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The Oregon Health Insurance Experiment - Evidence from the first year (page 2 of 51) Q ! v Q Search The Oregon Health Insurance... THE QUARTERLY JOURNAL OF ECONOMICS Vol. 127 August 2012 Issue 3 THE OREGON HEALTH INSURANCE EXPERIMENT: EVIDENCE FROM THE FIRST YEAR* AMY FINKELSTEIN SARAH TAUBMAN BILL WRIGHT MIRA BERNSTEIN JONATHAN GRUBER JOSEPH P. NEWHOUSE HEIDI ALLEN QUARTERLY JOURNAL KATHERINE BAICKER OF ECONOMICS OREGON HEALTH STUDY GROUP vol 127 August 1912 In 2008, a group of uninsured low-income adults in Oregon was selected by lottery to be given the chance to apply for Medicaid. This lottery provides an opportunity to gauge the effects of expanding access to public health insurance on the health care use, financial strain, and health of low-income adults using a randomized controlled design. In the year after random assignment, the treat- ment group selected by the lottery wa tage points more likely to have insurance than the control group that was not selected. We find that in this first year, the treatment group had substantively and statistically signifi- cantly higher health care utilization (including primary reventive care as well as hospitalizations), lower out-of-pocket medical expenditures and medical debt (including fewer bills sent to collection), and better self-reported physical and mental health than the control group. JEL Codes: H51, H75, I1. "We are grateful to Josh Angrist, Robert Avery, David Autor, Ethan Cohen-Cole, Carlos Dobkin, Esther Duflo, Jack Fowler, Guido Imbens, Larry 2 Katz, Jeff Kling, John McConnell, Jon Levin, Richard Levin, Ben Olken, Alan Zaslavaky, three anonymous referees, and numerous seminar participants for helpful comments and advice; to Brandi Coates, Michael Gelman, John Graves, Ahmed Jaber, Andrew Lai, Conrad Miller, Iuliana Pascu, Adam Sacarny, Nivedhitha Subramanian, Zirui Song, James Wang, and Annetta Zhou for expert research assistance; and to numerous Oregon state employees for help acquiring the necessary data and for answering our many questions about the The Author(s) 2012. Published by Oxford University Press, on behalf of President and Fellows of Harvard College. All rights ease email: journals .permissions@oup.com The Quarterly Journal of Economies (2012), 1057-1106. doi:10.1093/qje/qj=020. Advance Access publication on May 3, 2012. 1057The Oregon Health Insurance Experiment - Evidence from the first year (page 5 of 51) ! v Q Search The Oregon Health Insurance... This content downloaded from 132.174.250.220 on Fri, 07 Sep 2018 10:47:12 UTC All use subject to https://about.jstor.org/terms 1060 QUARTERLY JOURNAL OF ECONOMICS uncompensated care allow low-income individuals to consume de facto free medical care similar to that of the insured. Medicaid's impact would also be attenuated if-as is often claimed- Medicaid itself is not particularly "good" insurance in terms of being able to access health care providers (e.g., Medicaid Access Study Group 1994; GAO 2011; Rosenbaum 2011). Our analysis draws on administrative data from hospital discharge, credit report, and mortality records, as well as on re- sponses to a large mail survey we conducted. The administrative data are objectively measured and s hould not be biased by the treatment and control groups differentially reporting outcomes, but they only cover a relatively narrow set of outcomes. The survey data allow examination of a much richer set of outcomes than is feasible with administrative data alone, but with a 50% effective response rate, are subject to potential nonresponse bias. Our available evidence on this issue is limited but reasonably reassuring. Prior to looking at the data on outcomes for the treatment group, virtually all of the analysis pre sented here was prespeci- fied and publicly archived in a detailed analysis plan. Although prespecification of hypotheses is the norm for randomized con- trolled medical trials, is it rare in ev tion of social policy ex- periments." Our prespecification was designed to minimize issues of data and specification mining and to provide a record of the full set of planned analyses. About one year after enrollment, we find that those selected by the lottery have substantial and statistically significantly higher health care utilization, lower out-of-pocket medical expenditures and medical debt, and better self-reported health than the control group that was not given the opportunity to apply for Medicaid. Being selected through the lottery is asso- ciated with a 25 percentage point increase in the probability of having insurance during our study period. This net increase in 2. Our analysis plan was archived on December 3, 2010, at http:/www.nber org/sap/20101203/. Some of those analyses yielded little of interest, and we describe them briefly, presenting the full results only in appendixes. In the few instances in which the results suggested the performance of additional analyse that had not originally been planned, we have indicated this in the text and tables. 3. In economics, within the last few years, prespecification of hypotheses has started to become more cole mmon in analyses of randomized experin ing countries (e.g, Alatas et al. 2010; Olken, Onishi, and Wong 2010; Schaner 2010; Casey, Glennerster, and Miguel 2011). 