00:00:05
in my research I examined the effect of
00:00:09
the generosity of government payments to
00:00:12
health insurers for a program known as
00:00:14
Medicare Advantage uh the paper is
00:00:16
actually jointly authored with a Wharton
00:00:19
another Wharton faculty member Amanda
00:00:20
Stark and with a Wharton PhD student uh
00:00:23
Boris vson and essentially what we're
00:00:25
trying to figure out is when the
00:00:27
government pays Health insurers more to
00:00:30
provide Medicare recipients with
00:00:33
Healthcare how much of that additional
00:00:36
money ripples through to consumers in
00:00:37
the form of better coverage so just at a
00:00:40
at a high level uh the Medicare program
00:00:43
there are 52 million people enrolled in
00:00:46
it in the US the vast majority are 65
00:00:48
years old and up uh but there are some
00:00:52
people who who qualify for being
00:00:53
disabled now for about 30% of those 52
00:00:57
million they opt out of what's called
00:00:59
traditional Medicare and instead select
00:01:02
into one of these private insurance
00:01:03
plans so the other 70% are in
00:01:05
traditional Medicare where if they go to
00:01:07
the hospital or a physician the
00:01:09
government directly pays the hospital or
00:01:11
the physician for their care it's fee
00:01:14
for service traditional Medicare
00:01:16
Medicare Advantage which is what we're
00:01:18
studying in that program the government
00:01:20
just cuts a check per person per month
00:01:22
to a health insurer and the health
00:01:24
insurer then coordinates and finances
00:01:26
that person's care and so this is a
00:01:28
really big program it is 30% of all
00:01:31
Medicare recipients and it's grown a lot
00:01:32
it's more than doubled over the last
00:01:35
eight or nine years and there is there
00:01:38
have been many studies comparing it with
00:01:40
traditional Medicare so for example are
00:01:43
people getting better quality care if
00:01:45
they're in Medicare Advantage than in
00:01:46
fee for service or uh are they uh do
00:01:50
they have better health outcomes
00:01:52
Medicare Advantage fee for service there
00:01:53
been very little work that has asked as
00:01:56
you pay these plans more how much does
00:01:58
quality rise if at all and what other
00:02:00
things happen um and this is a really
00:02:02
important issue because a key feature of
00:02:06
Obamacare is uh calls for a reduction in
00:02:10
the payments to these plans there's
00:02:11
going to be pretty significant
00:02:13
reductions to their reimbursement over
00:02:14
time we actually don't have much
00:02:16
evidence on what will happen as a result
00:02:18
of that so we have a number of key
00:02:20
findings and I'll just sort of run
00:02:22
through the big ones so one is that when
00:02:25
the government pays Health insurers more
00:02:27
many more Health insurers enter the
00:02:29
market
00:02:30
so it's kind of uh on the one hand great
00:02:33
for incumbent Health insurers because
00:02:35
they get paid more but on the other hand
00:02:37
potentially not great because they're
00:02:39
going to see more competition for
00:02:41
Medicare recipients so that is uh you
00:02:44
know one big effect that we find
00:02:45
additionally we find that more people
00:02:47
enroll in Medicare Advantage when the
00:02:49
government pays the plans more
00:02:51
essentially the reason there is that as
00:02:53
the plans get more money it becomes
00:02:55
profitable to to advertise and Market to
00:02:57
still more U Medicare recipients
00:03:00
um but then we you know the most of the
00:03:03
study focuses on the quality of coverage
00:03:06
in let's say a high reimbursement regime
00:03:09
versus a low reimbursement regime and to
00:03:12
get to look at this we um exploit a
00:03:14
quirk in the government's methodology
00:03:17
for payment essentially counties that
00:03:19
are grouped in metropolitan areas with a
00:03:21
population of 250,000 or more typically
00:03:24
get about 105% more than otherwise
00:03:28
identical counties in Metro areas just
00:03:30
underneath 250,000 so that turns out to
00:03:33
be a really big difference in how much
00:03:35
the plans are reimbursed and we exploit
00:03:38
that and telescope in on do we see
00:03:40
higher quality coverage in the places
00:03:42
with more generous reimbursement than in
00:03:43
less and we look at a number of
00:03:45
different uh kinds of quality um some
00:03:49
having to do with financial
00:03:50
characteristics like what kind of
00:03:51
deductibles and co-pays do people have
00:03:54
others having to do with the breadth of
00:03:56
people's provider networks are they able
00:03:58
to easily see a physician
00:04:00
or a specialist or Primary Care person
00:04:03
