Principal investigator: Eduarda Miller de Figueiredo
Authors: Jason Abaluck, Mauricio Caceres Bravo, Peter Hull, Amanda Starc
Location of the Intervention: United States
Sample Size: 186.603.694 beneficiary-years
Sector: Health Insurance
Primary Variable of Interest: Mortality
Type of Intervention: Differences between health plans
Methodology: OLS and IV
Summary
The quality of a product is an important factor when consumers make their decisions, and knowing this, policymakers are concerned with better informing consumers. The objective of this article was to estimate the effects of different private health insurance plans on mortality, investigating why some plans have better quality. Furthermore, there is an important assessment of consumer demand and its response to mortality effects. Using OLS and IV methodologies, the authors demonstrated that there may be benefits in directing consumers to use plans with lower observational mortality rates.
- Policy Problem
The quality of a product is an important factor for consumers in making decisions and investments. If consumers cannot determine whether certain plans are more likely to improve their health, competition is unlikely to incentivize insurers to invest in quality. To better inform consumers, policymakers disseminate provider information and plan quality measures. But there is little evidence of how well existing quality measures predict causal impacts, let alone whether consumers are aware of quality differences between plans.
- Implementation and Evaluation Context
The aim of this article was to estimate the effects of different private health insurance plans on mortality, investigating why some plans have better quality and assessing whether consumer demand responds to the mortality effects of the plans.
The analysis was conducted by observing the market of Medicare Advantage (MA), which beneficiaries choose from a wide range of private managed care plans that are subsidized by the government. The MA Program is large and growing, covering more than a third of beneficiaries of Medicare (KFF, 2019). Furthermore, it is important to point out that the annual mortality rate in the elderly population benefiting from MA is high, at 4,7%.
- Policy/Program Details
The program Medicare It was created in 1965 to provide insurance coverage for Americans aged 65 and older. Parts A and B of the program are referred to as "Traditional Medicare” (TM) and covers hospitalizations and medical services for most beneficiaries. The “Medicare Advantage"(MA) has a large and growing share of beneficiaries who have opted for coverage through a range of different private health insurance plans. The beneficiaries of Medicare They need to choose between TM and MA at their workplaces, where MA plans must provide all the mandatory benefits of TM insurance in exchange for a monthly payment.
Competitive plans may charge lower premiums or offer supplemental benefits to attract certain consumers. MA plans, on the other hand, tend to vary significantly in their insurance networks, offering more generous financial coverage or better cost-sharing.
The MA program has historically had two conflicting objectives: to expand consumer choice and to reduce costs. Medicare (Commission, 2001, 1998). However, even though policymakers recognize the need for health insurance beneficiaries to make informed decisions in the market, what is less discussed is the role of competition among MA plans in increasing product quality.
Public plan quality ratings have existed since 1999, with current quality rankings, the famous rating stars. These stars began to play an important role in policymaking with the Affordable Care Act of 2009.[1], which provides bonus payments for high-tier MA plans. Unlike other programs, MA plans are not currently ranked or rewarded for achieving low enrollment mortality rates.
- Method
Data on the beneficiaries of were used. Medicare The study included individuals aged 65 or older in one of the 50 U.S. states or the District of Columbia from 2006 to 2011. The sample consisted of 186.603.694 beneficiary-years with enrollment, demographic, and mortality information. For the instrumental variable analysis, the authors restricted the sample to the period 2008–2011, including beneficiaries who finished their MA plan in the previous year.
The initial analysis involves calculating the observational differences in mortality rates between plans. Medicare Operating within the same county, the authors use ordinary least squares (OLS) regressions. Subsequently, they employ an instrumental variables approach, using plan terminations to measure the validity of observational mortality differences in predicting differences in causal plan mortality effects. With this approach, it is possible to estimate the expected impact on mortality of reallocating beneficiaries across different plans.
The authors also estimated the extent to which higher-quality plans tend to attract a larger market share. Through a further extension of the IV framework, they estimated the implicit weight that consumers place on the plan's mortality effects and estimated the implicit willingness to pay for plan quality. Thus, it was possible to estimate latent demand from a plan's market share after accounting for price differences, and, through the IV framework used in this article, it was possible to relate demand to unobserved plan quality and recover the implicit willingness to pay from this relationship.
- Main results
The results shown by the estimates from the OLS indicate that beneficiaries enrolled in high or low mortality plans that are terminated in the year t-1 They tend to choose plans throughout the year. t which are more typical in terms of observational mortality, in relation to the more inertial beneficiaries in unclosed plans.
When analyzing the predicted average mortality between terminated and unterminated plans in different mortality deciles, the results of the first stage demonstrated that there is no differential trend in predicted mortality for terminated plans compared to unterminated plans. Therefore, according to the authors, it would be unlikely that there is any differential trend in the actual mortality of beneficiaries in terminated plans. versus The non-terminated cases may be due to pre-existing differences in their health.
Observational lagged mortality strongly predicts the subsequent mortality of beneficiaries previously enrolled in non-terminated plans, but this relationship is effectively flat for beneficiaries previously enrolled in terminated plans. That is, beneficiaries in terminated plans with high and low mortality appear similar to those in corresponding non-terminated plans until they are induced by terminations to choose more average plans.
Taken together, the results suggest that a large proportion of the considerable variation in observational mortality among MA plans reflects the causal impact of plan enrollment. The authors emphasize that the findings do not rule out selection bias in observational mortality; for example, it can be expected that sicker (unobserved) beneficiaries will systematically prefer certain plans with greater coverage.
When analyzing the demand for higher-quality plans, the authors estimated an upper limit of implied willingness to pay ranging from $275 to $476; that is, consumers are willing to pay no more than this amount to compensate for a 1 percentage point increase in mortality over 1 year.
- Lessons in Public Policy
In this article, the authors demonstrated, through a robust methodology, that mortality effects are critical for evaluating consumer choices, considering not only financial consequences but also the quality of the plan. Furthermore, the findings suggest, according to the authors, that plans with higher premiums, more generous medication coverage, and higher expenses tend to reduce consumer mortality.
Therefore, the results demonstrate that there may be significant benefits in directing consumers to use plans with lower observational mortality rates. Furthermore, they suggest that insurers face weak incentives to invest in improving consumer health, which could be strengthened by new contractual or organizational models.
References
KFF (2019). A dozen facts about Medicare Advantage in 2019. https://www.kff.org/medicare/
issue-brief/a-dozen-facts-about-medicare-advantage-in-2019/. Accessed: 2021-03-05.
[1] 2009 Affordable Care Act
