Chapin White - AcademyHealth

Supply-Side
pp y
Simulation
Modeling
Chapin White
June 9, 2014
Slide 1
Supply-Side Simulation Modeling
Chapin White
White, Ph
Ph.D.
D
@ChapinWhite
[email protected]
https://t.co/TPKykS4Soe
June 9,
9 2014
AcademyHealth Annual Research Meeting
Motivation
• How is the Affordable Care Act affecting total
health care spending?
Slide 3
Levels
• Micro-level
– many agents interacting
• Macro-level
Macro level
– herd behavior
Slide 4
Levels
• Micro-level
– many agents interacting
• Macro-level
Macro level
– herd behavior
Slide 5
“Normal” Market
supply
Q=D(P)=S(P)
quantity
tit
demand
P
price
Slide 6
Effect of Subsidy in Normal Market
• Creates wedge between demand price and
supply price
• Effect on quantity depends on
– elasticity of demand with respect to price
– elasticity of supply with respect to price
Slide 7
Effect of Subsidy in “Normal” Market
supply
Q=D(PD)=S(P)
quantity
tit
demand
PD
P
subsidy
price
Slide 8
How is Health Care Different
• 2 very different prices
– out-of-pocket (Poop) paid by patient
– total ((Ptot) p
paid to p
provider
• Prices not free-floating
– Poop and Ptot affected by policy
Slide 9
The Health Care Market
supply
Q=D(P
( oop))=
S(Ptot)
quantity
demand
Poop
Ptot
price
Slide 10
Impacts of the ACA
• Demand side
– Medicaid expansion
– subsidized exchanges
g
– individual mandate
• Supply side
– Medicare p
payment
y
cuts
Slide 11
The ACA in One Slide
supply
Q=D(P
( oop))=
S(Ptot)
quantity
demand
Poop
Ptot
price
Slide 12
Impacts of the ACA
• Will quantity go up or down?
Slide 13
The Lure of the Streetlamp
RAND Health Insurance Experiment
Q
quantity
Poop
price
Slide 14
The Lure of the Streetlamp
RAND Health Insurance Experiment
Q
quantity
demand
Poop
price
Slide 15
Demand-only Model of the ACA
Q=D(Poop)
quantity
demand
Poop
Ptot
price
Slide 16
Demand-only Model of the ACA
Q=D(Poop)
quantity
demand
Poop
Ptot
price
Slide 17
Demand-only Model of the ACA
Q=D(Poop)
net effect on
spending:
p
g +2%
(See OACT, 2009;
and CMS, 2013)
quantity
demand
Ptot
Poop
price
Slide 18
What’s the Problem?
• Demand-only model assumes providers
supply whatever quantity patients demand
• Assumes providers are price-insensitive
price insensitive
• Whyy would
ou d providers
p o de s supply
supp y more
o e ca
care
e when
e
paid a lower price?
Slide 19
What’s the Solution?
congestion (C):
a non-price factor that
reduces demand, and
increases supply (or leaves
unchanged)
• S(Ptot,C)
C) =D(P
D(Poop,C)
C)
S
0
C
D
0
C
Slide 20
Congestion: Examples
• Longer wait time for physician appointments
• Longer drive to nearest emergency
department
• C
Changes
a ges in p
practice
act ce norms
o s
– 6 months between follow-ups vs. 3 months
– watchful waiting vs.
vs prostatectomy
Slide 21
What Does Demand-only Model
Assume?
• Demand curve slopes downward
• Demand is insensitive to congestion
• Supply is extremely sensitive to congestion
• Supply
S
l curve iirrelevant
l
t
patients get whatever quantity they want
Slide 22
What Does Evidence Say?
• Supply curve is upward sloping
– Inpatient hospital admissions (White, 2014)
– Physician
y
labor supply
pp y ((Staiger
g et al., 2010))
• Coverage expansions shift utilization
– UK National Health Service (Stewart and Enterline,
1961)
– Quebec (Enterline et al., 1973)
Slide 23
What Does Evidence Say? (cont.)
