behavioral hazard in health insurance a fundamental implication of standard moral hazard models is overuse of low value medical care because copays are lower than costs in these models the demand curve alone can be used to make welfare statements a fact relied on by much empirical work there is ample evidence though that people misuse care for a different reason mistakes or behavioral hazard much high value care is underused even when patient costs are low and some useless care is bought even when patients face the full cost in the presence of behavioral hazard welfare calculations using only the demand curve can be off by orders of magnitude or even be the wrong sign we derive optimal copay formulas that incorporate both moral and behavioral hazard providing a theoretical foundation for value based insurance design and a way to interpret behavioral nudges once behavioral hazard is taken into account health insurance can do more than just provide financial protection it can also improve health care efficiency jel codes d03 i12 i13 i30 i38

post layoff earnings among semiconductor workers this study uses administrative data from california s unemployment insurance program to analyze the post layoff earnings of displaced and recalled workers in silicon valley s semiconductor industry

a welfare measure of offset effects in health insurance abstract changing health insurance coverage for one service may affect use of other insured services when improving coverage for one service reduces use of another the savings are referred to as offset effects for example costs of better coverage for prescription drugs may be partly offset by reductions in hospital costs offset effects have welfare implications but it has not been clear how to value these impacts in design of health insurance we show that plan paid rather than total spending is the right welfare measure of the offset effect and go on to develop a sufficient statistic for evaluating the welfare effects of change in coverage in the presence of multiple goods we derive a simple rule for when a coverage improvement increases welfare due to offset effects

what have we learned from empirical studies of unemployment and turnover unemployment reminds economists that we have a lot to be modest about twenty years ago robert hall 1972 asked why is the unemployment rate so high at full employment at the time hall wrote male unemployment in the united states had risen to 3 5 percent and it would peak at 4 4 percent in the recession of 1971 since then every cyclical low of unemployment has exceeded the one before it the end of the 1980 s expansion reduced unemployment to about 4 5 percent and unemployment peaked at 7 4 percent of the labor force in the recession that just ended the natural rate of unemployment has evidently risen through time which led lawrence summers 1986 to place a modifier in hall s question why is the unemployment rate so very high in what follows i pose three questions about the causes and consequences of rising joblessness first who are the unemployed i will show that unemployment and nonparticipation are heavily concentrated among the least skilled and more importantly that virtually all of the long term increase in joblessness occurs among low wage men unemployment and nonparticipation among highly skilled men are unchanged since the 1960 s second what factors have caused jobless time to rise there are many theories including changes in labor force demographics social programs that discourage employment and changes in the amount of frictional unemployment caused by sectoral shifts none of these is consistent with the evidence which points instead to a secular decline in the demand for lessskilled workers the data also cast doubt on nonmarket clearing models of rising unemployment wages are demonstrably flexible in the long run and they have fallen dramatically among the unskilled whose jobless rates have risen third what happens to the unemployed in contrast to the view that unemployment spells cause transitory reductions in income recent evidence indicates that job losses have substantial and permanent effects on earning power many of the unskilled who are unemployed or out of the labor force appear to have been high wage workers whose specialized skills have become obsolete

the effect of patient cost sharing on utilization health and risk protection abstract this paper exploits a sharp reduction in patient cost sharing at age 70 in japan using a regression discontinuity design to examine its effect on utilization health and financial risk arising from out of pocket expenditures due to the national policy cost sharing is 60 80 percent lower at age 70 than at age 69 i find that both outpatient and inpatient care are price sensitive among the elderly while i find little impact on mortality and other health outcomes the results show that reduced cost sharing is associated with lower out of pocket expenditures especially at the right tail of the distribution jel g22 i11 i12 i13 i18 j14

the effect of insurance coverage on preventive care despite the growth in health insurance products that differentially cover preventive care and nonpreventive care little is known about how preventive care utilization responds to targeted changes in coverage using administrative data from a large company this paper examines the implementation of an insurance benefit design which differentially increased the price of nonpreventive care while decreasing the price of prevention leveraging a difference in differences research strategy we find that preventive care utilization did not increase and even declined due to the differential price change this evidence indicates a meaningful negative cross price effect suggesting that nonpreventive care and preventive care are complements jel i13 i11

