Unbiased Analysis of Today's Healthcare Issues
It has been shown in various studies and opinion polls that consumers generally believe that HMOs provide an inferior level of care than non-HMO plans. This is true even when more objective measures of medical service quality are taken into account. Why is HMO satisfaction so low? A study by Reschovsky, et al. (2002) claims…
As insurance markets began to develop in the U.S., we observed two types of insurance emerging: indemnity plans and health maintenance organizations (HMOs). Indemnity plans compensated providers on a fee-for-service basis and HMOs used a capitation scheme. Typically, HMOs used gatekeepers to restrict services while indemnity plan restrictions were few and far between. Typical analysis…
In modern medicine, doctors are agents for two distinct groups. The physician is an agent for the patient, but also an agent for insurance companies-especially in the managed care settings. In balancing both relationships, the doctor must juggle the conflicting principal-agent problems of information asymmetry and third party payment. Ake Blomqvist develops an interesting theoretical model to…
Health economists frequently examine the effect of physician payment method on the provision of medical services. It is often found that patients whose doctors are compensated via capitation or salaried schemes receive fewer services than patients whose doctors are compensated through a fee for service mechanism. This finding is robust to a variety of medical settings…
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…