Effect of cost-sharing on the use of medical services by children: interim results from a randomized controlled trial.

Health care expenditures of 1,136 children whose families participated in a randomized trial, The Rand Health Insurance Experiment, are reported. Children whose families were assigned to receive 100% reimbursement for health costs spent one third more per capita than children whose families paid 95% of medical expenses up to a family maximum. Outpatient use decreased as cost-sharing rose for a variety of use measures: the probability of seeing a doctor, annual expenditures, number of visits per year, and numbers of outpatient treatment episodes. Hospital expenditures did not vary significantly among children insured with varying levels of cost-sharing. Episodes of treatment for preventive care were as responsive to cost-sharing as episodes for acute or chronic illness. The results give no reason not to insure preventive care as liberally as care for acute illness.

Consequences of cost-sharing for children's health.

Do children whose families bear a percentage of their health care costs reduce their use of ambulatory care compared with those families who receive free care? If so, does the reduction affect their health? To answer these questions, 1,844 children aged 0 to 13 years were randomly assigned (for a period of 3 or 5 years) to one of 14 insurance plans. The plans differed in the percentage of their medical bills that families paid. One plan provided free care. The others required up to 95% coinsurance subject to a +1,000 maximum. Children whose families paid a percentage of costs reduced use by up to one third. For the typical child in the study, this reduction caused no significant difference in either parental perceptions of their child's health or in physiologic measures of health. Confidence intervals are sufficiently narrow for most measures to rule out the possibility that large true differences went undetected. Nor were statistically significant differences observed for children at risk of disease. Wider confidence intervals for these comparisons, however, mean that clinically meaningful differences, if present, could have been undetected in certain subgroups.

Effect of epidural analgesia for labor on the cesarean delivery rate.

OBJECTIVE: To use meta-analysis to evaluate the effect of epidural analgesia on the cesarean delivery rate. DATA SOURCES: The MEDLINE data base was searched for articles published in English between January 1981 and April 1992. We also interviewed experts and conducted a bibliographic follow-up and manual review of recent journals published from April to July 1992. METHODS OF STUDY SELECTION: We excluded articles with irrelevant titles, and those case studies, book chapters, or articles that did not provide primary and relevant data. Two hundred thirty articles were read, including articles that reported on women of standard obstetric risk and on cesarean delivery rates for an epidural group and for a concurrent no-epidural group. These criteria yielded six studies for a primary analysis and two others for a secondary analysis. DATA EXTRACTION AND SYNTHESIS: The sample size of the epidural and no-epidural groups and the number of cesareans within each group were extracted. Tests of homogeneity were conducted. The pooled cesarean delivery risk difference as a result of epidural analgesia was estimated. The cesarean rate for women undergoing epidural analgesia was ten percentage points greater than for no-epidural women (P < .05). More than a nine percentage point increase was shown for cesarean deliveries for dystocia (P < .05), when pooling either all studies or only randomized studies. CONCLUSIONS: The results of this meta-analysis strongly support an increase in cesarean delivery associated with epidural analgesia. Further research should evaluate the balance between analgesia associated with the use of epidurals, and postpartum morbidity and costs associated with cesarean deliveries.

The value of remaining lifetime is close to estimated values of life.

Workers under 50 on average will spend 10-20% of their future hours working. So, assuming they value leisure time at the wage rate, the value of their lives is 5-10 times their future lifetime earnings. This value is close to values of life estimated by compensating wage differentials or willingness to pay.

The demand for episodes of treatment in the Health Insurance Experiment.

This paper analyzes claims data from the RAND Insurance Experiment, which were grouped into episodes of treatment. The insurance plans in the experiment have coinsurance and a cap on out-of-pocket spending. Using new statistical techniques to adjust for the increased sickliness of those who exceed the cap, the effects of coinsurance on cost per episode and number of episodes are estimated. Cost sharing reduced the number of episodes but had little effect on cost per episode. People in the experiment responded myopically as their current insurance status changed through the year. The price elasticity of spending was about -0.2 throughout the range of coinsurance studied. When data permit it, the study of episodes complements analyses of annual medical spending by revealing more about how decisions to spend are made within the year.

A model of the impact of reimbursement schemes on health plan choice.

Flat capitation (uniform prospective payments) makes enrolling healthy enrollees profitable to health plans. Plans with relatively generous benefits may attract the sick and fail through a premium spiral. We simulate a model of idealized managed competition to explore the effect on market performance of alternatives to flat capitation such as severity-adjusted capitation and reduced supply-side cost-sharing. In our model flat capitation causes severe market problems. Severity adjustment and to a lesser extent reduced supply-side cost-sharing improve market performance, but outcomes are efficient only in cases in which people bear the marginal costs of their choices.