health insurance and the demand for medical care instrumental variable estimates using health insurer claims data this paper takes a different approach to estimating demand for medical care that uses the negotiated prices between insurers and providers as an instrument the instrument is viewed as a textbook cost shifting instrument that impacts plan offerings but is unobserved by consumers the paper finds a price elasticity of demand of around 0 20 matching the elasticity found in the rand health insurance experiment the paper also studies within market variation in demand for prescription drugs and other medical care services and obtains comparable price elasticity estimates

the impact of patient cost sharing on low income populations evidence from massachusetts greater patient cost sharing could help reduce the fiscal pressures associated with insurance expansion by reducing the scope for moral hazard but it is possible that low income recipients are unable to cut back on utilization wisely and that as a result higher cost sharing will lead to worse health and higher downstream costs through increased use of inpatient and outpatient care we use exogenous variation in the copayments faced by low income enrollees in the massachusetts commonwealth care program to study these effects we estimate separate price elasticities of demand by type of service overall we find price elasticities of about 0 16 for this low income population similar to elasticities calculated for higher income populations in other settings these elasticities are somewhat smaller for the chronically sick especially for those with asthma diabetes and high cholesterol these lower elasticities are attributable to lower responsiveness to prices across all categories of service and to some statistically insignificant increases in inpatient care

do physicians financial incentives affect medical treatment and patient health we investigate whether physicians financial incentives influence health care supply technology diffusion and resulting patient outcomes in 1997 medicare consolidated the geographic regions across which it adjusts physician payments generating area specific price shocks areas with higher payment shocks experience significant increases in health care supply on average a 2 percent increase in payment rates leads to a 3 percent increase in care provision elective procedures such as cataract surgery respond much more strongly than less discretionary services non radiologists expand their provision of mris suggesting effects on technology adoption we estimate economically small health impacts albeit with limited precision

the single vendor single buyer integrated production inventory model with a generalised policy abstract this note considers a more general type of policy for the single vendor single buyer integrated production inventory model than has hitherto been presented based on successive shipments to the buyer within a single production batch increasing by a fixed factor

on improving the single vendor single buyer integrated production inventory model with a generalized policy abstract in this note a simple procedure is suggested for modifying shipment size as obtained on applying the procedure given by hill european journal of operational research 97 1997 493 499

prescription drug use under medicare part d a linear model of nonlinear budget sets abstract medicare part d enrollees face a complicated decision they dynamically choose prescription drug consumption in each period given difficult to find prices and a nonlinear budget set we use part d claims data to estimate a flexible model of consumption that accounts for nonlinear prices dynamic responses and salience we use reduced form price responses from a linear regression of consumption on coverage range prices to compare performance under several models of behavior we find small price elasticities substantial myopia and that salient characteristics impact consumption beyond their effect on prices a hyperbolic discounting model with salience fits the data best

health insurance and the demand for medical care evidence from a randomized experiment we estimate how cost sharing the portion of the bill the patient pays affects the demand for medical services the data come from a randomized experiment a catastrophic insurance plan reduces expenditures 31 percent relative to zero out of pocket price the price elasticity is approximately 0 2 we reject the hypothesis that less favorable coverage of outpatient services increases total expenditure for example by deterring preventive care or inducing hospitalization

adverse selection moral hazard and wealth effects in the medigap insurance market using data from a longitudinal study of the recently retired we attempt to separate the moral hazard effect of medicare supplementary medigap insurance on health care expenditures from the adverse selection effect of poor health on medigap coverage we find evidence of adverse selection but its magnitude is unlikely to create serious efficiency problems taking adverse selection into account reduces the estimate of the moral hazard effect in addition we find a strong positive wealth effect on the demand for supplementary insurance

