Health Insurance Markets
& Managed Care
Call for Papers
The Market for Health Insurance
Chair: Jon Christianson, University of Minnesota
Sunday, June 26 • 3:30 pm – 5:00 pm
●What Happens When Workers Fail to Take up
Employment-Related Health Insurance? Evidence from
1996 and 2001
Didem Bernard, Ph.D., Tom Selden, Ph.D.
Presented By: Didem Bernard, Ph.D., Economist, CFACT,
AHRQ, 540 Gaither Road, Rockville, MD 20850; Tel: (301) 4271682; Email: dbernard@ahrq.gov
Research Objective: A growing percentage of workers do not
take up employment-related health insurance, and persons in
families with incomplete take-up represent a growing share of
the uninsured and publicly-insured population in the U.S. Yet
little is known about what happens to families when workers
do not take up offered coverage. Do these families face
reduced access or financial obstacles to needed care? Do they
bear significant financial burdens and/or risks? To what
extend do they rely on publicly-funded and uncompensated
care? How large are these subsidies compared to the taxrelated subsidies they would have received had they taken up
employment-related coverage? The objective of this paper is to
answer these questions using data from the Medical
Expenditure Panel Survey for 1996 and 2001.
Study Design: We examine access to health care, utilization,
expenditures, and risk of high expenditure burdens among
families of workers who do not take up employment-related
health insurance.
Population Studied: Families of workers who do not take up
employment-related health insurance.
Principal Findings: We find that families turning down
coverage do not have higher out-of-pocket expenditures on
care. Nor do they have increased risk of facing high
expenditure burdens as a percentage of income. Rather, our
analysis indicates that families turning down offered coverage
avoid paying high out-of-pocket burdens by relying on good
health, reduced consumption of needed health care, and,
when care is consumed, safety net financing through public
insurance and uncompensated care. We compare the tax
subsidy available to these families for health insurance
premiums to the subsidies for health care they receive
“through the safety net” when they do not take up coverage.
We find that the net flow of subsidies favors not taking up
employer offers of coverage.
Implications for Policy, Delivery, or Practice: A subject for
public policy discussion is that the public and private transfers
required to fund these families’ safety net expenditures appear
to be substantially larger than the tax-related subsidies for
taking up employment-related coverage.
Primary Funding Source: AHRQ
●Employer Offers of Health Insurance and Worker
Enrollment Decisions: The Role of Health Risk
M. Kate Bundorf, Ph.D., MBA, MPH, Bradley Herring, Ph.D.
Presented By: M. Kate Bundorf, Ph.D., MBA, MPH, Assistant
Professor, Health Research and Policy, Stanford University
School of Medicine, HRP Redwood Building, Stanford, CA
94305; Tel: (650) 725-0067; Fax: (550) 723-2586; Email:
bundorf@stanford.edu
Research Objective: Individuals who decline health insurance
offered by an employer represent a growing proportion of the
uninsured. The implications of this trend for both the stability
of the employer-sponsored market and the likely effects on
health for the uninsured depend in part on the health status of
those who decline employer-sponsored coverage. In this
paper, we investigate the role of health risk in a worker’s
decision to enroll in the coverage offered by an employer.
Study Design: Using data from the 2-year panel component
of the 1996-2001 Medical Expenditure Panel Survey, we
develop estimates of an individual’s expected health
expenditures based on the presence of medical conditions.
We use these estimates to develop measures of health risk
which distinguish between demographic characteristics and
medical conditions. Using these measures, we compare the
health risk of workers accepting and declining health
insurance offered by their employer as well as workers not
offered health insurance by their employer both overall and by
family income. In addition, we use multivariate models to
obtain estimates of the relationship between health risk and
coverage choices controlling for other demographic and
socioeconomic characteristics of workers that affect demand
for health insurance.
Population Studied: A nationally representative sample of
workers 25-64 who were not covered by public insurance at
any point during the year.
Principal Findings: We find that workers who decline the
health insurance offered by their employer are characterized by
lower expected health care expenditures than those who
choose to enroll, particularly among workers in low and
medium income households. In addition, the expected health
expenditures of workers in low and medium income
households who decline coverage from an employer are
similar to workers who are not offered coverage from an
employer. Among workers in high income households, we
find that workers not offered health insurance from an
employer have lower expected medical expenditures than
those offered coverage, whether or not they enroll.
Conclusions: Selection into coverage based on health risk in
the employer-sponsored market indicates that employmentbased coverage does not necessarily effectively pool health
risks. Among workers in low and medium income families,
this selection occurs both when workers choose jobs and
when they make enrollment decisions. For workers in high
income families, selection into coverage based on health risk
occurs primarily through the choice of a job.
Implications for Policy, Delivery, or Practice: Both
employers offering health insurance to workers and
policymakers developing policies targeted at the employersponsored market to reduce the number of uninsured should
consider how benefits may be made more attractive to low risk
workers.
Primary Funding Source: RWJF, ERIU
●Hospital Market Effects on Uptake and Utilization of
Innovative Healthcare Technologies: 1983-2001
Peter Groeneveld, M.D., MS, Gregory Kruse, MSc, Ellen K.
Brookstein, BA, Jingsan Zhu, MBA, Zhen Chen, Ph.D., Kevin
G.M. Volpp, M.D., Ph.D.
Presented By: Peter Groeneveld, M.D., MS, Assistant
Professor of Medicine, Center for Health Equity Research and
Promotion, Philadelphia VA Medical Center, 9-East, 3900
Woodland Avenue, Philadelphia, PA 19104; Tel: (215)898-2569;
Fax: (215)573-8779; Email: peter.groeneveld@med.va.gov
Research Objective: Prior studies of market effects such as
managed care market penetration on hospital acquisition of
healthcare technology have examined static measures of
hospital technical capacity, but few studies have investigated
actual procedure utilization. The preponderance of prior
investigations have been confined to a single type or class of
technology. We hypothesized that increases in managed care
market share in California during the 1980s and 1990s would
have blunted the uptake of a wide array of innovative medical
technologies, and that this effect would be most clearly
evident in records of actual procedure use.
Study Design: We examined hospital discharge data provided
by California's Office of State Health Planning and
Development, comprising care delivered at all non-federal
acute-care California hospitals. Assuming that rapid-growth
procedures would be the most likely to demonstrate variation
in use, we selected eleven procedures that were generally
performed in inpatient settings and that rapidly increased in
volume from 1983-2001. Patient-level logistic regression
models were used to generate propensity scores for each
procedure based on the presence of indicator diagnoses (e.g.
cardiac valve disease for valve replacement surgery),
comorbidities, age, race, sex, and year of admission. The
annual sums of hospitalized patients' propensity scores for
each hospital were included in a series of eleven hospital-level,
negative binomial regression models predicting use of the
eleven procedures. Covariates included each hospital's bedsize, previous year's net income, ownership status, and
academic affiliation. We also included health service area
(HSA) level measures including managed care penetration,
hospital market concentration, physicians-per-capita,
urban/rural status, and the percentage of white-collar workers
in the population. Model parameters were estimated using
generalized estimating equations.
Population Studied: Adult patients admitted to non-federal,
acute-care California hospitals from 1983-2001.
Principal Findings: Eleven new medical procedures were
performed in 472 California hospitals located in 28 different
HSAs. A 5% increase in managed care market share was
associated with higher utilization rates of inferior vena cava
filters (rate ratio [RR] 1.11, 95% confidence interval [CI] 1.081.15), cardiac electrophysiology studies (RR 1.25, 95% CI 1.081.45), endoscopic treatment of gastrointestinal bleeding (RR
1.11, 95% CI 1.08-1.14), endoscopic biliary procedures (RR 1.19,
95% CI 1.15-1.24), internal mammary artery coronary bypass
grafting (RR 1.14, 95% CI 1.04-1.25), dual-chamber pacemaker
implantation (RR 1.43, 95% CI 1.40-1.48), and transpleural
thoracoscopy (RR 1.21, 95% CI 1.12-1.30). There were no
significant differences in bioprosthetic aortic or mitral valve
replacement surgery (p=0.24 and 0.26), cardioverter-
defibrillator implantation (p=0.87), or vascular access device
implantation (p=0.11).
Conclusions: Increasing managed-care market share was
associated with greater use of innovative medical procedures
by hospitals. This association persisted despite control for
variation in the hospitals' case-mix, physician workforce,
urban/rural location, socioeconomic status of the local
population, and financial stresses from decreasing revenue or
local competition.
Implications for Policy, Delivery, or Practice: This
surprising finding was possibly due to these procedures being
sources of increased revenues for hospitals, or because new
procedures were more cost-efficient to implement compared
to older technologies.
Primary Funding Source: Thomas B. and Jeanette E. Laws
McCabe Fund
●Why Employer Coverage Changed: 1997-2003
James Reschovsky, Ph.D., Bradley Strunk, BA
Presented By: James Reschovsky, Ph.D., Senior Health
Researcher, Center for Studying Health System Change, 600
Maryland Avenue SW, Suite 550, Washington, DC 20850; Tel:
(202)484-4233; Fax: (202)484-9258; Email:
jreschovsky@hschange.org
Research Objective: To explore reasons behind changes in
employer sponsored insurance (ESI) coverage, 1997-2003.
Study Design: This study uses nationally representative
survey data on individuals and families from the 1997, 1999,
2001, and 2003 Community Tracking Study Household Survey
(n˜60,000 each year) to decompose factors driving changes
in ESI coverage rates among the nonelderly. The annual
samples were divided into 122 groups, of which 120 were
defined by 3 family work status categories (2 full-time workers
in the family, one full-time worker, part-time workers only), 8
job quality categories, and (among those with offers) 5 income
groups. Job quality was based on a pooled model estimating
the likelihood jobs will offer access to ESI, using industry, firm
size, and time-adjusted wages as regressors. The highest
quality job in each family was assigned to all members. The
two additional groups were for those in non-working families
and families with only self-employed workers. We calculated
offer, eligibility rates and take-up rates for all but the last two
groups, using family-level concepts to define offer and
eligibility. These data were then used in a shift-share analysis
to isolate the change in ESI coverage over time attributable to
changes in labor force participation, job quality, offer rates,
eligibility rates, income levels among those with access to ESI,
and take-up rates. The analysis was replicated for people in 3
socio-economic status (SES) groups, based on whether
predicted family income from a human capital regression
equation was <200%, 200-399%, or =400% of poverty.
Population Studied: Nonelderly persons in 1997,1999,2001,
and 2003.
Principal Findings: The percent of nonelderly Americans with
ESI dropped from 67 to 63.4% between 2001 and 2003. After
accounting for population growth, this amounts to 8.9 million
fewer people with ESI. The decline came after a populationadjusted gain of 4.5 million people with ESI from 1997 to
2001. Out of that 8.9 million, 5 million (53%) is attributable to
lower workforce participation; 2.7 million (30%) to a drop in
job quality, only .5 million (5%) to changes in employer offer
rates, and 1.5 (17%) million to lower take-up. This was
somewhat offset by gains in incomes of those with access to
ESI and in eligibility rates. The relative importance of these
factors differed in the 1997-1999 and 1999-2001 periods,
though work status is consistently important. There is
evidence of secular declines in take-up. We classified 19%,
39%, and 42% of the population into low, middle, or high SES
categories. These groups accounted for 27%, 57%, and 17% of
those losing ESI coverage between 2001 and 2003,
respectively. Changes in family work status had its greatest
proportional effect on lower SES families, while changes in job
quality affected higher SES families the most. Surprisingly,
declining take-up affected higher income persons the most in
proportional terms
Conclusions: Reflecting macroeconomic trends, family work
status is a primary factor governing ESI coverage trends.
Changes in job quality, a reason often cited as contributing to
the long-term decline in ESI coverage rates. Trends in job
quality appear to be influenced by macroeconomic trends,
explaining improved job quality in the late 90’s. Rising health
care costs appear contribute to lower ESI rates by
discouraging people from accepting ESI offers. These factors
have different effects on different SES groups. Finally, the
analysis illustrates the importance of thinking about insurance
coverage trends in a family context.
Implications for Policy, Delivery, or Practice: Apart from
explicit government subsidies, there are two primary avenues
for bolstering ESI coverage rates. The first is through
macroeconomic and trade policy, which affects work force
participation and job quality. Apart from these policies, efforts
need to be directed at controlling health care costs.
Successful policies to lower costs will increase take-up and, to
a lesser extent, offer and eligibility rates. Moreover, lower
health care costs will benefit the macro economy, further
improving ESI coverage rates.
