October 1, 2007, and June 30, 2008. Generalized estimating equations were used to identify factors related to repeat ED visits and hospitalizations within 30 days of the index ED visit.

Results: At their index ED visit, 80% of veterans were treated and released. Of these, 15% returned to the ED and 5% were hospitalized in the next 30 days. In adjusted= models, factors associated with increased odds of repeat ED visits included homelessness (odds ratio [OR] 1.70; 95% confidence interval [CI] 1.59, 1.82) and having a previous ED visit (OR 1.66; 95% CI 1.58, 1.74). Odds of hospitalization were higher among older (OR 1.35; 95% CI 1.26, 1.46), homeless (OR 1.61; 95% CI 1.44, 1.80), and functionally impaired (OR 1.52; 95% CI 1.35, 1.76) veterans, those with greater comorbidity (OR 1.31; 95% CI 1.27, 1.34), previous hospitalization (OR 2.48; 95% CI 2.28, 2.70), and an original ED visit related to a chronic condition (OR 1.30; 95% CI 1.23, 1.37). Among veterans who returned to the ED, 71.7% did not see another VA outpatient provider between their original and return visits.

Conclusions: A substantial proportion of veterans treated and released from VAMC EDs returned to the ED or were hospitalized within 30 days.

Hospital Market Concentration, Pricing, and Profitability in Orthopedic Surgery and Interventional Cardiology, by James C. Robinson (AJMC)

Objective: To examine the association between hospital market concentration and pricing.

Background: Hospitals have been merging into systems that potentially wield bargaining power over private health insurers. Concern is growing among policy makers that these systems may respond to provisions of the 2010 health reform legislation by further increasing consolidation and prices.

Methods: Multivariate statistical methods were used to evaluate the association between hospital market concentration, prices, and profits (contribution margins) for commercially insured patients admitted for any of 6 major cardiac and orthopedic surgery procedures, adjusting for characteristics of the patient (diagnoses, comorbidities, complications) and of the hospital (size, patient volume, teaching status). Data were obtained on 11,330 patients treated in 61 hospitals in 27 markets across 8 states in 2008.

Results: Hospital prices for patients in concentrated markets were higher than hospital prices for otherwise-comparable patients in competitive markets by 25.1% for coronary angioplasty, 13.0% for cardiac rhythm management (CRM) device insertion, 19.2% for total knee replacement, 24.1% for total hip replacement, 19.3% for lumbar spine fusion, and 22.7% for cervical spine fusion (P <.05). Contribution margins were higher in concentrated than in competitive hospital markets by $5259 for angioplasty, $3417 for CRM device insertion, $4123 for total knee replacement, $5889 for total hip replacement, $7931 for lumbar spine fusion, and $4663 for cervical spine fusion (P <.05). Conclusion: Hospitals in concentrated markets charge significantly higher prices and earn significantly higher margins from private insurers than do hospitals in competitive markets.

The Structure of Risk Adjustment for Private Plans in Medicare, by Joseph P. Newhouse, Jie Huang, Richard J. Brand, Vicki Fung, and John Hsu (AJMC)

Medicare bases its risk adjustment method for Medicare Advantage plan payment on the relative costs of treating various diagnoses in traditional Medicare. However, there are many reasons to doubt that the relative cost of treating different diagnoses is similar between Medicare Advantage plans and traditional Medicare, including the varying applicability of care management methods to different diagnoses and the varying degrees of market power among suppliers of services to plans. We use internal cost data from a large health plan to compare its cost of treating various diagnoses with Medicare’s reimbursement. We find substantial variability across diagnoses, implying that the current risk adjustment system creates incentives for Medicare Advantage plans to favor beneficiaries with certain diagnoses, but find no consistent relationship between the costliness of the diagnosis and the difference between reimbursement and cost.

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