integrated longitudinal employer employee data for the united states the development of a database infrastructure that captures the complex interactions among households and businesses at the microeconomic level and characterizes the dynamics of the modern economy is critical for the social sciences the creation of such an infrastructure has posed a major challenge to national statistical institutes since most institutes collect store and disseminate data on the engines of economic growth businesses and households in twin data silos proposals to integrate the two face technical monetary legal and policy obstacles that go far beyond the norm of datacollection activities recent efforts at the longitudinal employer household dynamics lehd program at the u s census bureau have finally made this critical data infrastructure achievable and accessible the potential uses of longitudinal integrated employer employee data are far reaching a partial list includes the effect of technological and structural change on earnings employment and productivity the analysis of the firmspecific contribution to pay the effect of firm wage setting and turnover policies on productivity the impact of firm policies on different groups of workers e g welfare recipients the effect of firm expansion exit and relocation decisions on neighborhood demographic composition the analysis of worker commuting patterns and mobility and a full accounting of the

the impact of employer provided health insurance on dynamic employment transitions we estimate the impact of employer provided health insurance ephi on the job mobility of males over time using a dynamic empirical model that accounts for unobserved heterogeneity previous studies of job lock reach different conclusions about possible distortions in labor mobility stemming from an employment based health insurance system a few authors find no evidence of job lock although most find reductions in the mobility of insured workers of between 20 and 40 percent we use data from the national longitudinal survey of youth which includes variables describing the health insurance an individual holds as well as whether he is offered insurance by his employer this additional information allows us to model the latent individual characteristics that are correlated with the offer of ephi the acceptance of ephi and employment transitions our results provide an estimate of job lock unbiased through correlation with positive job characteristics and individual specific turnover propensity we find no evidence of job lock among married males and produce small estimates of job lock among unmarried males of between 10 and 15 percent

health insurance for humans information frictions plan choice and consumer welfare traditional models of insurance choice are predicated on fully informed and rational consumers protecting themselves from exposure to financial risk in practice choosing an insurance plan is a complicated decision often made without full information in this paper we combine new administrative data on health plan choices and claims with unique survey data on consumer information to identify risk preferences information frictions and hassle costs our additional friction measures are important predictors of choices and meaningfully impact risk preference estimates we study the implications of counterfactual insurance allocations to illustrate the importance of distinguishing between these micro foundations for welfare analysis

the incidence of mandated maternity benefits i consider the labor market effects of mandates which raise the costs of employing a demographically identifiable group the efficiency of these policies will be largely dependent on the extent to which their costs are shifted to group specific wages i study several state and federal mandates which stipulated that childbirth be covered comprehensively in health insurance plans raising the relative cost of insuring women of childbearing age i find substantial shifting of the costs of these mandates to the wages of the targeted group correspondingly i find little effect on total labor input for that group jel 118 j32 h51 in an era of tight fiscal budget constraints mandating employer provision of workplace benefits to employees is an attractive means for a government to finance its policy agenda consequently in recent years there has been a growth of interest in mandated benefits as a tool of social policy for example the centerpiece of president bill clinton s health care proposal is mandated employer provision of health insurance and more than 20 states have man

the demand for episodes of treatment in the health insurance experiment abstract this paper analyzes claims data from the rand health insurance experiment which were grouped into episodes of treatment the insurance plans in the experiment have coinsurance and a cap on out of pocket spending using new statistical techniques to adjust for the increased sickliness of those who exceed the cap the effects of coinsurance on cost per episode and number of episodes are estimated cost sharing reduced the number of episodes but had little effect on cost per episode people in the experiment responded myopically as their current insurance status changed through the year the price elasticity of spending was about 0 2 throughout the range of coinsurance studied when data permit it the study of episodes complements analyses of annual medical spending by revealing more about how decisions to spend are made within the year

selection on moral hazard in health insurance economic analysis of market failure in insurance markets tends to analyze selection and moral hazard as distinct phenomena in this paper we explore the potential for selection on moral hazard in insurance markets by this we mean the possibility that moral hazard effects are heterogenous across individuals and that individuals selection of insurance coverage is affected by their anticipated behavioral response to coverage we examine these issues empirically in the context of employer provided health insurance in the united states specifically we break down the general

