"Health Spending, Consumption and Labour Supply Over the Life-Cycle: The Effect of Old-Age Security and Annuity Market Imperfections" 

CASPER WORM HANSEN, University of Southern Denmark - Department of Business and Economics, Netspar
Email: cwh@sam.sdu.dk

We setup a multi-period discrete time overlapping generations model in general equilibrium. The framework contains endogenous mortality risk, labour supply and annuity market imperfections. In these settings we derive an intuitive law of motion for health spending over the life-cycle. We then focus on the implications of old-age security on longevity and retirement related behavior. In general, we find that old-age security tend to lower aggregate health spending and health share, a result that is strengthen by the retirement decision.

In addition our model demonstrates that life-cycle health spending is very sensitive to variation in the discount factor. In particular, a high discount factor leads to better health and early retirement.

"Employing E-Health: The Impact of Electronic Health Records on the Workplace" 

Kansas Journal of Law & Pubic Policy, Forthcoming
Case Legal Studies Research Paper No. 2010-1

SHARONA HOFFMAN, Case Western Reserve University - School of Law
Email: sxh90@po.cwru.edu

Electronic Health Record (EHR) systems may soon become a fixture in most medical settings. President Obama’s 2009 stimulus legislation includes $19 billion to promote their implementation. The sophisticated features and efficiencies of EHR systems have the potential to improve health outcomes and enhance patient welfare considerably. However, this emerging technology also poses significant challenges and risks, not the least of which are its workplace impacts. This article provides a first of its kind analysis of the ramifications of EHR systems for workers and employers.

The potential effects of health information computerization on the workplace are numerous. Employers may obtain and process EHRs for purposes of fitness for duty determinations, reasonable accommodations, workers’ compensation, and payment of medical claims. Digitized records could enable employers to obtain unprecedented amounts of information in response to lawful requests and thus intensify workers’ concerns about privacy and discrimination. At the same time, employers may find EHRs to be cumbersome and difficult to interpret and, if they store health information electronically, may worry about security breaches. EHR systems could also affect employers’ insurance costs, impact discovery in litigation, and profoundly affect the work habits of health care providers. This article argues that these concerns can best be addressed by specific changes to the ADA, the HIPAA Privacy and Security Rules, and parallel state laws as well as by technological advances and appropriate federal oversight. As the country transitions to computerization in the medical field, proactive steps must be taken to protect stakeholders in all settings, including the American workplace.

"The Effects of Offering Health Plan Choice within Employment-Based Purchasing Groups" 

Journal of Risk and Insurance, Vol. 77, Issue 1, pp. 105-127, March 2010

M. KATE BUNDORF, affiliation not provided to SSRN

Employers may offer employees a choice of health plans either to promote competition among plans or to better cater to employee preferences for different types of products. This article examines whether the relationship between the availability of choice and insurance costs and coverage are consistent with these models of employer behavior. The results indicate that employers who offer choice have lower average premiums, primarily because employees are enrolled in less generous plans, and cover a greater proportion of workers than those who do not. The results are consistent with employers offering choice to accommodate diverse worker preferences.

"Let Them Have Choice: Gains from Shifting Away from Employer-Sponsored Health Insurance and Toward an Individual Exchange" 

NBER Working Paper No. w15687

LEEMORE S. DAFNY, Northwestern University - Department of Management & Strategy, National Bureau of Economic Research (NBER)
Email: l-dafny@kellogg.northwestern.edu
KATHERINE HO, Columbia University - Department of Economics, National Bureau of Economic Research (NBER)
Email: kh2214@columbia.edu
MAURICIO J. VARELA, affiliation not provided to SSRN

Most non-elderly Americans purchase insurance through their employers, which sponsor a limited number of plans. We estimate how much employees would be willing to pay for the right to apply their employer subsidy to the plan of their choosing. We make use of a proprietary dataset containing information on plan offerings and enrollment for 800+ large employers between 1998 and 2006; the dataset represents over 10 million Americans annually. We estimate a model of employee preferences using the set of plans they are offered. Using the estimated parameters from this model, we predict employees’ choices in a hypothetical world in which additional plans in a market are available to them on the same terms, i.e. tax-free and subsidized by their employers. Holding employer outlays constant, we estimate that the median welfare gain from expanding choice amounts to roughly 20 percent of premiums. For the vast majority of employee groups and alternative model specifications, the gains from choice are likely to outweigh potential premium increases associated with a transition from large group to individual pricing.

Institutional subscribers to the NBER working paper series, and residents of developing countries may download this paper without additional charge at www.nber.org.

"The Effects of Consumer-Directed Health Plans on Health Care Spending" 

Journal of Risk and Insurance, Vol. 77, Issue 1, pp. 85-103, March 2010

ANTHONY T. LO SASSO, University of Illinois at Chicago - School of Public Health
Email: losasso@uic.edu
LORENS A. HELMCHEN, UIC School of Public Health, Institute of Government and Public Affairs
Email: helmchen@uic.edu
ROBERT KAESTNER, University of Illinois at Chicago - Institute of Government and Public Affairs, National Bureau of Economic Research (NBER)
Email: kaestner@uic.edu

We use unique data from an insurer that exclusively offers high-deductible, “consumer-directed” health plans to identify the effect of plan features, notably employer contributions to the spending account, on health care spending. Our results show that the marginal dollar contributed by the employer to the spending account is entirely spent on outpatient and pharmacy services. In contrast, out-of-pocket spending was not responsive to the amount the employer contributes to the spending account. Our results represent the first plausibly causal estimates of the components of consumer-driven health plans on health spending. The magnitudes of the effects suggest important health care spending consequences to higher employer contributions to spending accounts. Our findings are most directly relevant to health reimbursement arrangement plan designs, though our results are still of value to health savings account plan designs.

