The ACA's Choice Problem.

The Affordable Care Act (ACA) is in many ways a success. Millions more Americans now have access to health care, and the ACA catalyzed advances in health care delivery reform. Simultaneously, it has reinforced and bolstered a problem at the heart of American health policy and regulation: a love affair with choice. The ACA's insurance reforms doubled down on the particularly American obsession with choice. This article describes three ways in which that doubling down is problematic for the future of US health policy. First, pragmatically, health policy theory predicts that choice among health plans will produce tangible benefits that it does not actually produce. Most people do not like choosing among health plan options, and many people-even if well educated and knowledgeable-do not make good choices. Second, creating the regulatory structures to support these choices built and reinforced a massive market bureaucracy. Finally, and most important, philosophically and sociologically the ACA reinforces the idea that the goal of health regulation should be to preserve choice, even when that choice is empty. This vicious cycle seems likely to persist based on the lead up to the 2020 presidential election.

Does managed competition constrain hospitals' contract prices? Evidence from the Netherlands.

In the Dutch health care system, health insurers negotiate with hospitals about the pricing of hospital products in a managed competition framework. In this paper, we study these contract prices that became for the first time publicly available in 2016. The data show substantive price variation between hospitals for the same products, and within a hospital for the same product across insurers. About 27% of the contract prices for a hospital product are at least 20% higher or lower than the average contract price in the market. For about half of the products, the highest and the lowest contract prices across hospitals differ by a factor of three or more. Moreover, hospital product prices do not follow a consistent ranking across hospitals, suggesting substantial cross-subsidization between hospital products. Potential explanations for the large and seemingly random price variation are: (i) different cost pricing methods used by hospitals, (ii) uncertainty due to frequent changes in the hospital payment system, (iii) price adjustments related to negotiated lumpsum payments and (iv) differences in hospital and insurer market power. Several policy options are discussed to reduce variation and increase transparency of hospital prices.

Data transformations to improve the performance of health plan payment methods.

The conventional method for developing health care plan payment systems uses observed data to study alternative algorithms and set incentives for the health care system. In this paper, we take a different approach and transform the input data rather than the algorithm, so that the data used reflect the desired spending levels rather than the observed spending levels. We present a general economic model that incorporates the previously overlooked two-way relationship between health plan payment and insurer actions. We then demonstrate our systematic approach for data transformations in two Medicare applications: underprovision of care for individuals with chronic illnesses and health care disparities by geographic income levels. Empirically comparing our method to two other common approaches shows that the "side effects" of these approaches vary by context, and that data transformation is an effective tool for addressing misallocations in individual health insurance markets.

Do quality improvements in assisted reproduction technology increase patient numbers in a managed competition setting?

In a system of managed competition, selective contracting and patient choice reward providers for quality improvements through increases in patient numbers and revenue. We research whether these mechanisms function as envisioned by investigating the relationship between quality improvements and patient numbers in assisted reproduction technology in the Netherlands. Success rate improvements primarily reduce volume as fewer secondary treatments are necessary, but this can be compensated by attracting new patients. Using nationwide registry data from 1996 to 2016, we find limited evidence that high-quality clinics attract new patients, and insufficiently as to compensate for the reduction in secondary treatments. The net effect of quality increases appears to be a small decline in revenue. Therefore, we conclude that patient choice and active purchasing reward quality improvements insufficiently. Nevertheless, clinics have improved quality drastically over the last years, showing that financial incentives are perhaps less important factors for quality improvements than factors such as intrinsic motivation and professional autonomy.

Managed competition in the Netherlands: Do insurers have incentives to steer on quality?

In health care systems based on managed competition, insurers are expected to negotiate with providers about price, quantity, and quality of care. The Dutch experience shows that this expectation may be justified with regard to price and quantity, but for quality the results are less conclusive. To examine the incentives insurers face for enhancing quality of care, we conducted in-depth interviews with CEOs and organised separate focus groups with purchasers and marketers of five Dutch health insurers. Jointly these insurers account for more than 90 percent of the market. We distinguished three categories of both positive and negative incentives to steer on quality: social, competitive and financial incentives. The overall picture emerging is that insurers are caught in a struggle between positive and negative incentives, with CEOs being more positive about the incentives to steer on quality than purchasers and marketers. At present, the social mission perceived by insurers seems to be their most important driver to invest in quality enhancement. However, whether or not the role of the social mission is sustainable in a competitive market remains unclear. Improving publicly available information on quality therefore seems to be crucially important for reinforcing the positive as well as counteracting the negative incentives insurers face with respect to enhancing quality of care.

Advice from the health insurer as a channelling strategy: a natural experiment at a Dutch health insurance company.

