The demand for episodes of mental health services

Observational studies of demand for mental health services showed much greater use by those with more generous insurance, but this difference may have been due to adverse selection, rather than in response to price. This paper avoids the adverse selection problem by using data from a randomized trial, the RAND Health Insurance Experiment (HIE). Participating families were randomly assigned to insurance plans that either provided free care or were a mixture of first dollar coinsurance and free care after a cap on out-of-pocket spending was reached. We estimate that separate effects of coinsurance and the cap on the demand for episodes of outpatient mental health services. We find that outpatient mental health use is more responsive to price than is outpatient medical use, but not as responsive as most observational studies have indicated. Those with no insurance coverage would spend about one-quarter as much on mental health care as they would with free care. Coinsurance reduces the number of episodes of treatment, but has only a small effect on the duration and intensity of use within episodes. Users appear to anticipate exceeding the cap, and spend at more than the free rate after they do so.     

Do cost-sharing and entry deregulation curb pharmaceutical innovation?

This paper examines the role of both cost-sharing schemes in health insurance systems and the regulation of entry into the pharmaceutical sector for pharmaceutical R&D expenditure and drug prices. The analysis suggests that both an increase in the coinsurance rate and stricter price regulations adversely affect R&D spending in the pharmaceutical sector. In contrast, entry deregulation may lead to higher R&D spending of pharmaceutical companies. The relationship between R&D spending per firm and the number of firms may be hump-shaped. In this case, the number of rivals which maximizes R&D expenditure per firm is decreasing in the coinsurance rate and increasing in labor productivity.     

Using elicitation techniques to estimate the value of ambulatory treatments for major depression.

Estimating the value of spending on medical treatments in a health care system involves relating output, measured in terms of effectiveness, to cost, measured in terms of spending. Although information on spending at the system level often exists in administrative data, such as insurance claims, information on effectiveness is not always available. An inferential tool available to researchers in this context is elicitation. The authors develop an approach to elicit effectiveness parameters and apply it to a panel of 10 experts to estimate predictive Hamilton Depression Rating Scale scores representing postambulatory treatment outcomes. The elicited parameters are used to estimate outcomes associated with 120 acute phase treatments for major depression within a privately insured health insurance system. The outcome-adjusted price per full remission episode is estimated for each acute treatment, and corresponding 95% percentile bootstrap intervals are calculated. The average spending for all observed treatments was $473 (SE = 478), with a depression-free adjusted price per case of $5,995 (95% confidence interval = $5,959-$6,031).     

Lessons from the first to the latest nation to enact national health insurance

In 1989, South Korea became the latest country to enact a national health insurance plan. In 1989-91, South Korea experienced a 22 percent increase in health care spending despite instituting the world's highest level of cost-sharing and coinsurance. Now, taking a page from the lesson book of Germany--the first country to adopt a national insurance strategy--South Korea is applying a system of global budgeting that should produce an optimal amount of cost control while preserving consumer choice.     

Use and costs of care in retail clinics versus traditional care sites

Retail clinics have generated much interest, promising convenient, lower-cost service for the treatment of minor conditions than conventional care sites can offer. Using health plan claims data, we describe utilization trends, patient mix, and cost per episode of care for the five conditions most frequently treated at a retail clinic chain in the Minneapolis-St. Paul area, as compared with other care settings. Retail clinic use for these conditions is increasing at about 3 percent per year and offers savings of $50-$55 per episode. However, it accounts for only 6 percent of such episodes, and the impact on overall cost and quality remains undetermined.     

The effect of reinsuring a deductible on pharmaceutical spending: A Dutch case study on low-income people

Many countries have cost sharing schemes in health insurance to control health care expenditures. The Dutch basic health insurance includes a mandatory deductible of currently 385 euros per adult per year. To avoid affordability problems, several municipalities offer a group contract for low-income people in which the mandatory deductible is ‘reinsured’. More specifically, this means that out-of-pocket spending under the deductible is covered by supplementary insurance.By comparing groups with and without the reinsurance option, this study examines whether low-income people are price-sensitive when it comes to pharmaceutical spending. We use a unique dataset from a Dutch health insurer with anonymized individual insurance claims for the period 2014–2017. The data allows for a clean difference-in-difference analysis as it contains both municipalities without reinsurance and municipalities that introduced reinsurance on January 1st 2017.We find that the introduction of reinsurance led to a statistically significant increase in pharmaceutical spending of 16% in the first quarter of 2017 and 7% in the second quarter. For the second half of 2017 the effect is small and not statistically significant. This study adds to the evidence that low-income people are indeed price-sensitive when it comes to pharmaceutical spending.     