The changing effects of competition on non-profit and for-profit hospital pricing behavior.

Has the nature of hospital competition changed from a medical arms race in which hospitals compete for patients by offering their doctors high quality services to a price war for the patients of payors? This paper uses time-series cross-sectional methods on California hospital discharge data from 1986-1994 to show the association of hospital prices with measures of market concentration changed steadily over this period, with prices now higher in less competitive areas, even for non-profit hospitals. Regression results are used to simulate the price impact of hypothetical hospital mergers.

Insurance aspects of DRG outlier payments.

As part of the prospective payment system, the government pays 'outlier' payments for especially long or expensive cases. These payments can be viewed as insurance for the hospital against excessive losses. They mitigate problems of access and underprovision of care for the sickest patients, and provide additional payments to the hospitals that take care of them, thereby making payments to hospitals more equitable. This paper characterizes the outlier payment formulae that minimize risk for hospitals under any fixed constraints on the sum of outlier payments and minimum hospital coinsurance rate. We then simulate per-case payments for a policy that did not include any outlier payments, the current outlier policy, and several other policies that minimize risk subject to different coinsurance constraints. The current outlier policy achieves each of its goals to at least some extent, but more insurance could be provided without lessening attainment of the other goals. We also discuss some problems with the implementation of the current policy, such as its reliance on day outliers.

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.

Simulating the impact of medical savings accounts on small business.

OBJECTIVE: To simulate whether allowing small businesses to offer employer-funded medical savings accounts (MSAs) would change the amount or type of insurance coverage. STUDY SETTING: Economic policy evaluation using a national probability sample of nonelderly non-institutionalized Americans from the 1993 Current Population Survey (CPS). STUDY DESIGN: We used a behavioral simulation model to predict the effect of MSAs on the insurance choices of employees of small businesses (and their families). The model predicts spending by each family in a FFS plan, an HMO plan, an MSA, and no insurance. These predictions allow us to compute community-rated premiums for each plan, but with firm-specific load fees. Within each firm, employees then evaluate each option, and the firm decides whether to offer insurance-and what type-based on these evaluations. If firms offer insurance, we consider two scenarios: (1) all workers elect coverage; and (2) workers can decline the coverage in return for a wage increase. PRINCIPAL FINDINGS: In the long run, under simulated conditions, tax-advantaged MSAs could attract 56 percent of all employees offered a plan by small businesses. However, the fraction of small-business employees offered insurance increases only from 41 percent to 43 percent when MSAs become an option. Many employees now signing up for a FFS plan would switch to MSAs if they were universally available. CONCLUSIONS: Our simulations suggest that MSAs will provide a limited impetus to businesses that do not currently cover insurance. However, MSAs could be desirable to workers in firms that already offer HMOs or standard FFS plans. As a result, expanding MSA availability could make it a major form of insurance for covered workers in small businesses. Overall welfare would increase slightly.

Adjusting cesarean delivery rates for case mix.

OBJECTIVES: (1) To describe the issues in developing a clinical predictor of cesarean delivery that could be used to adjust reported cesarean rates for case mix, and (2) to compare its performance to other, simpler predictors using clinical and statistical criteria. DATA SOURCES: Singleton births greater than 2,500 grams in Washington State in 1989 and 1990 for whom mothers and infant hospital discharge records could be matched to birth certificate data. DESIGN: Statistical analysis of retrospective merged hospital and birth certificate data, which were used to develop variables and models to predict the probability that any particular delivery would be a cesarean. PRINCIPAL FINDINGS: Merged data led to better predictor variables than those based on one source. A simple four-category hierarchical classification into births with prior cesarean, breech but no prior cesarean, first birth, and other explains 30 percent of the variance in individual cesarean rates. The full clinical model fit the data well and explained 37 percent of the variance. Multiparas without serious complications comprised 35 percent of the mothers and averaged less than 2 percent cesareans. A hospital's predicted cesarean rate depends strongly on the proportion of its births that are first births. CONCLUSION: Government and private agencies have reported cesarean rates as measures of hospital performance. Depending on data and resources available, both simple and complex measures of case mix can be used to adjust reported rates. These adjustments should not include all variables related to the rates. Proper adjustments may not alter hospital rankings greatly, but they will improve the validity and acceptability of the reports.

Effects of cost sharing on physiological health, health practices, and worry.

In a randomized trial of the effects of medical insurance on spending and the health status of the nonaged, we previously reported that patients with limited cost sharing had approximately one-third less use of medical services, similar general self-assessed health, and worse blood pressure, functional far vision, and dental health than those with free care. Of the 20 additional measures of physiological health studied here on 3,565 adults, people with cost sharing scored better on 12 measures and significantly worse only for functional near vision. People with cost sharing had less worry and pain from physiological conditions on 33 of 44 comparisons. There were no significant differences between plans in nine health practices, but those with cost sharing fared worse on three types of cancer screening and better on weight, exercise, and drinking. Overall, except for patients with hypertension or vision problems, the effects of cost sharing on health were minor.