• Coverage expansions ≠ more supply
– CHIP   pediatrician supply (He and White,
White
2013)
– Medicaid
M di id   NICU (Freedman
(F d
et al.,
l 2014)
• But
But,
– coverage   supply if payments are generous
(e g Medicare in 1960-70s,
(e.g.
1960 70s Finkelstein
Finkelstein, 2007)
Slide 24
What Do We Need Model ACA?
• Demand curve
• Supply curve
• Demand response to C
• Supply
S
l response tto C
Slide 25
What Do We Need Model ACA?
• Demand curve
• Supply curve
• Demand response to C
• Supply
S
l response tto C
Slide 26
What Do We Need Model ACA?
• Demand curve
-• Supply curve
• Demand response to C
• Supply
S
l response tto C
Slide 27
What Do We Need Model ACA?
• Demand curve
-• Supply curve
??• Demand response to C
??• Supply
S
l response tto C
Slide 28
Example #1: Demand is Congestion-Elastic
supply
Q
C
quantity
demand
Poop
Ptot
price
Slide 29
Example #2: Supply is Congestion-Elastic
supply
Q
C
quantity
demand
Poop
Ptot
price
Slide 30
A Very Simple Model of the ACA
• D(Poop,C)=+Poop+C
• S(Ptot,C)= +Ptot+C
behavioral parameters (fixed)
policy variables
endogenous
• equilibrium condition: D(Poop,C)=S(Ptot,C)
• proposed beha
behavioral
ioral parameters
Slide 31
Proposed Behavioral Parameters






2.200 -1.869 -1.000 0.400 0.500 0.100
RAND HIE,
and others
supply
response
studies
Slide 32
Prices and Congestion
Poop
Without 0.107
ACA
With
0.099
ACA
Ptot
1.000
0.986
C
1.000
?
Slide 33
Equilibria
Without
ACA
With ACA
Poop
Ptot
0.107 1.000
C
1.000
$
1,000
0.099 0.986
1.020
0.9804
Slide 34
Supply- and Demand-based Model
supply
Q=D(P
( oop))=
S(Ptot)
C
quantity
demand
Poop
Ptot
price
Slide 35
Supply- and Demand-based Model
Q=D(P
( oop))=
S(Ptot)
net effect on
spending:
p
g -2%
quantity
Poop
Ptot
price
Slide 36
References
•
Bond, A. M., and C. White. 2013. "Massachusetts Coverage Expansion Associated with Reduction in Primary Care Utilization among
Medicare Beneficiaries.
Beneficiaries " Health Services Research 48(6pt1),
48(6pt1) 1826-39.
1826 39
•
Centers for Medicare & Medicaid Services. 2013. "National Health Expenditure Projections 2012-2022." Online:
http://cms.gov/Research-Statistics-Data-and-Systems/Statistics-Trends-andReports/NationalHealthExpendData/Downloads/Proj2012.pdf.
p
/
p
/
/ j
p
•
Chernew, M., K. Baicker, and C. Martin. 2010. "Spillovers in Health Care Markets: Implications for Current Law Projections." Centers for
Medicare & Medicaid Services, Online: https://www.cms.gov/ReportsTrustFunds/downloads/spillovereffects.pdf.
•
Dunn, A., and A. H. Shapiro. 2012. "Physician Market Power and Medical-Care Expenditures." Online:
http://www.bea.gov/papers/pdf/physician_market_power_and_medical_care.pdf.
•
Enterline, P. 1973. "The Distribution of Medical Services before and after 'Free' Medical Care -- The Quebec Experience." New England
Journal of Medicine 289,
289 1174-78.
1174 78
•
Enterline, P., A. D. McDonald, and J. C. McDonald. 1973. "Effects of "Free" Medical Care on Medical Practice -- The Quebec
Experience." New England Journal of Medicine 288(22), 1152-55.