employment based health insurance and job mobility is there evidence of job lock the majority of privately insured americans obtain their health insurance through their own or a family member s employment the rationale for employers to provide health insurance is straightforward by pooling the risks of individuals employers can reduce adverse selection and lower administrative expenses in addition they benefit from tax laws allowing businesses to deduct their health insurance costs these advantages of employer provision however must be weighed against the distortions they may generate in individual labor market decisions in particular health insurance may distort job mobility if employees decide to keep jobs they would rather leave for fear of losing coverage for preexisting conditions a possibility that has been termed job lock this paper attempts to quantify the effect of employer provided health insurance on the labor market mobility of individuals the link between employer provided health insurance and

price sensitivity of demand for prescription drugs exploiting a regression kink design this paper investigates price sensitivity of demand for prescription drugs using drug purchase records for at 20 random sample of the danish population we identify price responsiveness by exploiting exogenous variation in prices caused by kinked reimbursement schemes and implement a regression kink design thus within a unifying framework we uncover price sensitivity for different subpopulations and types of drugs the results suggest low average price responsiveness with corresponding price elasticities ranging from 0 08 to 0 25 implying that demand is inelastic individuals with lower education and income are however more responsive to the price also essential drugs that prevent deterioration in health and prolong life have lower associated average price sensitivity

what happens when the insurer can say no assessing prior authorization as a tool to prevent high risk prescriptions and to lower costs abstract insurers are increasingly requiring physicians to obtain prior authorization before prescribing drugs that are costly or have high abuse potential these prior authorization requirements have the potential to reduce risky prescriptions and to lower prescription drug costs but little is known about their ability to do either this study estimates the effect of a prior authorization requirement for certain costly and abuse prone drugs on prescription drug use and costs for work related injuries in texas the findings indicate that the prior authorization requirement reduces the likelihood that claimants receive non preferred drugs as well as insurers spending on non preferred drugs while there is some substitution to preferred drugs i do not find evidence of large increases in spending on preferred drugs the estimated effects on average total pharmacy spending are imprecise though there is suggestive evidence that the prior authorization requirement reduces the likelihood that a claim has high prescription drug costs the results provide strong evidence that the prior authorization requirement drastically reduces the likelihood that patients receive combinations of drugs that have contributed disproportionately to the rise in prescription drug overdoses despite the success of prior authorization in lowering spending on non preferred drugs and in reducing high risk prescriptions i find little evidence that prior authorization has disproportionately large effects on the most dangerous prescription drug use and only weak suggestive evidence that it has larger effects on prescription drug use that likely arises because physicians are not fully informed suggesting that prior authorization requirements do not necessarily target the riskiest drug use

technology growth and expenditure growth in health care in the united states health care technology has contributed to rising survival rates yet health care spending relative to gdp has also grown more rapidly than in any other country we develop a model of patient demand and supplier behavior to explain these parallel trends in technology growth and cost growth we show that health care productivity depends on the heterogeneity of treatment effects across patients the shape of the health production function and the cost structure of procedures such as mris with high fixed costs and low marginal costs the model implies a typology of medical technology productivity i highly cost effective home run innovations with little chance of overuse such as anti retroviral therapy for hiv ii treatments highly effective for some but not for all e g stents and iii gray area treatments with uncertain clinical value such as icu days among chronically ill patients not surprisingly countries adopting category i and effective category ii treatments gain the greatest health improvements while countries adopting ineffective category ii and category iii treatments experience the most rapid cost growth ultimately economic and political resistance in the u s to ever rising tax rates will slow cost growth with uncertain effects on technology growth

a joint inventory model for an open loop reverse supply chain abstract this research focuses on an open loop reverse supply chain which includes a single centralized returns center crc and multiple local collection points lcps each lcp receives a stream of returned products from consumers and once its inventory reaches its economic inventory level these products are immediately delivered to the crc the crc begins to handle those returned products when its inventory reaches its economic batch size special attention is placed on the joint inventory control and product return handling policies the purpose of this study is to find the optimal economic delivery batch size for the lcps as well as the optimal handling batch size for the crc in order to minimize the long run average cost for the open loop reverse supply chain an algorithm to find an optimal policy of delivery batch size for lcps and handling batch size for crc is developed we present detailed discussions on how the optimal policy of delivery as well as the handling batch sizes changes with respect to changes in system parameters we show that the formulas for optimal policies of delivery and handling batch sizes are modifications of the eoq model simulation results illustrate that our model development is suitable for more general situations

