Unbiased Analysis of Today's Healthcare Issues
Years ago, when someone needed care from a doctor they visited the physician directly whether they were a general practitioner or a specialist. Nowadays, it is rarer for patients to visit a specialist without a referral. The typical referral comes from a primary care physician, but it is also common for a specialist to refer…
Introduction Much of health care today is paid for by managed care plans. If the managed care plans are profit maximizers–which I assume them to be–then they face a tradeoff. By offering a lower quality of care, they will make more money; but lowering the quality of care reduces the demand for their insurance product. …
There is a dynamic relationship between generalists and specialists. Currently, 4.5% of visits to PCPs result in a referral. A RAND study and my own investigation of the 1998-1999 Community Tracking Survey show that about 10% of individuals are hospitalized at least once each year. How should we model the decision patients face between generalist and specialist care.…
Moral hazard and adverse selection are ever-present problems in the health insurance market. Identifying their existence and their magnitudes is difficult. Most of the papers presented in this blog have used a reduced form approach [see Finkelstein, McGarry (2003) and Bhattacharya, Vogt (2006)]. Today we will look at a paper by Bajari, Hong and Khwaja where the…
Jason has insurance and his brother Nosaj does not. Jason utilizes more medical services than Nosaj. Is this situation occuring because Jason is truly sicker than Nosaj (adverse selection), or is this because since Jason has insurance, medical services are cheaper for him than Nosaj (moral hazard)? Disentangling the problems of moral hazard and adverse selection…
Daniel Polsky and Sean Nicholson have two papers which aim to look at employer health insurance offerings. The first [Polsky, Nicholson (2004)] tries to estimate the factors driving the cost differences between HMO plans and non-HMO (eg: PPO, indemnity) plans. The authors deconstruct the cost differences into three factors: Utilization Effect: this occurs if individuals…
According to the Kaiser Family Foundation, 160 million Americans receive their health insurance from their employers. That figure represents three out of five non-elderly individuals. Many experts argue that using employer provided health insurance eliminates the problem of adverse selection by forming an insurance pool around a non-medical issue (employment). Jayanta Bahattacharya and William Vogt…
The adverse selection death spiral has reared its ugly head again. PacAdvantage, an insurance pooling company for 6000 small and medium sized businesses in California has closed its doors. The Sacramento Business Journal reports (“Backer pulls plug on PacAdvantage health purchasing pool“) that the three remaining insurers underwriting the plan have pulled out. Michael Holt of The…
Many papers on health insurance worry about the problem of adverse selection. Critics of HMOs claim that the fact that HMOs have lower costs is not due to more efficient provision of services nor the limitation of the provision of services, but instead largely caused by the fact that the people who choose to enroll…
In the mid to late 1990s, there was a large backlash against HMOs due to the perception that the “HMO cares more about saving money than it does about them.” People feared that HMO would drop coverage of services which they valued. In this month’s NBER working paper edition, Yu-Chu Shen (2006) looks answer two…