Primary Funding Source: RWJF
●Health Insurance Enrollment Decisions: Understanding
the Role of Preferences for Coverage
Jessica Vistnes, Ph.D., Alan Monheit, Ph.D.
Presented By: Jessica Vistnes, Ph.D., Senior Economist,
CFACT, AHRQ, 540 Gaither Road, Rockville, MD 20852; Tel:
(301)427-1671; Email: jvistnes@ahrq.gov
Research Objective: Policy initiatives to expand access to
health insurance in the US remain prominent on the public
agenda. However, the weak responsiveness of the uninsured
to such efforts has perplexed researchers and policymakers
and raised the issue of whether the uninsured value health
insurance. Individual valuation of health insurance also has
important implications regarding the choice between
voluntary and mandatory approaches to expanding coverage.
Our purpose is to explicitly examine the association between
health insurance preferences and coverage status. We
consider whether uninsured adults are more likely to exhibit
weak preferences for coverage than are insured adults. We
also examine whether preferences for coverage are associated
with worker decisions to sort among jobs that offer/fail to
offer coverage and to enroll in offered coverage. We compute
the subsidy necessary to overcome weak preferences and
induce such workers to enroll in offered coverage. We
consider whether demographic variables are appropriate
proxies for reported preferences.
Study Design: We use data from the 2000 MEPS on attitudes
toward health insurance, risk, and medical care to characterize
individuals and families as having strong or weak preferences
for coverage. These responses are obtained independent of
insurance status thus minimizing their role as rationales for
lack of coverage. We describe the prevalence of weak
insurance preferences among the non-elderly US population,
its association with health insurance status, demographic,
health and economic characteristics. We apply econometric
models to examine whether preferences for coverage affect
worker sorting between jobs with/without coverage and
enrollment decisions. We use MEPS data on health insurance
premiums to estimate the subsidy required to offset the utility
loss borne by persons with weak preferences were they to
enroll in health insurance.
Population Studied: The non-elderly U.S. civilian noninstitutionalized population.
Principal Findings: Uninsured adults are more likely to report
weak preferences for health insurance than are insured adults.
Econometric analyses reveal that single workers and married
couples with weak insurance preferences are less likely to sort
into jobs that offer coverage and less likely to take up offered
coverage. We find the premium subsidy necessary to
overcome the disutility associated with weak preferences for
coverage is equivalent to the out-of-pocket premium costs
faced by such workers.
Conclusions: We find striking differences in attitudes toward
health insurance between insured and uninsured adults.
Preferences for health insurance play an independent role in
determining whether single workers and married couples
obtain jobs with health insurance and whether they take-up
offered coverage.
Implications for Policy, Delivery, or Practice: There may be
a considerable gap between perceptions of policymakers and
some uninsured persons regarding the social and private
value of health insurance. Mandatory provision of health
insurance is likely to lead to welfare losses for some uninsured
but voluntary efforts are likely to require subsidies as well as
educational efforts to inform targeted groups among the
uninsured about the value of health insurance.
Primary Funding Source: Robert Wood Johnson
Foundation/University of Michigan Economic Research
Initiative on the Uninsured
Call for Papers
Insurance & Pharmaceuticals
Chair: Timothy McBride, Saint Louis University
Sunday June 26 • 5:30 pm – 7:00 pm
●The Relationship Between Prescription Drug Benefits and
Use and Physician Office Benefits and Use
William Cecil, MBA, John Barnes, MBA, MA, Terence K. Shea,
PharmD, Steven L. Coulter, M.D.
Presented By: William Cecil, MBA, Director, Health Policy
Research, Health Policy Research, BlueCross BlueShield of
Tennessee, 801 Pine Street 1E, Chattanooga, TN 37402; Tel:
(423) 763-3372; Fax: (423) 755-5100; Email:
bill_cecil@bcbst.com
Research Objective: The prescription drug benefit is
frequently designed and employed as if it is a stand-alone
product without consideration for influence from aspects of
the medical benefits design. An increasingly common tactic is
to carve out the prescription drug benefit so that it is vended
by a completely separate source from the medical benefits.
There is a need to study the relationship between medical and
pharmacy benefit designs to determine the level and nature of
any relationship. The purpose of this study is to assess the
relationship between the physician office visit cost sharing and
utilization and prescription drug cost sharing and utilization in
a commercially insured population.
Study Design: Analysis of the claims records of 448,180
commercially insured Tennesseans for the incurred service
year of 2003. We used standard tabulations and regression
analysis to characterize and control for demographics and
estimate elasticities for cost sharing and other factors that
could influence the decision to buy prescription drugs or
physician office visits and the number of units bought.
Population Studied: A commercially insured population of
448,180 Tennesseans with medical and prescription drug
benefit coverage.
Principal Findings: Higher prescription drug cost sharing
was associated with decreased prescription drug use. Higher
office visit cost sharing was associated with increased use of
generic drugs, reduced use of preferred brand drugs and
average use of non-preferred brand drugs. The decision to buy
primary care physician office visits was associated with
reduced generic drug use, increased preferred brand use and
reduced non-preferred brand use. The decision to buy
specialist office visits was associated with reduced generic
prescription drug use, increased preferred and non-preferred
brand use. Increased prescription drug use was associated
with female gender, age and DCG score. Decreased generic
drug use was associated with increased distance to physician
office. Reduced primary care physician office visits were
associated with age, office visit cost sharing, generic drug
copay, female gender, distance to physician’s office and the
number of specialist visits. Reduced specialist visits were
associated with physician office visit cost sharing, generic and
preferred brand copay and the decision to buy primary care
physician office visits.
Conclusions: The physician office visit cost sharing may
influence consumer preference for prescription drug use and
prescription drug cost sharing may influence consumer
preference for physician office visits. Prescription drug use
varies with the physician office visit copay level. Consumers,
preferred physician office visits and prescription drug use in
combinations that allow for generic drugs to be a complement
and preferred brand drugs to be a substitute for office visits.
Preferred brand drugs are a substitute for generic drugs. Plan
costs for prescription drug and physician office visits could be
influenced significantly by how physician office benefits are
distributed across plan membership. The cost-optimizing
bundle occurs at an office visit copay of $20.
Implications for Policy, Delivery, or Practice: Benefits
managers should not assume that higher cost sharing always
means lower costs, as higher cost sharing in medical benefits
may cause higher prescription drug costs. There is significant
value in considering both medical and pharmacy benefits in
the same management construct.
Primary Funding Source: BlueCross BlueShield of Tennessee
●Prescription Drug Demand for Psychotropics: the Impact
of Out-of-Pocket Payment
Jieling Chen, Ph.D.
Presented By: Jieling Chen, Ph.D., Health Economist, Health
Economic Statistics, Merck Research Laboratories, 10 Sentry
Parkway, Blue Bell, PA 19422; Tel: (610) 650-0714; Email:
whjane@hotmail.com
Research Objective: This paper examines the effect of out-ofpocket payment on the purchase of psychotropic drugs for
treating depressive disorders.
Study Design: Using the Medical Expenditure Panel Survey
(MEPS) data from 1996 to 2000, the numbers of psychotropic
purchases among patients with depressive disorder in a time
period are modeled using truncated count data models, with
covariates that include the out-of-pocket payment and other
measurements related to demographics, socioeconomic
characteristics, and health status. Potential endogeneity of the
out-of-pocket payment variable is handled with an
instrumental variable approach.
Population Studied: Medical Expenditure Panel Survey
(MEPS) data from 1996 to 2000
Principal Findings: We find an overall out-of-pocket price
elasticity of -0.225. But the demand elasticity for elderly is
quite inelastic (-0.046). We also find evidence of plan
manipulation.
Conclusions: The demand for psychotropics is responsive to
changes in out-of-pocket price, but the degree of
responsiveness varies dramatically between depressed elderly
and depressed non-elderly. Some degree of moral hazard is
likely to be present among the young and the middle age, but
not among the elderly. Moreover, insurers have been
successful in manipulating prescription drug benefits for
depressive patients, particularly among young and middle age
patients.
Implications for Policy, Delivery, or Practice: In an era with
increasing emphasis on high out-of-pocket payments to
control moral hazard, highly responsive psychotropic demand,
compounded by significant plan manipulation, could
aggrevate the undertreatment problem among patients with
depressive disorder. For depressed elderly, high copayments
will simply increase the financial burden on already financially
stressed elderly, thereby reducing their welfare without the
benefit of significantly reducing moral hazard. For depressed
non-elderly, the moral hazard profile of this disease suggests
that imposing a high rate of copayment may actually be
socially inefficient.
Primary Funding Source: No Funding
●Prescription Drug Copayments, Mail Order Substitution
and Stockpiling of Maintenance Medications for Early
Retirees with Chronic Conditions
Teresa B. Gibson, Ph.D., Catherine G. McLaughlin, Ph.D.,
Dean G. Smith, Ph.D.
Presented By: Teresa B. Gibson, Ph.D., Director, Research
Division, Medstat, 777 East Eisenhower Parkway, Ann Arbor,
MI 48108; Tel: (734)913.3481; Fax: (734)913.3200; Email:
teresa.gibson@thomson.com
Research Objective: Many employers provide financial
incentives for enrollees to switch to mail order pharmacies
from retail pharmacies and to lower-cost generic drugs from
more expensive brand name medications. We assess the
effects of the introduction of an incentive-based formulary on
maintenance prescription drug utilization for early retirees
with chronic conditions enrolled in an employer-sponsored
plan.
Study Design: We take advantage of a natural experiment
where one employer introduced an incentive-based formulary
and a comparison employer that did not change copayments.
A monthly panel data set was created from the 1996-1997
MarketScan database representing the maintenance
prescription drug experience. Negative binomial difference-indifference models were estimated to measure the effects of
the benefit change. Distributed lag models were estimated to
assess the extent of pre-implementation stockpiling of
prescription drugs.
Population Studied: Continuously-enrolled early retirees and
spouses of two large firms with at least one chronic condition
(n=6,165).
Principal Findings: Utilization of maintenance prescription
drugs declined 5.5% (p<.01) after the introduction of an
incentive-based prescription drug benefit, a decline that was
limited to retail pharmacy prescriptions. In contrast, mail
order utilization rose 23% (p<.001), dominated by an increase
in mail order brand name prescriptions (31%, p<.001). There
was little evidence of generic substitution as the utilization of
generic drugs filled in a retail pharmacy dropped 8.9%
(p=.001) and mail order generic prescriptions were largely
unchanged. No evidence of pre-implementation stockpiling
of brand name retail drugs was discovered, although enrollees
may have anticipated the change and increased utilization of
mail order brand name drugs 15.7% (p=.059) in the month
prior to the new benefit and retail generic drugs in the two
months prior to the new benefit (5.6% two months before
(p=.078) and 6.6% one month before (p=.054)).
Conclusions: The introduction of an incentive-based
formulary had significant effects on maintenance drug
utilization patterns for early retirees with chronic conditions, a
subgroup that typically depends upon prescription drugs to
maintain and improve health. Contrary to expectations,
generic drug use did not increase. However, many enrollees
switched to mail order pharmacy for brand name drugs.
Implications for Policy, Delivery, or Practice: An increase in
prescription drug copayments can produce intended and
unintended effects on the maintenance drug consumption
patterns of near-elderly retirees with chronic conditions who
were enrolled in a relatively generous employer-based health
plan. The copayment increase may be associated with
unintended effects such as a reduction in consumption of
maintenance medications. However, retirees responded to
financial incentives and increased utilization of the mail order
pharmacy for maintenance medications. In contrast, the
generic incentive did not appear to induce retirees to switch to
generic maintenance drugs.
Primary Funding Source: No Funding
●Prescription Drug Benefit Caps and Drug Adherence:
Quitting When the Money Runs Out
Mary Reed, MPH
Presented By: Mary Reed, MPH, Research Associate, Division
of Research, Kaiser Permanente, 2000 Broadway, Oakland, CA
94610; Tel: (510)891.3808; Fax: (510)891.3606; Email:
mer@dor.kaiser.org
Research Objective: We investigated patient self-reported
responses to a prescription drug benefit cap.
Study Design: We conducted a cross-sectional telephoneinterview study in a random sample of integrated delivery
system (IDS) adult members, with over-sampling of members
age 65+ years. Participants reported whether they faced a drug
benefit cap (after exceeding a benefit cap, subjects pay the full
price of their prescription drugs), the amount of their cap, and
whether they had exceeded a cap in the previous calendar
year. Participants then reported whether their cost-sharing
affected their drug adherence against their physician’s
recommendation (took less than prescribed, did not fill a new
prescription, or did not refill a prescription). We linked the
survey data with information from the IDS’s automated
databases.
