An examination of flexible spending accounts

This paper develops a framework for analyzing flexible spending account (FSA) participation and usage. We explore patterns of FSA usage using data from a benefits firm for 1996 including an examination of types of FSA expenditures and their timing. We estimate some simple econometric models of the participation decision and also the decision of how much to put into an FSA. Several pieces of evidence suggest that much of an FSA election amount is based on foreknowledge of expenditures. We also find that participants tend to spend their election amount early, thus obtaining an interest-free loan.     

Will Choice‐Based Reform Work for Medicare? Evidence from the Federal Employees Health Benefits Program

OBJECTIVE:. To examine the effect of premiums and benefits on the health plan choices of older enrollees who choose Federal Employees Health Benefits Program (FEHBP) health plans as their primary payer. DATA SOURCES: Administrative enrollment data from the Office of Personnel Management (OPM) and plan premiums and benefits data taken from the Checkbook Guide to health plans. STUDY DESIGN: We estimate individual plan choice models where the choice of health plan is a function of out-of-pocket premium, actuarial value, plan attributes, and individual characteristics. Plan attributes include plan structure (fee-for-service/preferred provider organization, point-of-service, or health maintenance organization), drug benefit structure, and whether or not the plan covers other types of spending such as dental services and diabetic supplies. The models are estimated by conditional logit. Our study focuses on three populations that currently choose FEHBP as their primary health care coverage and are similar to the Medicare population: current employees and retirees who are approaching the age of Medicare eligibility (ages 60-64) and current federal employees age 65+. Current employees age 65+ are eligible for Medicare, but their FEHBP plan is their primary payer. Retirees and employees 60-64 are not yet eligible for Medicare but are similar in many respects to recently age-eligible Medicare beneficiaries. We also estimate our model for current employees age 55 and younger as a comparison group. DATA COLLECTION METHODS: We select a random sample of retirees and employees age 60-64, as well as all current employees age 65+, from the OPM administrative database for the calendar year 2001. The plan choices available to each person are determined by the plans participating in their metropolitan statistical area. We match plan premium and attribute information from the Checkbook Guide to each plan in the enrollee's list of choices. PRINCIPAL FINDINGS: We find that current workers 65+, 60-64, and non-Medicare eligible retirees are sensitive to variation in plan premiums. The premium elasticities for these groups are similar in magnitude to those of the age 55 and under employee group. Older workers and retirees not yet eligible for Medicare are willing to pay a substantial amount for plans with open provider networks. The willingness to pay for open networks is significantly greater for these groups than for younger employees. Willingness to pay for open network plans varies significantly by income, but varies little by age within group. CONCLUSIONS: Our finding that older workers and non-Medicare eligible retirees are sensitive to plan premiums suggests that choice-based reform of Medicare would lead to cost-conscious choices by Medicare beneficiaries. However, our finding that these groups are willing to pay more for open network plans than younger employees suggest that higher risk individuals may migrate toward higher benefit, higher cost plans. Our findings on the relationship between income and willingness to pay for open network plans suggest that means testing is a viable reform for lowering Medicare program costs.     

Framing Flexible Spending Accounts: A Large‐Scale Field Experiment on Communicating the Return on Medical Savings Accounts

Tax‐preferred health savings devices such as Flexible Spending Accounts (FSAs) and Health Savings Accounts (HSAs) offer employees potentially valuable financial instruments for directing pre‐tax earnings to eligible medical expenses. Despite their increasing popularity as an employee benefit, however, there is little causal evidence around individual demand for these accounts. This paper seeks to address this gap in the literature, reporting on a randomized controlled field experiment conducted with over 11,000 U. S federal employees in 2017 in order to evaluate the effectiveness of targeted messages designed to increase FSA contributions. Our results suggest that the provision of basic information about FSAs delivered via an emailed employee newsletter did not affect the likelihood of contribution or the contribution level. The addition of statements about the absolute returns or relative returns offered by the accounts similarly had no significant effects, and these null effects are observed despite relatively high email open rates. We discuss explanations for the null results and the policy implications of findings from what appears to be the first health economics experiment analyzing tax incentives around health care savings.     