uh additionally uh uh what are what's
00:04:05
their overall satisfaction with their
00:04:07
plan and what sorts of services are
00:04:08
covered so we try to look at a broad set
00:04:10
of quality indicators and our findings
00:04:13
indicate that we see more insurers enter
00:04:16
and we s see more people enroll and we
00:04:18
see more advertising expenditures but we
00:04:20
actually don't see much better quality
00:04:22
when you pay plans more and so I think
00:04:24
that this is um and and so what we what
00:04:28
we uh the the question then naturally
00:04:31
arises where does the money seem to go
00:04:34
and in a sort of final empirical
00:04:35
analysis we try to see how much of it
00:04:37
ripples through to profits of Health
00:04:39
insurers and we see that quite
00:04:41
significant in uh share of it does so
00:04:44
this has uh imp you know this is um to
00:04:48
us you know an important area to be
00:04:50
studying because there are going to be
00:04:52
so many changes to how Medicare
00:04:54
Advantage plans and other government
00:04:56
healthc care is is is reimbursed how
00:04:58
generously it's reimbursed in years
00:05:00
ahead and so you know we've sort of made
00:05:02
some progress on that front it's not
00:05:04
this isn't the last word on this issue
00:05:06
but it is um we think uh you know an
00:05:09
important uh piece of evidence for for
00:05:12
policy makers to weigh as they're
00:05:14
thinking about can we cut reimbursement
00:05:16
to these plans or not so a Medicare
00:05:19
recipient in choosing between
00:05:20
traditional Medicare and a Medicare
00:05:22
Advantage plan will weigh a number of
00:05:24
factors so neither one is likely to
00:05:26
dominate the other one so on the one
00:05:30
hand traditional Medicare is going to
00:05:32
tend to have more providers in the
00:05:36
network so it most Physicians most
00:05:39
hospitals contract with traditional
00:05:42
Medicare however a private insurer May
00:05:45
contract with some Physicians perhaps
00:05:48
very high quality Physicians who don't
00:05:50
contract with traditional Medicare and
00:05:53
additionally the Medicare Advantage plan
00:05:55
May provide additional benefits above
00:05:57
and beyond what traditional Medicare
00:05:59
covers so just as one example many of
00:06:02
the plans have historically offered
00:06:04
things like gym memberships or Vision
00:06:06
Care and these are additional uh uh
00:06:08
benefits above and beyond what
00:06:09
traditional Medicare covers so their
00:06:12
premium will sometimes be slightly
00:06:14
higher than traditional Medicare but
00:06:16
that is partly because uh they sometimes
00:06:19
offer these additional benefits above
00:06:20
and beyond traditional uh Medicare so
00:06:23
there it is there's no simple comparison
00:06:26
because each insurer can tailor the sort
00:06:29
of
00:06:30
level of benefits that it offers um as a
00:06:33
function of the characteristics of of
00:06:36
people so human might offer a plan with
00:06:39
Vision Care in one County but without
00:06:41
Vision Care in another County it might
00:06:43
offer a plan with a deductible of you
00:06:45
know n Dollar in one place and two n
00:06:47
Dollar in another place so it just it
00:06:49
depends they really have uh you know a
00:06:51
fair amount of flexibility to tailor
00:06:53
their benefits across the counties but
00:06:55
they have to at least provide a level of
00:06:58
benefits as as generous is traditional
00:07:00
Medicare they can't undercut traditional
00:07:02
MediCare at least on
00:07:06
paper first key takeaway is that firm's
00:07:10
decision to enter a market is highly
00:07:12
responsive to how much the government
00:07:14
pays so when the government pays more
00:07:18
for medic Private health insurance
00:07:21
through Medicare uh more insurers
00:07:24
compete to offer that coverage so that
00:07:27
is one really important key take away a
00:07:30
second is
00:07:32
that at least given the many quality
00:07:35
measures that we can look at we don't
00:07:37
find a ton of evidence that paying plans
00:07:40
substantially more uh leads to much
00:07:43
better equality and this you know
00:07:44
there's a lot of research in uh Health
00:07:48
economics and related areas trying to
00:07:50
figure out when we pay more for medical
00:07:52
care in this country how much do we get
00:07:54
in return for it and there's conflicting
00:07:57
evidence on that but within Medicare
00:07:59
Advantage we don't find a huge payoff on
00:08:01
the margin and so you know takeaway as
00:08:04
we think about the Affordable Care Act
00:08:06
being phased in and reductions in the
00:08:08
generosity of reimbursement to the plans
00:08:11
I think uh you know there's been a lot
00:08:13
