Medicaid spends 40\% of its total spending on disabled beneficiaries, a sum that amounts to 6\% of the U.S. national health expenditure. Over the last two decades, states have shifted the provision of Medicaid to the disabled from their public fee-for-service system to private managed care plans. To study such transitions, we use an administrative database to identify county-level mandates that lead to a sharp increase in managed care enrollment. We exploit these mandates as an instrument for individuals' enrollment in managed care plans. We find that a transition to managed care eventually increases Medicaid's fiscal spending. Although spending mostly doesn't change at the first year after the transition, it increases by 0.5\% to 30\% of the baseline mean in the years after that, compared to the public program. Our results suggest that spending tends to increase more in states that have lower pre-mandate payment rates to providers.

The provision of public health insurance through regulated markets requires
a dynamic procurement of insurers over time. I study switching costs between
insurers, exploiting non-renewed contracts with incumbent insurers after a state
bid in Medicaid managed care. Using a difference-in-differences framework, I
find that beneficiaries that are forced to switch health plans after these bids have
fewer visits to primary care physicians and lower utilization of prescription drugs,
including for chronic conditions. Children, non-whites, and sicker switchers have
more preventable hospital admissions. In the year following the exit, insurers’
spending on switchers is 4% lower than the pre-exit baseline. Changes in the
network of providers and in drug formularies may serve as mechanisms.
in drug formularies — all may serve as mechanisms.

Importance: The utilization of elective surgeries is lower in Medicare Advantage (MA) than in Traditional Medicare (TM), but it remains uncertain whether costs of surgical episodes differ between comparable MA and TM patients.

Objective: Compare costs, markers of efficiency (e.g., length of stay, location of surgery), and outcomes of surgical episodes for MA and TM patients.

Design: Retrospective cohort study.

Setting: Medicare.

Participants: 1.17 million procedures across 11 categories of common elective surgeries that could be performed in either inpatient or outpatient settings.

Exposures: Enrollment in MA vs. TM.

Main Outcomes and Measures: Estimates of 30-days costs of surgical episodes and factors affecting costs: share of inpatient procedures, length of stay, share discharged home, readmission rate. Age- and gender-standardized surgery rates were calculated. 30-days mortality rates were examined to assess quality. Multivariable linear regression models controlling for type of surgery, patient characteristics, and risk scores were used to assess MA vs TM differences in outcomes for surgical episodes within hospital referral regions.

Results: The overall rate of surgery utilization was 4.4% (CI: 4.1 – 4.8) lower in MA than in TM, with variation across surgery categories. Across procedures, 30-day costs of surgical episodes were on average lower in MA by 0.9% ($193, 95% CI:$176 - $211). The share of procedures billed at the higher inpatient rate was lower in MA by 7.9% (5pp, CI: 4.8 - 5.2), the average length of MA inpatient stays was lower by 5.4% (0.23 days, CI:0.21 -0.25), and the share of patients discharged home was 5.1% higher in MA (3.2pp, CI:3.0 – 3.4). The 30-day mortality rate was slightly higher for MA surgical patients with 0.3 additional death per 1,000 patients (CI:0.1 - 0.5).

Conclusions and Relevance: In addition to lower utilization of common elective surgeries, the costs of surgical episodes were lower in MA than in TM.  MA plans achieved lower costs by shifting procedures from inpatient to outpatient settings, shortening lengths of stay, and avoiding expensive post-acute care.

Risk adjustment systems, that reallocate funds among competing health insurers, often use risk adjustors that are based on utilization. The level of utilization that triggers an adjustor - the utilization threshold - is frequently chosen implicitly and uniformly. I empirically study utilization thresholds in the setting of the U.S. Marketplaces and demonstrate how an explicit choice of such thresholds, tailored to each adjustor, may improve the prediction fit of the risk adjustment system and may decrease the incentives to game it. Using simulations, I find that a single alternative threshold may improve the prediction fit in some disease groups, by up to 14\%. A choice of multiple utilization thresholds, guided by a regression tree algorithm, may improve fit furthermore while taking into account the effect on gaming incentives.