"The Massachusetts Health Plan: Much Pain, Little Gain" 

Policy Analysis, No. 657, January, 20, 2010

AARON YELOWITZ, University of Kentucky - Department of Economics
Email: aaron@uky.edu
MICHAEL F. CANNON, Cato Institute
Email: mcannon@cato.org

In 2006, Massachusetts enacted a sweeping health insurance law that mirrors the legislation currently before Congress. After signing the measure, Gov. Mitt Romney (R) wrote, "Every uninsured citizen in Massachusetts will soon have affordable health insurance and the costs of health care will be reduced." But did the legislation achieve these goals? And what other effects has it had? This paper is the first to use Current Population Survey data for 2008 to evaluate the Massachusetts law, and the first to examine its effects on the accuracy of the CPS's uninsured estimates, self-reported health, the extent of "crowd-out" of private insurance for both children and adults, and in-migration of new Massachusetts residents.

We find evidence that Massachusetts' individual mandate induces uninsured residents to conceal their true insurance status. Even setting that source of bias aside, we find the official estimate reported by the Commonwealth almost certainly overstates the law's impact on insurance coverage, likely by 45 percent. In contrast to previous studies, we find evidence of substantial crowdout of private coverage among low-income adults and children. The law appears to have compressed self-reported health outcomes, without necessarily improving overall health. Our results suggest that more than 60 percent fewer young adults are relocating to Massachusetts as a result of the law. Finally, we conclude that leading estimates understate the law's cost by at least one third, and likely more.

Our results hold important lessons for the legislation moving through Congress. As in Massachusetts, there has been no effort to estimate the cost of the private health insurance mandates that legislation would impose on individuals and employers. The costs may therefore be far greater than legislators and voters believe, while the benefits may be smaller than the conventional wisdom about Massachusetts suggests.

"Health Insurance Reforms: Unintended Consequences" 

The Hastings Center Bioethics Forum, Forthcoming

MARK A. ROTHSTEIN, University of Louisville - Institute for Bioethics, Health Policy, and Law, University of Louisville - Louis D. Brandeis School of Law
Email: mark.rothstein@louisville.edu

With comprehensive health reform stalled, there is growing pressure to enact more modest health insurance reforms. These efforts have an understandable practical and political appeal. Denials of coverage, cancellations of policies, preexisting condition exclusions, lifetime caps on benefits, and other practices have the effect of denying coverage to many individuals who need health insurance. Legislation prohibiting these practices is a seemingly easy way to fix obvious injustices without tackling the entire range of contentious issues. Unfortunately, enacting “health insurance reform” is likely to lead to severe unintended consequences.

"The Health Insurance Reform Debate" 

Journal of Risk and Insurance, Vol. 77, Issue 1, pp. 5-38, March 2010

SCOTT E. HARRINGTON, University of Pennsylvania - Wharton School
Email: harring@wharton.upenn.edu

This article provides an overview of the U.S. health care reform debate and legislation, with a focus on health insurance. Following a synopsis of the main problems that confront U.S. health care and insurance, it outlines the health care reform bills in the U.S. House and Senate as of early December 2009, including the key provisions for expanding and regulating health insurance, and projections of the proposals' costs, funding, and impact on the number of people with insurance. The article then discusses (1) the potential effects of the mandate that individuals have health insurance in conjunction with proposed premium subsidies and health insurance underwriting and rating restrictions, (2) the proposed creation of a public health insurance plan and/or nonprofit cooperatives, and (3) provisions that would modify permissible grounds for health policy rescission and repeal the limited antitrust exemption for health and medical liability insurance. It concludes by contrasting the reform bills with market-oriented proposals and with brief perspective on future developments.

"Yes, Mr. President: A Free Market Can Fix Health Care" 

Cato Policy Analysis Series, No. 650

MICHAEL F. CANNON, Cato Institute
Email: mcannon@cato.org

In March 2009, President Barack Obama said, "If there is a way of getting this done where we're driving down costs and people are getting health insurance at an affordable rate, and have choice of doctor, have flexibility in terms of their plans, and we could do that entirely through the market, I'd be happy to do it that way." This paper explains how letting workers control their health care dollars and tearing down regulatory barriers to competition would control costs, expand choice, improve health care quality, and make health coverage more secure.

First, Congress should give Medicare enrollees a voucher and the freedom to choose any health plan on the market. Vouchers would be means-tested, would contain Medicare spending, and are the only way to protect seniors from government rationing.

Second, to give workers control over their health care dollars, Congress should reform the tax treatment of health care with "large" health savings accounts. Large HSAs would reduce the number of uninsured Americans, would free workers to purchase secure health coverage from any source, and would effectively give workers a $9.7 trillion tax cut without increasing the federal budget deficit.
Third, Congress should break up state monopolies on insurance and clinician licensing. Allowing consumers to purchase health insurance licensed by other states could cover one-third of the uninsured without any new taxes or government subsidies.

Finally, Congress should reform Medicaid and the State Children's Health Insurance Program the way it reformed welfare in 1996. Block-granting those programs would reduce the deficit and encourage states to target resources to the truly needy. The great advantage of a free market is that innovation and more prudent decision-making means that fewer patients will fall through the cracks.