of concern that those reimbursement Cuts
00:08:16
would um harm consumers a fair amount
00:08:18
and our evidence suggests that um those
00:08:21
effects may not be so great not not to
00:08:24
say that they would be zero but they're
00:08:26
certainly not the case that for each
00:08:27
dollar you reduce uh reimbursement into
00:08:29
the plans a full dollar is being um uh
00:08:32
taken away from consumers in the form of
00:08:35
the uh quality of their coverage so I'd
00:08:37
say those are the three key
00:08:42
takeway I think it was surprising to me
00:08:45
how responsive insurers were to uh
00:08:49
receiving 10 a half% more in
00:08:51
reimbursement so we estimate that in a
00:08:53
typical Market there are about four
00:08:55
insurers operating uh let's say in in
00:08:59
the the somewhat smaller counties and as
00:09:01
soon as you pay them 10 a half% more
00:09:03
that increases to about six insurers so
00:09:05
it's a 50% increase in the number of
00:09:07
number of insurers offering coverage I
00:09:09
think that was surprising to me it was
00:09:12
also surprising to me though that with
00:09:13
that additional reimbursement it we
00:09:15
didn't see a a big Improvement in
00:09:17
quality and there we're talking about
00:09:19
billions of dollars in additional
00:09:21
government spending as a result of this
00:09:24
somewhat higher reimbursement in um in
00:09:26
the places with a population of 250,000
00:09:28
or more so was s somewhat surprised to
00:09:30
see so little of the benefit passing
00:09:32
through to consumers in the form of
00:09:35
better benefits um those would be my two
00:09:37
biggest
00:09:41
surprises the key implication for
00:09:42
business is that as let's say the level
00:09:45
of reimbursement for some government
00:09:47
service whether it's Health Care
00:09:50
defense uh infrastructure or what have
00:09:53
you as the level of payment as as the
00:09:55
level that the government will pay for
00:09:57
that increases uh the number of firms
00:09:59
that are going to compete for that is
00:10:01
going to grow so I think that is one uh
00:10:04
important implication that there's sort
00:10:06
of a a positive and a negative in in
00:10:09
terms of uh G getting more generous
00:10:12
reimbursement for the government um for
00:10:14
consumers I think that it is uh
00:10:17
important to sort of follow the money
00:10:20
and to think about when the government
00:10:21
is paying more for some benefit whether
00:10:23
it's education or Healthcare or
00:10:24
something else it's important to sort of
00:10:26
think about is that additional money
00:10:29
passing through in the form of let's say
00:10:31
better schooling better healthare or
00:10:33
what have you and so I think it is um
00:10:35
it's useful to for anyone uh for any for
00:10:38
anyone who's on one of these programs or
00:10:40
a taxpayer who's funding them to think
00:10:42
critically about what are we getting for
00:10:45
that extra little bit that we're paying
00:10:47
because governments are
00:10:49
constantly uh making decisions about how
00:10:52
much to allocate to this area versus
00:10:55
that area versus another area and I
00:10:57
think it's uh incumbent on everyone not
00:10:59
just the people who are on the programs
00:11:01
but but taxpayers and others uh to think
00:11:04
critically about where we get the
00:11:05
biggest bang for the buck in uh in what
00:11:07
the government is
00:11:11
doing there are a number of changes that
00:11:14
are coming in that will take effect over
00:11:17
the next several years uh as a result of
00:11:20
the Affordable Care Act better known as
00:11:22
Obamacare um and chief among them is a
00:11:25
reduction in the re generosity of
00:11:27
reimbursement of Medicare Advantage
00:11:28
plans that's a a big part of the
00:11:32
financing for the expansion of health
00:11:33
insurance coverage uh that made it uh
00:11:38
lowering the deficit overall I think
00:11:40
that um the concerns that many have had
00:11:43
about the adverse effects of those
00:11:45
reimbursement reductions on
00:11:46
consumers um I I'm uh I think those are
00:11:51
somewhat less problematic now than I
00:11:53
would have before embarking on This
00:11:56
research now so I I so so far the the
00:12:00
reductions in reimbursement to these
00:12:02
plans have already been delayed twice so
00:12:05
one set was supposed to take effect last
00:12:07
April another set this April and the
00:12:09
government has uh to some extent sort of
00:12:13
pushed off somewhat those reimbursement
00:12:15
cuts um out of partially out of a fear
00:12:18
of what that would mean for Medicare
00:12:19
recipients and I think that our evidence
00:12:22
suggests that those um the the the the
00:12:27