The medical care programs of the Farm Security Administration, 1932 through 1947: a rehearsal for national health insurance?

At a time of renewed interest in universal health insurance, an examination of earlier periods when society grappled with the link between socioeconomic status and health is fruitful. Between 1935 and 1947, the federal government sponsored a comprehensive medical care program for low-income farmers, sharecroppers, and migrant workers under the auspices of the Farm Security Administration (FSA). Despite the strong opposition of the American Medical Association, humanitarian and economic concerns at the local level often promoted physicians' participation in the program's group prepayment plans. Many FSA leaders clearly saw the program as a model upon which national health insurance might advance. However, in the wake of World War II, the FSA program declined as physicians' income improved, the rural population declined, and traditional ideological objections to federal intervention in medical care resurfaced. The FSA experience illuminates the complex ideological, economic, and humanitarian motivations of American physicians in the face of health care reform.     

The fraction of total hand surface area involved in young children's outdoor hand-to-object contacts

Information on the fraction of total hand surface area touching a contaminated object is necessary in accurately estimating contaminant (e.g., pesticides, pathogens) loadings onto the hands during hand-to-object contacts. While several existing physical-stochastic human exposure models require such surface area data to estimate dermal and non-dietary ingestion exposure, there are very limited data sets. This paper provides statistical distributions of fractional surface areas (FSAs) for children's outdoor hand contacts. These distributions were constructed by combining information collected from two distinct studies exploring children's activity patterns and quantifying hand contact surface area. Results show that for outdoor contacts with “All Objects”, a range of 0.13-0.27 captured median FSAs, while a range of 0.12-0.24 captured time-weighted FSAs. Overall, an FSA of 0.31 captured 80-100% of FSAs involved in each child's outdoor hand contacts, depending upon the object of interest. These values are much lower than the often conservative assumptions of up to 1 (i.e., the entire hand) that researchers currently make regarding FSAs involved in indoor and outdoor contacts [USEPA, 1997. Standard operating procedures (SOPs) for residential exposure assessments. Contract no. 68-W6-0030. 〈http://www.epa.gov/pesticides/trac/science/trac6a05.pdf〉].     

The impact of financial incentives on health and health care: Evidence from a large wellness program

Workplace wellness programs have become increasingly common in the United States, although there is not yet consensus regarding the ability of such programs to improve employees' health and reduce health care costs. In this paper, we study a program offered by a large U.S. employer that provides substantial financial incentives directly tied to employees' health. The program has a high participation rate among eligible employees, around 80%, and we analyze the data on the first 4 years of the program, linked to health care claims. We document robust improvements in employee health and a correlation between certain health improvements and reductions in health care cost. Despite the latter association, we cannot find direct evidence causally linking program participation to reduced health care costs, although it seems plausible that such a relationship will arise over longer horizons.     

An economic history of Medicare part C

Context: Twenty‐five years ago, private insurance plans were introduced into the Medicare program with the stated dual aims of (1) giving beneficiaries a choice of health insurance plans beyond the fee‐for‐service Medicare program and (2) transferring to the Medicare program the efficiencies and cost savings achieved by managed care in the private sector. Methods: In this article we review the economic history of Medicare Part C, known today as Medicare Advantage, focusing on the impact of major changes in the program's structure and of plan payment methods on trends in the availability of private plans, plan enrollment, and Medicare spending. Additionally, we compare the experience of Medicare Advantage and of employer‐sponsored health insurance with managed care over the same time period. Findings: Beneficiaries’ access to private plans has been inconsistent over the program's history, with higher plan payments resulting in greater choice and enrollment and vice versa. But Medicare Advantage generally has cost more than the traditional Medicare program, an overpayment that has increased in recent years. Conclusions: Major changes in Medicare Advantage's payment rules are needed in order to simultaneously encourage the participation of private plans, the provision of high‐quality care, and to save Medicare money.     