The use of many services is lower in Medicare Advantage (MA) compared with traditional Medicare, generating cost savings for insurers, whereas the quality of ambulatory services is higher. This study examined the role of selective contracting with providers in achieving these outcomes, focusing on primary care physicians. Assessing primary care physician costliness based on the gap between observed and predicted costs for their traditional Medicare patients, we found that the average primary care physician in MA networks was $433 less costly per patient (2.9 percent of baseline) compared with the regional mean, with less costly primary care physicians included in more networks than more costly ones. Favorable selection of patients by MA primary care physicians contributed partially to this result. The quality measures of MA primary care physicians were similar to the regional mean. In contrast, primary care physicians excluded from all MA networks were $1,617 (13.8 percent) costlier than the regional mean, with lower quality. Primary care physicians in narrow networks were $212 (1.4 percent) less costly than those in wide networks, but their quality was slightly lower. These findings highlight the potential role of selective contracting in reducing costs in the MA program.

Background

Low socioeconomic status (SES) is often associated with excess morbidity and premature mortality. Such health disparities claim a steep economic cost: Possibly-preventable poor health outcomes harm societal welfare, impair the domestic product, and increase health care expenditures. We estimate the economic costs of health inequalities associated with socioeconomic status in Israel.

Methods

The monetary cost of health inequalities is estimated relative to a counterfactual with a more equal outcome, in which the submedian SES group achieves the average health outcome of the above-median group. We use three SES measures: the socioeceonmic ranking of localities, individuals’ income, and individuals’ education level. We examine costs related to the often-worse health outcomes in submedian SES groups, mainly: The welfare and product loss from excess mortality, the product loss from excess morbidity among workers and working-age adults, the costs of excess medical care provided, and the excess government expenditure on disability benefits. We use data from the Central Bureau of Statistics’ (CBS) surveys and socio-health profile of localities, from the National Insurance Institute, from the Ministry of Health, and from the Israel Tax Authority. All costs are adjusted to 2014 terms.

Results

The annual welfare loss due to higher mortality in socioeconomically submedian localities is estimated at about 1.1–3.1 billion USD. Excess absenteeism and joblessness occasioned by illness among low-income and poorly educated workers are associated with 1.4 billion USD in lost product every year. Low SES is associated with overuse of inpatient care and underuse of community care, with a net annual cost of about 80 million USD a year. The government bears additional cost of 450 million USD a year, mainly due to extra outlays for disability benefits. We estimate the total cost of the estimated health disparities at a sum equal to 0.7–1.6% of Israel’s GDP.

Conclusions

Our estimates underline the substantial economic impact of SES-related health disparities in Israel. The descriptive evidence presented in this paper highlights possible benefits to the economy from policies that will improve health outcomes of low SES groups.

We estimate the effect of legislated tax changes on revenues in Israel from 1991 to 2012. We exploit numerical revenue forecasts, prepared alongside the proposed tax changes, to control for the information policy makers had. Estimating an error-correction model, we find that the average tax change ultimately yields about 70 percent of its static revenue effect. The dynamic offset is consistent with a large tax multiplier. The steady state estimated collection rate is 90 percent for a change in the corporate income tax, 65 percent for the personal income tax, and 58 percent for indirect taxes.

As part of the public discussion in Israel in recent years about the erosion of public expenditure on health services, it has been argued that the relatively young composition of Israel’s population is the main reason for the relatively low health expenditure in comparison to that of other countries. This policy study examines Israel’s place in the ranking of OECD countries by national health expenditure, taking into account the differences in the age composition of the population and the differences in the expenditure profile by age. The expenditure profile by age reflects not only the rise in medical needs with age, but also the influence of unique institutional and sociocultural factors in each country on the supply of health services and the demand for them.

The findings show that Israel’s relative ranking by health expenditure has improved to some degree, if the relatively young composition of the population is taken into account, but even then Israel usually remains in the lower third of the scale. The findings also show that correcting for the differences in the age distribution of the total national health expenditure does reduce the variance between the countries in terms of health expenditure, but it does not substantially change Israel’s relative ranking. These findings demonstrate that the erosion in public expenditure over time must be ascribed to other factors on the supply side of health services and in the demand for them, including government policy.