costs of those uh reimburse cost for
00:12:29
consumers might be um might not be so
00:12:32
great after
00:12:36
all turns out that more than one in
00:12:39
three us residents is insured by
00:12:41
Medicare or another government Health
00:12:43
Care Program so one example of that is
00:12:46
Medicaid which also ensures more than 50
00:12:48
million people in the US and it turns
00:12:50
out that more than 2third of Medicaid
00:12:52
recipients are enrolled in a form of
00:12:54
managed care that is somewhat similar to
00:12:56
Medicare Advantage so uh in which
00:13:00
basically Medicaid is a state
00:13:02
administered program and it primarily
00:13:04
provides health insurance for lower
00:13:06
income Americans um and so as with
00:13:09
Medicare Advantage in Medicaid many
00:13:12
state governments pay a fixed amount per
00:13:14
member per month to an insurance company
00:13:16
that then coordinates and finances care
00:13:18
uh for recipients and I think our
00:13:20
findings for Medicare Advantage um
00:13:23
suggest that now we didn't study
00:13:26
Medicaid so I hesitate to extrapolate
00:13:28
from one program to another but to the
00:13:31
extent that the Contracting details are
00:13:34
similar in Medicaid as in Medicare seems
00:13:37
plausible that the level of
00:13:38
reimbursement to these plans um you know
00:13:41
changing it either up or down may not uh
00:13:44
have a huge effect on Medicaid
00:13:46
recipients so I think this is and this
00:13:49
is just more generally I mean the US
00:13:50
spends vastly more on medical care than
00:13:54
any other country on the planet as a
00:13:56
share of our economy there's no one
00:13:58
close
00:13:59
and I think partly because of that it's
00:14:03
sometimes not so surprising when we look
00:14:05
at what what we're getting for that last
00:14:07
$100 or last $500 on the margin we often
00:14:11
find not much and so I think that the
00:14:15
Medicare Advantage uh findings may have
00:14:18
implications for Medicaid managed care
00:14:20
but just government spending on Health
00:14:22
Care More generally that on the margin
00:14:24
we're already spending so much more than
00:14:26
other places that there there are a lot
00:14:28
of opportunities to cut with minimal
00:14:30
impact on minimal adverse impact on
00:14:36
consumers well this uh paper was um
00:14:40
itself featured in the news a couple of
00:14:41
times and and uh but very recently just
00:14:45
a week or two ago the um the federal
00:14:48
government decided to hold off on part
00:14:51
of the reduction in Medicare Advantage
00:14:53
reimbursement that was called for in the
00:14:55
Affordable Care Act and I think
00:14:59
uh you know and they had uh I think
00:15:01
there were well-intentioned con uh
00:15:03
reasons for that um a concern that if
00:15:06
they paid the plans less uh fewer people
00:15:09
would end up enrolled in the plans and
00:15:11
those who were enrolled would see lower
00:15:13
quality I think uh our research is
00:15:16
pretty relevant for that it was a pretty
00:15:18
big news item because it's an example
00:15:21
there have been a number of things in
00:15:22
Obamacare that have been delayed uh in
00:15:25
one way or another it's another example
00:15:27
of of such a uh such a delay uh and I
00:15:30
think that our research suggests that
00:15:33
when the time comes and policy makers
00:15:35
are ready to implement some of those
00:15:37
reimbursement Cuts uh that the the the
00:15:40
impact for consumers may not be uh that
00:15:46
negative I think there's a general view
00:15:49
that as uh the government pays more for
00:15:53
health care or for many services that
00:15:57
this is likely to benefit
00:15:59
uh the people enrolled in the program
00:16:02
the people attending the school the
00:16:04
people driving on the road or what have
00:16:05
you and so I think that um to the extent
00:16:09
there is some conventional wisdom it may
00:16:10
be that reductions in let's say Medicare
00:16:14
spending will harm Medicare recipients
00:16:18
and you know I I don't want us we're not
00:16:20
going to extrapolate to all components
00:16:21
of Medicare but at least in this pretty
00:16:23
big part that rep that accounts for 30%
00:16:26
of Medicare recipients um I think our
00:16:28
findings pretty pretty clearly indicate
00:16:31
that um uh paying somewhat less uh
00:16:35
doesn't necessarily harm consumers and
00:16:37
conversely paying somewhat more doesn't
00:16:38
necessarily benefit consumers all that
00:16:40
much uh and I think that's important
00:16:42
because the country is going to Grapple
00:16:45
with some pretty difficult decisions
00:16:46
maybe not tomorrow maybe not next year
00:16:48
but in the not too distant future given
00:16:50
the demographic changes about how we're