Population Studied: Overall, 298 study participants (32% of
all respondents) faced a drug benefit cap. Those with a cap
had a mean age of 74 years, and predominantly were female
(64%), and all had Medicare insurance. In addition, 22%
reported being of White race; 43% had “excellent” or “very
good” health status; 75% had less than a college-graduate
education; and 62% had an annual household income of less
than $35,000.
Principal Findings: Overall, 80% of those with a cap
accurately reported having this benefit structure. Actual cap
amounts were either $500 or $1000; 72% of subjects
accurately stated their benefit cap amount, 21%
overestimated, and 6% underestimated. Among respondents
with a cap, 16% were not adherent to their prescription drug
treatment because of the cost ; specifically, 9% took less
medication than prescribed, 9% did not fill a new prescription,
and 8% did not refill a prescription because of the cost.
Additionally, 10% had exceeded their benefit cap in the
previous year. In multivariate logistic models, subjects’ who
had exceeded their cap in the previous calendar year (OR:4.1,
95%CI:1.4-12.2) were more likely to report being non-adherent
Those who had incomes under $35,000 (OR:3.4, 95% CI:1.48.4), who had a college degree (OR:2.5, 95%CI:1.1-5.8) and
those with lower age (10 year increment, OR:2.7, 95% CI:1.45.0) were also more likely to report being non-adherent.
Conclusions: Nearly one in six patients with a drug benefit
cap reported being non-adherent to their drug therapy
because of costs. Patients who had exceeded their cap in the
past year were more vulnerable to these cost-induced
behaviors.
Implications for Policy, Delivery, or Practice: Some forms of
cost sharing such as benefit caps appear to result in poor drug
adherence. More research is needed, especially as partial
coverage health plans (e.g. caps, deductibles, donuts) increase
in use.
Primary Funding Source: Kaiser Foundation Research
Institute
●The Effect of Pharmacy Benefits on Initiation of
Antihypertensive Therapy
Matthew D. Solomon, MA, M.Phil., Jose J Escarce, M.D.,
Ph.D., Dana P Goldman, Ph.D., Geoffrey F Joyce, Ph.D.,
Robert H Brook, M.D., Sc.D.
Presented By: Matthew D. Solomon, MA, M.Phil., Graduate
Fellow, Health, RAND, 1776 Main Street, Santa Monica, CA
90407; Tel: (310)393-0411 x7403; Email: msolomon@rand.org
Research Objective: To control rapidly rising prescription
drug costs, nearly all health plans have increased their costsharing requirements. This study aims to understand the
effect of cost-sharing on the initiation of treatment for
hypertension, the most commonly treated chronic condition.
Study Design: This is a retrospective study conducted from
1997 to 2000 examining pharmacy and medical claims data
that are matched to the health benefits from 7 large employers
and 18 health plans.
Population Studied: The sample includes 4010 elderly
individuals newly diagnosed with hypertension who have
employer-based retiree insurance benefits, including insurance
for prescription drugs.
Principal Findings: Mean time to initiation of
antihypertensive therapy was 103.5 days (S.D. 192.6) from the
date of initial diagnosis to the date of first prescription among
enrollees who purchased drugs in our observation window. In
multivariate Cox models, doubling copayments was
associated with a decrease in the proportion of patients
initiating antihypertensive therapy by 100 days post-diagnosis
from 45% to 24%. Concurrent use of non-antihypertensive
medications, age, and female gender were positively
associated with initiation of antihypertensive treatment.
Conclusions: The initiation of antihypertensive medication
was negatively associated with increased cost-sharing. Since
delays in antihypertensive treatment may be responsible for
adverse health outcomes, these results raise concern about
the potential health effects of high levels of cost-sharing.
Implications for Policy, Delivery, or Practice: These results
will help policy makers understand how drug benefits affect
antihypertensive adoption and use, and will help physicians
address factors that may interfere with treatment regimens
they prescribe for their hypertensive patients. CMS should
carefully monitor cost-sharing arrangements in the new
Medicare Part D benefit to ensure that beneficiaries with
chronic diseases adopt needed drugs in a timely manner.
Primary Funding Source: AHRQ
Related Posters
Poster Session A
Sunday, June 26 • 2:00 pm – 3:15 pm
●Implications of Incentives Increasing Mail-Service
Pharmacy Utilization
Bartholomew Clark, Ph.D., Mark Siracuse, Pharm.D., Ph.D.,
Robert Garis, Ph.D.
Presented By: Bartholomew Clark, Ph.D., Assistant Professor,
Creighton Health Services Research Program, Creighton
University School of Pharmacy & Health Professions, 2500
California Plaza (Boyne 141), Omaha, NE 68178; Tel: (402)280-3724; Fax: (402)-280-4809; Email: bclark@creighton.edu
Research Objective: Examine implications of pharmacy
benefit plan design incentives that encourage patients to
utilize mail-service pharmacies in lieu of community-based
retail pharmacies.
Study Design: Study design utilized the untreated control
group with pretest-posttest quasi-experimental design with
non-random assignment. Prescription transactions for
identical drug products and dates of service were compared at
the per-unit level based on whether they were dispensed by a
community-based retail pharmacy or by a mail-service
pharmacy. Prescriptions dispensed by a retail pharmacy were
considered the control group. The intervention group was
comprised of prescriptions dispensed by mail-service
pharmacies. Differences in means between retail pharmacies
and mail-service pharmacies were examined for the following
variables in pharmacy benefit expenditures: drug ingredient
costs, pharmacist dispensing fees (i.e., fill fees), patient
copayments, amounts owed by plan sponsors and total
amounts. “Total amount” is “drug ingredient cost” plus
“dispensing fee”. “Amount owed by plan sponsor” is “total
amount” less “patient copayment”. The Wilcoxon rank-sum
test was utilized for all comparisons. Separate comparisons
were performed for all claims, for generic drug claims, for
brand name drug claims, and for non-drug supply claims (e.g.
diabetic testing strips).
Population Studied: Prescription transaction records from
five employer groups totaling 19,300 prescription transactions
(a total of 9,650 exact matches for drug product and date of
service) were examined. Each match consisted of one
prescription from a retail pharmacy and one prescription from
a mail-service pharmacy on identical dates of service for
identical drug products within the same employer group.
Prescription claims data were from publicly held and private
employers involved in enterprises as diverse as food
processing, transportation, and higher education.
Principal Findings: Analyses of retail-to-mail comparisons for
all transactions generated the following significant results (p <
0.001). Plan sponsors paid 4.0% more for prescriptions filled
at mail-service pharmacies. Drug ingredient costs were 9.8%
lower for mail-service pharmacy prescriptions. Pharmacist
dispensing fees were 98.6% lower for mail-service pharmacy
prescriptions. Patient copayments were 46.7% lower for mailservice pharmacy prescriptions. The total amounts were
13.6% lower for mail-service pharmacy prescriptions. Separate
analyses of retail-to-mail comparisons for brand name drugs,
generic drugs and non-drug supplies revealed that plans
sponsors paid 2.1% more for brand name mail-service
prescriptions (p < 0.01), 25.6% more for generic mail-service
prescriptions (p < 0.001), and 36.5% more for mail-service
non-drug supplies (p < 0.001).
Conclusions: Despite the fact that mail-service drug
ingredient costs, dispensing fees and total amounts were
lower, the incentive of discounts in patient copayments for
these transactions resulted in higher amounts owed by plan
sponsors.
Implications for Policy, Delivery, or Practice: Recent actions
of large employer groups (e.g. the “Big Three” U.S auto
manufacturers) that require their employees to utilize mailservice pharmacies have created a conventional wisdom that
conversion of retail prescriptions to mail-service prescriptions
will result in cost savings to plan sponsors (i.e., employers).
Policies encouraging or requiring such conversions may not
achieve the desired result. Public policy that requires full
disclosure of pharmacy benefit manager revenue streams and
true costs to plan sponsors may be required.
Primary Funding Source: Creighton School of Pharmacy &
Health Professions Internal Grant
●What Drives Health Insurance Options at the Workplace?
Evidence from 1997-2002 MEPS Employer Data
Philip Cooper, Ph.D., Kosali Simon, Ph.D., Jessica Vistnes,
Ph.D.
Presented By: Philip Cooper, Ph.D., Senior Economist,
CFACT, AHRQ, 540 Gaither Road, Rockville, MD 20850; Tel:
(301)427-1675; Email: pcooper@ahrq.gov
Research Objective: 1)To examine trends in the availability of
different plan types from 1997 to 2002 using a large, nationally
representative survey of roughly 25,000 private sector
employers. 2)To assess whether the observed trends were
related to changes in the characteristics of employers, workers
and labor market characteristics or changes in the relationship
between those characteristics and the plan types offered.
Study Design: We analyze data from repeated cross-sections
of the 1997-2002 Medical Expenditure Panel Survey -Insurance
Component List Sample, which ascertains whether an
employer offers health insurance and if so, collects detailed
information on up to four health plans. The survey also
contains information on employer and employee
characteristics. For the first research objective, we present
trends in indicator measures of whether establishments offer
any Fee-for-Service (FFS), HMO, Preferred Provider
Organization (PPO) or Point-of-Service (POS) plans by firm
size. For establishments offering two or more plans, we also
present trends in the combination of plans offered to
employees. We then estimate econometric models and
perform simulations to assess whether the observed trends in
the availability of different plan types were related to changes
in the characteristics of employers, workers and labor market
characteristics or changes in the relationship between those
characteristics and the plan types offered.
Population Studied: Private sector establishments in the US.
Principal Findings: Employers offered workers a very different
mix of health insurance plans in 2002 compared to 1997.
Specifically, there was a steady decline in the availability of FFS
plans and an increase in the availability of PPOs. Additionally,
we find different trends for small and large firms. Lastly, we
find that characteristics of employers, employees and local
labor markets were fairly stable over this period and therefore
do not predict observed trends in plan type availability.
Conclusions: We find that characteristics of the employer,
labor force and local markets were fairly stable over this period
and therefore do not predict much of the observed trends in
plan type availability. Instead, relationships between certain
employer, worker, and other characteristics have changed over
this period.
Implications for Policy, Delivery, or Practice:
Understanding the reasons for the change in prevalence of
certain types of plans offered by employers, particularly
managed care, is important for policymakers’ assessment of
whether the current employer provided health insurance
system functions in a manner that provides employees with
adequate choice.
Primary Funding Source: No Funding Source
●Public Sector Retiree Health Benefit Challenges Under
GASB 43 and 45
Julia Costich, JD, Ph.D.
Presented By: Julia Costich, JD, Ph.D., Assistant Professor,
Health Services Management, University of Kentucky College
of Public Health, 121 Washington Avenue, Lexington, KY
40536; Tel: (859)257-6712; Fax: (859)257-3909; Email:
julia.costich@uky.edu
Research Objective: Government Accounting Standards
Board (GASB) statements 43 and 45 require public sector
employers or multi-employer plans to report net present
liability for future retiree benefits on an accrual basis, in
contrast with the current prevailing practice of accounting for
such benefits on a pay-as-you-go basis. The challenges to
public sector retiree health benefit programs presented by the
GASB statements are assessed along with an analysis of
employers' potential responses.
Study Design: We analyze available public sector employer
responses to GASB 43 and 45 in light of simultaneous
pressure on retiree health plan financing from rising costs,
volume of impending retirees, competing entitlements such
as public education and Medicaid, and state budget
constraints. Public sector considerations are compared with
those taken by the corporate sector in response to FASB 106
in the early 1990s.
Population Studied: Public sector employers and retiree
health benefit plans covering state, school system, municipal,
public university, and other public sector employees.
Principal Findings: The largest public sector retiree health
benefit plans will be required to comply with the new reporting
standards beginning in 2006; employer compliance begins in
2007. Since FASB implementation, some 46% of private
sector firms have capped retiree health benefit contributions
to avoid open-ended liability. Other strategies under
consideration in the public sector include longer service
requirements, proportionally lower employer contribution
rates to monthly premiums, and disaggregation of active and
(under-65) retiree rate computations. The availability of
Medicare prescription drug coverage may mitigate the fiscal
impact of the new standards, but the magnitude of aggregate
retiree health benefit liability for public sector organizations is
already a source of serious concern.
Conclusions: The scope of health coverage for public sector
retirees is threatened by GASB 43/45 implementation. The
high risk of overreaction to the size of accrued liability makes
informed, principled assessment of alternatives imperative.
Implications for Policy, Delivery, or Practice: Retiree health
benefit cutbacks in reaction to GASB 43/45 implementation
put public sector employees at risk for inadequate postretirement coverage and have the potential to shift significant
cost to Medicare and Medicaid.
