As US health expenditures skyrocketed in the late 70s and 80s, managed care started to proliferate as a potential cost saving measure. The basic idea was (and is) simple: combine providers and insurers into a single organizations and incentivize providers to use the least amount of resources as necessary for a given patient. Along with that, throw in an emphasis on preventative care so as to cut costs further down the line.
This system was revolutionary compared to what was going on before, where doctors were mostly paid by third party insurers on a fee-for-service basis. Many argue that this system encourages doctors and patients to use more resources than necessary. Today, payments to physicians take on a variety of different flavors, and fee-for-service and managed care incentives both coexist.
However, there may be a dark side to managed care , as well. The 'managed care backlash' was basically driven by uneasiness over whether necessary care would be disincentivized by typical managed care instruments such as utilization review, capitation payments, pay for performance, etc. Thus, managed care could be good or bad for patients, and the whole thing comes down to an empirical question.
So where does the axe ultimately fall? Anna Aizer, Janet Currie and Enrico Moretti's recent paper in the Review of Economics and Statistics provides some interesting insight into this issue:
Poor and uneducated patients may not know what health care is desirable and, if fully insured, have little incentive to minimize the costs of their care. Partly in response to these concerns, most states have moved a substantial portion of their Medicaid caseloads out of traditional competitive fee-for-service (FFS) care, and into mandatory managed care (MMC) plans that severely restrict the choice of provider.
We use a unique longitudinal data base of California births in order to examine the impact of this policy on pregnant women and infants. California phased in MMC creating variation in the timing of MMC. We identify the effects of MMC using changes in the regime faced by individual mothers between births. Some counties adopted single-carrier plans, while others adopted regimes with at least two carriers. Hence, we also ask whether competition between at least two carriers improved MMC outcomes. We find that MMC reduced the quality of prenatal care and increased low birth weight, prematurity, and neonatal death. Our results suggest that the competitive FFS system provided better care than the new MMC system, and that requiring the participation of at least two plans did not improve matters.
What I like about the paper is the use of quirks in public policy (like phase-ins), great data, and sound econometrics in coming up with an answer to a policy relevant question. I think the most convincing evidence in this paper comes from comparing siblings, whose mother was exposed to different "incentive regimes." This allows the authors to control for fixed factors that induce selection bias at the level of a given mother. Good stuff.
Other Links:
1) John Stossel doesn't think US health care system is as bad as everyone says it is. Check out this link as well as the articles listed in the sidebar on the right. I'll have more to say about this in a future post.
2) On that note, check out this recent working paper looking at differences in the US and Canadian health care systems. Here is a nice sentence from that piece:
We also find that Canada has no more abolished the tendency for health status to improve with income than have other countries. Indeed, the health-income gradient is slightly steeper in Canada than it is in the U.S.
3) I miss Audioslave. Check out their live cover of "Seven Nation Army." Even Omar Siddiqi enjoyed this.
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