The Effectiveness of Health Screening

Using a matched insurant–general practitioner panel data set, we estimate the effect of a general health‐screening program on individuals' health status and health‐care cost. To account for selection into treatment, we use regional variation in the intensity of exposure to supply‐determined screening recommendations as an instrumental variable. We find that screening participation increases inpatient and outpatient health‐care costs up to 2 years after treatment substantially. In the medium run, we find cost savings in the outpatient sector, whereas in the long run, no statistically significant effects of screening on either health‐care cost component can be discerned. In sum, screening participation increases health‐care cost. Given that we do not find any statistically significant effect of screening participation on insurants' health status (at any point in time), we do not recommend a general health‐screening program. However, given that we find some evidence for cost‐saving potential for the sub‐sample of younger insurants, we suggest more targeted screening programs. Copyright © 2014 John Wiley & Sons, Ltd.     

Reconsidering the income‐health relationship using distributional regression

We reconsider the relationship between income and health taking a distributional perspective rather than one centered on conditional expectation. Using structured additive distributional regression, we find that the association between income and health is larger than generally estimated because aspects of the conditional health distribution that go beyond the expectation imply worse outcomes for those with lower incomes. Looking at German data from the Socio‐Economic Panel, we find that the risk of bad health is roughly halved when doubling the net equivalent income from 15,000 to 30,000€. This is more than tenfold of the magnitude of change found when considering expected health measures. A distributional perspective thus highlights another dimension of the income–health relation—that the poor are in particular faced with greater health risk at the lower end of the health distribution. We therefore argue that when studying health outcomes, a distributional approach that considers stochastic variation among observationally equivalent individuals is warranted.     

Health Insurance and Health Care among the Mid‐Aged and Older Chinese: Evidence from the National Baseline Survey of CHARLS

We document the recent profile of health insurance and health care among mid‐aged and older Chinese using data from the China Health and Retirement Longitudinal Study conducted in 2011. Overall health insurance coverage is about 93%. Multivariate regressions show that respondents with lower income as measured by per capita expenditure have a lower chance of being insured, as do the less‐educated, older, and divorced/widowed women and rural‐registered people. Premiums and reimbursement rates of health insurance vary significantly by schemes. Inpatient reimbursement rates for urban people increase with total cost to a plateau of 60%; rural people receive much less. Demographic characteristics such as age, education, marriage status, per capita expenditure, and self‐reported health status are not significantly associated with share of out‐of‐pocket cost after controlling community effects. For health service use, we find large gaps that vary across health insurance plans, especially for inpatient service. People with access to urban health insurance plans are more likely to use health services. In general, Chinese people have easy access to median low‐level medical facilities. It is also not difficult to access general hospitals or specialized hospitals, but there exists better access to healthcare facilities in urban areas. Copyright © 2016 John Wiley & Sons, Ltd.     

Managed health care plans in Southern United States municipalities: empirical evidence on choice of plan

This study examines factors that influence choice of Southern municipal government health care plans in the United States. Using survey data, this article specifically examines the managed care offerings of Health Maintenance Organizations (HMO), Preferred Provider Organizations (PPO) and Point of Service (POS) plans. Some of the more interesting empirical results indicate that HMO plans are associated more with employee satisfaction; PPO plans are associated with cost containment; and POS plans are more likely to provide health care benefits to part-time employees. Empirical evidence also indicates that employee satisfaction is increased when there is a greater choice of managed care plans available to municipal governments.     

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.     

The relation between selective contracting and healthcare expenditures in private health insurance plans in the United States

