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   EMPLOYEE BENEFITS, COMPENSATION & PENSION LAW ABSTRACTS
             Sponsored by Pension Governance, LLC
                Vol. 8, No. 26: August 9, 2007

Editor:     PAMELA J. PERUN
              Policy Director, Aspen Institute - Initiative on
              Financial Security
              PAMELA@PLANETNOW.COM
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                     Topic of This Issue:
                        Health Policy
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T A B L E    O F    C O N T E N T S

"Impact of Tort Reform on Private Health Insurance Coverage"
    RONEN AVRAHAM
        Northwestern University - School of Law
    MAX M. SCHANZENBACH
        Northwestern University - School of Law

"Public Support for National Health Insurance: Roles of Attitudes
 and Beliefs"
    M. KATE BUNDORF
        Stanford University - Department of Health Research And
        Policy, National Bureau of Economic Research (NBER)
    VICTOR R. FUCHS
        National Bureau of Economic Research (NBER)

"Tax Incentives as a Solution to the Uninsured: Evidence from the
 Self-Employed"
    GULCIN GUMUS
        Florida International University, Institute for the
        Study of Labor (IZA)
    TRACY REGAN
        University of Miami - Department of Economics

"Patient Cost-Sharing, Hospitalization Offsets, and the Design of
 Optimal Health Insurance for the Elderly"
    AMITABH CHANDRA
        Harvard University - John F. Kennedy School of
        Government, National Bureau of Economic Research (NBER),
        Institute for the Study of Labor (IZA)
    JONATHAN GRUBER
        Massachusetts Institute of Technology (MIT) - Department
        of Economics, National Bureau of Economic Research
        (NBER)
    ROBIN MCKNIGHT
        University of Oregon - Department of Economics, National
        Bureau of Economic Research (NBER)

"Can the Elderly Have Too Much Choice?: Insurance for
 Prescription Drugs and Long-Term Care"
    THOMAS RICE
        University of California, Los Angeles - Department of
        Health Services
    YANIV HANOCH
        University of Plymouth
    BETTY E. TANIUS
        Claremont Colleges - Scripps College
    STACEY WOOD
        Claremont Colleges - Scripps College
_________________________________________________________________

"Impact of Tort Reform on Private Health Insurance Coverage"
    Northwestern Public Law Research Paper No. 07-16


 Contact:  RONEN AVRAHAM
             Northwestern University - School of Law
   Email:  r-avraham@law.northwestern.edu
Auth-Page:  http://ssrn.com/author=273037

Co-Author:  MAX M. SCHANZENBACH
             Northwestern University - School of Law
   Email:  m-schanzenbach@law.northwestern.edu
Auth-Page:  http://ssrn.com/author=346044

Full Text:  http://ssrn.com/abstract=995270

ABSTRACT: This study evaluates the impact of tort reform on
health insurance coverage using the Current Population Survey's
March Demographic Files. Proponents of tort reform argue that
reform will reduce medical malpractice insurance costs, damage
awards, and costs associated with defensive medicine. If
proponents are correct, these cost reductions should lower the
price of healthcare and increase health insurance coverage. On
the other hand, if the prior tort law was functioning well,
reform may increase medical costs by reducing doctors'
care-taking or increasing the number of unnecessary procedures.
In this case, tort reform could actually decrease insurance
coverage by raising the price of health care. We evaluate the
effect of eight common tort reforms on private health insurance
coverage between 1981 and 2004. In triple-difference
specifications, we find that reform generally increased health
insurance coverage for the most price-sensitive groups (the
young, the self-employed, and the single). We also find that
those uninsured around the time of reform were more likely to
obtain private insurance after reform. Given the
multicollinearity of many reforms, it is difficult to gauge the
impact of individual reforms. However, the evidence suggests that
limitations on punitive and non-economic damages do not affect
private insurance coverage, while caps on total damages,
collateral source reform, and reforms to liability and payment
structure are associated with increased private insurance
coverage for price-sensitive groups. Accordingly, we conclude
that some tort reforms are effective in reducing healthcare
costs. The magnitude of the effects on price sensitive groups
suggests that some tort reforms can reduce health care costs by
as much as two percent.
______________________________

"Public Support for National Health Insurance: Roles of Attitudes
 and Beliefs"