5The Oregon Health Insurance Experiment - Evidence from the first year (page 6 of 51) ! v Q Search The Oregon Health Insurance... OREGON HEALTH INSURANCE EXPERIMENT 1061 insurance appears to come entirely through a gross increase in Medicaid coverage, with little evidence of crowd-out of private insurance. Using lottery selection as an instrument for insurance coverage, we find that insurance coverage is associated with a 2.1 percentage point (30%) increase in the probability of having a hospital admission, an 8.8 percentage point (15%) increase in the probability of taking any prescription drugs, and a 21 per- centage point (35%) increase in the probability of having an out- patient visit. We are unable to reject the null of no change in emergency room utilization, although the confidence intervals do not allow us to rule out substantial effects in either direction. In addition, insurance is associated with 0.3 standard devi- ation increase in reported compliance with recommended pre- ventive care such as mammo I monitoring. Insurance also results in decreased exposure to medical liabilities and out-of-pocket medical expenses, including a 6.4 percentage point (25%) decline in the probability of having an unpaid medical bill sent to a collections agency and a 20 percentage point (35%) decline in having any out-of-pocket medical expenditures. Because much medical debt is never paid, the financial incidence of expanded coverage thus appears to be not only on the newly insured but also on their medical providers (or whomever they pass the costs on to). Finally, we find that insurance is associated with improve- ments across the board in measures of self-reported physical and mental health, averaging 0.2 standard deviation improvement. 6 Two pieces of evidence suggest that the improvements in self- reported health that we detect may at least partly reflect a gen- eral sense of improved well-being. First, evidence from a separate survey we conducted very shortly after random assignment shows no impact of lottery selection on health care utilization but improvements in self-reported health that are about two- thirds the magnitude of our main survey results more than a year later. Second, we find that one year later, Medicaid is associated with about a 32% increase in self-reported overall happiness, albeit reported in the context of a survey primarily about health. Whether there are also improvements in objective, physical health is more difficult to determine with the data we now have available. More data on physical health, including biometric measures such as blood pressure and blood sugar, will be available from the in-person interviews and health exams This content downloaded from 132.174.250.220 on Fri, 07 Sep 2018 10:47:12 UTC All use subject to http://about.jstor.org/terms 7The Oregon Health Insurance Experiment - Evidence from the first year (page 48 of 51) ! v Q Search The Oregon Health Insurance... OREGON HEALTH INSURANCE EXPERIMENT 1103 dimensions we can measure. For example, like Oregon, almost all states operate Medicaid managed care programs. Medicaid fees in Oregon are around the median of U.S. states. OHP Standard is fairly generous in its lack of any copayments and its coverage of nonmandated services, although some states cover dental and vision, which OHP Standard does not (Ramirez de Arellano and Wolfe 2007; Kaiser Family Foundation 2011). It appears the safety net may be slightly more generous in Oregon, although other measures of the health care system like the share of admissions in public hos- pitals and the physician-to-population ratio are quite similar to the national average (Allen et al. 2010). Finally, the insurance we study was free or heavily subsi- dized, and as a result our estimates capture the combined effect of insurance at actuarially fair prices and the wealth effect from 47 the large premium subsidy. Average annual OHP Standard ex- penditures-and hence an actuarially fair premium-were esti- mated to be about $3,000 in 2001-2004 (Wallace et al. 2008), which is quite high relative to the actual annual premium of $0 to $240. Presumably, however, most health insurance coverage for this type of low-income population would also be heavily or completely subsidized. VI.C. Conclusion Using a randomized controlled experiment design, we exam- ined the approximately one-year impact of extending access to Medicaid among a low-income, uninsured adult population. We found evidence of increases in hospital, outpatient, and drug util- ization; increases in compliance with recommended preventive care; and declines in exposure to substantial out-of-pocket med- ical expenses and medical debts. We also found evidence of im- provement in self-reported mental and physical health measures, perceived access to and quality of care, and overall well-being Our results suggest that Medicaid provides benefits to this popu- lation above and beyond the non-Medicaid alternatives that exist through various safety-net options. These results are important inputs into a careful cost-benefit analysis of this expansion in Medicaid, although such an analysis would require a number of additional assumptions that go beyond the data that this experi- ment can provide. 48RAND_RB9174(1) (page 3 of 7) 1 v Q Search RAND_RB9174(1) - 3- Figure 3 Participants with Cost Sharing Spent Less on Health cost-sharing. Second, the overall level of quality for process Care Services measures was surprisingly low for all participants: criteria for quality were met only 62 percent of the time. These results 1,500 were discouraging at the time. What is more, recent RAND Average annual charge incurred per capita ($) work found that health care quality may not have improved 1,000 significantly in the interim. Results of a 2003 nationwide study showed that quality criteria were met only 55 percent of the time.' Thus, despite tremendous technical progress 500 that raises the potential value of care received, quality of care as a proportion of the best possible care has not improved in 50 the past 20 years. 