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Innovations in Medicare Regulations

Paper Session

Sunday, Jan. 5, 2020 10:15 AM - 12:15 PM (PDT)

Manchester Grand Hyatt, Solana Beach AB
Hosted By: Health Economics Research Organization
  • Chair: Michael Chernew, Harvard University

The Impact of Insurance Generosity on the Healthcare Utilization of Low Income Medicare Beneficiaries

Marika Cabral
,
University of Texas-Austin
Colleen Carey
,
Cornell University
Sarah Miller
,
University of Michigan

Abstract

Policymakers are concerned about whether low-income beneficiaries covered by public health insurance programs have adequate access to medical care. This paper analyzes the effect of insurance generosity on the health care utilization of low income beneficiaries dually eligible for both Medicare and Medicaid (``dual-eligibles”). We begin by analyzing the effects of a large, federally-mandated provider reimbursement rate increase for Evaluation and Management (E&M) services provided to dual-eligible beneficiaries. This rate increase effectively eliminated the gap between physician reimbursements for these services provided to dual-eligible beneficiaries relative to standard Medicare beneficiaries. Leveraging variation across beneficiaries and across providers in the policy-induced reimbursement rate increase, we find that provider reimbursement rate increases led to an economically significant increase in the utilization of targeted services. We explore heterogeneity in the effects of this reform by patient and provider characteristics as well as spillovers onto other services. Further, we compare these estimates of the impact of provider incentives to estimates of the overall effect of Medicaid coverage in this population to assess the impact of provider verses patient incentives among the dual eligible population. Drawing on these estimates, we explore the potential impact of policies that would vary the structure of provider and patient incentives for the dual-eligible population.

Drug Firms' Payments and Physicians' Prescribing Behavior in Medicare Part D

Colleen Carey
,
Cornell University
Sarah Miller
,
University of Michigan
Ethan M.J. Lieber
,
University of Notre Dame

Abstract

In a pervasive but controversial practice, drug firms frequently make monetary or in-kind payments to health care providers. Critics are concerned that drug firms are distorting prescribing behavior away from the best interests of patients, while defenders of the practice claim that payments arise from the need to educate providers about changing drug technologies. We investigate the effect of payments from drug firms on prescribing behavior in Medicare Part D. We use the universe of financial interactions between drug firms and physicians as reported in the Open Payments database linked to a 20% sample of Medicare Part D patients. In a difference-in-differences framework, we show that prescribers sharply increase their prescribing of paid drugs in the exact month after a payment is received. The effect fades over time. This does not necessarily imply that the quality of prescribing fell. We conduct a number of analyses to evaluate the impacts of payments on quality. First, we test whether doctors who had been paid keep their patients on brand name drugs even after a generic equivalent has become available. Second, we use hand-collected clinical trial results as a proxy for a drug’s quality and use a difference-in-differences framework to assess the impacts of payments. And third, we use antipsychotics as a case study. There is a Black Box warning that antipsychotics should not be prescribed to patients with dementia. We test whether physicians follow this warning less as a result of being paid by a pharmaceutical firm. Overall, our results do not support the assertion that payments by pharmaceutical firms dramatically reduce the quality of prescribing at the consumers’ expense.

Optimal Contracting with Altruistic Agents: A Structural Model of Medicare Reimbursements for Dialysis Drugs

Seth Richards-Shubik
,
Lehigh University
Martin Gaynor
,
Carnegie Mellon University
Nirav Mehta
,
University of Western Ontario

Abstract

We study physician agency and optimal payment policy in the context of an expensive medication (epoetin alfa) used with dialysis. Using Medicare claims data we estimate a model of treatment decisions, in which physicians are partially altruistic and value both their own compensation and their patients' health. We then use the recovered parameters of the model in combination with contract theory to derive and simulate optimal linear and nonlinear reimbursement schedules. Physicians differ in their degrees of altruism and marginal costs of treatment, and this heterogeneity is unobservable to the government, which affects payment policy and the effectiveness of treatment. Comparing outcomes under these optimal contracts against those observed under the actual contracts suggests that substantial improvements in payment policy can be achieved within a fee-for-service framework.
Discussant(s)
Molly Schnell
,
Northwestern University
Thuy Nguyen
,
Indiana University
Kate Ho
,
Princeton University
JEL Classifications
  • I1 - Health