BACKGROUND: In a health care system based on managed competition it is important that health insurers are able to channel their enrolees to preferred care providers. However, enrolees are often very negative about financial incentives and any limitations in their choice of care provider. Therefore, a Dutch health insurance company conducted an experiment to study the effectiveness of a new method of channelling their enrolees. This method entails giving enrolees advise on which physiotherapists to choose when they call customer service. Offering this advice as an extra service is supposed to improve service quality ratings. Objective of this study is to evaluate this channelling method on effectiveness and the impact on service quality ratings. METHODS: In this experiment, one of the health insurer's customer service call teams (pilot team) began advising enrolees on their choice of physiotherapist. Three data sources were used. Firstly, all enrolees who called customer service received an online questionnaire in order to measure their evaluation of the quality of service. Enrolees who were offered advice received a slightly different questionnaire which, in addition, asked about whether they intended to follow the advice they were offered. Multilevel regression analysis was conducted to analyse the difference in service quality ratings between the pilot team and two comparable customer service teams before and after the implementation of the channelling method. Secondly, employees logged each call, registering, if they offered advice, whether the enrolee accepted it, and if so, which care provider was advised. Thirdly, data from the insurance claims were used to see if enrolees visited the recommended physiotherapist. RESULTS: The results of the questionnaire show that enrolees responded favorably to being offered advice on the choice of physiotherapist. Furthermore, 45% of enrolees who received advice and then went on to visit a care provider, followed the advice. The service quality ratings were higher compared to control groups. However, it could not be determined whether this effect was entirely due to the intervention. CONCLUSIONS: Channelling enrolees towards preferred care providers by offering advice on their choice of care provider when they call customer service is successful. The effect on service quality seems positive, although a causal relationship could not be determined.

With Roots In California, Managed Competition Still Aims To Reform Health Care.

Managed competition is a concept that was born in California and has achieved a measure of acceptance there. As California and the United States as a whole continue to struggle with the challenge of providing high-quality health care at a manageable cost, it is worth asking whether managed competition-with its tools for harnessing market forces-continues to hold promise as a means of improving value in health care, and whether the standard conceptualization of managed competition should be modified in any way. In this article we reflect on four aspects of California's health care ecosystem that provide insights into these questions: integrated delivery systems, patients' choice of health plans, quality measurement, and new health care marketplace architectures such as Covered California and private insurance exchanges. Overall, while California's experience with managed competition has resulted in some challenges and adaptations, it also gives reason to believe that principles of managed competition continue to have the potential to be a powerful force toward creating a more efficient health care system.

Managing imperfect competition by pay for performance and reference pricing.

I study a managed health service market where differentiated providers compete for consumers by choosing multiple service qualities, and where copayments that consumers pay and payments that providers receive for services are set by a payer. The optimal regulation scheme is two-sided. On the demand side, it justifies and clarifies value-based reference pricing. On the supply side, it prescribes pay for performance when consumers misperceive service benefits or providers have intrinsic quality incentives. The optimal bonuses are expressed in terms of demand elasticities, service technology, and provider characteristics. However, pay for performance may not outperform prospective payment when consumers are rational and providers are profit maximizing, or when one of the service qualities is not contractible.

Japanese healthcare: Fostering competition and controlling costs.

Japan's universal healthcare system is relatively inexpensive, provides accessible services, and was established nearly 10 years before Canada's. Two aspects of Japan's system are particularly interesting. The first is that there is active competition for patients between a variety of hospital providers, which can be privately or publicly owned. This competition is based on service quality because prices are set centrally. The second feature is that these prices are adjusted biannually by a National Council, the Chuikyo, that includes payers (employers), providers, and third-party experts in public negotiations. This process improves transparency, reduces political stakes, and allows for appropriate fee adjustments. Recent movements in Canada toward more activity-based funding and greater management accountability are developing the capabilities of healthcare executives to embrace these ideas, if introduced in Canada. The increased autonomy afforded to providers will empower their leaders to make strategic decisions to improve the quality and efficiency of healthcare services.

Competition policy for health care provision in the Netherlands.

In the Netherlands in 2006 a major health care reform was introduced, aimed at reinforcing regulated competition in the health care sector. Health insurers were provided with strong incentives to compete and more room to negotiate and selectively contract with health care providers. Nevertheless, the bargaining position of health insurers vis-à-vis both GPs and hospitals is still relatively weak. GPs are very well organized in a powerful national interest association (LHV) and effectively exploit the long-standing trust relationship with their patients. They have been very successful in mobilizing public support against unfavorable contracting practices of health insurers and enforcement of the competition act. The rapid establishment of multidisciplinary care groups to coordinate care for patients with chronic diseases further strengthened their position. Due to ongoing horizontal consolidation, hospital markets in the Netherlands have become highly concentrated. Only recently the Dutch competition authority prohibited the first hospital merger. Despite the highly concentrated health insurance market, it is unclear whether insurers will have sufficient countervailing buyer power vis-à-vis GPs and hospitals to effectively fulfill their role as prudent buyer of care, as envisioned in the reform. To prevent further consolidation and anticompetitive coordination, strict enforcement of competition policy is crucially important for safeguarding the potential for effective insurer-provider negotiations about quality and price.