00:16:52
going to reform Medicare Medicaid and
00:16:54
Social Security and I think more
00:16:57
evidence about what are the implications
00:17:00
of either paying less in
00:17:02
Medicare uh uh or you know other other
00:17:05
changes in entitlement programs that
00:17:07
will make them somewhat more fiscally
00:17:09
sustainable I think more of that kind of
00:17:10
research is going to be
00:17:15
important I think there's been a fair
00:17:17
amount of work comparing Medicare
00:17:19
Advantage with traditional Medicare
00:17:22
there's been much less work asking the
00:17:23
question how much better Does Medicare
00:17:25
Advantage become as we pay health
00:17:27
insurers more so I think that's
00:17:29
something that really different helps to
00:17:31
differentiate our research from other
00:17:33
studies and sort of also tries to drill
00:17:36
down and understand how companies are
00:17:39
impacted by more generous payment from
00:17:42
the government when the government
00:17:43
offers to pay more for a product in this
00:17:46
case health insurance for Medicare
00:17:48
recipients what we see is companies
00:17:50
respond to that they enter somewhat more
00:17:52
aggressively but surprisingly
00:17:54
surprisingly to us the increase in
00:17:57
competition that's generated by that
00:17:58
addition additional payment doesn't seem
00:17:59
to translate into better benefits for
00:18:01
consumers so um I think it is uh it you
00:18:06
it it's not like this will be the last
00:18:08
uh research written on this topic but I
00:18:10
think really understanding in the US
00:18:12
Health Care System what we get on the
00:18:13
margin for additional spending is really
00:18:15
important because it's it's a huge junk
00:18:18
of the economy and it's going to grow uh
00:18:21
bigger and bigger as as a result of
00:18:23
demographics and other factors
00:18:29
so one thing we're eager to know is who
00:18:32
are the firms who are sort of on the
00:18:34
bubble for entering the Medicare
00:18:36
Advantage um Market versus not entering
00:18:39
so there are some insurers that seem to
00:18:41
operate whether reimbursement is
00:18:43
generous or somewhat stingy um but then
00:18:45
there are these sort of marginal firms
00:18:47
that come in when uh when the government
00:18:50
pays somewhat more and I think
00:18:51
understanding who these firms are and or
00:18:54
do they offer a somewhat different
00:18:55
different level of quality perhaps lower
00:18:57
level of quality than the incumbent
00:18:59
firms that might help us to understand
00:19:02
better why we're uh reaching the the the
00:19:05
conclusions that we are how the the
00:19:08
incumbent firms differ from the firms
00:19:10
that are on the bubble from entering um
00:19:13
that's one area we'd like to work on
00:19:15
additionally in related work I would
00:19:18
like
00:19:19
to perform similar similar analyses for
00:19:22
the state-based health insurance
00:19:24
exchanges so a big part of Obamacare is
00:19:29
uh the setup of we've heard about
00:19:32
healthcare.gov uh through which about 35
00:19:35
States uh enrolled people for their uh
00:19:39
Insurance exchanges and then in other 15
00:19:41
states kind of did their own exchanges
00:19:43
um and these are brand new
00:19:46
marketplaces um that through which more
00:19:48
than 7 million people have enrolled for
00:19:50
health insurance and so I think a
00:19:53
another area that I'm eager to do work
00:19:55
on that will sort of build in this area
00:19:58
is to understand what determines uh how
00:20:01
many firms are entering these exchanges
00:20:04
different markets in these exchanges and
00:20:06
how those decisions about uh what how
00:20:10
the those decisions by Health insurers
00:20:12
influence the quality of coverage that's
00:20:14
available and the level of premiums so I
00:20:17
think some Geographic markets are
00:20:19
benefiting from a from uh the presence
00:20:22
of many different Health insurers uh
00:20:24
whereas others have just one or two so
00:20:26
there are parts of the US entire states
00:20:29
that are served by just one or two
00:20:30
Health insurers and I think uh it will
00:20:33
be important to understand are uh those
00:20:36
consumers being short changed relative
00:20:38
to their counterparts in in places with
00:20:40
somewhat more competition and I think
00:20:42
that this isn't exactly related to the
00:20:44
Medicare Advantage stuff but it it
00:20:46
essentially trying to understand how the
00:20:48
design of a government Marketplace a
00:20:50
government administered Marketplace um
00:20:53
what effect that has on the quality and
00:20:55
price of a very important product which
00:20:57
is health insurance
00:21:01
[Music]