 Contact:  M. KATE BUNDORF
             Stanford University - Department of Health Research
             And Policy, National Bureau of Economic Research
             (NBER)
   Email:  bundorf@stanford.edu
Auth-Page:  http://ssrn.com/author=333592

Co-Author:  VICTOR R. FUCHS
             National Bureau of Economic Research (NBER)
   Email:  fuchs@newage3.stanford.edu
Auth-Page:  http://ssrn.com/author=93849

 Abstract:  http://ssrn.com/abstract=992956

ABSTRACT: Despite numerous attempts to enact legislation
throughout the 20th century, the U.S. is the only developed
country without a system of national health insurance. Yet,
public opinion polls over the last 20 years consistently find
that a solid majority of Americans support national health
insurance. Why does the U.S. lack a system of health insurance
despite widespread public support for it? In this paper, we
examine the relationship between public support for national
health insurance and attitudes toward different roles of
government and individual beliefs. We find that people who have
favorable attitudes toward government economic intervention and
government redistribution are more likely to favor national
health insurance than those who have less favorable attitudes
toward these roles of government. The most intense support for
national health insurance is among those who have favorable
attitudes toward both roles of government. Consistent with
research about other social programs, we find that the beliefs
regarding racial minorities as well as beliefs regarding
individual control over life limit support for national health
insurance in the U.S. On the other hand, negative beliefs
regarding businesses are an important source of support for
national health insurance.
______________________________

"Tax Incentives as a Solution to the Uninsured: Evidence from the
 Self-Employed"
    IZA Discussion Paper No. 2866


  Author:  GULCIN GUMUS
             Florida International University, Institute for the
             Study of Labor (IZA)
   Email:  gumusg@fiu.edu
Auth-Page:  http://ssrn.com/author=357495

 Contact:  TRACY REGAN
             University of Miami - Department of Economics
   Email:  tregan@miami.edu
Auth-Page:  http://ssrn.com/author=438176

Full Text:  http://ssrn.com/abstract=999336

ABSTRACT: Between the years 1996 and 2003, a series of amendments
were made to the Tax Reform Act of 1986 (TRA86) that gradually
increased the tax credit for health insurance purchases by the
self-employed from 25 to 100 percent. We study how these changes
in the tax code have influenced the likelihood that a
self-employed person has health insurance coverage as the policy
holder of the plan. The Current Population Survey (CPS) is used
to construct a data set corresponding to 1995-2005. The empirical
analysis is performed for prime-age men and women, and accounts
for differences in family structure and potential eligibility.
The difference-in-difference estimates suggest that the series of
tax credits did not provide sufficient incentives for the
self-employed to obtain health insurance coverage. Estimates of
the price elasticity of demand confirm the limited response to
changes in the after-tax health insurance premium. The effect was
largest, however, among the single men and women in our sample,
suggesting that a 10 percent decrease in the after-tax price
increases the likelihood of coverage by 0.68 and 1.02 percentage
points, respectively.
______________________________

"Patient Cost-Sharing, Hospitalization Offsets, and the Design of
 Optimal Health Insurance for the Elderly"
    NBER Working Paper No. W12972


 Contact:  AMITABH CHANDRA
             Harvard University - John F. Kennedy School of
             Government, National Bureau of Economic Research
             (NBER), Institute for the Study of Labor (IZA)
   Email:  Amitabh_Chandra@harvard.edu
Auth-Page:  http://ssrn.com/author=337835

Co-Author:  JONATHAN GRUBER
             Massachusetts Institute of Technology (MIT) -
             Department of Economics, National Bureau of
             Economic Research (NBER)
   Email:  gruberj@mit.edu
Auth-Page:  http://ssrn.com/author=17348

Co-Author:  ROBIN MCKNIGHT
             University of Oregon - Department of Economics,
             National Bureau of Economic Research (NBER)
   Email:  robinm@uoregon.edu
Auth-Page:  http://ssrn.com/author=327620