25 Level of coinsurance (6) Effects on Health SOURCE: Newhouse and the Insurance Experiment Group, 1993, Tables 3.2 and 3.3. In general, the reduction in services induced by cost sharing NOTES: Spending numbers include both adults and children Spending numbers have been ad had no adverse effect on participants' health. However, there have been adjusted to 2005 dollars using all-items Consumer Price Index. were exceptions. The poorest and sickest 6 percent of the sample at the start of the experiment had better outcomes under the free plan for 4 of the 30 conditions measured. specifically. . Free care improved the control of hypertension. The poor- received by participants. Did cost sharing deter participants est patients in the free care group who entered the experi- from seeking appropriate care to a greater or lesser extent than it deterred ineffective care? To answer this question, analysts ment with hypertension saw greater reductions in blood pressure than did their counterparts with cost sharing. 3 grouped specific conditions into seven categories according to The projected effect was about a 10 percent reduction in the degree to which outpatient care and therapies were known mortality for those with hypertension. to be effective in treating each condition. The categories Free care marginally improved vision for the poorest ranged from conditions for which care is highly effective to patients. conditions for which care is rarely effective. The analysis found that cost sharing reduced the use of . Free care also increased the likelihood among the poorest patients of receiving needed dental care. effective and less-effective care across the board (see the table). For hospitalizations and prescription drug use, cost . Serious symptoms were less prevalent for poorer people on the free plan. sharing likewise reduced more-effective and less-effective . Cost sharing also had some beneficial effects. Participants care in roughly equal amounts for all participants. The pro- in cost sharing plans worried less about their health and portion of inappropriate hospitalizations was the same (23 had fewer restricted-activity days (including time spent in percent) for cost-sharing and free-plan participants, as was seeking medical care). the inappropriate use of antibiotics. In addition to measuring the appropriateness of care Likewise, patient satisfaction, another outcome of inter- sought by patients, the experiment measured the quality of care delivered. Analysts constructed process measures of est, was generally high and did not vary at different levels of cost sharing among the fee-for-service plans. While health the quality of ambulatory and dental care received by HIE participants. The process measures dealt with the appropri- outcomes at the HMO were no different than outcomes for those with free care, patient satisfaction was lower among are use of visits and diagnostic tests by providers and the appropriate use of therapeutic participants initially assigned to the HMO. These partici- sought care. interventions after participants Two striking findings emerged: First, cost sharing did not significantly affect the quality of care received by par- For a summary of this work, see "The First National Report Card on Quality of Health Care in America," RB 9053-2, available at ticipants. Clinically meaningful differences between the free http://www.rand.org/pubs/research_briefs/RB9053-2/. plan and cost sharing plans appeared only for the process 2 Defined as chest pain when exercising, bleeding locher than nosebleed a criteria dealing with the need for an office visit: 59 percent menstrual period) not caused by accident or injury, loss of consciousness, for free-plan participants versus 52 percent for those under shortness of breach with light exercise of work, and weight loss of more than ten pounds (except when dieting).BRAND_RB9174(1) (page 1 of 7) v Q Search RAND_RB9174(1) HEATH HIGHLIGHT The Health Insurance Experiment A Classic RAND Study Speaks to the Current The Health Insurance Experiment Health Care Reform Debate A= THE ARTS OWL JUSTICE EDUCATION A fer decades of evolution and xperiment, the U.S. health care Key findings: system has yet to solve a funda- mental challenge: delivering quality . In a large-scale, multiyear experiment, MOUTH AND HEALTH CARE health care to all Americans at an affordable participants who paid for a share of their price. In the coming years, new solutions will health care used fewer health services HADOPAL SECURITY POPULATION AND AGING be explored and older ideas revisited. One than a comparison group given free care. CENCE AND TECHNOLOGY idea that has returned to prominence is cost sharing, which involves shifting a greater Cost sharing reduced the use of both share of health care expense and responsibil highly effective and less effective services n roughly equal proportions. Cost sharing ity onto consumers. ent public discussion did not significantly affect the quality of 1 of cost sharing has often cited a landmark care received by participants. RAND study: the Health Insurance Experi- ment (HIE). Although it was completed over Cost sharing in general had no adverse two decades ago, in 1982, the HIE remains effects on participant health, but there the only long-term, experimental study of cost were exceptions: free care led to improve sharing and its effect on service use, quality of ments in hypertension, dental health, care, and health. The purpose of this research vision, and selected serious symptoms. These brief is to summarize the HIE's main findings mprovements were concentrated among