Primary Funding Source: Institutional
●National Trends in Length of Stay and Associated
Hospital Charges Before and After State and Federal
Postpartum Stay Legislation
Matthew Davis, M.D., MAPP, Devesh K. Tiwari, MPP
Presented By: Matthew Davis, M.D., MAPP, Assistant
Professor, Pediatrics, Internal Medicine, & Public Policy,
University of Michigan, 300 NIB, Ann Arbor, MI 48109-0456;
Tel: (734) 615-3508; Fax: (734) 764-2599; Email:
mattdav@med.umich.edu
Research Objective: In response to declining length of stay
(LOS) for postpartum discharges during the early 1990s
attributed to the implementation of managed care, several
states enacted postpartum LOS legislation beginning in 1996.
State laws mandated that insurance companies cover a
postpartum stay of =48 hours for uncomplicated vaginal
births and =96 hours for cesarean sections, but such
regulations did not involve all states and did not apply to
ERISA-exempt health plans. A federal postpartum LOS law
(implemented in 1998) overrode ERISA and applied across all
states. We examined national trends in LOS and related
expenditures in the pre- and post-legislation periods.
Study Design: We analyzed data from the Nationwide
Inpatient Sample (NIS), an annual nationally representative
sample of non-federal hospital discharges, to characterize
trends in postpartum LOS and associated hospital charges for
the years 1993 through 2002. Delivery types were assigned to
4 categories: vaginal deliveries with and without complications
and cesarean sections with and without complications. Trends
in LOS and associated charges (adjusted for inflation to 2002
US$) were analyzed with respect to patient age and expected
primary payer. All analyses were weighted to reflect the
complex stratified sampling of the dataset and permit
inferences at the national level. Analyses reported below
emphasize results for uncomplicated cases that were the
focus of the legislation.
Population Studied: Cases eligible for analyses in each of the
NIS years were identified by diagnosis related group (DRG)
codes 370 to 375.
Principal Findings: From 1993 through 1995, postpartum
LOS for all delivery types fell from a mean of 2.38 days (95%
CI: 2.33-2.43) to 2.11 days (2.07-2.15). With the subsequent
enactment of postpartum stay legislation in selected states
and then nationally, all-delivery LOS increased to a high of
2.56 days (2.52-2.60) by 2002. LOS for uncomplicated vaginal
deliveries (61.4%-65.0% of deliveries across all years) mirrored
the overall trend, with a decline from 1.93 days (1.89-1.97) in
1993 to 1.71 days (1.68-1.74) in 1995 followed by an increase to
2.14 days (2.11-2.17) by 2002. In contrast, for uncomplicated
cesarean sections (14.3%-20.3% of deliveries) there was a
slight decline in mean LOS from 1993 (4.00 days; 3.91-4.09)
through 1995 (3.61 days; 3.54-3.69), but mean LOS did not
subsequently change significantly through 2002 (3.71 days;
3.64-3.78). Notably, inflation-adjusted mean hospital charges
for uncomplicated vaginal deliveries and uncomplicated
cesarean section deliveries remained unchanged from 1993
through 1995. However, from 1995 through 2002 mean
hospital charges for uncomplicated vaginal deliveries
increased annually by $263; for uncomplicated cesarean
deliveries, charges increased annually by $577. There were no
significant time trends in LOS or hospital charges with respect
to age or payer.
Conclusions: This study, the first to characterize longitudinal
trends in LOS and associated charges related to postpartum
stay legislation, indicates differential effects of such legislation
for vaginal versus cesarean births. While postpartum hospital
charges remained steady for uncomplicated births while LOS
declined in the pre-legislation period, post-legislation charges
rose steadily for vaginal deliveries along with LOS, compared
to rising charges but stable LOS for cesarean deliveries.
Implications for Policy, Delivery, or Practice: Legislative
insurance mandates have the potential to alter practice
fundamentally, with economic consequences.
Primary Funding Source: No Funding Source
●How Significant are “Mismatches” Between Workers’
Preferences and Employers’ Health Insurance Provision in
Explaining Aggregate Patterns of Coverage?
Richard Hirth, Ph.D., Reagan Baughman, Ph.D., Michael E.
Chernew, Ph.D., Emily C. Shelton, BS
Presented By: Richard Hirth, Ph.D., Associate Professor,
Health Management and Policy, University of Michigan SPH,
109 South Observatory, Ann Arbor, MI 48109-2029; Tel:
(734)936-1306; Fax: (734)764-4338; Email: rhirth@umich.edu
Research Objective: The majority of working-age Americans
and their families obtain health insurance through employers.
To assess the performance of this employer-sponsored
insurance (ESI) system, it is necessary to understand how well
workers sort into jobs that offer their desired mix of cash
wages relative to benefits. However, few studies directly
measure the extent of sorting. We attempt to quantify the
prevalence of mismatches between workers’ preferences and
firms’ insurance offerings, considering two types of mismatch,
1) workers who would desire coverage through their employer,
but do not receive an offer from their employer, and 2)
workers who do not desire coverage through their employer,
but do receive an offer.
Study Design: To help assess the quality of matching
between workers’ demand for ESI and their employers’
decisions to offer coverage, we divide workers into 8 groups
based on ESI offers and takeup, insurance obtained through
alternative sources and type of source (e.g., spouse's ESI, nongroup coverage, public program), and a multivariate model
estimating the worker's demand for insurance coverage. For
workers in each of these 8 groups, we then infer the quality of
the labor market match. We considered individuals that
received an offer of coverage from their employer as
mismatched if they declined the offer. This designation stems
from the literature indicating that wage offsets do not operate
perfectly at the individual level. Thus, workers declining an
offer are unlikely to receive enough additional cash wages to
recoup the entire value of the foregone offer. We considered
individuals that did not receive an ESI offer mismatched if they
were not insured through a public program or another source
of private group coverage, and they appear to have a high
demand for ESI. High demand was inferred either from the
purchase of non-group coverage (which is likely to be
undesirable relative to a typical offer of ESI due to higher cost,
greater intertemporal premium risk, and/or more limited
coverage), or from having a high estimated demand for
insurance based on observable characteristics. These "high
demanders" were workers we believed to be likely to have
desired and taken up an offer of ESI. Our classification
scheme is, of course, an approximation, subject to both Type I
and Type II errors. For example, we classify workers who were
not offered ESI by their own employers and hold group
coverage from another source as well-matched. Certainly,
some of these workers may have prefered an offer of ESI and
are took up the alternative coverage as means of
compensating for a poor labor market match. Similarly, some
workers declining coverage may be willing to forego some
cash wages in exchange for the "option value" or access to a
redundant source of coverage.
Population Studied: The study population includes workers
in the 1996-1997 Community Tracking Household and
Followback Survey (CTS). This survey includes households in
51 metropolitan statistical areas (MSA) and 9 rural sites.
Survey sites were chosen to yield a nationally representative
survey sample. Our analysis sample includes 24,454 working
individuals between 18 and 64 years old. The unemployed,
the self-employed, and non-workers were excluded.
Principal Findings: Based on the classification algorithm
described above, most workers (78.1 percent) enjoy labor
market matches that appear consistent with their preferences,
either receiving an offer that they accept, or not receiving an
offer that we believe they would not have valued highly (either
because of the availability of alternative group or public
coverage, or because they were low demanders of insurance).
The remaining 21.9 percent of workers appear to be
mismatched. The most common types of mismatches
involved workers who declined an offer of ESI (12.9% of the
sample declined and held coverage from another source; 2.9%
declined and were uninsured). In addition, 2.6% purchased
non-group coverage, and 3.4% were uninsured, had no offer of
ESI, and were classified as high insurance demanders by
virtue of having a predicted probability of coverage in excess of
70%. The prevalence of different types of mismatches across
the 60 labor markets represented in the CTS is correlated with
several labor market characteristics.
Conclusions: Using our classification scheme, it appears that
the employment-based health insurance system works well for
most workers, at least in terms of whether or not the worker’s
desire for ESI matches their employer’s offer decision. We do
not explore more subtle manifestations of mismatching such
as workers who have insurance but would prefer a plan not
offered by their current employer. Nonetheless, more than
one worker out of five appears to be mismatched.
Implications for Policy, Delivery, or Practice: We identify
different types of missorting that may have quite different
policy implications (e.g., uninsured workers who would desire
insurance, vs. dual income families accepting one member’s
offer of ESI and rejecting the other’s offer). For most of the
identified mismatches, the primary consequence is lower cash
earnings or higher insurance premiums than they would face
if they were better matched in the labor market. However,
some of the identified mismatches (representing the 3.4% of
the total sample) were uninsured, lacked an ESI offer and had
characteristics indicating high demand for insurance. These
individuals appear to be “involuntarily uninsured” workers
who would gain insurance if they were to find a better match
or if their existing employer began offering coverage to them.
Extrapolating from the analysis sample, these involuntarily
uninsured workers and their uninsured dependents may
represent more than one in six uninsured individuals in the
United States. Therefore, policies either facilitating labor
mobility or encouraging offers of ESI by employers of these
involuntarily uninsured workers could alleviate a significant
source of uninsurance in the United States.
Primary Funding Source: RWJF
●The Value of Quality in Healthcare
Russell Mardon, Ph.D., L. Gregory Pawlson, M.D., Frank
Lichtenberg, Ph.D., Steven Teutsch, M.D., MPH, Pamela
Landsman, DrPH, Claire Sharda, RN, MBA
Presented By: Russell Mardon, Ph.D., Director of Analysis,
Research and Analysis, NCQA, 2000 L Street NW, suite 500,
Washington, DC 20036; Tel: (202)955-3567; Fax: (202)9553599; Email: mardon@ncqa.org
Research Objective: To quantify the effect of higher quality
(as measured by HEDIS indicators) on utilization and cost in
disease or demographically homogeneous populations, while
controlling for demographic and case-mix differences.
Study Design: A longitudinal cohort design with multiple
regression estimates based on claims-level hospital,
ambulatory, and laboratory data from the Medstat Marketscan
database. Sample sizes ranged from 42,000 to 318,000
depending on the population. The quality measurement year
was 1999. Then, through the use of individual pseudoidentifiers, subsequent utilization was tracked for each person
in the eligible population through 2002 for as long as they
remained continuously enrolled in the same health plan. For
the expenditure variable, we used the actual paid cost (i.e. the
sum of insurance reimbursements, patient copayments, and
deductibles) for each inpatient or outpatient claim.
Comorbidities were measured using flag variables for 99
diagnostic categories produced by Medstat.
Population Studied: The study populations were commercial
managed care plan members with asthma, diabetes, or major
depression, as well as women in the managed care population
in general. The conditions chosen have a relatively high
prevalence, a high impact on costs, and at least one
established Health Plan Employer Data Information Set
(HEDIS) quality measure with an accepted definition and
methodology for defining the population based on claims
data. Each subgroup was modeled separately, taking into
account co-morbidities to better identify the clinical areas in
which health plan services can have the greatest economic
impact.
Principal Findings: For three of the four quality areas
examined (breast cancer screening for women age 50-69, the
use of inhaled steroids for patients with persistent asthma,
and a set of tests related to diabetes monitoring, there were
substantial and significant negative correlations between
patients' quality of care and total costs of care. For example,
the estimated average inpatient and outpatient expenditure of
women who had a mammogram was 13% -24% lower than
the average expenditure of women who did not have a
mammogram in the subsequent three years. For
antidepressant medication management there were no
significant associations found.
Conclusions: Using patient-level data from commercial
health plans, we found substantial and significant negative
correlations between effectiveness of care as measured by
selected HEDIS measures, and cost of care based on paid
claims in three areas, breast cancer screening, asthma and
diabetes. These findings are in agreement with those of
Wennberg et al in examining the relationship of resource use
and cost in the Medicare program at the hospital-physician
practice level.
Implications for Policy, Delivery, or Practice: Higher quality
care can result in cost savings in the years immediately
following, at least for some disease groups and types of
services. This reinforces the importance of quality
measurement and evaluation in the health care system.
Primary Funding Source: Merck, Inc.
●Tiered Hospital Plans: Are They Tiered Drug Plans Writ
Large?
James Maxwell, Ph.D., Peter Temin, Ph.D., Tanaz Petigara
Presented By: James Maxwell, Ph.D., Director of Health Policy
and Management Research, Health Services, JSI Research &
Training, 44 Farnsworth Street, Boston, MA 02210; Tel: (617)
482-9485; Fax: (617) 482-0617; Email: maxwell@jsi.com
Research Objective: Based on data from a survey of large
California employers, we compare the implications of tiered
hospital plans where consumers pay more for high-cost
hospitals to already existing tiered drug plans.