Slide 37
References (continued)
•
Finkelstein, A. 2007. "The Aggregate Effects of Health Insurance: Evidence from the Introduction of Medicare." Quarterly Journal of Economics
122(1),
( ), 1-37.
•
Freedman, S., H. Lin, and K. Simon. 2014. "Public Health Insurance Expansions and Hospital Technology Adoption." No. 20159, Online:
http://www.nber.org/papers/w20159.
•
He, F
He
F., and C.
C White.
White 2013
2013. "The
The Effect of the Children
Children’ss Health Insurance Program on Pediatricians
Pediatricians’ Work Hours.
Hours " Medicare & Medicaid Research
Review 3(1), E1-E33, Online: http://www.cms.gov/Research-Statistics-Data-andSystems/Research/MMRR/Downloads/MMRR2013_003_01_A01.pdf.
•
Liu, S., and D. Chollet. 2006. "Price and Income Elasticity of the Demand for Health Insurance and Health Care Services: A Critical Review of the
Literature " Mathematica Policy Research,
Literature.
Research Inc.,
Inc MPR Reference No.:
No : 6203
6203-042
042, Online: http://www.mathematica
http://www mathematicampr.com/publications/pdfs/priceincome.pdf.
•
McDonald, A. D., J. C. McDonald, N. Steinmetz, P. E. Enterline, and V. Salter. 1973. "Physician Service in Montreal Before Universal Health
Insurance." Medical Care 11(4), 269-86.
•
Office of the Actuary. 2009. "Estimated Financial Effects of the "America's Affordable Health Choices Act of 2009" (H.R. 3200), as Reported by the
Ways and Means Committee." Online: https://www.cms.gov/ActuarialStudies/Downloads/HR3200_2009-10-21.pdf.
•
Staiger, D. O., D. I. Auerbach, and P. I. Buerhaus. 2010. "Trends in the Work Hours of Physicians in the United States." Journal of the American
Medical Association 303(8)
303(8), 747
747-53.
53
•
Stewart, W. H., and P. E. Enterline. 1961. "Effects of the National Health Service on Physician Utilization and Health in England and Wales." New
England Journal of Medicine 265, 1187-94.
Slide 38
References (continued)
•
Wennberg, J. E., J. L. Freeman, and W. J. Culp. 1987. "Are Hospital Services Rationed in New Haven or Over-Utilised in Boston?" Lancet,
1185 88
1185-88.
•
White, C. 2012. "A Comparison of Two Approaches to Increasing Access to Care: Expanding Coverage versus Increasing Physician
Fees." Health Services Research 47(3, Part I), 963-83, Online: http://onlinelibrary.wiley.com/doi/10.1111/j.14756773.2011.01378.x/abstract;
/
http://www.hschange.org/CONTENT/1273/1273.pdf.
p //
g
g/
/
/
p
•
White, C. 2014. "Cutting Medicare Hospital Prices Leads to a Spillover Reduction in Hospital Discharges for the Nonelderly." Health
Services Research, n/a-n/a, Online: http://onlinelibrary.wiley.com/store/10.1111/1475-6773.12183/asset/hesr12183.pdf.
•
White, C., and N. Nguyen. 2011. "How Does the Volume of Post-Acute Care Respond to Changes in the Payment Rate?" Medicare &
Medicaid Research Review 3(1), E1-E22, Online: http://dx.doi.org/10.5600/mmrr.001.03.a01.
•
White, C., and V. Y. Wu. 2014. "How Do Hospitals Cope with Sustained Slow Growth in Medicare Prices?" Health Services Research
49(1) 11
49(1),
11-31.
31
•
White, C., and T. Yee. 2013. "When Medicare Cuts Hospital Prices, Seniors Use Less Inpatient Care." Health Affairs 32(10), 1789–95,
Online: http://content.healthaffairs.org/content/32/10/1789.abstract.
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