Estimating the cost of hospital treatment for injuries using linked morbidity data

This paper describes the analysis of injury-related linked hospital morbidity data by admissions and by individual patients in Western Australia (WA) from 1990 to 1994. Over this five-year period, there were an average of 35,385 admissions and 30,524 people admitted each year for injuries in WA. The age-standardised rates for injury-related hospital admissions and persons admitted for injuries increased significantly, by 2.4% and 1.5% per year respectively, over the five-year period. The number of admissions and the number of persons admitted peaked in the 20–24 years age group but the highest rates were among those aged 75 years and above.
Injuries accounted for nearly 10% of all hospital bed day costs and cost about $50 per head of population per year. The cost of hospitalisation rose steadily from $85.2 million in 1990 to $113.6 million in 1994, the average cost being nearly $100 million per year. The average cost per injury related hospital episode was $2,748.
Generally, the cost per hospital episode was higher for males and increased with age, following a similar pattern to that for the average length of stay.     

Moral hazard in insurance, value-based cost sharing, and the benefits of blissful ignorance

The conventional theory of optimal coinsurance rates for health insurance with moral hazard indicates that coinsurance should vary with the price responsiveness or price-elasticity of demand for different medical services. An alternative theory called "value-based cost sharing" indicates that coinsurance should be lower for services with higher (marginal) benefits relative to costs. This paper reconciles the two views. It shows that, if patient demands are based on correct information, optimal coinsurance is the same under either theory. If patient demands differ from informed demands, optimal coinsurance depends both on information imperfection and price responsiveness. Value-based cost sharing can be superior to providing information (even if the cost of information is minimal) when patient demands fall short of informed demands. An extended numerical example illustrates these points.     

Predicting Treatment Cost for Bacterial Diarrhoeaat a Regional Hospital in Thailand

The aim of this study was to estimate the treatment cost and formulate a cost-function for bacterial diarrhoea among patients in a Thai regional hospital. This study was an incidence-based cost-of-illness analysis from a hospital perspective, employing a micro-costing approach. It covered new episodes of both outpatients and inpatients who were diagnosed to have bacterial diarrhoea (ICD-10 code A00-A05) and who received treatment during 1 October 2000–31 July 2003. Retrospective data were collected from medical records of the hospital. The study covered 384 episodes, and the mean age of patients was 24 years. The average treatment costs (at 2002 prices; US$ 1=approximately 40 Thai baht) were US$ 11.29, 76.78, and 44.72 per outpatient episode, inpatient episode, and outpatient/inpatient combined episode respectively. Furthermore, the positive significant predictor variables were: inpatient care, other Salmonella-associated infections, shigellosis, other bacterial intestinal infections, and the health insurance scheme. The fitted model was able to predict greater than 80% of the treatment cost. The estimation of simulated patients demonstrated a wide range of costs, from US$ 10 per episode to US$ 163 per episode. Overall, hospital administrators can apply these results in cost-containment interventions.Key words: Bacteria, Cost-function analysis, Cost and cost analysis, Diarrhoea, Health expenditure, Healthcare cost, Retrospective studies, Thailand     

Trends in out-of-pocket spending by insured American workers, 1990-1997

This paper examines trends in out-of-pocket spending for insured workers from 1990 to 1997. Data are from the Consumer Expenditure Survey conducted by the U.S. Bureau of Labor Statistics. The survey collects detailed quarterly data on all consumer spending from logs kept each year by more than 10,000 households with job-based health insurance. During the study period, total out-of-pocket spending in constant dollars remained unchanged. Spending for medical expenses, drugs, and supplies declined by 23 percent, but this decline was offset by rising employee contributions for health insurance premiums. The shift to managed care, whose benefit structure requires less cost sharing, may have played a role in reducing out-of-pocket spending.     