Study Design: During 2002-2003, we conducted qualitative
interviews with employers and major health plans in
California, asking them about new health insurance products
and trends.
Population Studied: Health benefits managers at 318 of
California's largest public and private employers. We also
interviewed all the major health plans, provider groups, and
employer purchasing coalitions in California.
Principal Findings: Tiered hospital plans resemble tiered
drug plans in name only. While drug tiers reduce costs by
affecting consumer behavior, hospital tiers reduce costs by
affecting provider behavior.
Conclusions: Tiered strategies can be applied across a variety
of health services including drugs, hospitalizations, and
specialty care. However, the application of these strategies to
different services leads to very different effects. Infrequent
hospitalizations, difficulty in evaluating hospital services, and
the subsequent provision of adequate information to
consumers may limit the ability of tiered hospital plans to
affect consumer behavior. Exclusive networks—the ultimate
tier—demonstrate the point. Like hospital tiers, they work
through suppliers, since the great gap between the cost of
included and excluded services precludes almost all choices
by consumers.
Implications for Policy, Delivery, or Practice: Tiered hospital
plans are not part of the new wave of consumerism in health
benefits purchasing. New trends such as tiering must be
examined carefully to determine who they affect most.
Primary Funding Source: California HealthCare Foundation
●Are Large Employers Moving to Catastrophic Health
Insurance Coverage?: Results from a Study of Large
California Employers
James Maxwell, Ph.D., Peter Temin, Ph.D., Tanaz Petigara
Saminaz Zaman
Presented By: James Maxwell, Ph.D., Director of Health Policy
and Management, Health Services, JSI Research & Training,
44 Farnsworth Street, Boston, MA 02210; Tel: (617) 482-9485;
Fax: (617)482-0617; Email: maxwell@jsi.com
Research Objective: To document the adoption and
penetration rates of new insurance products such as highdeductible PPOs and consumer-driven health products within
the California marketplace.
Study Design: To document these new products, in 20022003 we administered a 30 minute telephone survey to health
benefits managers at California’s largest employers. We
surveyed 318 out of 374 employers for a response rate of 85
percent. We asked about offer rates, penetration rates, and
plans to implement high-deductible PPOs and consumerdriven health plans in the future.
Population Studied: 318 of the largest public and private
employers in California.
Principal Findings: Although the California market has
traditionally been dominated by HMOs, we found that a
significant number of employers now offer a PPO option to
their employees (85% of private employers and 67% of public
employers). High-deductible PPOs, however, are not a
widespread offering. We found that only a modest number
(12% of private employers and 5% of public employers) of
employers offer these plans and that they do not offer
adequate incentives for their employees to move to them.
There appears an equal interest in high deductible PPOs and
consumer-driven health plans.
Despite the publicity, only 5 percent of private employers
offered consumer driven health plans, and an even smaller
fraction of large public employers have moved to these new
products. Only about one-third of large employers offer either
a high-deductible PPO or a consumer-driven health plan.
Conclusions: We found no evidence of a swift and linear
movement towards catastrophic health plans. Instead,
employers have moved incrementally to add new product
options, hoping that they will yield cost savings.
Implications for Policy, Delivery, or Practice: While media,
the President, and many policy analysts have touted
consumer-driven health products as the answer to rising
health care costs, employers have only responded cautiously
to these developments. Employers are not moving all their
employees to high-deductible PPOs or consumer-driven
health plans. Neither are they providing strong financial
incentives for their employees to chose these plans.
Primary Funding Source: California HealthCare Foundation
●Health Purchasing Among Large Private and Public
Employers in California
James Maxwell, Ph.D., Tanaz Petigara, Saminaz Zaman
Presented By: James Maxwell, Ph.D., Director of Health Policy
and Management Research, Health Services, JSI Research and
Training, 44 Farnsworth Street, Boston, MA ; Email:
maxwell@jsi.com
Research Objective: Past research has shown that public
employers are, in general, unable to be as aggressive as their
private counterparts in rate negotiations.
California has been an exception because of the presence of
CalPERS, the University of California system, and SISC, a
coalition of state and community colleges. These public
agencies more closely resemble large private firms, with the
financial and administrative resources needed to aggressively
negotiate with carriers.
Study Design: In 2002-2003, we conducted a study of the
purchasing practices of over 300 private and public employers
in California, using a 30-minute telephone interview that
targeted the official with the most responsibility and detailed
knowledge of health benefits. In-depth in-person interviews
were also conducted with employers, consultants and all the
major California health insurance carriers.
Population Studied:
Principal Findings: Both large public and private employers
in California reported losing their purchasing clout in the last
few years due to consolidation among health carriers,
hospitals, and provider groups. We found that both private
and public employers in California now showed a greater
reliance on financial incentives (e.g., copayments and
deductibles) aimed at influencing consumer decisions.
However, the purchasing practices of large private and public
employers in California have started to diverge as private
employers have greater leeway to implement these changes.
Private employers often have younger workforces and less
unionization. In contrast, heavy unionization and entrenched
public sector culture of rich benefits discourages public
employers from rapidly adopting cost-cutting measures aimed
at the consumer.
Conclusions: The disparities between the private and public
sector workforces, coupled with differences in management
culture, suggest that a higher portion of health care costs will
continue to beset public employers in California.
●A State by State Comparison of U.S. Small Group Market
Rating Methods
Andrea McAllister, BS, Andrea DeVries, Ph.D.
Presented By: Andrea McAllister, B.S., Decision Support
Specialist, Health Services Research, Highmark, Inc., 120 Fifth
Avenue, Pittsburgh, PA 15222; Tel: (412)544-0664; Fax:
(412)544-0700; Email: andrea.mcallister@highmark.com
Research Objective: To (1) identify small group insurance
rating structures among the 50 United States during 2003. (2)
Determine disparities, if any, between regulations for for-profit
and non-profit health insurers and HMO’s within each state.
(3) Define categories and identify patterns of rating structures
between states.
Study Design: For the purpose of health insurance, a “small
group” is defined as an employer group containing between
two and fifty employees. Multiple sources of insurance rating
structure information are researched for 2003. Individual
state insurance departments are contacted when the
information is ambiguous or sources provide conflicting
information. At that point, the actuary or other insurance
analyst responsible for the small group market in that state is
interviewed. Subsequent to gathering states’ regulation
information, categories are created to define the various types
of rating structures among the states.
Population Studied: The population consists of the 50 states
comprising the United States.
Principal Findings: Almost all of the states, 48 of 50, do not
differentiate between for-profit and non-profit health insurers
and HMO’s. Michigan has passed reform legislation to
change their status. This will leave Pennsylvania as the only
state to have small group rating structures that distinguish
between these types of insurers. Additionally, Pennsylvania is
only one of two states, Hawaii being the other, which does not
have specified premium limits. Over time, the trend has been
for states to move toward equitable regulation of for-profit and
non-profit health insurers and HMO’s. Additionally, more
states have adopted the use of health status as a determinant
of premium level for small groups.
Conclusions: There is little available information regarding
the direct comparison of small group insurance market rating
structures among the United States. It became quite evident
that Pennsylvania holds a unique status in the U.S. as a state
with a small group market rating structure different from any
other. It has a rare combination of differentiating between forprofit and non-profit health insurance plans and HMO’s while
having premium limits only for the non-profit insurers and
HMO’s and no limits specified for the for-profit insurers.
Implications for Policy, Delivery, or Practice: In
Pennsylvania, for-profit insurers have much more flexibility in
determining premium rates for small groups than the nonprofits and HMO’s. As a consequence, the for-profit insurers
leave the non-profit insurers and HMO’s to insure the small
groups that cannot afford the high rates offered to them. This
results in the non-profit insurers and HMO’s keeping the
high-risk small groups while the for-profit insurers keep the
low-risk small groups. Potentially, the costs for these groups
could increase to the point that the non-profits and HMO’s
may not be able to continue to insure the small group market.
This would unfairly affect high-risk small businesses, leaving
them with no alternative to for-profit insurers and could
potentially hamper the retention and growth of small
businesses in the state.
Primary Funding Source: No Funding Source
●Does Relying on the VA Health System Affect Enrollment
in Medicare Managed Care?
Robert Morgan, Ph.D., Jessica Davila, Ph.D., Margaret Byrne,
Ph.D., Debora Paterniti, Ph.D., Dolly John, MPH, Jennifer
Hasche, MS, Laura Petersen, M.D., MPH
Presented By: Robert Morgan, Ph.D., Senior Research
Scientist and Associate Professor, Houston Center for Quality
of Care and Utilization Studies, Michael E. DeBakey VA
Medical Center and Baylor College of Medicine, 2002
Holcombe Boulevard (152), Houston, TX 77030; Tel: (713) 7948635; Fax: (713) 748-7359; Email: rmorgan@bcm.tmc.edu
Research Objective: Compared to traditional Medicare,
Medicare managed care plans (‘Medicare HMOs’) often
provide additional services and/or reduced costs. Since many
veterans enroll in Medicare HMOs, changes in Medicare
HMO policies can have a significant impact on VA system
use. However, we have little information on why veterans
decide to enroll in Medicare HMOs. This study examines
reasons for enrolling in Medicare HMOs and attitudes about
the VA system among Medicare-enrolled veterans who do and
do not use the VA for care.
Study Design: Prospective mailed survey of VA-using and VA
non-using (no VA use in prior 3 years), elderly, male veterans
in six large metropolitan areas. Analyses were weighted to
reflect the sampling proportions used in each area.
Population Studied: We used survey data from elderly,
Medicare enrolled male VA-users and elderly male veterans
who did not use the VA system. VA users were sub-classified
based on whether they reported receiving most of their
medical care from the VA (‘primary’ VA users) or from non-VA
sources (‘secondary’ VA users).
Principal Findings: The overall survey response rate was 52%.
Our final analysis sample included 1,258 VA-users and 828 VA
non-users. 31.3% of VA users and 32.9% of VA non-users in
our sampling areas were enrolled in Medicare HMOs. Among
VA users, 29.3% of HMO enrollees were primary VA users,
compared to 38.2% of non-HMO enrollees (p <= .0001).
Among HMO enrollees, secondary VA users and VA nonusers were more likely to cite cost factors (e.g., reducing copayments), coverage factors (e.g., availability of specialty
care), or physician or hospital availability as reasons why they
joined their HMO plan (p <= .01 for all comparisons). In
contrast, primary VA users enrolled in HMOs were more likely
to regard the quality of care at the VA as both affordable and
better (p <= .001 for both).
Conclusions: Primary and secondary VA users view Medicare
HMOs and the VA system quite differently, with secondary VA
users resembling VA non-users in terms of their reasons for
joining Medicare HMOs. Reductions in service and/or price
increases by Medicare HMOs are likely to mitigate the reasons
secondary VA users and VA non-using veterans cite for joining
HMOs. In contrast, increases in services, or price reductions
by HMOs do not appear as likely to influence primary VA
users to seek care outside of the VA.
Implications for Policy, Delivery, or Practice: 70% of HMO
enrolled VA users report using the VA as a secondary source
of care. Even in the absence of increased enrollment in the VA
system, reductions in service provided by Medicare HMOs, or
increases in costs, could put the VA system at substantial risk
for increased demand.
Primary Funding Source: VA
●Extent of Selection Bias in Choice of Level of Patient Cost
Sharing
James Naessens, MPH, Holly VanHouten, BS, Sidna Scheitel,
M.D., Rebecca Pautz, BA, Prathiba Varkey, M.D., Karen
Ytterberg, M.D.
Presented By: James Naessens, MPH, Clinical Associate,
Health Care Policy & Research, Mayo Clinic, Pavilion 3,
Rochester, MN 55905; Tel: (507)284-5592; Fax: (507)285-1731;
Email: naessens@mayo.edu
Research Objective: Explore the extent of selection bias
among eligible employees choosing health insurance with
different levels of cost sharing.
Study Design: Assessment of the selection bias in a natural
experiment, within the self-funded medical care plan of a large
medical group practice. In 2004, the medical care coverage of
the main medical benefit option was changed. 82% of eligibles
in 2003 were enrolled in the Comprehensive plan which
covered full first dollar coverage of services provided within
the group practice and 17% were in the Select plan with
copays and deductibles. The new options were between a plan
which included relatively small copayments for visits to
specialty care physicians and emergency rooms, and relatively
low (10%) coinsurance for all other services(Universal); or a
plan with the same level of copayments, but a deductible and
20%coinsurance(Choice). In addition the Universal plan had
higher premiums and a lower out-of-pocket maximum than
the Choice plan. Selection bias was determined by comparing
the characteristics of the enrollees in the Universal versus
Choice plans in January 2004. Health status was measured by
assigning diagnoses from medical care claims for each
enrollee for the previous calendar year to the Johns Hopkins
Adjusted Clinical Groups (ACGs) and the AHRQ
comorbidities developed by Elixhauser. The demographic,
health status, previous plan and 2003 incurred medical
expenses were compared using Chi-square tests for nominal
factors and Wilcoxon rank-sum tests for quantitative factors. A
logistic regression model was used to assess the
simultaneous effects of the independent variables.