and clarify its relevance for today's debate. he sickest and poorest patients. Our goal is not to conclude that cost sharing is good or bad but to illuminate its effects so that This product is part of the policymakers can use the information to make The HIE posed three basic questions: brief series. BAND asisarch sound decisions How does cost sharing or membership in an HMO affect use of health services com- Learning from Experiment: pared to free care? documents ar al a body of whisked work. Conducting the HIE How does cost sharing or membership in Corporate Headquarters In the early 1970s, financing and the impact of an HMO affect appropriateness and quality 1776 Main Street cost sharing took center stage in the national of care received? PO. Box 2138 Sola Marica, Calilamia health care debate. At the time, the debate . What are the consequences for health? 90407 2138 focused on free, universal health care and reL 310.393.0417 AM 310. 393. 4918 whether the benefits would justify the costs The HIE was a large-scale, randomized GRAND 2006 To inform this debate, an interdisciplinary experiment conducted between 1971 and team of RAND researchers designed and car 1982. For the study, RAND recruited 2,750 ried out the HIE, one of the largest and most families encompassing more than 7,700 indi- comprehensive social science experiments ever viduals, all of whom were under the age of www.rand.arg performed in the United States. 65. They were chosen from six sites across the - 2 - United States to provide a regional and urban/rural balance. Figure 1 Participants were randomly assigned to one of five types of Participants with Cost Sharing Visited the Doctor Less FrequentlyRAND_RB9174(1) (page 4 of 7) 1 v Q Search RAND_RB9174(1) - 4- Cost Sharing Reduced the Use of Medical Services at all Levels of Effectiveness Predicted Percentage of Participants with at Least One Episode of Care in a Single Year, by Medical Effectiveness Category and Plan Medical Effectiveness Category Adults Children Free Care Cost Sharing Free Care Cost Sharing Highly effective Acute Acute/chronic 28 17 32 25 16 Chronic Quite effective 13 23 Less effective 25 18 19 22 7 13 Rarely effective 11 3 Rarely effective but equally effective with self-care or doctor 39 29 36 24 SOURCE: Lohr et NOTE: Percentages refer to participants who had at least one episode of care within the relevant diagnostic categories during a year of the experiment. pants were less satisfied with care overall than either those who had previously chosen to be in the HMO or those who On the other hand, the HIE showed that cost sharing can be a blunt tool. It reduced both needed and unneeded health remained in the fee-for-service system. services. Indeed, subsequent RAND work on appropriate- Finally, the experiment examined whether shouldering ness of care found that economic incentives by themselves more of their own health care costs leads people to take bet- do not improve appropriateness of care or lead to clinically ter care of themselves. It did not. Risky behaviors were not sensible reductions in service use. affected-rates of smoking and obesity, for instance, did not In addition, cost sharing may not address the principal change. causes of cost growth. Cost sharing cuts expenditures by Implications for Today's Health Care Reform reducing visits but has little effect on the cost of treatment Discussion once care is sought. If, as is widely believed, cost increases Today's health care environment differs in fundamental ways are driven by treatment expense and new technologies, cost sharing can contribute to reducing costs at each point in from the one in which the HIE took place. The science of medicine has changed across all dimensions. Managed care time but may have little effect on the overall rate of cost has become more prominent, as has prescription drug use growth. Doctors emphasize preventive care to a greater extent and Testing the effects of cost sharing in today's environment and determining its usefulness as a tool for health system know more about providing it. Given these and many other systemic changes, it is impossible to know whether a similar reform would require another large-scale demonstration. To our knowledge, no such demonstration has been conducted experiment undertaken today would produce similar results. It is possible to take two contrasting perspectives on the since the HIE. However, important nonexperimental work has been done in the interim using the HIE's findings on HIE's relevance to today's health care debate. On the one hand, the study raises the possibility that cost sharing can be the effect of cost sharing in more targeted insurance plans. A recent series of RAND studies showed that cutting prescrip adapted to help achieve fundamental goals: containing costs and reducing waste without damaging health or quality of tion co-payments for patients who needed cholesterol- care. Would pairing some form of cost sharing and managed lowering drugs the most could improve their health and save care allow us to exploit cost sharing's benefits (reduced costs more than $1 billion annually in medical costs by increasing and unnecessary care, small overall health effects) while adherence and reducing the chance of hospitalization.$ In avoiding its negatives (reduction in needed care, some health 4 effects for poorer and sicker patients)? The study suggested that cost sharing should be minimal or nonexistent for the For a summary of this work, see "Assessing the Appropriateness of poor, especially those with chronic disease. Care: How Much Is Too Much?" RB-4522, available at herp:W/www.rand.org/pubw/research_briefs/RB4522