MICHAEL CHERNEW, Harvard University - Harvard Medical School
Email: chernew@hcp.med.harvard.edu
PHILIP DECICCA, McMaster University - Department of Economics
Email: decicca@mcmaster.ca
ROBERT J. TOWN, University of Minnesota - Twin Cities - School of Public Health, National Bureau of Economic Research (NBER)
Email: rjtown@umn.edu

This paper investigates the impact of Medicare HMO penetration on the medical care expenditures incurred by Medicare fee-for-service enrollees. We find that increasing penetration leads to reduced health care spending on fee-for-service beneficiaries. In particular, a one percentage point increase in Medicare HMO penetration reduces such spending by .9 percent. We estimate similar models for various measures of health care utilization and find penetration-induced reductions, consistent with our spending estimates. Finally, we present evidence that suggests our estimated spending reductions are driven by beneficiaries who have at least one chronic condition.

ELIZABETH CANNEY BORER, University of Minnesota Law School
Email: bore0034@umn.edu

Increasingly, senior citizens throughout the United States are victimized by aggressive and fraudulent health care marketing practices. Medicare Advantage and Part D prescription drug plans are health benefit options approved by the federal government but sold and administered by private insurance companies. The programs were created as part of the Medicare Modernization Act of 2003 and coverage became effective in 2006. Since that time, tens of thousands of Medicare beneficiaries have been victimized by deceptive sales tactics of insurers running Medicare's private plan options. Abusive marketing directly impacts the health of patients - by delaying access to urgently needed medications or denying coverage of medical treatments.

Predatory marketing problems are aggravated by insufficient regulations and federal enforcement failures. Current Medicare marketing guidelines lack comprehensive protections for beneficiaries. Unfortunately, weak federal regulations preempt stronger state law protections. Inaction by federal regulatory agencies, coupled with broad preemption of state law, creates a legal fissure in which vulnerable Medicare patients are pitted against wealthy private insurers without accessible legal avenues for relief. This Note offers solutions to the weak regulation and enforcement gaps that facilitate marketing abuse. Specifically, this Note proposes delegating enforcement authority to states, employing existing state consumer protections, creating a private cause of action, and enhancing violation penalties.

RICHARD FRANK, Harvard Medical School, National Bureau of Economic Research (NBER)
Email: frank@hcp.med.harvard.edu
KARINE LAMIRAUD, University of Lausanne - Institute of Health Economics and Management (IEMS)
Email: karine.lamiraud@unil.ch

The United States and other nations rely on consumer choice and price competition among competing health plans to allocate resources in the health sector. A great deal of research has examined the efficiency consequences of adverse selection in health insurance markets, less attention has been devoted to other aspects of consumer choice. The nation of Switzerland offers a unique opportunity to study price competition in health insurance markets. Switzerland regulates health insurance markets with the aim of minimizing adverse selection and encouraging strong price competition. We examine consumer responses to price differences in local markets and the degree of price variation in local markets. Using both survey data and observations on local markets we obtain evidence suggesting that as the number of choices offered to individuals grow their willingness to switch plans given a set of price dispersion differences declines allowing large price differences for relatively homogeneous products to persist. We consider explanations for this phenomenon from economics and psychology.

PAUL FRONSTIN, Employee Benefit Research Institute (EBRI)
Email: FRONSTIN@EBRI.ORG
SARA R. COLLINS, The Commonwealth Fund
Email: src@cmwf.org

This paper presents findings from the 2007 EBRI/Commonwealth Fund Consumerism in Health Care Survey. Findings from the 2007 survey are compared with our findings from 2005 and 2006. In 2007, 2 percent of the population was enrolled in a consumer-driven health plan (CDHP), up from 1 percent in 2006 and 2005. Enrollment in high-deductible health plans (HDHPs) increased from 9 percent in 2005 to 11 percent. The 2 percent of the population with a CDHP represents 2.3 million adults ages 21-64 with private insurance, while the 11 percent with a HDHP represents 12.5 million people. The survey shows that enrollment in consumer-driven health plans, while growing, remains low. Other findings show that enrollees in consumer-driven health plans tend to have higher income and educational levels and to be in better health than nonenrollees. Enrollees in CDHPs are just as likely to work for a large company as adults in more comprehensive plans and more likely to have a choice of plan than either adults in comprehensive plans or those in HDHPs. As in 2006, the survey finds that adults in CDHPs are no more likely to have been uninsured prior to enrolling in their plans than are those in more comprehensive plans. As in 2005 and 2006, individuals in CDHPs and HDHPs continue to be less satisfied with various aspects of their health plan than individuals in more comprehensive plans. Adults in consumer-driven plans continue to be more cost-conscious in their health care decision-making.

So far there is little evidence that the tax benefits of consumer-driven health plans have the potential to help change the trajectory of health care cost growth, are leading health plans or providers to provide more information about the quality and price of services to patients, or are decreasing the number of people without health insurance. Policymakers should be concerned about the possibility suggested by the demographic trends in this survey that consumer-driven plans with health savings accounts could evolve into tax-preferred savings vehicles whose benefits ultimately will disproportionately accrue to wealthier individuals, rather than to the health system.

RICHARD OSTUW, Employee Benefit Research Institute (EBRI)
Email: rich@ostuw.com

This paper provides reaction to, and analysis of, the 2007 EBRI/Commonwealth Fund Consumerism in Health Care Survey, published in the March 2008 EBRI Issue Brief. The analysis offers a framework for considering whether or not consumer-driven health plans (CDHPs) and high-deductible health plans (HDHPs) are effective in managing costs and improving the health of plan participants. SWOT analysis - focusing on strengths, weaknesses, opportunities, and threats, is often used to evaluate current or proposed approaches or situations:

Strengths - Participants in CDHPs and HDHPs report being more cost-conscious about health care than participants in traditional plans. Seventy-four percent of CDHP participants and 60 percent of HDHP participants say that the terms of the health plan make them think about the cost when deciding whether to see a doctor or to fill a prescription, compared with 47 percent of traditional plan participants.

Weaknesses - The level of participant satisfaction with these new plans is significantly lower than for traditional plans. About 64 percent of participants in traditional plans are very or extremely satisfied with their plans, compared with 48 percent for CDHP participants and 35 percent for HDHP participants.

Opportunities - There are opportunities to improve results under these plans. Because of the financial structure, they offer the possibility of being the most cost-efficient type of health plan.

Threat - Unless workers become more positive about consumer-driven health plans meeting their needs, enrollment may decline.

DAVID M. BLAU, Affiliation Unknown
DONNA B. GILLESKIE, Affiliation Unknown

Using data from the Health and Retirement Survey, we estimate preference and expectations parameters of a structural model of the employment and medical care decisions of older men in order to evaluate the role of health insurance. The budget constraint incorporates detailed cost-sharing characteristics of private health insurance and Medicare as well as rules and requirements associated with Social Security and private pensions. Simulations imply that changes in health insurance, including access and restrictions to retiree health insurance and Medicare, have a modest impact on employment behavior among older males, with the greatest effect on men in bad health.

SHERRY GLIED, Columbia University - Mailman School of Public Health, National Bureau of Economic Research (NBER)
Email: sag1@columbia.edu

Inequality in access to health care services, through private purchase, appears to pose policy challenges greater than inequality in other spheres. This paper explores how inequality in access to health care services relates to social welfare. I examine the sources of private demand for health insurance and the ramifications of this demand for health, for patterns for government spending on health care services, and for individual and social well-being. Finally, I evaluate the implications of a health tax as a response to the externalities of health service consumption, and provide a rough measure of the tax in the context of the Canadian publicly-financed health care system.