Population Studied: Employees and their dependents of the
Mayo Clinic in Rochester, Minnesota (MCR) who were under
65 years of age in January 2004. MCR employees included the
medical, administrative, educational and research staff of the
clinic, hospitals and schools located at the Rochester campus.
N=59,374.
Principal Findings: 95% of those choosing Universal had
been in the Comprehensive option in 2003, while almost 42%
of those choosing Choice had been in the Select option. Sicker
patients were much more likely to choose the Universal plan.
18.2% of Universal versus 9% of Choice had ACGs based on
2003 diagnoses which indicated they sought medical care for
at least 6 different ambulatory diagnosis groups. 22% of
Choice versus 15% of Universal had either only preventive or
no diagnoses in 2003, while almost 12% of Choice versus 9%
of Universal had only an acute condition in 2003.
Conclusions: Employees with either no health care utilization
or utilization for only preventive or acute care in 2003 tended
to select the health plan with a low premium, 20%
coinsurance and deductible. Enrollees with multiple problems
the previous year were more likely to select the plan with a
higher premium, but to lower personal financial risk. Past
medical experience clearly dominates the extent of cost
sharing eligible employees are willing to undertake.
Implications for Policy, Delivery, or Practice: Recent studies
have discounted the impact of selection bias based on level of
employee cost sharing. Selection bias is alive and well in
2004.
Primary Funding Source: No Funding Source
●The Association of Switching Primary Care Physicians
with Utilization and Disease Burden
Chih-Wen Pai, Ph.D.
Presented By: Chih-Wen Pai, Ph.D., Senior Research
Associate, Office of the Dean, University of Michigan Medical
School, M7325B Medical Science Building I, Box 0624, Ann
Arbor, MI 48109; Tel: (734) 615-7041; Fax: (734) 615-5154;
Email: cwpai@umich.edu
Research Objective: Little is known about how primary care
physician (PCP) switching affects utilization and disease
burden of academic health systems (AHSs). Anecdotal
evidence suggests that patients switch to PCPs at the AHS in
order to receive specialty care. In this study we examined if
managed care members switching to an AHS had higher
utilization and disease burden compared to others.
Study Design: We applied a standardized fee schedule to
estimate all health care use in one common monetary unit,
including inpatient and outpatient services as well as
pharmacy and ancillary uses. We classified members based
on age and sex, Adjusted Clinical Groups (ACGs), and
Aggregated Diagnosis Groups (ADGs). We compared ACG
distributions to examine different patterns of disease burden.
Population Studied: Commercial members enrolled in a
health maintenance organization for the entire 12 months of
2001.
Principal Findings: About 3% of the study population
switched PCPs across the academic and community
boundary. Members switching to the AHS only had higher
utilization than those staying with community providers.
There was no dominating pattern of different disease burden
for these two groups. Compared to members staying with the
AHS, those switching out of the AHS had lower utilization but
significantly higher disease burden, characterized by more
acute minor conditions.
Conclusions: There was no direct evidence that members
switching into the AHS had medical need discernibly different
from those staying with community providers. Members
switched their care from the AHS to community providers
probably due to access and capacity constraint at the AHS.
Implications for Policy, Delivery, or Practice: Although
members switching to the AHS decreased burden of
community providers, they did not add to the AHS’s
“absolute” disease burden that was already high compared to
the rest of the population. However, PCP switching is not
necessarily beneficial or harmful to the AHS, depending on
capitation payment level and cost estimate. Decision making
on whether to carve out switchers from capitation pool is
complicate due to sensitivity in payment negotiation and
accuracy in cost estimate. Nevertheless, a small size of
switcher population is not likely to have much impact on
adjusting the financial status.
Primary Funding Source: No Funding Source
●Why Do Fewer Californians Have Job-Based Health
Insurance?
Ninez Ponce, MPP, Ph.D., E.Richard Brown, Ph.D., Thomas
Rice, Ph.D., Shana Alex Lavarreda, MPP
Presented By: Ninez Ponce, MPP, Ph.D., Assistant Professor,
Health Services, UCLA School of Public Health, 31-254B CHS,
Los Angeles, CA 90095; Tel: (310)206-4021; Email:
nponce@ucla.edu
Research Objective: California’s lower rates of employmentbased health insurance (EBHI) compared to other parts of the
United States has been attributed to compositional differences
in its population—primarily that California has more Latinos
and noncitizens in its labor force. We examine if given similar
employee/employment characteristics and other area-level
factors as the rest of the US, whether California employers
would be more likely to offer EBHI, and whether California
employees would increase its already higher take-up rates of
EBHI, than their counterparts in the rest of the country.
Study Design: Algebraic decompositions distinguished
whether California’s offer and take-up rates of EBHI were
different than the rest of the nation because of the
sociodemographic composition of its workforce and its
communities, or, because of structural differences in its labor
market.
Population Studied: Linked individual-level data on
employees, ages 19-64 from the February 1999 Current
Population Survey, with metropolitan-statistical area (MSA)level data from the March 2000 Current Population Survey
and InterStudy 1997/98 HMO Data.
Principal Findings: Compared to the rest of the US, California
has a lower offer rate (80.96% vs. 86.31%), but has a higher
take-up rate (87.05% vs, 84.41%). Large differences due to
California’s population composition (-8.50 percentage-points)
is not fully offset by the state’s positive structural factors (3.15
percentage-points). For take-up, both structural and
compositional factors are favorable in California. The
structural environment advantage (1.90 percentage-points) is
the key driver of California’s higher take-up rates. Greater
concentration of noncitizens had the largest compositional
effect on take-up. And unlike its negative effect on offer-rates,
its effect on take-up was positive.
Conclusions: With a large vulnerable workforce that is
disadvantaged when it comes to getting EBHI, California’s
structural environment, though favorable relative to the rest of
the nation, still needs to be ameliorated in such a way to
encourage employers to offer health insurance. For take-up,
strong contextual effects suggest that California’s large
noncitizen communities as a whole attribute high value to
health insurance.
Implications for Policy, Delivery, or Practice: (1) Offer
rates: Nationally, the findings on the structural effects on
offer rates suggest that employers in the rest of the US would
be less likely to offer EBHI if they had the same types of
workers who lived in California. This is troubling since the
growth in the immigrant, principally Latino and Asian
workforce in California, foretells of the spread of the growing
foreign-born population in the rest of the country.
(2) Take-up rates: With the same types of California workers
and communities, nationally, workers would be less likely to
take-up. Increasing immigration also plays a role: unlike
California, workers in the rest of the US would be less likely to
take up EBHI with higher concentrations of noncitizens in
communities. Future studies that focus on why California is
different in this respect are needed.
In the absence of policies and incentives that increase the
propensity of employers to offer, and employees to take-up,
then EBHI coverage rates nationwide would be expected to
decline even more.
Primary Funding Source: California Wellness Foundation
●Does Managed Care in California Close the Equity Gap?
For Whom and For What Services?
Ninez Ponce, MPP, Ph.D., Robert Nordyke, Ph.D., Ellen Wu,
MPH
Presented By: Ninez Ponce, MPP, Ph.D., Assistant Professor,
Department of Health Services, UCLA School of Public Health,
31-254B CHS, Los Angeles, CA 90095; Tel: (310)206-4021;
Email: nponce@ucla.edu
Research Objective: Managed care (MC) may encourage use
of a usual source of care (USOC) via requirements to choose
or be assigned a primary care provider. However, it is unclear
whether this translates into greater access to preventive or
diagnostic care and whether it reduces or exacerbates
race/ethnic disparities in access to these services. Our study
examined whether utilization by different racial and ethnic
groups (African American, Asian, Latino, non-Hispanic White,
and American Indian/Alaskan Native (AIAN) or Other ) is
higher in MC than FFS.
Study Design: Weighted multivariate logit models examined
factors associated with the likelihood of: 1) having a USOC; 2)
receiving appropriate cancer screening; and, 3) receiving
appropriate care for chronic diseases. Separate estimates were
obtained for those with insurance coverage in: 1) public
Medicaid and Children’s Health Insurance (CHIP) programs;
and 2) employment-based or privately purchased health plans
(EBI). We evaluated MC’s potential differential effect by
race/ethnicity by specifying MC interaction terms for each
racial and ethnic group.
Population Studied: Insured adults ages 18-64 covered by
Medicaid/CHIP program or by EBHI from the 2001 California
Health Interview Survey (CHIS 2001) random-digit dial and
Asian oversample files ( n =38,130 ). Cancer screening use was
evaluated on a subset of individuals meeting the ageappropriate guidelines.
Principal Findings: Overall, MC is associated with greater
chance of having a USOC (OR=2.86 public, =2.54 private;
p<0.001 for both) and appropriate cancer screening (OR=2.25
public, =1.22 private; p<0.001 for both). There was no overall
or differential race/ethnicity impact of MC on chronic disease
management. We found no race/ethnic difference in having a
USOC among the publicly insured. However, among adults
covered by EBI, Latinos, Asians, and African Americans tend
to have higher USOC in EBI than Whites. Latinos and AIANs
also have higher rates of cancer screenings in public programs
than Whites. However, consistent with other studies, APIs
have substantially lower rates of cancer screening in both
public and EBI plans.
Conclusions: The evidence on the differential racial/ethnic
effect of MC is mixed. For USOC, MC appears to lower the
likelihood of having a USOC among AIANs with EBI coverage,
but we saw no additional MC effect for other groups. For
cancer screening, MC appears favorable for APIs and African
Americans covered by EBI, but not favorable for Latinos and
AIANs in public programs.
Implications for Policy, Delivery, or Practice: MC in
California may result in better utilization than FFS depending
on the service and source of coverage. However, MC may
also have negative effects on utilization – the difference is
determined by demographics and service sought. Additional
research and public policies to ensure that minorities are
aided by the implementation of MC is essential. These efforts
will be supported by: 1) investigation of health plan
characteristics that influence utilization differences among
California’s racial and ethnic population groups; 2) Identifying
best practices that may reduce disparities that exist; collection
and analysis of race/ethnicity data by all health insurance
purchasers.
Primary Funding Source: California Program on Access to
Care / California Policy Research Center
●Cost Savings Associated with an Integrated Workers’
Compensation/ Managed Care Pharmacy Benefit Program
Shadi Saleh, Ph.D., MPH
Presented By: Shadi Saleh, Ph.D., MPH, Assistant Professor,
Health Policy, Management and Behavior, State University of
New York at Albany, School of Public Health, One University
Place, Rensselaer, NY 12144; Tel: (518) 402-0299; Fax: (518)
402-0414; Email: ssaleh@albany.edu
Research Objective: The study was aimed at examining the
cost savings’ potential of an integrated workers’
compensation managed care prescription drug program in
New York State. The program, called ONECARD Rx, allowed
New York State employees to use their general health
insurance card to buy WC-related prescription drugs.
Study Design: A retrospective cost analysis design conducted
through the use of a prescription drug claims’ dataset.
Population Studied: The study population consists of New
York State government employees who filed a workers’
compensation-related prescription drug claim through
ONECARD Rx in 2002. A total number of claims processed
through the use of the ONECARD Rx system during 2002 was
6705.
Principal Findings: : The results of this study showed that the
use of ONECARD Rx produced total cost savings of $322,067
($48.04/claim) in 2002. Projections of the cost savings of
ONECARD Rx were even higher for subsequent years.
Findings revealed that the combination of the increase in use
of ONECARD Rx coupled with the buffered effect of generic
and brand-name price increases results in increased savings
each year.
Conclusions: Integrated WC/managed care prescription drug
program has the potential to produce significant cost savings
to employers.
Implications for Policy, Delivery, or Practice: The study
results may have an impact on how employers organize,
deliver and finance their WC systems, specifically the
prescription drugs' benefit package. Merging WC prescription
drug benefits with the employees' general health insurance
may be one way to control the skyrocketing prescription drug
costs. In addition, this study may be a stepping stone towards
evaluating the effects of combining/integrating all WC services
(medical and prescription drug benefit packages) into the
general health insurance plan of their employees for potential
cost reductions.