Many healthcare systems, including The Netherlands, Germany and Switzerland, have incorporated elements of managed competition, whereby insurers compete for enrollees in a marketplace organized or facilitated by a government or governing entity. In these countries, managed competition was introduced with the idea that the system would contain cost growth while maximizing value for consumers and employers. An important mechanism to control costs is selective contracting: the process of contracting providers into a network and offer insurance packages with varying levels of provider coverage. In these systems, enrollees are expected to choose lower cost plans which offer access to only contracted providers in the network. The questions is, however, if restricting provider choice leads to reduced healthcare expenditures.In the United States, enrollees often have a choice between plans with restricted networks of providers and plans that offer more provider choice, where care outside the contracted network of providers is (partly) covered. The purpose of this study is to understand whether insurance plans with restrictions on provider access in the United States have reduced healthcare expenditures and to identify the mechanism by which that reduction occurred. We used data from the Medical Expenditure Panel Survey (MEPS), a nationally representative sample of families and individuals. We estimated expenditures for enrollees in restricted network plans using two-part models and generalized linear models. We found that restricted network plans, on average, save $761 per enrollee.Our results suggest that cost savings due to restricted network plans are largely a result of price reductions rather than utilization reductions, although both play a role in cost savings. When introducing reforms shifting from a supply‐oriented to a demand‐oriented health care system, these findings might be worth considering by other countries.     

The Impact of Health Insurance on Health Outcomes and Spending of the Elderly: Evidence from China's New Cooperative Medical Scheme

This paper investigates the effects of China's New Cooperative Medical Scheme (NCMS) on health outcomes and healthcare expenditure of the elderly in rural China, using panel data from the 2005 and 2008 waves of the Chinese Longitudinal Healthy Longevity Survey. We employ a strategy that combines propensity score matching with a difference‐in‐differences approach to address selection bias. Results show that the NCMS has significantly improved the elderly enrollees' activities of daily living and cognitive function but has not led to better self‐assessed general health status. We find no significant effect of NCMS on mortality for the previously uninsured elderly in NCMS counties, although there is moderate evidence that it is associated with reduced mortality for the elderly enrollees. We also find that the elderly participants are more likely to get adequate medical services when sick, which provides a good explanation for the beneficial health effects of NCMS. However, there is no evidence that the NCMS has reduced their out‐of‐pocket spending. Furthermore, we also find that low‐income seniors benefit more from NCMS participation in terms of health outcomes and perceived access to health care, suggesting that the NCMS helps reduce health inequalities among the rural elderly. Copyright © 2014 John Wiley & Sons, Ltd.     

Income and employment among homeless people: the role of mental health, health and substance abuse

BACKGROUND: The homeless population is among the poorest of the poor in the United States. Employment and government programs are potential sources of income, but many homeless people face potential barriers to work: many have serious mental and physical disabilities, and many more have alcohol and drug disorders. As a result, most homeless who work do so either for a few hours per day or only some days, which provides little income. General Assistance, a public program of last resort, also provides a low level of income support. More income might be gained through higher levels of work or participation in income support programs for people with disabilities. AIMS OF THE STUDY: To investigate the characteristics of homeless people that impede them in the labor market and in government program participation, paying particular attention to their mental and physical health, as well as their alcohol and drug problems. DATA: Data are from a survey of the homeless population in Alameda County, California, conducted from 1991 to 1993. Our sample is 471 homeless adults randomly selected from area shelters and meal providers, who were reinterviewed approximately 6 months later, regardless of domiciliary status. Mental health and substance use problems were assessed using the Diagnostic Interview Schedule, a structured, psychiatric interview that uses criteria based on the American Psychiatric Association's Diagnostic and Statistical Manual of Mental Disorders 3rd edn (revised). Employment between the first and second interview is categorized as none, low level (less than 6 hours a day or fewer than half the days between interviews) or higher level (at least 6 hours a day for at least half the days). ANALYTICAL PROCEDURES: The models of employment status and program participation are recursive in that homelessness at the first wave of the survey is treated as given. Thus we explore whether, given their initial homelessness, persons can gain or maintain access to income between the two interviews, conditional on the sample member's homelessness, health and disability at the first interview. Using maximum-likelihood methods, we estimate a generalized ordered logit model of whether the person works not at all, at a low level or at a higher level. Participation in disability programs and GA are estimated as probit models over the subsamples of potentially eligible participants. RESULTS: While a surprisingly large number of homeless people work, few homeless persons are able to generate significant earnings from employment alone. Physical health problems that limit work or daily activities, in particular, are barriers to employment. Drug and alcohol abuse and dependence are positively associated with lower work level but are negatively related to higher work level. Program participation is quite low relative to eligibility. Those with physical health problems are substantially more likely than those with mental health problems to be in the more generous disability programs. Substance use disorders are also a barrier to participation in disability programs. DISCUSSION: Mental health, health and disability play a large role in the employment and program participation of the homeless and persons at risk for homelessness. Physical disabilities are a barrier to employment, and those with substance use disorders are most likely to work at lower levels that provide less income. Rates of participation in government programs are low, and people with major mental disorders have especially low participation rate in disability programs. The low rates of participation, particularly in the disability programs, suggest the need for continued research in improving access to income support programs among eligible homeless populations.     