Effects of cost sharing on long-term care service utilization among home-dwelling older adults in Japan

ObjectivesThis study aimed to examine the effect of increased cost sharing on long-term care (LTC) service utilization among home-dwelling older adults, using nationwide long-term care insurance (LTCI) claims data in Japan.MethodsIn August 2015, the coinsurance rate for Japanese LTCI increased from 10% to 20% for higher-income beneficiaries. We analyzed 27,911,076 person-month observations between April 2015 and July 2016 from 1,983,163 home-dwelling older adults (aged ≥ 65 years). We employed a difference-in-differences approach to estimate the effect of the increased coinsurance rate on overall LTC service utilization and for each of the four main service subcategories. The control group comprised those whose coinsurance rates remained at 10%.ResultsThe treatment group, whose coinsurance rate increased, accounted for 9.6% of all participants. The raised coinsurance rate caused statistically significant reductions of 0.46% (95% confidence interval [CI]: 0.36%, 0.56%) and $25.7 (95% CI: $23.7, $27.8) in the percentage of utilization of LTC services and total monthly LTC expenditures per person, respectively. Service utilization decreased in each of the four service subcategories.ConclusionsThe increased coinsurance rate resulted in statistically significant but small reductions in LTC service utilization overall and in each service type among higher-income home-dwelling beneficiaries. Requiring more cost sharing from higher-income individuals may alleviate the fiscal burden on LTC systems without serious reductions in service utilization.     

Lack of access due to costs remains a problem for some in Massachusetts despite the state's health reforms

Did the Massachusetts health reforms, which provided near-universal insurance coverage, also address problems of unmet need resulting from the cost of care and of inadequate preventive care for diverse patient groups? We found that nearly a quarter of adults who were in fair or poor health reported being unable to see a doctor because of cost during the implementation of the reforms. We also found that state residents earning less than $25,000 per year were much less likely than higher earners to receive screening for cardiovascular disease and cancer. The state needs to implement new strategies to build on the promise of universal coverage and address specific needs of vulnerable populations, such as limiting out-of-pocket spending for this group. Also, more data are needed on the social determinants of health to identify specific barriers related to cost and access for vulnerable groups that general insurance reforms may not address.     

Costs of dying: alternatives to rationing

In western industrialised countries, about 30% of health-care expenditure of retired people is incurred by individuals in their last year of life. The corresponding high costs of dying have led medical philosophers to ask for a rationing of health-care services according to age. By contrast, this paper pursues an individualistic approach. High costs of dying are identified as a consequence of moral hazard on both the demand and supply side of the health-care sector. Health insurance prevents demand for health-care services from decreasing when an individual's residual life expectancy shrinks. Age-related moral hazard can be limited by a coinsurance scheme with a deductible that increases with the age of the insured. Given the high costs of dying, the optimal insurance policy links the coinsurance rate to the age-specific mortality risk.     

The impact of change from copayment to coinsurance on medical care usage and expenditure in outpatient setting in older Koreans

Patient cost‐sharing change was implemented on August 1, 2007, for outpatient care in the clinic setting in Korea from copayment to coinsurance. This study aims to estimate the effect of the policy change on medical care usage and expenditure in older Koreans. By using national health insurance claims data from the Health Insurance Reimbursement Assessment Service, this study analyzed the entire 137 million claims for a total of approximately 4.1 million patients aged 60 to 69 years who had been diagnosed and/or treated for outpatient care in clinics from January 1, 2007, to December 31, 2008. Medical care usage was defined as the proportion of all beneficiaries in each group who visited clinics and the mean number of visit days per beneficiary. Medical care expenditure per visit day was expressed as total costs, reimbursed amount, and patient's out‐of‐pocket payment. Data on January through June of 2008 were analyzed as compared with the same months of 2007. Raw difference‐in‐difference and multiple regression analyses were performed. The interaction coefficients, which measured the impact of cost‐sharing change, was ?0.078 in model 1 and ?0.039 in model 2 (P < .0001). In conclusion, a cost‐sharing change from copayment to coinsurance reduced medical care usage and expenditure.     

A median voter model of health insurance with ex post moral hazard

One of the main features of health insurance is moral hazard, as defined by Pauly [Pauly, M.V., 1968. The economics of moral hazard: comment. American Economic Review 58, 531-537), people face incentives for excess utilization of medical care since they do not pay the full marginal cost for provision. To mitigate the moral hazard problem, a coinsurance can be included in the insurance contract. But health insurance is often publicly provided. Having a uniform coinsurance rate determined in a political process is quite different from having different rates varying in accordance with one's preferences, as is possible with private insurance. We construct a political economy model in order to characterize the political equilibrium and answer questions like: "Under what conditions is there a conflict in society on what coinsurance rate should be set?" and "Which groups of individuals will vote for a higher and lower than equilibrium coinsurance rate, respectively?". We also extend our basic model and allow people to supplement the coverage provided by the government with private insurance. Then, we answer two questions: "Who will buy the additional coverage?" and "How do the coinsurance rates people are now faced with compare with the rates chosen with pure private provision?".     