Primary Funding Source: RWJF
●Prescription Drug Insurance: Effects on Drug Use,
Expenditure and Out-of-Pocket Spending Among the NearElderly
Jaeun Shin, Ph.D., Sangho Moon, Ph.D.
Presented By: Jaeun Shin, Ph.D., Assistant Professor, , KDI
School of Public Policy and Management, 207-43
Cheongnyangri2-dong, Dongdaemoon-gu, Seoul, 130-868;
Tel: (822) 3299-1037; Fax: (822) 3299-1240; Email:
jshin@kdischool.ac.kr
Research Objective: As the Baby Boom generation begins to
reach at 55, the near-elderly population between ages 55-64
receives special attention recently.
Despite the growing concern on the potential consequences of
a Medicare prescription drug benefit, relatively little is known
about how prescription drug insurance relates to the patterns
of drug use and expenditures among the prospective
beneficiaries, the near-elderly. The purpose of this study is to
understand differences in prescription drug use and
expenditures in the near-elderly population by drug insurance
status; to identify the factors associated with prescription drug
insurance coverage; to examine the effect of drug insurance
on the use and spending on prescription drug; and to assess
the health policy implications of the findings for a Medicare
prescription drug benefit and its impact on the beneficiaries.
Study Design: Prescription drug insurance is identified for
respondents to the 2001 Medical Expenditure Panel Survey
(MEPS). The primary outcome variables are total number of
prescription refills per year and three categories of
prescription drug expenditures (total expenditures, total outof-pocket spending, total payment by insurance). Statistical
significance of the differences in means is calculated using ttests. Race, gender, marital status, region of residence,
educational attainment, employment status, poverty level,
family size, and health conditions are included in the logistic
regression as predictors of whether or not an individual has
prescription drug insurance coverage. We use a zero-inflated
negative binomial model (logistic regression to separate those
with nonzero outcomes from those with zero outcomes,
followed by negative binomial regression) to understand the
relationship between drug insurance coverage and
prescription drug use and expenditures among the nearelderly.
Population Studied: The population studied includes the
near-elderly, individuals ages 55-64 (N=2,606) from the 2001
MEPS. The respondents are divided into two groups, those
with prescription drug insurance versus those without
prescription drug insurance for further analysis.
Principal Findings: Respondents with drug insurance refill
smaller number of prescriptions on average (18 prescriptions)
compared to 25 prescriptions for those without insurance. The
mean of total prescription drug expenditure (RXEXP) for
respondents with drug insurance is significantly lower
compared to those without drug insurance ($1032.2 versus
$1293.2). Substantial difference in total out-of-pocket spending
for prescription drug (RXSLF) is also found between
respondents with drug insurance ($340.6 or 46% of total outof-pocket spending for all health care use (TOTSLF), 40% of
RXEXP) and those without drug insurance ($687.3 or 64% of
TOTSLF, 69% of RXEXP). These differences are all statistically
significant at 1% level (p<0.01). Being Hispanic or nonHispanic Afro-American, being unemployed and living in a
larger family significantly lower the probability of having
prescription drug insurance, while being married, living in
urban area, having higher levels of education and family
income increase the probability. The family income effects
(200% or higher than the Federal Poverty Level) and high
education effect (college education or more) are stronger than
the effect of race/ethnicity. Prescription drug insurance
coverage has no significant relationship with level of
utilization and total prescription drug expenditure. However, it
shows a positive and significant (p<0.01) association with outof-pocket spending (RXSLF) and a negative significant
(p<0.01) association with payment by insurance for
prescription drug (RXPRV). Being Hispanic/non-Hispanic
Afro-American and being unemployed are negatively and
significantly (p<0.05) correlated with drug use and RXSLF,
while being unemployed, being in poor self-rated health
status, having at least one priority disease, having larger
number of co-morbidities, having limitations in (instrumental)
activities of daily living, and being diagnosed with certain
chronic conditions show significantly (p<0.05) positive
associations.
Conclusions: This study provides preliminary evidence that
the near-elderly without drug insurance demand more use and
higher costs for prescription drugs compared to those with
drug insurance. Without drug insurance, prescription drug is a
financially heavy medical item to afford, requiring high
consumer cost sharing of out-of-pocket spending. Income,
education, race/ethnicity are major predictors for prescription
drug insurance status, implying insurance coverage disparity
by these characteristics may lead to disparity in access to
prescription drugs and, subsequently, in health outcomes
between those with insurance and those without insurance.
Providing drug insurance does not increase level of utilization
and total expenditures for drug. It shifts burden of payment
from consumers to insurers in a significant way. Medicare
prescription drug benefit would help remove insurance
disparity by income, education and race/ethnicity and reduce
relatively high financial burden for those without drug
insurance under private insurance system. It may enhance
accessibility to prescription drugs among the elderly and
promote their health, while special attention is needed for the
potential fiscal impact of additional prescription drug coverage
in Medicare to support the current near-elderly population.
Implications for Policy, Delivery, or Practice: Policy makers
can use results from this study in designing and modifying
Medicare prescription drug benefit. Further research should
pay attention to quantitatively approximate the fiscal effect on
Medicare program when the current near-elderly becomes
eligible for Medicare prescription benefit.
Primary Funding Source: KDI School of Public Policy and
Management; Sungkyunkwan University, Korea (South)
●The Effect of Area HMO Market Share on Colorectal
Cancer Screening Within the VA Health Care System
Lynn Soban, Ph.D., MPH, RN, Elizabeth Yano, Ph.D., MPH,
Patricia Parkerton, Ph.D., Lisa Rubenstein, M.D., Susan Ettner,
Ph.D.
Presented By: Lynn Soban, Ph.D., MPH, RN, Post-doctoral
fellow, VA Greater Los Angeles HSR&D Center of Excellence,
16111 Plummer Street (152), Sepulveda, CA 91343; Tel: (818)
891-7711 x9954; Email: lsoban@ucla.edu
Research Objective: Managed care “spillover” effects are
reflected by the degree to which local managed care activity
influences the structure and functioning of other health care
systems in the same environment. These effects may be
important as they may explain local variations in the delivery
of care. Recent research has demonstrated that the VA’s
fundamental reorganization towards managed care principles
in the mid-1990’s has resulted in substantial quality gains,
outstripping Medicare performance. We aimed to evaluate
the extent to which managed care spillover might have
contributed to VA quality reports, using colorectal cancer
(CRC) screening as a case example.
Study Design: This cross-sectional study uses facility and
patient-level data. Data on the level of managed care activity
in the local VA facility environment (defined as percent HMO
enrollment per total area population) were obtained from
Interstudy. This was linked to other area characteristics (e.g.,
rural/urban location, area physician capacity) from the Area
Resource File; and with individual VA health care facility
characteristics (e.g., facility size, academic affiliation) from the
National VA Survey of Primary Care Practices. CRC screening
data among veteran users were obtained from the VA’s
External Peer Review Program (EPRP). These data are
generated from chart review conducted by trained nurse
abstractors using standardized abstraction protocols. CRC
screening is “achieved” when a guideline-eligible patient
receives screening from a VA or non-VA provider. Using
generalized estimating equations, we then examined the effect
of HMO penetration in each VA’s locale on the probability of a
veteran receiving CRC screening in general (by a VA or
community provider), and, among screened veterans, the
probability that the screening was performed by a VA provider
(as opposed to by a community provider, but credited to the
VA).
Population Studied: 52,213 randomly sampled outpatient
clinic patients from 214 VA facilities across the U.S.
Principal Findings: The level of HMO activity in a VA’s local
market is not a significant predictor of the receipt of CRC
screening. However, among veterans who were screened,
those who received care in areas with higher levels of HMO
market share were less likely to have received screening from a
VA provider (RR: 0.98; 95% CI: 0.96, 0.99). Patient
characteristics predictive of receipt of screening from a nonVA provider included: female gender (p<.05), having private
insurance (p<.001), or Medicare coverage (p<.001).
Conclusions: In areas with higher levels of HMO penetration,
VA patients are substituting non-VA screening for VA
screening; this effect is more pronounced among women
veterans and those with outside insurance coverage.
Implications for Policy, Delivery, or Practice: Most
screening occurred within the VA system, thus, the magnitude
of the shift to non-VA providers in areas with higher levels of
HMO penetration is not large enough to inflate VA
performance. However, it appears that VA facilities located in
areas with higher levels of HMO penetration may benefit from
their location by relying more on community providers to
perform screening.
Primary Funding Source: AHRQ
●Impact of a Medication Copayment Increase on
Medication Acquisition in the VA
Kevin Stroupe, Ph.D., Bridget Smith, Ph.D., Todd Lee,
PharmD, Ph.D., Ramon Durazo-Arvizu, Ph.D., Elizabeth
Tarlov, Ph.D., Lishan Cao, MS
Presented By: Kevin Stroupe, Ph.D., Research Scientist,
Department of Veterans Affairs, Midwest Center for Health
Services and Policy Research, PO Box 5000 (151H), Hines, IL
60141; Tel: (708)202-3557; Fax: (708)202-2316; Email:
kevin.stroupe@med.va.gov
Research Objective: In February 2002, the Department of
Veteran’s Affairs, VA, raised medication copayments from $2
to $7 per 30-day prescription. Veterans are subject to
medication copayments based their service-connected health
conditions and income. Veterans fall into three groups where
they face no copayments, copayments for non-service
connected medications only, or copayments for all
medications. We examined the number of 30-day equivalent
prescriptions veterans obtained from VA during 12-months
before and after the increase. We evaluated the impact of the
copayment increase across several medication categories: all
chronic medications, defined as medications with at least one
30-day supply; higher and lower-cost medications, defined as
medications with retail cost more or less than the copayment;
over-the-counter and prescription only medications; generic
and brand medications; and more or less essential
medications, defined as medications preventing deterioration
in health or relieving symptoms only.
Study Design: This was a retrospective cohort study using
data from VA national administrative databases. We used
zero-inflated negative binomial count models to examine the
effect of the copayment increase on the number of 30-day
prescriptions, controlling for age, race, comorbidities, and
insurance status. We employed a difference-in-differences
approach to estimate the change in number of 30-day
prescriptions, i.e., the marginal effects, after the increase for
veterans with copayments relative to veterans without
copayments, across the medication categories. We used these
marginal effects to calculate price elasticities, which give the
percentage change in 30-day prescriptions per 1 percent
increase in the copayment.
Population Studied: We took a 5.5 percent random sample of
male VA users in fiscal year 2001, excluding veterans with no
VA healthcare in the 12 months before the study or who died
during the study period, resulting in 150,983 veterans: 19,620
with no copayments, 102,643 with some copayments, and
28,720 with copayments for all medications.
Principal Findings: Following the copayment increase, the
number of 30-day prescriptions for all chronic medications fell
by 6 to 7 percent among veterans subject to copayments for
some or all medications relative to veterans with no
copayments, implying an elasticity of -0.05 to -0.06. The
number of lower-cost medications fell by 16 to 25 percent,
while the number of higher-cost medications fell by 5 percent.
For over-the-counter medications, the number of 30-day
supplies fell by 25 to 44 percent, while for prescription-only
medications the number fell by only 3 percent. For both brand
and generic medications, the number of 30-day supplies fell by
5 to 8 percent. The number of essential medications fell by 4
percent; however, there was no significant difference among
non-essential medications.
Conclusions: Following the copayment increase, the number
of medications veterans obtained from VA fell among veterans
subject to the copayment. The copayment increase had
relatively larger impacts on lower-cost and over-the-counter
medications.
Implications for Policy, Delivery, or Practice: As a managed
care organization, VA may wish to monitor medication
acquisition by its chronically ill veterans. However, charging
veterans copayments larger than the price they might pay
elsewhere for certain lower-cost medications might lead
veterans to obtain those medications outside of the VA, if at
all, limiting VA’s ability to monitor medication acquisition.
Primary Funding Source: VA
●The Effect of Co-Payment Change on the Discontinuation
of VA Pharmacy Use for Chronic Prescription and Overthe-Counter Medication
Kevin Stroupe, Ph.D., Todd Lee, Ph.D., Ramon Darazo-Arvizu,
Ph.D., Elizabeth Tarlov, Ph.D., Lishan Cao, M.S.