Oral Health,Dental Insurance and Dental Service use in Australia

This study uses data from the 2004–2006 Australian National Survey of Adult Oral Health and a simultaneous equation framework to investigate the interrelationships between dental health, private dental insurance and the use of dental services. The results show that insurance participation is influenced by social and demographic factors, health and health behaviours. In turn, these factors affect the use of dental services, both directly and through insurance participation. Our findings confirm that affordability is a major barrier to visiting the dentist for oral health maintenance and treatment. Our results suggest that having supplementary insurance is associated with some 56 percentage points higher probability of seeing the dentist in the general population. For those who did not have private insurance cover, we predict that conditional on them facing the same insurance conditions, on average, having insurance would increase their visits to the dentist by 43 percentage points. The uninsured in the survey have lower income, worse oral health and lower rates of preventive and treatment visits. Copyright © 2015 John Wiley & Sons, Ltd.     

Employee Choice of Consumer-Driven Health Insurance in a Multiplan, Multiproduct Setting

Objective. To determine who chooses a Consumer-Driven Health Plan (CDHP) in a multiplan, multiproduct setting, and, specifically, whether the CDHP attracts the sicker employees in a company's risk pool.
Study Design. We estimated a health plan choice equation for employees of the University of Minnesota, who had a choice in 2002 of a CDHP and three other health plans—a traditional health maintenance organization (HMO), a preferred provider organization (PPO), and a tiered network product based on care systems. Data from an employee survey were matched to information from the university's payroll system.
Principal Findings. Chronic illness of the employee or family members had no effect on choice of the CDHP, but such employees tended to choose the PPO. The employee's age was not related to CDHP choice. Higher-income employees chose the CDHP, as well as those who preferred health plans with a national provider panel that includes their physician in the panel. Employees tended to choose plans with lower out-of-pocket premiums, and surprisingly, employees with a chronic health condition themselves or in their family were more price-sensitive.
Conclusions. This study provides the first evidence on who chooses a CDHP in a multiplan, multiproduct setting. The CDHP was not chosen disproportionately by the young and healthy, but it did attract the wealthy and those who found the availability of providers more appealing. Low out-of-pocket premiums are important features of health plans and in this setting, low premiums appeal to those who are less healthy.     

The Role of Product Design in Consumers' Choices in the Individual Insurance Market

Objective. To evaluate the role of health plan benefit design and price on consumers' decisions to purchase health insurance in the nongroup market and their choice of plan.
Data Sources and Study Setting. Administrative data from the three largest nongroup insurers in California and survey data about those insured in the nongroup market and the uninsured in California.
Study Design. We fit a nested logit model to examine the effects of plan characteristics on consumer choice while accounting for substitutability among certain groups of products.
Principal Findings. Product choice is quite sensitive to price. A 10 percent decrease in the price of a product would increase its market share by about 20 percent. However, a 10 percent decrease in prices of all products would only increase overall market participation by about 4 percent. Changes in the generosity of coverage will also affect product choice, but have only small effects on overall participation. A 20 percent decrease in the deductible or maximum out-of-pocket payment of all plans would increase participation by about 0.3–0.5 percent. Perceived information search costs and other nonprice barriers have substantial effects on purchase of nongroup coverage.
Conclusions. Modest subsidies will have small effects on purchase in the nongroup market. New product designs with higher deductibles are likely to be more attractive to healthy purchasers, but the new benefit designs are likely to have only small effects on market participation. In contrast, consumer education efforts have a role to play in helping to expand coverage.