Estimating Determinants of Multiple Treatment Episodes for Substance Abusers

BACKGROUND: Health services researchers have increasingly used hazard functions to examine illness or treatment episode lengths and related treatment utilization and treatment costs. There has been little systematic hazard analysis, however, of mental health/substance abuse (MH/SA) treatment episodes. AIMS OF THE STUDY: This article uses proportional hazard functions to characterize multiple treatment episodes for a sample of insured clients with at least one alcohol or drug treatment diagnosis over a three-year period. It addresses the lengths and timing of treatment episodes, and the relationships of episode lengths to the types and locations of earlier episodes. It also identifies a problem that occurs when a portion of the sample observations is ?possibly censored. Failure to account for sample censoring will generate biased hazard function estimates, but treating all potentially censored observations as censored will overcompensate for the censoring bias. METHODS: Using insurance claims data, the analysis defines health care treatment episodes as all events that follow the initial event irrespective of diagnosis, so long as the events are not separated by more than 30 days. The distribution of observations ranges from 1 day to 3 years, and individuals have up to 10 episodes. Due to the data collection process, observations may be right censored if the episode is either ongoing at the time that data collection starts, or when the data collection effort ends. The Andersen-Gill (AG) and Wei-Lin-Weissfeld (WLW) estimation methods are used to address relationships among individuals multiple episodes. These methods are then augmented by a probit censoring model that estimates censoring probability and adjusts estimated behavioral coefficients and related treatment utilization and treatment costs. There has been little systematic hazard analysis, however, of mental health/substance abuse (MH/SA) treatment episodes. RESULTS: Five sets of variables explain episode duration: (i) individual; (ii) insurance; (iii) employer; (iv) binary, indicating episode diagnosis, location, and sequence; and (v) linkage, relating current diagnoses to previous diagnoses in a sequence. Sociodemographic variables such as age or gender have impacts at both the individual and at the firm level. Coinsurance rates and deductibles also have impacts at the individual and the firm levels. Binary variables indicate that surgical/outpatient episodes were the shortest, and psychiatric/outpatient episodes were the longest. Linkage variables reveal significant impacts of prior alcoholism, drug, and psychiatric episodes on the lengths of subsequent episodes. DISCUSSION: Health care treatment episodes are linked to each other both by diagnosis and by treatment location. Both the AG and the WLW models have merit for treating multiple episodes. The AG model permits more flexibility in estimating hazards, and allows researchers to model impacts of prior diagnoses on future episodes. The WLW model provides a convenient way to examine impacts of sociodemographic variables across episodes. It also provides efficient pooled estimates of coefficients and their standard errors. LIMITATIONS: The insurance claims data set covers 1989 through 1991, predating current managed care plans. It cannot identify untreated substance abusers, nor can it identify those with out-of-plan use. It provides treatment information only if services are covered by the insurance plan and are defined with a substance abuse diagnosis code. Like medical records, insurance claims will not specify substance abuse treatment received within the context of other health care (and thus identified by a non-substance abuse diagnosis code) or community services. IMPLICATIONS FOR POLICY AND RESEARCH: This article characterizes multiple health treatment episodes for a sample of insured clients with at least one alcohol or drug treatment diagnosis within a three-year period. We identify both individual and employer effects on episode length. We find that episode lengths vary by the diagnosis type, and that the lengths (and by inference cost and utilization) may depend on the treatments that occurred in previous episodes. We also recognize that health care or illness episodes may be ongoing at times of health care events prior to the ends of data collection periods, leading to uncertain episode lengths. Corresponding estimates of costs or utilization are also uncertain. We provide a method that adjusts the episode lengths according to the probability of censoring.     

A decade of health care cost growth has wiped out real income gains for an average US family

Although a median-income US family of four with employer-based health insurance saw its gross annual income increase from $76,000 in 1999 to $99,000 in 2009 (in current dollars), this gain was largely offset by increased spending to pay for health care. Monthly spending increases occurred in the family's health insurance premiums (from $490 to $1,115), out-of-pocket health spending (from $135 to $235), and taxes devoted to health care (from $345 to $440). After accounting for price increases in other goods and services, the family had $95 more in monthly income to devote to nonhealth spending in 2009 than in 1999. By contrast, had the rate of health care cost growth not exceeded general inflation, the family would have had $545 more per month instead of $95-a difference of nearly $5,400 per year. Even the $95 gain was artificial, because tax collections in 2009 were insufficient to cover actual increases in federal health spending. As a result, we argue, the burdens imposed on all payers by steadily rising health care spending can no longer be ignored.