Presented By: Kevin Stroupe, Ph.D., Social Science Analyst,
Midwest Center for Health Services and Policy Research,
Hines VA Hospital, P.O. Box 5000, 151-H, Hines, IL 60141; Tel:
(708)202-4870; Fax: (708)202-2499; Email:
Bridget.Smith@med.va.gov
Research Objective: The co-payment for a 30-day supply of
medication obtained from Veterans Affairs’ pharmacies was
increased from $2 to $7 in February 2002. Based on the
relationship of their condition to their military service and
income, veterans may be subject to co-payments for none,
some, or all of their medications. The objective of this study
was to determine if veterans affected by co-payments were
more likely than those not affected to discontinue use of VA
pharmacy for chronic prescription and over-the-counter
medications following the co-pay increase.
Study Design: This was a retrospective observational study
using VA pharmacy and utilization data. We examined the
effect of the co-payment change on the discontinuation of VA
pharmacy use for chronic prescription and over-the-counter
medications and the intensity of outpatient use with bivariate
probit models. A medication was defined as chronic if a
subject received more than a 30-day supply. Other variables
in the models included race, age, a co-morbidities score,
insurance coverage, and distance to the nearest VA hospital.
Population Studied: The study population was an
approximately 5 percent sample of male veterans who had
pharmacy utilization 12 months before the increase and had
some VA healthcare utilization 12 months after the increase.
A total of 140,232 veterans had complete data for all the
characteristics and were included in the model for prescription
medications and 96,093 were included in the over-the-counter
model.
Principal Findings: After the change, 2.9 percent of veterans
with no co-payments, 4.46 percent of veterans with some copayments and 3.5 percent of veterans always subject to the co-
payment discontinued their VA pharmacy use for chronic
prescription medications. The percentages of veterans who
discontinued their chronic over-the-counter medications were
much higher: 26.6 percent of veterans with no co-payments,
40.5 percent of those with some co-payments and 61.0
percent of veterans who always paid a co-payment. Based on
the results of the multivariate models, the probability of
discontinuing VA pharmacy use was 0.99 percentage points
higher for veterans with some co-payments than for
prescription use and 12.4 points higher for over-the-counter
medications than for veterans not subject to the co-pay. For
veterans who had to pay the co-payment for all medications,
the probability of discontinuing use was 0.79 percentage
points higher for prescription and 24.9 points higher for overthe-counter medications than for unaffected veterans.
Conclusions: Veterans that were required to pay co-payments
for some or all of their chronic medications were significantly
more likely to stop filling both their prescription and over-thecounter medications through the VA after the co-payment
change. The marginal effects for veterans that paid some or
all of the co-payment were substantially larger for over-thecounter medications than for prescription medications.
Implications for Policy, Delivery, or Practice: The fact that
Veterans that were required to pay a co-payment for some or
all of their chronic medications were more likely to
discontinue their VA pharmacy use than unaffected veterans
has the potential to result in some unintended health
consequences. It will be important to determine if veterans
stopped using their medications or obtained them elsewhere,
and to examine the impact on health outcomes.
Primary Funding Source: VA
●Prescription Drug Management: Are Health Maintenance
Organizations Different From Traditional Insurance Plans?
Cindy Thomas, Ph.D., Stanley S. Wallack, Ph.D., Timothy
Martin, MS, Grant A Ritter, Ph.D.
Presented By: Cindy Thomas, Ph.D., Senior Scientist,
Schneider Institute for Health Policy, Brandeis University, 415
South Street MS 035, Waltham, MA 02454; Tel: (781)736-3921;
Fax: (781)736-3905; Email: cthomas@brandeis.edu
Research Objective: This research determines whether the
different management approaches used by health
maintenance organizations (HMOs) versus other types of
insurers result in different patterns of prescription drug use
and expenditures. We assess differences in prescription drug
expenditures and use between two different types of insurance
programs: HMOs; and self insured employer groups whose
health care benefits are not provided by HMOs. We examine
whether these insurers differ on several aspects of drug
management, and how these translate to cost and utilization
outcomes.
Study Design: We examined differences between HMOs and
other insurers to determine unadjusted and adjusted
differences in the types of benefit design features
implemented, such as average prescription drug use and
copayments for three tier plans, and average cost sharing. We
also compared utilization and expenditure outcomes between
the two types of insurers. We decomposed the difference
between HMOs and non-HMO plans in overall expenditures,
the average price of a prescription, and average number of
prescriptions, into the contribution of generic versus brand
use, and into each therapeutic class of drugs. Multivariate
regression was also used to estimate the importance of
demographic and prescription program design features on
total drug expenditures per person, and its two components:
price per prescription and number of prescriptions per
member.
Population Studied: The sample used in the analyses
included pharmacy claims from a total of 734 specific
insurance plans, representing nearly 2 million working age
individuals and their dependents, all under age 65, in a
national sample. Among the 332 three-tier programs, 218
were HMOs and 114 were non-HMO (employer groups that
were self-insured and did not provide health care benefits
through an HMO). All study plans were managed by the
same pharmacy benefits manager.
Principal Findings: The enrollees in both health maintenance
organization plans and non-HMO plans responded
significantly to higher cost sharing. The results also indicate
that there is clearly an “HMO effect” in the cost and utilization
of prescription drugs, managed by the same PBM. The price
per prescription was significantly lower in HMOs than in other
types of health plans (p<.0001), due to greater use of generics
and less expensive brand drugs. After controlling for
demographics and cost sharing, HMOs experienced lower per
capita expenditures (p<.01), number of prescriptions (p<.05)
and average price per prescription (p<.01).
Conclusions: Prescription drug utilization and spending
patterns differ between HMOs and non-HMO health plans
administered by the same PBM. Per capita prescription drug
expenditures and use are affected both by consumer cost
sharing and other management strategies.
Implications for Policy, Delivery, or Practice: Measuring
differences in prescription drug management between HMOs
and other insurers will be critical for evaluating the impact and
estimating costs of the new Medicare prescription drug
benefit, and prescription drug management in other insured
groups. Studies that do not take into account the effect HMO
management strategies are likely to overestimate the effect of
cost sharing alone and underestimate the long-run impact of
additional prescription drug management efforts. As well,
future studies on prescription use and cost should take into
consideration the fact that health plans use a number of
concurrent strategies, with the plan’s culture, physician
organizational arrangement and market dictating the strategy
and its impact.
Primary Funding Source: California Health Care Foundation
●Employer-Sponsored Retiree Health Benefits in 2004
Heidi Whitmore, MPP, Jon Gabel, MS, Jeremy Pickreign, MS
Presented By: Heidi Whitmore, MPP, Deputy Director, Health
Research and Educational Trust, 17215 49th Avenue North
Unit H, Plymouth, MN 55446; Tel: (763)478-6725; Fax:
(763)478-6725; Email: hwhitmore@aha.org
Research Objective: This study examines the current state of
employer-based retiree health benefits for Medicare retirees,
recent changes in their coverage, and possible employer
responses to the Medicare Modernization Act (MMA) of
2003.
Study Design: The Kaiser Family Foundation and HRET
conduct this annual survey of employer-sponsored health
benefits, with MedPAC supporting the portion of the survey
on retiree health benefits in 2004. The survey collected data
from 1,925 firms on the largest Medicare retiree plan and
included questions on offer rates, eligibility and coverage,
premiums, retiree cost-sharing, prescription drug benefits,
and possible responses to the MMA. HRET retained National
Research to conduct telephone interviews with benefits
managers from January to May 2004, with a response rate of
50%.
Population Studied: Interviews were conducted with 1,925
U.S. employers with a minimum of three employees. The
survey asked benefit managers about health benefits offered
to their Medicare retirees.
Principal Findings: About three-fourths of employers that
offer retiree health benefits extend them to retirees who have
reached Medicare age. Some firms currently providing retiree
coverage have already terminated retiree coverage for active
workers. About 2/3 of workers from firms currently offering
coverage will be eligible for retiree benefits when they retiree.
Medicare retirees pay a higher percentage of the monthly
premium than do active workers – 25% vs 16%. For those
firms currently offering Medicare retiree coverage, about onefourth reported they are very or somewhat likely to eliminate
retiree health benefits for new hires in the next two years, and
13% indicated they might do so for active employees. Most
firms reported they are very or somewhat likely to require
Medicare retirees to pay a larger proportion of the premium –
73 percent of retirees will likely pay more. Most (78%) retirees
who now have benefits would continue to have some
supplement to the new Medicare drug benefit from their
former employer. The plan option that qualifies employers to
receive a 28 percent subsidy was reported as “most likely” by
more firms than other options, encompassing almost half of
covered retirees. About one fourth of retirees are in firms that
were considering wrapping around the Medicare benefit.
Conclusions: We are witnessing a continuation of past trends
– erosion of retiree health benefits. We will not see wholesale
dropping of retiree health plans, but rather dropping of
coverage for current and new hires. Firms will have tougher
eligibility requirements, and a greater financial burden for
retirees. The survey does not support the view that enacting a
drug benefit would induce employers to drop retiree coverage
altogether, or even retiree drug benefits, in response to the
MMA.
Implications for Policy, Delivery, or Practice: While the data
do not support the concern that the MMA would crowd out
employer-based retiree coverage, erosion of health benefits in
general remains a growing problem for retirees. A smaller
share of today’s workers being eligible for employer-based
retiree coverage, coupled with less generous benefits, could
place a large financial strain on future retirees.
Primary Funding Source: MedPAC
●Patterns of Antibiotic Utilization among Managed Care
Enrollees That Potentially Contribute to Drug Resistance
Lok Wong, MHS, Jennifer Lis, MBA, MHSA, Barbara Souder,
PhD, MPH, RN
Presented By: Lok Wong, MHS, Senior Health Care Analyst,
Quality Measurement, National Committee for Quality
Assurance, 2000 L Street NW, Suite 500, Washington, FL
20036; Tel: (202)955-1784; Fax: (202)955-3599; Email:
wong@ncqa.org
Research Objective: To identify utilization patterns of
antibiotic use in managed care populations, including specific
antibiotics that potentially contribute to antibiotic drug
resistance which diminishes antibiotic drug efficacy.
Study Design: Retrospective pharmacy claims data analysis.
Number of antibiotic prescriptions dispensed by drug class,
plan, age cohort, member months enrolled, and drug class;
average days supplied per prescription.
Population Studied: Five million commercial members of all
ages 0-85+ enrolled in seven managed care plans across the
U.S. in 2002 and 2003 for which 4.6 million antibiotics were
prescribed in 2003.
Principal Findings: Overall antibiotic prescribing rates across
all field-test plans increased by 1% from 2002 to 2003;
however change varied by plan (range -3% to 5%). Antibiotic
use in plans ranged from 738 to 1,040 antibiotic prescriptions
per 1,000 members. Despite increase in total number of
prescriptions per member, average days per prescription
supplied declined (-1% to -3% change) between 2002 and
2003. Despite national efforts to reduce prescribing of
antibiotics that potentially contribute to drug resistance,
results show increased use of antibiotics of concern.
Prescribing of antibiotics of concern made up approximately
half of all antibiotic prescribing across plans (range 43% –
58%). Between 2002 and 2003, the percentage of these
antibiotics generally increased as a proportion of all antibiotics
prescribed (-0.2% to 9%) but with high levels of regional
variation. By drug class, prescribing antibiotics of concern
increased in most plans: clindamycin (plan range: 1% to 21%
change), amoxicillin/clavunate (-2% to 7%), azithromycin and
clarithromycin (2% to 17%), quinolones (-4% to 5%). Only
later-generation cephalosporins generally showed a decline in
prescribing (-2% to -13%, except one plan increased 2%).
Prescribing for vancomycin was low at 0.06 to 0.22 per 1000
members, with variable change (-40% to 27%). In contrast,
prescribing of antibiotics not known to contribute drug
resistance generally declined (range -6% to 1%) from 2002 to
2003. Prescribing rates varied widely by class of antibiotic and
patient age. Across all classes of antibiotics, females had a
higher rate of antibiotic utilization than males.
Conclusions: Study results show that despite national
concern about increased antibiotic drug resistance due to
overuse and misuse, there is an overall increase in antibiotic
use. Of particular concern is increased prescribing in
managed care of antibiotics of concern, compared to declining
prescribing of antibiotics not related to drug resistance.
Regional differences in prescribing antibiotics of concern
suggest some regions could be experiencing or contributing to
higher levels of drug-resistant organisms
Implications for Policy, Delivery, or Practice: This national
overview of antibiotic utilization trends in managed care using
a standardized HEDIS measure will help to identify
opportunities for quality improvement and inform national
efforts to educate providers and patients about the
importance of reducing use antibiotics that contribute to drug
resistance. Further research is needed to understand for what
conditions and patient populations antibiotics of concern are
prescribed to further target quality improvement and reduce
antibiotic drug resistance.
Primary Funding Source: CDC, Council for Affordable Quality
Healthcare, National Committee for Quality Assurance