Full Text:  http://ssrn.com/abstract=971606

ABSTRACT: Patient cost-sharing for primary care and prescription
drugs is designed to reduce the prevalence of moral hazard in
utilization. Yet the success of this strategy depends on two
factors: the elasticity of demand for those medical goods, and
the risk of downstream hospitalizations by reducing access to
beneficial health care. Amazingly, we know little about either of
these factors for the elderly, the most intensive consumers of
health care in our country. We remedy both of these deficiencies
by studying a policy change that raised patient cost-sharing for
retired public employees in California. We find that physician
office visits and prescription drug utilization are very price
sensitive; while direct comparison is difficult, the price
sensitivity appears to greatly exceed that of the famous RAND
Health Insurance Experiment (HIE). Moreover, unlike the HIE, we
find large "offset" effects in terms of increased hospital
utilization in response to the combination of higher copayments
for physicians and prescription drugs. These offset effects are
concentrated in patients for whom medical care is presumably
efficacious: those with a chronic disease. Finally, we find that
the savings from increased cost-sharing accrue mostly to the
supplemental insurer, while the costs of increased
hospitalization accrue mostly to Medicare; thus, there is a
fiscal externality associated with cost-sharing increases by
supplemental insurers. Our findings suggest that optimal
insurance should be tied to underlying health status, with
chronically ill patients facing lower cost-sharing. We also
conclude that the externalities to Medicare from supplemental
insurance coverage may be more modest than previously suggested
due to these offsets.
______________________________

"Can the Elderly Have Too Much Choice?: Insurance for
 Prescription Drugs and Long-Term Care"

 Contact:  THOMAS RICE
             University of California, Los Angeles - Department
             of Health Services
   Email:  trice@ucla.edu
Auth-Page:  http://ssrn.com/author=382403

Co-Author:  YANIV HANOCH
             University of Plymouth
   Email:  yaniv.hanoch@plymouth.ac.uk
Auth-Page:  http://ssrn.com/author=710802

Co-Author:  BETTY E. TANIUS
             Claremont Colleges - Scripps College
   Email:  Betty.Tanius@cgu.edu
Auth-Page:  http://ssrn.com/author=710804

Co-Author:  STACEY WOOD
             Claremont Colleges - Scripps College
   Email:  swood@scrippscollege.edu
Auth-Page:  http://ssrn.com/author=710805

 Abstract:  http://ssrn.com/abstract=992640

ABSTRACT: Economic theories have long postulated the benefits of
presenting consumers with more choice. Psychologists have
advanced a similar idea, postulating that greater choice is
related to consumer satisfaction. Economists and psychologists
alike have come to challenge this prevailing notion. Following
the pioneering work of Herbert Simon on bounded rationality,
researchers have argued that providing greater choice size can
adversely affect consumers' ability to locate the best choice,
lower satisfaction with choice made, and increase sense of
regret. Others have suggested that more choice demands greater
cognitive demands.

In our study, we extend this novel line of investigation to an
uncharted domain: older adults. We posit that older adults in the
United States face an increasingly bewildering array of health
insurance choices ? with deleterious consequences if the wrong
choice is made. This is especially the case since the
implementation of the Medicare Modernization Act, and in
particular Part D of the Medicare program, where older adults
must confront (is some cases) over 100 different insurance plans.
This is of particular concern as older adults tend to have
greater interaction with the medical care system but oftentimes
do so with reduced cognitive capacity.

To investigate this issue we designed a set of experiments
intended to examine the effect of choice size on younger (the
control group) and older adults' ability to make better choices,
and to evaluate their level of satisfaction with their choices.
They are being carried out in a California community.

We will present results from two experiments. The first study
examines older adults' ability to make choices among varying
numbers (3, 10, 20) of prescription drugs insurance plans, where
we supply subjects with realisitic information about each drug
plans (total annual prescription drug costs and several aspects
of benefits: whether drugs can be received by mail, the number of
pharmacies in their area, distance to the closest pharmacy,
deductible, and cost-sharing questions). Subjects answer both
factual questions as well as subjective ones.

Our second experiment studies the relationship between choice
size and standardization of information. We explore this question
within the context of long-term health care insurance. In this
study we manipulate the number of insurance choices subjects face
(5 vs. 15) and nature of the product (standardized benefits, vs.
allowing companies to offer any configuration of benefits they
like). We are particularly interested in the interaction between
these two treatments, hypothesizing that subjects will be able to
comprehend a larger choice set if benefits are standardized (as
they currently are in the Medigap market). To control for
confounders, in both experiments we also test participants'
cognitive, numerical, and information processing abilities.

We are currently carrying out the experiments; preliminary
evidence presented at the meeting will show that elders are less
facile as using health insurance informaton -- although they show
more confidence that they understand it. Moreover, the
preliminary results do indicate that a higher number of choices
reduces the ability to answer objective questions correctly.