Is the US Health Care System Wasteful and Inefficient? A Review of the Evidence (forthcoming, Journal of Health Politics, Policy and Law; Ungated Download)
This review critically evaluates perspectives on waste in the US health care sector. The conventional discussion of waste is often imprecise and blames factors outside the purview of the health care system. Taking an economic perspective, we propose that productive inefficiency is a more tractable concept than waste. We then review the literature on the efficiency of health providers. We discuss the evidence on whether supply- and demand-side policies, such as value-based payment and cost sharing, can raise efficiency, finding that many of these policies have effects that are meaningful but small. We then turn to the literature on variations, where we argue that the body of evidence suggests there are large efficiency gaps, though these gaps are smaller than the initial eye-catching results that began this strand of research. Ultimately, these findings provide a potential roadmap for efficiency gains, a process in which a diverse array of policies compound, over time, to bring the US system closer to the efficiency frontier.
Adoption and Learning Across Hospitals: The Case of a Revenue-Generating Practice (forthcoming, Journal of Health Economics, last updated June 1, 2018; Ungated Download)
Performance-raising practices tend to diffuse slowly in the health care sector. To understand how incentives drive adoption, I study a practice that generates revenue for hospitals: submitting detailed documentation about patients. After a 2008 reform, hospitals could raise their Medicare revenue over 2% by always specifying a patient’s type of heart failure. Hospitals only captured around half of this revenue, indicating that large frictions impeded takeup. Exploiting the fact that many doctors practice at multiple hospitals, I find that four-fifths of the dispersion in adoption reflects differences in the ability of hospitals to extract documentation from physicians. A hospital’s adoption of coding is robustly correlated with its heart attack survival rate and its use of inexpensive survival-raising care. Hospital-physician integration and electronic medical records are also associated with adoption. These findings highlight the potential for institution-level frictions, including agency conflicts, to explain variations in health care performance across providers.
Government-Academic Partnerships in Randomized Evaluations: The Case of Inappropriate Prescribing (with David Yokum and Shantanu Agrawal – American Economic Review Papers & Proceedings, May 2017; Ungated Download)
There is growing evidence that inappropriate prescribing is harming patients and raising costs in the U.S. health care system. Through a partnership between the federal government and academics, we seek to develop evidence on reducing this prescribing. We conduct several randomized letter interventions targeting high-volume prescribers of drugs that can harm patients. We take a continuous improvement approach, rapidly evaluating each round and using the results to inform subsequent work. The first round of letters yielded no effects, and we responded with new interventions that are now under evaluation. We discuss lessons our work provides for future government-academic partnerships.
Nudging Leads Consumers In Colorado To Shop But Not Switch ACA Marketplace Plans (with Keith Ericson, Jon Kingsdale, and Tim Layton – Health Affairs, February 2017; Ungated Download)
The Affordable Care Act (ACA) dramatically expanded the use of regulated marketplaces in health insurance, but consumers often fail to shop for plans during open enrollment periods. Typically these consumers are automatically reenrolled in their old plans, which potentially exposes them to unexpected increases in their insurance premiums and cost sharing. We conducted a randomized intervention to encourage enrollees in an ACA Marketplace to shop for plans. We tested the effect of letters and e-mails with personalized information about the savings on insurance premiums that they could realize from switching plans and the effect of generic communications that simply emphasized the possibility of saving. The personalized and generic messages both increased shopping on the Marketplace’s website by 23 percent, but neither type of message had a significant effect on plan switching. These findings show that simple “nudges” with even generic information can promote shopping in health insurance marketplaces, but whether they can lead to switching remains an open question.
Perhaps Market Forces Do Work in Health Care After All
(with Amitabh Chandra, Amy Finkelstein, and Chad Syverson – Harvard Business Review, December 2016)
This article reviews our work on hospital productivity and performance, detailed in full in the below two studies.
Healthcare Exceptionalism? Performance and Allocation in the U.S. Healthcare Sector (with Amitabh Chandra, Amy Finkelstein, and Chad Syverson – American Economic Review, August 2016; Ungated Download)
The conventional wisdom in health economics is that idiosyncratic features of the healthcare sector leave little scope for market forces to allocate consumers to higher performance producers. However, we find robust evidence across a variety of conditions and performance measures that higher quality hospitals tend to have higher market shares at a point in time and expand more over time. Moreover, we find that the relationship between performance and allocation is stronger among patients who have greater scope for hospital choice, suggesting a role for patient demand in allocation in the hospital sector. Our findings suggest that the healthcare sector may have more in common with “traditional” sectors subject to standard market forces than is often assumed.
An earlier version this study was published as the NBER working paper, Healthcare Exceptionalism? Productivity and Allocation in the U.S. Healthcare Sector.
Productivity Dispersion in Medicine and Manufacturing (with Amitabh Chandra, Amy Finkelstein, and Chad Syverson – American Economic Review Papers and Proceedings, May 2016; Ungated Download)
The conventional wisdom in health economics is that large differences in average productivity across US hospitals are the result of idiosyncratic features of the healthcare sector which dull the role of market forces. Strikingly, however, we find that productivity dispersion in heart attack treatment across hospitals is, if anything, smaller than in narrowly defined manufacturing industries such as ready-mixed concrete. While this fact admits multiple interpretations, it suggests that healthcare may have more in common with “traditional” sectors than is often assumed, and relatedly, that insights from research on productivity and allocation in other sectors may enrich analysis of healthcare.
Medicare Letters To Curb Overprescribing Of Controlled Substances Had No Detectable Effect On Providers (with David Yokum, Amy Finkelstein, and Shantanu Agrawal – Health Affairs, March 2016; Ungated Download)
Abstract: Inappropriate prescribing is a rising threat to the health of Medicare beneficiaries and a drain on Medicare’s finances. In this study we used a randomized controlled trial approach to evaluate a low-cost, light-touch intervention aimed at reducing the inappropriate provision of Schedule II controlled substances in the Medicare Part D program. Potential overprescribers were sent a letter explaining that their practice patterns were highly unlike those of their peers. Using rich administrative data, we were unable to detect an effect of these letters on prescribing. We describe ongoing efforts to build on this null result with alternative interventions. Learning about the potential of light-touch interventions, both effective and ineffective, will help produce a better toolkit for policy makers to improve the value and safety of health care.