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.

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.

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.

Demand for a Medicare Prescription Drug Benefit: Exploring Consumer Preferences under a Managed Competition Framework

Several proposals for adding a prescription drug benefit to the Medicare program rely on consumer choice and market forces to promote efficiency. However, little information exists regarding: 1) the extent of price sensitivity for such plans among Medicare beneficiaries, or 2) the extent to which drug-only insurance plans using various cost-control mechanisms might experience adverse selection. Using data from a survey of elderly Wisconsin residents regarding their likely choices from a menu of hypothetical drug plans, we show that respondents are likely to be price sensitive with respect to both premiums and out-of-pocket costs but that selection problems may arise in these markets. Outside intervention may be necessary to ensure the feasibility of a market-based approach to a Medicare drug benefit.

Hell no, we won't ACO. Providers, once eager to sign up for new program, say proposed rule on accountable care is a deal-breaker

Hospital executives were eager to sign up for Medicare's proposed ACO program--until they saw the proposed rule spelling out how the CMS wants to structure it. They see too many risks, with too little chance of rewards. Stephen Mansfield, left, of Methodist Health System, describes the rule as "cold water" on the industry's interest and says he fears a promising opportunity will be sidelined. "I am so disappointed," Mansfield says.

Payment reform. The lynchpin of health care reform

The federal Patient Protection and Affordable Care Act that was signed into law last year includes provisions that will improve access to health care for everyone in the United States and extend insurance coverage to some 300 million people who currently do not have it. But insurance reforms and expansion of coverage are only part of the solution to the problems within our health care system.The way health care is paid for is another important element of reform.This article describes the steps we need to take to change the way we pay for health care and efforts that are underway both in the United States and Minnesota to test new payment models.

Achieving accountable care in Massachusetts: payment reform to drive delivery system change

On November 30, 2010, the Massachusetts Health Policy Forum will convene a forum to examine models of accountable health care delivery. The forum will showcase organizations from Massachusetts and other states that have taken significant steps toward improving the efficiency and quality of health care delivery through vertically and virtually integrated systems. Local stakeholders representing government, payers, providers and consumers will discuss challenges and opportunities for the Commonwealth in promoting accountable care. This paper outlines the challenge of rising health care costs in Massachusetts and provides a brief summary of actions and reports by state officials to address quality and cost concerns. It then discusses the concept of accountable care delivery and related models of coordinated health care. Next, it provides a short overview of the five organizations invited to describe their delivery models. Finally, it identifies unresolved issues that may be addressed at the forum.

[Quality management in private practice. A nationwide survey in Germany]

Quality management (QM) will soon become mandatory for private practice physicians in Germany. We aimed to assess the knowledge about and state of implementation of QM in German private practices. In cooperation with the Stiftung Gesundheit (Foundation for Health), Hamburg, a stratified sample of 15,383 physicians was requested via e-mail in 2006 to participate in the online survey. The survey covered sources of information and experiences with QM, cost of implementing QM, and general attitudes towards QM in private health care. A total of 787 doctors (5.1% response rate) rendered useful data sets; 16% of doctors had not yet familiarized themselves with QM. The DIN-ISO QM System is by far the best-known system, with 86% of doctors having heard about it. All other systems are known by only 30% or less of the physicians. Only about 20% of private practices have already implemented QM or are about to have it implemented. The cost of QM depends heavily on the system used with DIN-ISO (5600 euros) and EFQM (2800 euros) being the more expensive, while EPA (1800 euros) and QEP (850 euros) are much less costly. All QM systems require roughly the same amount of time from staff to be implemented and maintained. Two thirds of all doctors have not yet decided which QM system to use and contacts during seminars and recommendations from colleagues are most important when selecting a system. The level of satisfaction with QM service providers is generally high. In general, the study revealed a very heterogeneous picture. As with other new technologies or organizational changes there is a group of enthusiastic "early adopters," but we also found a substantial number of physicians (about 25%) who are highly skeptical about implementing QM. They posed a challenge for health policy and service providers alike and careful market segmentation will be needed to cater for the different needs of the different groups of doctors. Moreover, the still rather technical approach towards QM might not be helpful in convincing the clinical and patient-oriented doctors of the need to install systematic and organization-based quality systems.