Policies towards hospital and GP competition in five European countries.

This study provides an overview of policies affecting competition amongst hospitals and GPs in five European countries: France, Germany, Netherlands, Norway and Portugal. Drawing on the policies and empirical evidence described in five case studies, we find both similarities and differences in the approaches adopted. Constraints on patients' choices of provider have been relaxed but countries differ in the amount and type of information that is provided in the public domain. Hospitals are increasingly paid via fixed prices per patient to encourage them to compete on quality but prices are set in different ways across countries. They can be collectively negotiated, determined by the political process, negotiated between insurers and providers or centrally determined by provider costs. Competition amongst GPs varies across countries and is limited in some cases by shortages of providers or restrictions on entry. There are varied and innovative examples of selective contracting for patients with chronic conditions aimed at reducing fragmentation of care. Competition authorities do generally have jurisdiction over mergers of private hospitals but assessing the potential impact of mergers on quality remains a key challenge. Overall, this study highlights a rich diversity of approaches towards competition policy in healthcare.

Oncology payment reform to achieve real health care reform.

Cancer care is transforming, moving toward increasingly personalized treatment with the potential to save and improve many more lives. Many oncologists and policymakers view current fee-for-service payments as an obstacle to providing more efficient, high-quality cancer care. However, payment reforms create new uncertainties for oncologists and may be challenging to implement. In this article, we illustrate how accountable care payment reforms that directly align payments with quality and cost measures are being implemented and the opportunities and challenges they present. These payment models provide more flexibility to oncologists and other providers to give patients the personalized care they need, along with more accountability for demonstrating quality improvements and overall cost or cost growth reductions. Such payment reforms increase the importance of person-level quality and cost measures as well as data analysis to improve measured performance. We describe key features of quality and cost measures needed to support accountable care payment reforms in oncology. Finally, we propose policy recommendations to move incrementally but fundamentally to payment systems that support higher-value care in oncology.

Demand-side strategies to deal with moral hazard in public insurance for long-term care.

Moral hazard in public insurance for long-term care may be counteracted by strategies influencing supply or demand. Demand-side strategies may target the patient or the insurer. Various demand-side strategies and how they are implemented in four European countries (Germany, Belgium, Switzerland and the Netherlands) are described, highlighting the pros and cons of each strategy. Patient-oriented strategies to counteract moral hazard are used in all four countries but their impact on efficiency is unclear and crucially depends on their design. Strategies targeted at insurers are much less popular: Belgium and Switzerland have introduced elements of managed competition for some types of long-term care, as has the Netherlands in 2015. As only some elements of managed competition have been introduced, it is unclear whether it improves efficiency. Its effect will depend on the feasibility of setting appropriate financial incentives for insurers using risk equalization and the willingness of governments to provide insurers with instruments to manage long-term care.

More choice in health insurance marketplaces may reduce the value of the subsidies available to low-income enrollees.

Federal subsidies available to enrollees in health insurance Marketplaces are pegged to the premium of the second-lowest-cost silver plan available in each rating area (as defined by each state). People who qualify for the subsidy contribute a percentage of their income to purchase coverage, and the federal government covers the remaining cost up to the price of that premium. Because the number of plans offered and plan premiums vary substantially across rating areas, the effective value of the subsidy may vary geographically. We found that the availability of more plans in a rating area was associated with lower premiums but higher deductibles for enrollees in the second-lowest-cost silver plan. In rating areas with more than twenty plans, the average deductible in the second-lowest-cost silver plan was nearly $1,000 higher than it was in rating areas with fewer than thirteen plans. Because premium costs for second-lowest-cost silver plans are capped, deductibles may be a more salient measure of plan value for enrollees than premiums are. Greater standardization of plans or an alternative approach to calculating the subsidy could provide a more consistent benefit to enrollees across various rating areas.

Market competition and price of disease management programmes: an observational study.

BACKGROUND: Managed competition was introduced into the health care system in several countries including the Netherlands, although effects of competition of both providers and health insurers on the price of health care are inconclusive. We investigated the association between competition of both providers (care groups) and health insurers and the price of disease management programmes (DMPs). METHODS: Data from 76 DMP contractual agreements for type II diabetes mellitus in 2008, 2009 and 2010 were used to analyse the association between market competition and the price of DMPs. Market competition was calculated per municipal health services region (GGD). Insurer market competition was measured by the Herfindahl-Hirschman Index (HHI), care group competition by the number of care groups and the care group market share of GPs. The effect of competition was cross-sectionally studied with linear regression analyses. RESULTS: Insurer market concentration (HHI) and care group market share were not associated with the price of DMPs. The number of care groups in a GGD region was associated with a lower price (-€4.68; 95% CI: -8.36 - -1.00). The mean difference in the price of DMPs between health insurers was €58. CONCLUSIONS: The price of DMPs seems to be more dependent on the particular health insurer than on market conditions. For competition among health insurers and provider groups to develop, preconditions such as selective contracting and option for patient to change provider should be in place.