the effects of employer provided health insurance on worker mobility the authors use data from the 1984 survey of income and program participation sipp to investigate whether employer provided health insurance reduced worker mobility a phenomenon termed job lock the sipp provides information on variables particularly pension receipt job tenure and spouse job change that were omitted from previous studies and are the authors argue key to the estimation of welldefined mobility models for dual earner married men and women the authors estimate a model that accounts for the interaction between husbands and wives job change decisions for both married and single individuals the results provide fairly strong evidence ofjob lock among women but only weak indications of job lock among men the authors speculate that this finding reflects higher health care use by women than by men

why do hmos spend less patient selection physician price sensitivity and prices abstract cost control incentives have become an important part of the health insurance landscape in the united states these incentives are the strongest in capitated managed care organizations especially hmos because such organizations are paid a fixed amount regardless of the spending they generate using a sample of insurance claims from about 500 plans i find that in hmos spending on anti cholesterol drugs is 19 lower than in other insurance plans this spending difference could reflect the strong cost control incentives generated by capitation but it could also reflect the selection of healthy price sensitive patients into hmos or it could simply reflect lower prices to understand the difference i estimate a model of physician prescribing and patient refill decisions patients in hmos are nearly twice as sensitive to copays as are other patients consistent with selection of healthy patients into hmos even after adjusting for this selection however hmo physicians remain highly sensitive to drug procurement costs this high sensitivity explains about a 20 of the spending difference combined with lower prices it explains about 25 55 of the difference i find no evidence that these spending reductions result in fewer patient refills or the prescribing of less effective statins

what to expect when you are expecting are health care consumers forward looking a fundamental question in health insurance markets is how do health care consumers dynamically optimize their medical utilization under non linear insurance contracts our paper tests the neoclassical prediction that a fully forward looking agent only responds to their expected end of year price our unique identification strategy studies families during the year of childbirth who will likely satisfy their annual deductible thereby knowing their expected end of year price we find that during the year of a childbirth fathers increase medical spending by 11 per month after their deductible is satisfied rejecting the null of fully forward looking consumers this behavior cannot be explained by fathers increasing utilization in response to the childbirth itself furthermore this myopia translates to a 21 24 decrease in total annual medical spending relative to the counterfactual of fully forward looking behavior and is concentrated in elective procedures we find no response in low value or urgent care our findings suggest the need for modeling non linear incentives while accounting for myopic behavior when studying the medical utilization responses to health insurance

an equilibrium model of health insurance provision and wage determination we investigate the effect of employer provided health insurance on job mobility rates and economic welfare using a search matching and bargaining framework in our model health insurance coverage decisions are made in a cooperative manner that recognizes the productivity effects of health insurance as well as its nonpecuniary value to the employee the resulting equilibrium is one in which not all employment matches are covered by health insurance wages at jobs providing health insurance are larger in a stochastic sense than those at jobs without health insurance and workers at jobs with health insurance are less likely to leave those jobs even after conditioning on the wage rate we estimate the model using the 1996 panel of the survey of income and program participation and find that the employer provided health insurance system does not lead to any serious inefficiencies in mobility decisions

the dynamics of worker reallocation within and across industries this paper uses an integrated employer employee data set to answer two key questions i what is the equilibrium amount of worker reallocation ii how much does firm level job reallocation affect worker reallocation about 26 of workers who had previously exhibited a substantial degree of attachment to their employer change jobs in a given year about twothirds of this reallocation is roughly evenly split within and across broadly defined industries firm level job and worker reallocation substantially increases the probability of transition for even the most stable group of workers even after controlling for individual characteristics and firm and industry tenure

