How increasing medical access to opioids contributes to the opioid epidemic: Evidence from Medicare Part D

Drug overdoses involving opioid analgesics have increased dramatically since 1999, representing one of the United States’ top public health crises. Opioids have legitimate medical functions, but they are often diverted, suggesting a tradeoff between improving medical access and nonmedical abuse. We provide causal estimates of the relationship between the medical opioid supply and drug overdoses using Medicare Part D as a differential shock to the geographic distribution of opioids. Our estimates imply that a 10% increase in opioid medical supply leads to a 7.1% increase in opioid-related deaths among the Medicare-ineligible population, suggesting substantial diversion from medical markets.     

Competitive bidding in Medicare Advantage: Effect of benchmark changes on plan bids

Bidding has been proposed to replace or complement the administered prices that Medicare pays to hospitals and health plans. In 2006, the Medicare Advantage program implemented a competitive bidding system to determine plan payments. In perfectly competitive models, plans bid their costs and thus bids are insensitive to the benchmark. Under many other models of competition, bids respond to changes in the benchmark. We conceptualize the bidding system and use an instrumental variable approach to study the effect of benchmark changes on bids. We use 2006–2010 plan payment data from the Centers for Medicare and Medicaid Services, published county benchmarks, actual realized fee-for-service costs, and Medicare Advantage enrollment. We find that a $1 increase in the benchmark leads to about a $0.53 increase in bids, suggesting that plans in the Medicare Advantage market have meaningful market power.     

Medicare prospective payment and the volume and intensity of skilled nursing facility services

In 1998, Medicare adopted a per diem Prospective Payment System (PPS) for skilled nursing facility care, which was intended to deter the use of high-cost rehabilitative services. The average per diem decreased under the PPS, but because per diems increased for greater therapy minutes, the ability of the PPS to deter the use of high-intensity services was questionable. In this study, we assess how the PPS affected the volume and intensity of Medicare services. By volume we mean the product of the number of Medicare residents in a facility and the average length-of-stay, by intensity we mean the time per week devoted to rehabilitation therapy. Our results indicate that the number of Medicare residents decreased under PPS, but rehabilitative services and therapy minutes increased while length-of-stay remained relatively constant. Not surprisingly, when subsequent Medicare policy changes increased payment rates, Medicare volume far surpassed the levels seen in the pre-PPS period.     

The spillover effects of Medicare managed care: Medicare Advantage and hospital utilization

More than a quarter of Medicare beneficiaries are enrolled in Medicare Advantage, which was created in large part to improve the efficiency of health care delivery by promoting competition among private managed care plans. This paper explores the spillover effects of the Medicare Advantage program on the traditional Medicare program and other patients, taking advantage of changes in Medicare Advantage payment policy to isolate exogenous increases in Medicare Advantage enrollment and trace out the effects of greater managed care penetration on hospital utilization and spending throughout the health care system. We find that when more seniors enroll in Medicare managed care, hospital costs decline for all seniors and for commercially insured younger populations. Greater managed care penetration is not associated with fewer hospitalizations, but is associated with lower costs and shorter stays per hospitalization. These spillovers are substantial – offsetting more than 10% of increased payments to Medicare Advantage plans.