Choosing quality of care measures based on the expected impact of improved care on health.

Consumers, payers, and policymakers are demanding to know more about the quality of the services they are purchasing or might purchase. The information provided, however, is often driven by data availability rather than by epidemiologic and clinical considerations. In this article, we present an approach for selecting topics for measuring technical quality of care, based on the expected impact on health of improved quality. This approach employs data or estimates on disease burden, efficacy of available treatments, and the current quality of care being provided. We use this model to select measures that could be used to measure the quality of care in health plans, but the proposed framework could also be used to select quality of care measures for other purposes or in other contexts (for example, to select measures for hospitals). Given the limited resources available for quality assessment and the policy consequences of better information on provider quality, priorities for assessment efforts should focus on those areas where better quality translates into improved health.

Are the diagnosis-related group case weights compressed?

One problem noted recently with the diagnosis-related group payment system is that the distribution of Medicare case weights and case-mix indexes are compressed; that is, the payment rates for high-cost procedures are too low and those for low-cost procedures are too high. Despite the attention compression has received, there are no direct estimates of its magnitude or importance. Presented in this article are an empirical test for compression and a suggestion for a simple correction to decompress the relative prices.

Risk adjustment for a children's capitation rate.

Few capitation arrangements vary premiums by a child's health characteristics, yielding an incentive to discriminate against children with predictably high expenditures from chronic diseases. In this article, we explore risk adjusters for the 35 percent of the variance in annual out-patient expenditure we find to be potentially predictable. Demographic factors such as age and gender only explain 5 percent of such variance; health status measures explain 25 percent, prior use and health status measures together explain 65 to 70 percent. The profit from risk selection falls less than proportionately with improved ability to adjust for risk. Partial capitation rates may be necessary to mitigate skimming and dumping.

Adjusting capitation rates using objective health measures and prior utilization.

Several analysts have proposed adding adjusters based on health status and prior utilization to the adjusted average per capita cost formula. The authors estimate how well such adjusters predict annual medical expenditures among non-elderly adults. Both measures substantially improve on the variables currently used. If only health measures are added, 20-30 percent of the predictable variance is explained; if only prior use is added, more than 40 percent is explained; if both are added, about 60 percent is explained. The results support including some measure of use in the formula until better health measures are developed.

A clinically detailed risk information system for cost.

The authors discuss a system that describes the resources needed to treat different subgroups of the population under age 65, based on burden of disease. It is based on 173 conditions, each with up to 3 severity levels, and contains models that combine prospective diagnoses with retrospectively determined elements. We used data from four different payers and standardized the cost of most services. Analyses showed that the models are replicable, are reasonably accurate, explain costs across payers, and reduce rewards for biased selection. A prospective model with additional payments for birth episodes and for serious problems in newborns would be an effective risk adjuster for Medicaid programs.

Health insurance and the demand for medical care: evidence from a randomized experiment.

We estimate how cost sharing, the portion of the bill the patient pays, affects the demand for medical services. The data come from a randomized experiment. A catastrophic insurance plan reduces expenditures 31 percent relative to zero out-of-pocket price. The price elasticity is approximately -0.2. We reject the hypothesis that less favorable coverage of outpatient services increases total expenditure (for example, by deterring preventive care or inducing hospitalization).

The validity of a nursing assessment and monitoring of signs and symptoms scale in ICU and non-ICU patients.

PURPOSE: This study examined the validity of medical-record-based nursing assessment and monitoring of signs and symptoms (nursing surveillance) in predicting patients who were admitted to ICUs and those admitted to non-ICUs. The association of this assessment and monitoring with differences in an intermediate patient outcome, instability at discharge, was also explored. Patients admitted to either setting with a diagnosis of acute myocardial infarction, cerebrovascular accident, congestive heart failure, or pneumonia, were included in the study. METHOD: A secondary analysis was carried out using a subset of data originally collected for a quality-of-care study. Data from the medical records of 11,246 patients (52% female, 48% male) with a mean age of 76.4 years were used in the present study. RESULTS: ICU patients (n = 3969) were found to have a longer length of stay and to be sicker on admission than non-ICU patients (n = 7277). Overall, patients in the ICU received significantly higher nursing assessment and monitoring of signs and symptoms scores than non-ICU patients. Nursing assessment and monitoring of signs and symptoms scores were lower for patients discharged with greater instability for three of the four diseases (cerebrovascular accidents, congestive heart failure, and pneumonia).