patient cost sharing and hospitalization offsets in the elderly in the medicare program increases in cost sharing by a supplemental insurer can exert financial externalities we study a policy change that raised patient cost sharing for the supplemental insurer for retired public employees in california we find that physician visits and prescription drug usage have elasticities that are similar to those of the rand health insurance experiment hie unlike the hie however we find substantial offset effects in terms of increased hospital utilization the savings from increased cost sharing accrue mostly to the supplemental insurer while the costs of increased hospitalization accrue mostly to medicare

adverse selection and inertia in health insurance markets when nudging hurts this paper investigates consumer inertia in health insurance markets where adverse selection is a potential concern we leverage a major change to insurance provision that occurred at a large firm to identify substantial inertia and develop and estimate a choice model that also quantifies risk preferences and ex ante health risk we use these estimates to study the impact of policies that nudge consumers toward better decisions by reducing inertia when aggregated these improved individual level choices substantially exacerbate adverse selection in our setting leading to an overall reduction in welfare that doubles the existing welfare loss from adverse selection jel d82 g22 i13 a number of potential impediments stand in the way of efficient health insur ance markets the most noted of these is adverse selection first studied by akerlof 1970 and rothschild and stiglitz 1976 in insurance markets prices reflect the expected risk costs of the insured pool whether the reason is price regulation or private information when insurers cannot price all risk characteristics riskier consumers choose more comprehensive health plans this causes the equilibrium prices of these plans to rise and healthier enrollees to select less comprehensive coverage than they would otherwise prefer

integrated insurance design in the presence of multiple medical technologies the classic theory of moral hazard concerns the insurance of a single good and predicts that co insurance is larger when the elasticity of demand is higher and when small risks are insured we extend this analysis to the insurance of multiple goods for example the simultaneous insurance of medical services and prescription drugs we show that when multiple goods are either complements or substitutes so that a change in co insurance for one service affects the demand of others the classic moral hazard results do not hold for example the single good model would predict high co payments for prescription drugs since drug demand is elastic and of modest financial risk however a model of multi good insurance suggests such drug coverage may optimally involve zero or even negative co insurance when it is a substitute to other services insured such as hospital care or physician services we summarize some of the empirical evidence in support of markets adopting optimal integrated pricing structures rather than individually optimal pricing structures this abstract was borrowed from another version of this item

salience myopia and complex dynamic incentives evidence from medicare part d the standard medicare part d drug insurance contract is non linear with reduced subsidies in a coverage gap resulting in a dynamic purchase problem we consider enrolees who arrived near the gap early in the year and show that they should expect to enter the gap with high probability implying that under a benchmark model with neoclassical preferences the gap should impact them very little we find that these enrolees have flat spending in a period before the doughnut hole and a large spending drop in the gap providing evidence against the benchmark model we structurally estimate behavioural dynamic drug purchase models and find that a price salience model where enrolees do not incorporate future prices into their decision making at all fits the data best for a nationally representative sample full price salience would decrease enrolee spending by 31 entirely eliminating the gap would increase insurer spending 27 compared to 7 for generic drug only gap coverage

patient cost sharing and healthcare spending growth in this paper we explore the role patient incentives play in slowing healthcare spending growth evidence suggests that while patients do indeed respond to financial incentives cost sharing does not uniformly improve value rather cost sharing provisions must be deliberately structured and targeted to reduce care of low marginal value other mechanisms may be helpful in targeting particular populations or types of utilization the spillover effects between privately insured and publicly insured populations as well as market imperfections suggest a potential role for public policy in promoting insurance design that slows spending growth while increasing the health that each dollar buys

lost jobs and health insurance an analysis of the impact of employment volatility on firm provided health insurance it is an established fact that there are high levels of employment volatility in the us despite the importance of employer provided benefits in the us health insurance system the impact of prior job instability on one s future ability to obtain insurance coverage is not well understood this article finds a negative relationship between the volatility of a worker s employment and her likelihood of receiving firm provided health insurance previous employment volatility reduces each of the four factors necessary to receive such insurance a worker s subsequent chances of getting a job her chances of getting a job in a firm that offers coverage her chances of staying with the firm long enough to become eligible for coverage and her ability to take up insurance if offered the most important impact is on the last her ability to take up insurance if offered lack of employment is not the only and not even the largest barrier to individual coverage under this system this finding has important policy imp